Karioi pulpmill in the foreground and Tangiwai sawmill in the distance, both of which are under an operational pause. /photo supplied
A major Ruapehu employer has been forced to put a two-week “operational pause” in place across its sites.
The Karioi pulpmill and the Tangiwai sawmill, located between Ohakune and Waiōuru on State Highway 49, employ just under 300 staff.
Both are operated by Winstone Pulp International.
Chief executive Mike Ryan said energy prices were the main driver behind the move.
“Since September 2021, energy prices have increased more than 600% – from $100/MWh (megawatt hour) to a futures price expected to average over $700/MWh for the month of August,” he said.
“Despite the team’s best efforts, energy costs have risen from 15% of our total production costs to in excess of 40%.
“We can’t pass these increases on to our customers because this is a New Zealand issue, and we sell into a commodity market where the price is the price.”
Ryan said overseas competitors were paying between $60 to $100/MWh.
The cost of energy was a challenge the company had been grappling with for a number of years “but the mountain keeps getting higher”.
“As a business, we’ve invested tens of millions into capex [capital expenditure] to improve production and energy efficiency,” Ryan said.
“The team’s hard work has seen us significantly improve production capacity, while at the same time reducing our energy use by 20-30% for every tonne produced.”
The company had a historic policy of maintaining a high level of energy price hedging to help manage the risk of increases and volatility, he said.
“However, as these arrangements have come up for renewal, the cost of replacing them has been unaffordable in the context of remaining globally competitive.”
Ryan said staff were still working normal hours at both sites but were focused on maintenance and other activities.
Ruapehu Mayor Weston Kirton said there would be huge implications if the closure became permanent.
“That amount of jobs is huge, and it goes beyond that,” he said.
“You have small businesses and a lot of associated people around that.”
Kirton said he thought the Government had a responsibility to safeguard the interests of the community.
“Whether it’s a stop-gap thing, I’m not sure.
“We [council] certainly want to support management in their bid to get the Government to sit up and listen to what they have to say around [electricity] prices.”
Ryan said a step change in pricing was required to make manufacturing viable in the long term.
That would require “some sort of government intervention” or a material increase in generation – or both.
“We need to be able to see long-term energy price stability and affordability.
“Without this certainty, our options are limited.”
Rangitīkei MP Suze Redmayne said she would meet with Ryan on Wednesday morning.
Ryan would also meet with Energy Minister Simeon Brown, she said.
“This is a massive worry for our region because they are one of the biggest employers, obviously.
“At the moment, hopefully it’s just a pause as opposed to anything more serious, while they consider their options.”
Ryan said a material increase in generation capacity was not a realistic ask or solution in the short-term.
“We have been aware of the risks associated with the rising cost of energy for some time now, and it is a sign of the seriousness of the situation that we are taking these measures.”
As well as rising energy costs, market prices for pulp and timber were relatively low and under pressure, Ryan said.
Kirton said it was impossible to reduce energy prices overnight.
“The provider of energy is the one we need to be talking to.
“I guess it’s a case of wait and see and hope they get operational again.”
Redmayne said her priority was to “stay in contact with [WPI’s] concerns” and talk to all parties involved.
“It’s probably not a quick fix but we [Government] are moving at pace to introduce policies that make sure this doesn’t happen, and to give houses and businesses access to affordable and reliable energy.”
She said closure would create a trickle-down effect on the local economy.
“Those people all live around the place and spend money in town.
“It makes a difference to the restaurants and supermarkets, to everyone.
But that option was still hypothetical and “we shouldn’t get ahead of ourselves”.
This article republished courtesy of NZME. Mike Tweed is a multimedia journalist at the Whanganui Chronicle. Since starting in March 2020, he has dabbled in everything from sport to music. At present his focus is local government, primarily the Whanganui District Council.
Critical Lifeline Needed for Winstone Pulp Mill Amidst Electricity Pricing Crisis
Ruapehu Mayor Weston Kirton has emphasised the urgent need to support the Winstone Pulp Mill near Ohakune, the largest employer in the Ruapehu District, amidst soaring electricity costs. The Mill’s potential closure due to the high cost of electricity has sent shockwaves through the community and could have severe local and national repercussions.
“The Winstone Pulp Mill is crucial to the central North Island economy and New Zealand’s overall economic health,” said Mayor Kirton. “The high cost of electricity, which has surged by 600% over the past couple of years, is jeopardizing its operations. In September 2021, a Megawatt hour cost $100; it now stands at $700. Despite significant investments in new equipment and a 30% reduction in electricity use to boost productivity, Winstone is ‘up against the wall.'”
The potential closure of the Mill would be a devastating blow, not only to the local and regional economy but also to New Zealand’s already limited value-added manufacturing base. “In a country where most of our electricity is produced from renewable resources, mainly rain, this situation is unacceptable and highlights systemic and policy failures,” added Mayor Kirton.
Mayor Kirton expressed his approval of Finance Minister Hon. Nicola Willis’s actions in seeking urgent advice from Treasury on possible interventions for spiking electricity costs. He also supports Regional Development Minister Hon. Shane Jones’s call for a substantive inquiry into electricity pricing to push down prices. “As Minister Jones pointed out, New Zealand has recently experienced the highest electricity costs in the western world, and we cannot allow our businesses to be destroyed by this.”
Mayor Kirton calls on the government to act with urgency to ensure the Mill remains operational. “The importance of the Winstone Pulp Mill to the central North Island economy is comparable to the Tiwai Aluminium smelter’s significance to Southland, which also faced closure due to long-term energy costs. With the government focused on growth and employment, a major export-earning employer should not be allowed to fail due to internal policy settings.”
