Forest contractor failure puts jobs at risk

17 March 2015

The collapse of one of the country's largest forest contractors, Harvestpro, will send a shock wave through rural communities as their workers are made redundant. The fragile rural economy in Northland, of all places, did not need this business blow. Many skilled people will be put out of work. The industry association for forest contracting is concerned this failure and job losses could be repeated and wants others to come forward if they need assistance to keep afloat.

Just as this local failure came to light the same thing appears to be happening in related markets on Canada's west coast. Operating losses by contractors of over half a million dollars in six months have been reported in British Columbia (BC). Last week the second massive sale of forest contractor equipment was held in the space of just six months. This time, over 420 pieces were sold at auction and 95 per cent of it was equipment from logging contractors in coastal BC.

"This business failure highlights how fragile forest contracting is right now in many places," says the CEO of the Forest Industry Contractors Association (FICA), John Stulen. He says, "Here in New Zealand there's been pressure from forest companies and export markets on forest contractors for months now and unfortunately one company has caved in. Many workers' jobs are at risk here and in other rural regions.

"Low export prices and high log stocks in China are only part of the problem.

"Higher capital costs have come with a rapid change to mechanised forest harvesting. The message we are hearing is that contract rates are not keeping up with the true cost of the equipment being employed to do the work more safely."

The collapse of this large contracting company sheds some light on a larger problem. Many more smaller forest contractors in our association have been complaining of the undue pressure they are under. Many contractor principals in forestry feel they have nowhere else to go with their skills, so are just hanging on in the hope business conditions will improve. FICA has systems in place to offer financial advice to business owners finding conditions tough. Timely advice can give them options and alternatives to shutting up shop and putting more workers' jobs in jeopardy.

"One of the problems is that forest contractors carry all of the risk but have none of the power in our industry."

"Among our members we've already seen several other large contractors walk away from contracts as the prices offered were just a recipe for the very financial disaster we're now seeing," says Stulen.

"Both outcomes put their workers at risk of redundancy.

"Pressure has come from the top for the need to purchase more mechanised harvesting equipment," says Stulen, "however contract rates are not being lifted to compensate.

"With the tough market conditions FICA wants to offer support to other contractors who feel they are in tough financial positions. Any forest contractors should contact us as soon as possible before they or their business suffers any further losses. Financially stressed contractors and workers are also at risk of having accidents and that's the not an outcome that anyone wants."

Source: FICA media release