Brad Olsen: Infometrics principal economist on the economic impact of Winstone Pulp International closing Ruapehu mills

The Ruapehu district has been dealt a huge blow - as Winstone Pulp International confirms it will close the two mills in the region.

Over 230 workers will lose their jobs, and mayor Weston Kirton is 'gutted' the Government couldn't broker a deal and save the mills.

Infometrics principal economist unpacks the economic impact of this announcement.

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Episode Transcript

Speaker 1 (00:00):
Now we've been talking about the Real A Pair Who District,
the fact that it's been dealt a huge blow with
today's announcement that Winstone is going to close two mills
in the region. Around two hundred and thirty workers are
set to lose their jobs and the mayor Western Curtain
is gutted. The government wasn't able to broker a deal.

Speaker 2 (00:14):
This is a big hit, Heather. I've had ups and downs,
as you know, but this is a big hit. I'm
really taking a personally to these companies seem to be
milking the system and then when it gets to you know,
paying it back to the communities or if not, these
businesses that they're working hard on our behalf. It just
doesn't add.

Speaker 1 (00:33):
Up infora metrics principle Econos. Brad Olson is with us.

Speaker 3 (00:35):
Now, Hey, Brad good evening Brad.

Speaker 1 (00:38):
What proportion of the economy and the re A Pair
Who were these two mills?

Speaker 3 (00:42):
Look, it was a substantial proportion. Around about three and
a half percent of Real pay Who District's entire workforce
was employed at the mill, So it is a substantial hit. Now,
of course it's not just that three point four four
percent of total employment directly, but it's all the other
businesses in real pay Who that supported those meals with
various you know, supply and similar So there is a
much wider challenge coming through I think important as well.

(01:04):
When you look through the numbers, we can see that
already over the last year, up until June, there was
a two point three percent fall according to our analysis
sative metrics of fuel jobs and all pay WHO. So
those jobs figures were already coming down. It's tougher now
because of the mill closures. You've of course had the
uncertainty because of Real pay Who, Alpine lifts, what's been

(01:25):
happening on both sides of the mountain. So an already
very difficult situation has become even more difficult with those closures.
So a big hit to the community and I sort
of think it's one of those areas where Real pay
Who is likely one of the hardest hit parts of
regional and rural New Zealand.

Speaker 2 (01:40):
At the moment.

Speaker 1 (01:41):
Yeah, I mean, you've got this, You've got the Tolareo Chateau,
you've got the ski fields. At the moment, how does
it feel to you? Does it feel like this is
a place that's a bit stuffed.

Speaker 3 (01:53):
I wouldn't I wouldn't say that. I mean, there's still
a lot going for the area, but it's quite clear
that the operating environment is a lot more differ I mean,
it's I think also worthwhile bearing in mind that we
do see some of these challenges cropping up across different
parts of the country. Real pay who's obviously sort of
the post child and really in the thick of it
at the moment, but it highlights that where you do

(02:14):
have some of those sort of bigger anchor employers in
particularly provincial New Zealand, you know, the change in fortune
for that anchor, provided that anchor employer, can have a
big influence on the wider economy. I think the challenge
all the difficulty here is that although you've seen electricity
wholesale prices that have come back towards sort of much
better positions over the last week or two, hydro levels

(02:37):
have come up in similar the fundamentals those for the
mills just didn't stack up anymore. You've got the potential
for those energy costs despite higher but more importantly commodity prices,
particularly for forestry and wood based products, just aren't in
a sustainable area. At the moment, and so if you've
got low prices that you're getting in high costs that
you're having to pay out, those numbers just don't start

(02:59):
to stack up. From a this point of view, do you.

Speaker 1 (03:00):
Think this will be the end of the closures because
of energy costs?

Speaker 3 (03:04):
Not necessarily. I think there's a lot of businesses, particularly
in that sort of forestry based area making sort of
wood based products that will still be considering. Yes, you
might not have those sort of super high rocketing up
prices like you had a couple of weeks back, but
equally the risk of that hasn't necessarily gone away. If
you have again drier conditions as we move through the

(03:26):
rest of this year and the hydro lakes sort of
you know, we keep using the water and there's not
quite as much that comes and replenishes it. If there's
still that sort of gas issue that comes through, I
think there's a lot of businesses that are probably going
is this just one off? For more realistically how many
more times might it come through? And can they last through?
I mean there are some big operators as well up
in the far North. They already lost energy of course

(03:47):
because the pylon fell over so there's a lot I
think that are probably going. Actually, the business operations are
a lot more risky, a lot more costly, and of
course that's got real implications for people, not only if
they lose their job, but even just over the last
couple of weeks, everyone who's been left in limbo. It's
a really tough environment out there for a lot of
people to.

Speaker 1 (04:05):
Right it is. Hey, Brad, thank you very much, appreciate it.
Brad Olson, infa Metrix Principle Economists.

Speaker 3 (04:10):
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