Vol. 487 No. 3
30 Mr. Sheehan asked the Minister for the Marine and Natural Resources if his attention has been drawn to the concerns within the sawmilling industry as a result of his decision to approve Coillte Teoranta to take over a company (details supplied) thus creating an unfair economic advantage for Coillte Teoranta to the detriment of the private sawmill industry in this country. [3904/98]
I am well aware of the concerns expressed by the sawmilling industry on the proposed purchase by Coillte Teoranta of an 80 per cent stake in the Balcas Group, the sawmilling company based in Enniskillen.
When we were considering this proposal, I met the Irish Timber Council, the representative body for the sawmilling sector, on two occasions. The council also met the Minister of State at my Department, Deputy Byrne, and separately the Minister for Finance. I am satisfied that the council was afforded every possible opportunity to make its views known and that these views were given the fullest consideration by the Government.
As the Deputy is aware, the Government agreed in December last, subject to certain safeguards, to approve the proposed purchase. These safeguards related to the independence of Coillte's electronic log auctions, the Balcas share of log supplies and further development of forward contracts between Coillte and the sawmillers.
The purpose of the safeguards was to meet concerns expressed by the Irish Timber Council, particularly in relation to the independence of the log pricing system. I should add that the approval given by the Minister for the Marine and Natural Resources, and the Minister for Finance, relates primarily to our responsibilities as shareholder in Coillte Teoranta as well as my overall responsibility for the rational development of the forestry sector.
While in the exercise of these functions we were, of course, mindful of competition aspects, these are primarily a matter for the Minister for Enterprise, Trade and Employment. Her consent is also required in accordance with the requirements of the Mergers and Take-Overs and Monopolies (Control) Acts 1978 to 1996. I understand that she has sought the views of the Competition Authority on the proposed acquisition.
While I welcome the Minister's reply, I am still not convinced that this matter has been dealt with adequately. It was dealt with expeditiously when the House was in recess for Christmas and the decision was taken by the Cabinet at that stage.
A question please, Deputy.
I am questioning the decision because it has created a monopoly in the timber industry. Is the Minister aware that 20 per cent of Coillte's logs are shipped unprocessed outside the State? This causes a serious shortage of logs for southern Irish sawmills. Furthermore, Coillte seems to have set its own reserve prices on logs. Does the Minister not agree that creates a monopoly? Once Coillte has obtained an overriding position for producing and selling logs and timber, it can dictate prices to other timber producing firms. The system is completely unfair and must be redressed. Does the Minister think a monopoly has already been created by giving Coillte the position it now enjoys? I would welcome the Minister's further comments on this.
Obviously if the Government felt it was creating a monopoly it would not have taken the decision. The adequacy of the situation was considered for some time by Coillte, for whom independent reports were undertaken. When the matter came to Government I asked many questions and I delayed its progress because I wanted to be assured about various aspects. I met twice with the Irish Timber Council and a great deal of consideration was given to the matter. I was particularly concerned about the independence of Coillte's electronic log auction system. It is generally agreed that system is working well, but others buying and using the logs are concerned about it. The fact it is within Coillte's control is itself questionable. For that reason, I insisted that it be seen to be independent and it will ultimately be a matter for the Minister for Enterprise, Trade and Employment. This is probably the most significant issue.
There will be a problem with oversupply of logs in about eight years' time from the private sector as well as Coillte. We should prepare now to ensure we will be exporting by that time. Coillte is doing that and is following the strategic plan for the development of the forestry sector approved by Government and published in 1996. That report, following an in-depth analysis of the Irish forestry sector, acknowledged the commercial logic of Coillte's corporate development strategy which was approved by the previous and current Government. Coillte, a private commercial company established by Government and the Oireachtas, is preparing for the future and it is especially interested in exporting.
As regards the possibility of monopoly, the Minister for Enterprise, Trade and Employment has, as we expected, referred the proposal to the Competition Authority to assess its suitability under the Mergers, Take-overs and Monopolies (Control) Act, 1978, and the authority will give its findings on the proposition.
Price is a key issue as is ensuring supply. It must be ensured that the supply is not entirely exported. That is why conditions are built in concerning the Balcas share of log supply and the further development of forward contracts between Coillte and sawmillers. These two conditions and the independent electronic log auctions are key measures and are part of the Government's decision.
Is it true that, as part of the acquisition of Balcas, Coillte has acquired a sawmilling facility in Estonia? Is it the Government's policy to encourage Coillte to develop its capacity outside the State? To what extent was that a factor in the Minister's decision to approve Coillte's acquisition of Balcas?
It does involve a facility in Estonia, and the Government expects Coillte to develop that in line with its commercial mandate. That is the basic point: the company now has a commercial mandate and is starting to operate outside this country.
I cannot agree with the information the Minister conveyed to the House. In December 1996, 79,769 tonnes of logs were offered with 100 per cent sold. A further offer of 41,923 tonnes was made in the same month, of which 64 per cent was sold. In the corresponding month last year, 58,158 tonnes of logs were offered with only 71 per cent sold. Only 35 per cent of a second offer of 23,137 tonnes was sold. This is a dramatic reduction of 33 per cent in the logs offered to the Irish timber industry in 12 months. Does the Minister think that is a step in the right direction? Coillte now has the opportunity of doing what it likes with the small timber industries. Will the Minister ensure small sawmill operators receive an ample supply of logs from Coillte? Were he to do that, I would be satisfied. I see the sawmill industry foundering for lack of raw material.
There is a problem with supply and it will exist for some years until the private sector plantings come on stream. Coillte is planting substantially for the future. There was a significant drop in planting last year, but it is expected it will increase. The Minister of State, Deputy Byrne, has responsibility for it. Various factors affected planting last year, but we hope it will increase this year.
The Minister would want to wake up.
Deputy Yates left it in a mess.
Plenty of logs are available.
There is a problem in terms of supply and that is why it is so important the auction system be cleared. I have had numerous discussions with the Irish Timber Council and others and they believe the auction system is, under current circumstances, the fairest way of operating. In the new circumstances, it is my responsibility to ensure it is seen to be independent and to act independently.
As regards the future of the industry and rationalisation within it, such a need has existed for some time and previous reports have stated this. There is no doubt that, with changing times and international price competition, small sawmills will come under pressure. As part of the Balcas discussions, Forbairt has been asked to examine the situation in the context of the structure of the industry. It is clear a relatively small number of large operators will modernise considerably and will survive for the future. Some small operators will survive in niche markets. However, it is recognised there is a competitive time ahead.
