Availability of plantation trees

IBISWorld anticipates the availability of plantation trees to fall by 0.1% in 2024-25 to reach 1.708 million hectares. The total plantation area has declined over the past five years because of the loss of commercial viability in certain plantations and the non-renewal of lease agreements, particularly affecting hardwood areas. This has resulted in a significant decrease in hardwood plantation land, while softwood plantations remained relatively stable. This trend is expected to continue in the current year, although an anticipated increase in the domestic price of timber will mitigate it. In addition, construction demand is expected to fall, resulting in relatively low harvesting activity over the year, limiting the decline in the availability of plantation trees.

The plantation sector has remained stagnant over the past decade, with minimal or no expansion, despite the urgent need to establish 200,000 to 250,000 hectares of new softwood plantations to meet log supply demands, according to a parliamentary report. Several key challenges have hindered growth, including high upfront costs, lengthy investment returns of approximately 30 years and modest average returns of 3-4%, which fail to attract private investors. The transition from government to private ownership has further reduced incentives for plantation development. This issue is compounded by declining funding for research and development and significant obstacles like limited land access, water allocation constraints and transportation inefficiencies. Collectively, these factors create a challenging environment for new investments in the plantation sector.

Also, during the 2019-20 summer bushfires, over 130,000 hectares of plantation forest were burned, significantly reducing the total area of affected regions. In recent years, bushfires and extreme weather events have significantly damaged existing plantations, reducing the overall stock of harvestable trees. These natural disasters have destroyed mature trees and affected younger plantations, creating a gap in the supply chain. Overall, IBISWorld forecasts the availability of plantation trees to decline at a compound annual rate of 0.8% over the five years through 2024-25.