Mill closures’ long and winding repercussions

The closure of Winstone Pulp International after 45 years of operation has left a significant void in the Ruapehu District, both economically and socially. The shutdown of the Karioi pulp mill and the Tangiwai sawmill, which resulted in the loss of 230 jobs, has forced the small rural community to grapple with profound challenges while exploring pathways to recovery and growth.

As one of the main employers in a district with a population of just 13,000, former workers had well-established lives in the surrounding areas of Raetihi, Ohakune and Waiouru. For many, it was their first job out of school and for others, it allowed them the financial stability to afford a house. Many have since found employment up and down the country, with some moving to Australia.

Mayor Weston Kirton acknowledges the closure as a severe blow to the region, as finding more than 200 jobs is no small task. The loss of wages has a multiplying effect on the local economy, impacting businesses from retailers to service providers.

The WPI wood processing operations produced a range of timber and pulp products derived from renewable plantations of Radiata pine for both New Zealand and international markets. WPI is a privately owned subsidiary of the Oregon Group.

The Karioi pulp mill – which produced wood pulp for folding boxboard manufacture – had more than doubled its production capacity since it began in 1978, by implementing new plant, processes, and technology.

It had only just upgraded its pulp mill to Rockwell Automation’s PlantPAx DCS in 2023, to take advantage of a standardised Distributed Control System to minimise downtime and enhance plant connectivity.

“The closure is obviously a big hit to our economy. And it’s been an especially challenging time for those who have had to move away from family and friends to find other work. When you consider the wages that these people created within the community, it sort of multiplies fivefold, in most cases, throughout our economy.”

However, Mr Kirton notes that redundancies have softened the immediate blow. “We’re not seeing a lot of closures in areas like retailers or service stations – life goes on. The community is very resilient, but that redundancy money won’t last forever.”

It is estimated between 10–20 per cent of affected individuals are still struggling to find employment, a statistic that underscores the long-term challenges of economic recovery in rural areas.

The closure of WPI is not the only example of regional vulnerabilities this year: the Oji Fibre Solutions-owned pulp and paper plant near Tokoroa will cease to produce paper in 2025, affecting about 230 jobs.

According to PF Olsen Limited’s Director Sales and Marketing Scott Downs, these closures will have flow-on effects for other mills as sawmills sell their sawdust to Karioi Pulp Mill.

“This volume will now have to be sold at alternative markets that will likely incur more transportation cost.”

Mr Kirton says diversification is critical with industries like forestry and agriculture offering potential growth areas. The pet food factory in Taumarunui, which plans to double its production in 2025 and again the following year, is a testament to the region’s ability to adapt.

“The factory could well become a hub in Taumarunui as it looks to bring ingredients into the district and ship out its products. They’re talking about 10 tonnes an hour, eventually.

“Our figures, the Mayors Taskforce for Jobs, show that they have reached close to 100 jobs including being an above average employer in filling jobs with youth between 18 and 22. That tells us that despite the challenges the district faces, places like the pet factory are working hard to fill vacancies and put young people into work through that system.

“That’s just one industry that’s going to increase its production and also, potentially just about double its workforce. Even though it’s of a different nature to the mill, it’s going to be a high-tech business that needs expertise and that could well be sourced from other parts of the country, if not the world.

“And of course, the agriculture and forestry sectors are other areas that could well be picking up some of the slack.”

Still, challenges remain. Rising energy costs, one factor of many in the mill’s closure, continue to pose risks to local industries. Mr Kirton stresses the importance of long-term energy planning and collaboration between government and businesses to ensure sustainability.

“So, what have we learned from that? Yes, energy is a huge resource that needs to be planned for. From what I understand, because I’ve asked the same question to the management of the pet food factory, they’re saying that they’ve hedged electricity pricing for a longer period, say, two years or so, and that gives them confidence that they’ve got a window of at least three or four years of certainty that their particular business has a continuity of power.

“Having said that, I think it’s correct to say that – it’s only my personal view – that the electricity system in our country is flawed and allows for the downturn of generation at certain times of the year.”

However, the future, despite some grim obstacles, looks optimistic for the district Mr Kirton says. “There is light at the end of the tunnel. We know that tourism is on the up in our district, that we provide very good products, and we have great plans for cycling, for example, and attracts people by the 1000s.”

Amidst these challenges, the Ruapehu District Council is looking to tourism as a potential driver of growth. One promising project is the expansion of the Mountains to Sea Cycle Trail NZ, which the Council has proposed as part of a regional development initiative. The trail, already a popular attraction for cyclists and hikers, could bring significant economic benefits if expanded.

The proposal includes constructing new infrastructure to enhance the trail’s appeal and accessibility. “We’re aiming to create one of the largest cycleways in New Zealand,” Mr Kirton says, “attracting year-round tourism, generating jobs and boosting local businesses.”

