Australia's $1.4-billion plantation woodchip industry has been dragged into the US-China trade war, with a number of shipments to the Asian economic powerhouse cancelled in the fallout from the dispute.

Key points: Australian timber exporters have been hit by falling demand from Chinese paper mills for woodchips

Australian timber exporters have been hit by falling demand from Chinese paper mills for woodchips Three Aussie woodchip shipments have been cancelled or deferred since July

Three Aussie woodchip shipments have been cancelled or deferred since July The industry says demand has decreased since the US put tariffs on Chinese paper products

Amid fading hopes of a speedy breakthrough in the trade war, timber exporters have been hit by falling demand for woodchips from Chinese paper mills, which have become the industry's biggest customers.

Since July, at least three ships that were supposed to take Australian woodchips to China have been cancelled or deferred, and there are fears further consignments could be affected.

While shipments from Albany on Western Australia's south coast have been hit hardest, it's believed other woodchip export hubs in South Australia and Victoria have also been disrupted.

The setbacks have put the brakes on an industry that had been enjoying sustained growth since a wave of turmoil brought on by the failure of the managed investment scheme scene a decade ago.

Earlier this year, prices for bluegum woodchips reached a record high. ( ABC Great Southern: Mark Bennett )

Soaring demand halted

Earlier this year, prices for bluegum woodchips reached a record high of more than $US180 ($265) a tonne, fuelled by soaring demand from Chinese paper mills, which have overtaken their Japanese counterparts as the biggest buyers of the commodity.

Forest Industries Federation of WA president Ian Telfer said the decision by the US to slap tariffs on Chinese paper products was hurting the profitability of mills, which was crimping demand for Australian woodchips.

Making matters worse, he said, was anticompetitive trade conduct by South American countries, which were dumping big volumes of cheap pulp on to Asian markets including China's in a bid to clear a supply glut.

"There's a short-term impact affected by sales into China that's affecting supply of wood fibre and that's impacting all exporters around Australia," Mr Telfer said.

"China is obviously affected by the ongoing discussions, that's affected packaging.

"A lot of our fibre goes into a range of paper-based products but particularly packaging as well, so as exports out of China decrease so does demand.

"That coupled with an influx of pulp into China from South America drove the pulp price down and that's affected the profitability of some of their mills.

"There's a short-term blip, if you like, as a commodity exporter, but one that we'll trade through and will restate itself in time."

After the US put tariffs on Chinese paper products, demand for Aussie woodchips dropped. ( ABC Great Southern: Mark Bennett )

Hope it will be a short-term problem

Giant plantation forestry owner New Forests, which manages a global portfolio worth about $6 billion, confirmed some of its shipments had been deferred because of the trade tensions.

However, the firm's timber products marketing director, David Evans, said he didn't expect the problems to last long.

"Some shipments to our North Asian clients have been delayed due to a combination of sudden changes in the market conditions in China and the overall economic tensions between China and the US," Mr Evans said.

"New Forests understands the conditions will gradually improve and fully expects our business to return to normal over the course of the next few months.

"The pulp and paper markets in North Asia go through cycles, however the fundamental bottom line is there is a fibre deficit in this industry and New Forests' certified plantations remain in a key position to service those markets."

As demand from Chinese buyers slows, Mr Telfer said contractors involved in the timber industry had opted to bring forward scheduled maintenance work, send staff on leave and reduce hours to minimise any damage.

A demand slows, contractors have brought forward scheduled maintenance work. ( ABC Great Southern: Mark Bennett )

Employment concerns

Mr Telfer said one of the biggest risks to the industry was losing workers as the fall in exports caused backlogs to the supply chain.

He said the sector had spent considerable time and money consolidating in recent years to ensure it could take advantage of rising demand for woodchips, and it could not afford to lose skilled labour.

"It's impacting exports into China — Japan is stable — and that has a supply chain flow-on effect," he said.

"So, ultimately, yeah, the contractor is affected directly.

"All exporters are looking to have stable supply chain flows, so we're all trying to make sure we keep contractors engaged and working.

"But it does mean reduced hours, reduced production rates.

"It's really important that we maintain that capacity because when demand increases we need that capacity back working at full volume.

"We're all working with contractors to ensure there's ongoing work, and no-one is unduly affected at this stage.

"But yes, there's an impact and it's unfortunate."

The industry is concerned about losing workers during the slowdown. ( ABC Great Southern: Mark Bennett )

Trucking company on alert

Southern Haulage, a WA-based company that handles timber haulage and carries out chipping services on tree farms, said it had to reshuffle its operations in response to the slowdown.

Owner Chris Pavlovich said that although he had not been required to take any drastic action yet, he was facing a period of reduced output.

"One of our major customers has indicated we may need to drop our production to 80 per cent and they've planned on sending us to lighter plantations that are farther out from the port of Albany," Mr Pavlovich said.

"I would think they [other contractors] will be trying to do what we're trying to do and move into the lower-yielding plantations farther out from the port so we can maintain as many staff as we can.

"It's a very highly skilled industry, especially in the harvesting and wood-chipping environment and it's very important that we retain staff because we're competing with a fairly buoyant mining industry as well.

"And once staff leave the likes of Albany and the regions, it's difficult to get them to come back."

Southern Haulage owner Chris Pavlovich is facing a period of reduced output. ( ABC Great Southern: Mark Bennett )

Future looks bright despite stall

Despite the challenges, Mr Pavlovich said the industry was in a better position to ride out any trade shocks than others and he was comfortable about its prospects.

"The good thing about the timber industry is the trees don't perish like fruit and livestock," he said.

"If you defer the harvesting they just get bigger."

It was a sentiment echoed by Mr Telfer, who said the long-term business case for Australia's plantation timber industry was strong.

"There are forces bigger and stronger than us such as the China-US discussions at the moment that do have an impact," he said.

"Beyond the short-term, I'm very confident that demand will pick up again and we'll be back in business as usual … and people will be busy.

"We just need people to grow more trees to meet the future demand."