Futuris Corp has signalled it will slow its expansion of short-rotation plantations due to the danger of oversupplying the export woodchip market.
Futuris chief executive Malcolm Jackman said continually buying new land and planting short-rotation trees was not in the best interests of the industry, otherwise "we will create a long-term oversupply of woodchips for exports".
This would put downward pressure on the price of woodchips, he told BusinessDay.
Mr Jackman said Australia's current plantations estate "is about as much as we need".
Futuris' forestry arm, ITC, would stabilise the amount of land it had and maybe get rid of less productive areas.
Australia has 1.9 million hectares of plantations — 1.01 million hectares (53 per cent) of softwood and 883,000 hectares (46 per cent) of hardwood, most of which is for woodchips.
Mr Jackman said ITC still saw merit in long-term plantations, such as its sandalwood, teak and red mahogany plantings, for higher value-added timber.
Futuris would still maintain its big stake in Tasmanian group, Forest Enterprises Australia, he said.
Mr Jackman said there was talk of consolidation in the industry.
"We want to make sure our plans do not preclude that from happening," he said.
Mr Jackman said the managed investment scheme (MIS) model was no longer sustainable for Futuris.
MIS was a tax-effective structure for investors and meant companies did not have to borrow money, but Futuris' review of its timber arm showed there were different models around the world to fund plantations, he said.
Futuris, with 160,000 hectares of plantations under management, is likely to sell its own 47,000 hectares.
In assessing new models, Mr Jackman said Futuris was keen to "move faster than slower".
"We don't want to create uncertainty in the market," he said.
As Futuris plots the future of ITC, a newcomer to the company will offer valuable policy insights from his native South Africa.
Ockert le Roux, ITC's general manager of forestry and a former senior executive with South Africa's big pulp and paper group, Sappi Mondi, said South African and Australian forestry had much in common, but there were also differences.
With little native forest, Mr le Roux said South African governments developed pine plantations, which reached a peak during the Great Depression before privatisation kicked in during the 1990s.
Private companies now dominate forestry in South Africa, which has 1.4 million hectares of plantations — 54 per cent softwood and the rest hardwood.
"The bulk of the hardwoods — 85 per cent — is for pulp," Mr le Roux said. "Very small and specialised groups grow hardwoods as solid timber for South African and European markets."
Mr le Roux said that unlike Australia, private landowners and farmers played a big role in South African forestry.
"Up to 35 per cent is in private hands. Farms always have a section of land not as good for agriculture," he said.
"We as a private company promoted it, put out tender in the market for farmers to grow trees. We provided seedlings for free, advice for free, and had long-term agreements with farmers.
"When it took off, it took off exponentially."
South African farmers formed co-operatives to give themselves more marketing muscle.
"We had 107,000 hectares under that scheme producing 1.2 million tonnes of pulp constantly off that source," he said. Farm forestry was a wonderful model and an alternative to MIS.
Mr le Roux said establishing forests with equity was possible, and despite the big up-front costs, investors could still make money.
"It's initially very difficult to overcome the long-time horizons of trees as investment," he said.
"You need some form of bridging capital. Once the forest is in rotation and is harvested annually, then it's fairly easy."
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