Smelter not only firm hit by high dollar, weak demand

ALEX FENSOME
Last updated 10:06 11/10/2012
Southland Times
Robyn Edie/Fairfax NZ
South Port is seeing a significant downturn in Southaland's wood, fish, dairy, meant and other primary exports.

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The high dollar is not just threatening the survival of the Tiwai Point aluminium smelter, but impacting on the rest of the south's exporters.

Export Southland chairman Mark O'Connor, who is also chief executive of South Port, said wood, fish, dairy, meat and the region's other primary exports were in a significant downturn, caused by world economic conditions and the overvalued kiwi.

"The Fonterra payout was pared back primarily because of the currency," he said.

Forestry and fish exports were being hurt by weak demand in key markets, he said.

Labour has suggested giving the Reserve Bank more power to lower the exchange rate if necessary, while Green Party co-leader Russel Norman last weekend suggested quantitative easing - printing money - to lower the value.

O'Connor said the Government would be wasting its time to try to interfere.

"Our resources are not sufficient to be able to manipulate the level of the dollar."

A high-value currency was a sign foreign investors thought the Kiwi economy was stable, he said.

"The exchange rate reflects in the same way as a share price for a company . . . when it's strong, you're saying people have confidence . . . there is a flip side."

As export returns fell, the profitability of large business would fall off, the amount of tax collected would be lower and the economy would gradually slow up. Only the recovery of the United States and European economies would lower the kiwi relative to the rest of the world, he said.

Tapanui-based Ernslaw One is one of the largest log exporters out of Bluff.

Regional manager Phil de la Mare said the dollar was affecting their business, as it was all exporters.

"Certainly, it's headwinds at the moment with the high dollar, but it's completely outside our control."

Ernslaw's main customers were construction businesses in China and Korea, he said. The Chinese market was holding but the Korean building sector had slowed, symptoms of the worldwide downturn.

South Wood Export manager Graeme Manley said his company's markets in Japan were relatively unaffected by the economic situation, but a high dollar was bad news for any exporter. South Wood exports more than 200,000 tonnes of wood chips a year. They are used to make writing paper.

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- The Southland Times

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