Value added timber works - too little too late by Govt?

Local firms launch $300M value-added timber works
By Nicosia Smith
Saturday, December 16th 2006
Stabroek News

Sustainable Forest Inc (SFI) is on a mission to give a supply boost to the value-added market in a $300M investment amid a shortage of prime species of logs.

The consortium comprising Bulkan Timber Works, Precision Woodworking Ltd and Farfan & Mendes Ltd, in June gained approval from the Guyana Forestry Commission (GFC) under a State Forest Permission for an 80,000-acre concession. The government had taken a position to enhance the availability of raw materials to manufacturers who add value to logs.

Yesterday, SFI formally launched at Cara Lodge, Quamina Street and its directors discussed their plans for the new company while calling for an increase in the number of concessions available to small forest producers.

Over the past weeks letters in this newspaper have called on the GFC to improve its monitoring of forest resources, amid concerns that foreign loggers were exporting prime log species like locust and purple heart and were not in compliance with their management plans.

Directors Howard Bulkan, Managing Director of Bulkan Timbers and Andrew Mendes, Managing Director of Farfan & Mendes in an interview with Stabroek News called for concessions in the vicinity of 20,000-100,000 acres to be given to 400-500 small forest producers - since these producers contribute revenues almost equal to the large companies.

Both Bulkan and Mendes said that GFC revenue figures show that in 2002, while the small forest producers only had 26% of the land, they contributed 48% of the total revenue compared to the large concession holders who had 74% of the land and contributed 52%. No other up-dated figures were available to indicate if this trend is continuing.

The directors used these figures to make the point that they will earn more revenue in a year than some of the large concession holders, by maintaining a very high efficiency level and maintaining reduced capital expenditure.

For example, it was noted that SFI will have a small road network since milling will be on site and there would be no need for large vehicles to access the site.

"Mobile saws will cut accurately the good timber and at 65% yield will give 50% more lumber than the best fixed mills in Guyana, and at 1/3 of the traditional cost," according to SFI. It was further noted that "SFI will have no or minimal log hauling costs because its preliminary milling will be at the tree stump." In addition, this means that SFI can cut and recover relatively small amounts of good timber from defective trees, which would not be worth hauling to fixed mills.

This form of logging by SFI, said Mendes, will also bring in more revenue for the government since the GFC calculates a relatively low recovery rate - 20% - in setting royalty for sawn lumber.

The "SFI's recovery rate of 65% means that the GFC will be gaining around three times as much in royalty per tree than it gains from pure logging operations, or about four times as much per hectare," according to Mendes. Some 57 persons will be employed in the forest side of SFI, plus others in a mill for wallaba shingles.

Bulkan noted that due to a shortage of their prime species, locust, over the past year they have operated at 40% capacity. The situation has gotten so bad that Bulkan Timber has had to import a few 40-foot containers of locust from Brazil this week. This comes, according to SFI, even as log exports from Guyana boom with more than 118,000 cubic metres of logs exported before September compared to 115,000 cubic metres in all of 2005.

The GFC has maintained that the forest sector is operating below capacity and that it will like to see harvests increase. Some 20 cubic metres of logs can be harvested per acre sustainably and currently the harvest level is at five cubic metres.

Both Mendes and Bulkan noted that this is true but that what is mainly being harvested are prime species and the harvest is not equally distributed among all the lesser known species. The large companies have made the argument that they must sell the prime species to gain buyers for the lesser known species.

Currently, Bulkan Timber has had to cut its staff from 160 to 135 due to a shortage of locust. Bulkan noted that over the past three to four years they have experienced a steady shortage of raw material.

This concession does not immediately solve the problem, said Bulkan, noting that a $5.3M preliminary forest inventory of 12 blocks, totalling 1200 hectares has shown that extremely low levels of locust and purple heart exist. It was estimated that the amounts are only sufficient for a half or one and a half days work for Bulkan Timbers or Precision whose prime species is purple heart. This discovery has led Bulkan to acknowledge that if the remaining concessions also show low levels of these prime species they may have to seek another. However, Mendes has noted that they will work with what was given and aggressively market the lesser known species and sell sawn lumber on the local market.

In July-October, the consortium entered into negotiations with Citizens Bank (Guyana). Three mobile sawmills and two edgers are already in Guyana; one US$22,000 mobile mill is en route; one US$160,000 skidder is on order together with two tractors worth US$120,000.

In the meantime, staff recruitment has begun and in January 2007 the start of in-forest road building is expected; tree cutting, logging and milling, and full production are expected in April-June 2007.

This week the Agriculture Minister noted that no species of locust or crabwood trees were exported to Asia after an investigation. While Jialing Forest Industries Inc and Barama Company Limited (BCL) were given until September 2007 to meet all requirements of their management plans including bringing into operation sawmills and other value added plants like a veneer plant and to reduce log exports. Jailing said that it will be labour compliant by 2008, which is, having its foreign staff be reduced to 15%, which is above the limit of 15%.

In the meantime, these two log exporting companies continue its export of Guyana's prime species.