Plantation woodchip exports and hundreds of forest contracting jobs in Tasmania will be hit by a downturn in economic activity in China.
Forico chief executive officer Bryan Hayes said the company's customers in China and Japan had advised postponement of up to eight ships or nearly 400,000 tonnes of woodchips.
The 40 per cent cut in quota means fewer people will be required to work in the forest harvesting and cartage of logs. Forico will shut down operations for two weeks at the end of July and beginning of August to reduce woodchip stockpiles at Long Reach and Burnie.
Mr Hayes said none of Forico's 110 direct jobs would be affected.
However, indirect employment of 450 people via contractors and sub contractors will be affected. If the 40 per cent quota cut was reflected in job numbers there would be a loss of 180 jobs.
"I am not anticipating any Forico staff job losses but certainly in the contracting workforce they will have no choice but to reduce numbers because of lower activity levels," Mr Hayes said.
"I can't give you an estimate of numbers, but I just know that some of the contractors have been hit very hard and some have stopped immediately."
The Australian Forest Contractors Association was unable to be reached for comment.
Mr Hayes said coronavirus had exacerbated an economic slowdown caused by the US-China trade war.
"That has caused consumption of paper products in Asia and globally to drop," he said.
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Chinese and Japanese woodchip importers have advised exporter Forico of cancellations and deferral of woodchip vessels until next year, Mr Hayes said.
"The impact on us for the next three months is that we have got a situation with high inventories because we have been holding high inventories in anticipation of the forward shipping schedules that had been advised to us by our customers," he said.
"That has been significantly adjusted downwards by some 40 per cent so we've had to put the brakes on and we are now pulling every lever to keep the business in the right direction.
"We've got to slow down production and slow down the whole supply chain and we have got to reduce our inventories with the few vessels that we do have coming over the next few months so that we realign to much lower operating levels," he said.
While Australia and China have had rising diplomatic tensions this year, Mr Hayes said that all the information coming to the company was that the downturn was purely economic.
"There is nothing to indicate that there is any other political considerations," he said.
Exports to China comprise 75 per cent of Forico's total export volume with Japan making up the remainder.
He said the company had high stocks at Long Reach and Burnie.
"We have just got to wait until the next scheduled vessels come in July and August. We've got a few vessels in September so by the end of September we expect to have re-balanced and reduced those inventories down to more acceptable levels," he said.
"We do have long term contracts with our Chinese buyers and at this stage they have advised they intend to honour those contracts albeit at the minimum volumes."
Mr Hayes said the company would cease purchasing logs from contractors who didn't have long term contracts with the company.
"Unfortunately that means that some contractors will no longer have work," he said.
"We will be reducing hours of production at our mills and that means we be having some shutdown periods and reducing overtime hours."
"Quotas are being reduced down by as much as 35 to 40 per cent.
"We will take a week at the end of July and one at the beginning of August just to try and get some of the stock out of the way."
He said that the outlook for the first and second quarter 2021 would affect what happened after September in Tasmania.
"We normally get our shipping schedules about six months in advance so as each month goes by you have got a bit more visibility on what is likely to happen," he said.
He said the company was encouraging contractors to access supports such as JobKeeper and would provide letters of support for contractors who may need relief on equipment repayments.
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