“Another area I’d like to focus on is how we might add value to the pet food factory in the north of the district, how to partner with them to increase their production.”

By focusing on tourism, leveraging partnerships for regional development, and supporting successful local businesses, the Ruapehu District will build back a more resilient and diversified economy.

The closure has also reshaped the region’s transport landscape. Logging trucks are placing significant strain on roads like the Gentle Annie Highway, on their way to Napier Port. The increased traffic on this and other rural roads raises concerns about wear and tear on infrastructure. Mr Kirton emphasised the importance of finding sustainable solutions, including the potential for rail transport, to alleviate the burden on road networks.

“The extra loading on the road is just not sustainable,” Mr Kirton says. “We share the concern that the quality of the roads will deteriorate with the current volume of truck traffic.”

The closure of the mill has been a seismic shift, particularly in its operations for Raetihi-based Lilburn Transport. Owner Robbie Lilburn shared how his company, once heavily reliant on transporting timber and pulp for the mill, has had to downsize its fleet and reconfigure its routes.

“At one point, we ran an eight-truck fleet. Now, we’re down to six trucks and are struggling to maintain efficiencies,” says Mr Lilburn. The mill’s closure not only reduced demand for local freight services but also increased reliance on less profitable hauls. “Without the mill, we’re often forced to run empty for 140 to 200 kilometres just to pick up the next load. That’s a huge hit to our bottom line.”

The rerouting of timber and other goods to Napier Port via the Gentle Annie Highway (the most direct to the port) has further complicated the situation. Described by Mr Lilburn as “a challenging route with sharp corners, steep inclines, and narrow passages,” the road was not designed to handle the volume of heavy trucks it now sees.

“It’s only a matter of time before there’s a major accident or the road falls apart,” Mr Lilburn warns. “The increased weight and frequency of trucks mean it needs significant maintenance, but I don’t see that happening fast enough.”

Mr Lilburn emphasised the broader impact on local transport companies and the community. “We relied on the mill for efficiencies—being able to coordinate inbound and outbound freight. Now, there’s no wool, the timber industry is scattered, and we’re spending more time and fuel to connect the dots.”

Despite the challenges, Mr Lilburn expressed cautious optimism, highlighting the resilience of local businesses and the adaptability of his crew. “We’re finding ways to stay afloat, but it’s not easy.”

Rail implications

The closure of the central North Island pulp and timber mills has significant implications for rail, as does the proposed cessation of paper-making at Kinleith.

Rail carried all the output from the Karioi pulp mill to Napier Port for export, and the export volumes of timber from the adjacent Tangiwai mill, also to Napier. About a quarter of a million tonnes a year of pulp and timber were involved. This was enough for a dedicated daily/weekday train from Palmerston North to Napier return. Nearly half of the traffic on this section was from the two mills.

On the North Island Main Trunk between Palmerston North and Karioi, there were two trains a day to maintain an optimal wagon turnround. Trains were up to 2, 000 tonne gross load. KiwiRail then restructured its operations in the area, to ensure the services reflect the changing demands of the market. Its operations will now be focussed on Palmerston North.

Nevertheless, KiwiRail has other customers on the line from Palmerston North to Napier and has assured them that it will continue to serve Hawkes Bay by rail. More recently, KiwiRail and the forest owners Ernslaw have agreed to rail 140,000t of logs from Tangiwai to Napier in the coming year, logs that would have otherwise fed the mills – recovering some of the traffic that was lost on the closure.

Interestingly the use of rail for the timber from Tangiwai was the subject of a special contribution from the NZ Transport Agency back in 2009, which enabled the mill to be connected to the rail system, and reduced heavy road traffic, reported at the time as 2,000 trucks a year off the roads. At the time, timber and pulp were railed to Wellington rather than Napier.

Kinleith is also an important contributor to rail traffic, for pulp, paper, and logs to the Port of Tauranga. Closure of the paper mill from mid-2025 will reduce the use of rail in the area unless more pulp is produced. It is too early to predict any consequences for services and staff.

WPI supplied timber and pulp products for export from Napier Port, the majority of which was packed into containers at Napier Port’s on-port Port Pack operation. According to Napier Port, WPI exported between 15k to 19k TEU of containerised timber and pulp from Napier Port on an annual basis.

In a statement published in August 2024, Chief Executive Todd Dawson said: “Our thoughts are with everyone at WPI. They have been a successful New Zealand export business and a long-standing customer of Napier Port since the 1970s. We feel incredibly disappointed they are confronted with no option but to consider ceasing their operations due to current and ongoing challenges related to abnormally high energy costs. These challenges are not isolated to WPI, and we remain concerned for wider NZ industries facing the same issue.

“While we don’t know the final outcome of WPI’s process, which could include the retention of some or all of their cargo trade, the loss of WPI’s cargo would be a setback for Napier Port, however, we continue to benefit from our diversity of trade and revenue streams, as well as the resilient nature of our business.”