Red Stag unveils $60m super-mill investment

Red Stag Timber announced today that it will build a new $60 million ‘super-mill’ on its Waipa site in Rotorua.

With an annual log input capacity of 1.2 million tonnes running on two shift when it starts operation mid-2016, it will be the southern hemisphere’s largest sawmill and – with further investment – will lift the company’s output from 450,000m³ to 700,000m³ by 2019.

Over that period the company is aiming to increase its share of the New Zealand structural timber market from its current 25% to 40%, according to Red Stag group CEO Marty Verry.

“You’ve got to remember Red Stag started at zero per cent of that market when we bought the mill 10 years because it wasn’t cutting for that market. So another 15% in five years? I think that’s quite achievable,” he says. “There’s a buildup of latent market share opportunity as things sit.”

Much of that is down to $70 million worth of capital projects Red Stag has invested in over the past decade, including upgraded kiln drying and treatment technology.

“As a result of that programme we have quite a few quality advantages over the competition at the moment. If we had greater volume, it would result in higher market share,” he says.

And the new state of the art mill – which features the latest sawmilling, scanning and optimization equipment – will only enhance quality.

“The new plant will saw differently, which creates more structurally sound, stronger timber,” says Mr Verry. “Basically it follows the line of the grain instead of cutting across it, which means there’s less tension in the sticks and they’re therefore more stable.”

At the same time, the new mill will reduce Red Stag’s costs, “mainly through scale and getting more recovery and value from logs.”

Mr Verry predicts the increased competition in the Australasian market triggered by the new sawmill will see “a reduction in pricing of up to 10% while there’s a further shakeout in the industry.”

The past 10 years has seen about 25 New Zealand sawmills close down due to competition from larger, more efficient operations, a trend Mr Verry says his family-owned company is determined to stay ahead of.

Mr Verry is a proponent of the Wood Processers and Manufacturers Association’s “Wood First” policy, which involves wood being given equal consideration as concrete and steel at the design stage of government building projects.

Although the policy has received a tepid response from MBIE’s Steven Joyce, Mr Verry remains optimistic the government will come to see its merits.

“If you want more jobs, more exports, well, adopting this policy will help grow the industry,” Mr Verry says, “delivering a stronger domestic supply base and more opportunity for new investment.”