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Dunedin's only sawmill - Otago Lumber Ltd - will develop new markets to offset difficult trading conditions which have threatened 27 jobs, the company says.
"Otago Lumber continues to pursue options to restructure its sawmilling operation and, despite recent difficulties marketing its woodchip, remains committed to ensuring that the operation continues in full production," board chairman Harold Hill said.
The company's board held a conference on Monday to address industry issues, such as the collapse of the international woodchip market.
The Mosgiel company was now investigating "a number of potentially promising options", Mr Hill said.
"These include the use of woodchip for dairy wintering pads, for landscaping use and as a carbon-neutral fuel source."
However, the New Zealand timber industry continued to struggle, with low timber selling prices and a high dollar, he said.
"High log purchase costs, which are largely driven by log export markets, make it extremely difficult to return a positive margin in the current environment. While these conditions have forced many sawmills in New Zealand to close, Otago Lumber has continued to trade by keeping operating costs down and because the company does not have crippling external debt to service."
"Like many in the industry, Otago Lumber is confident that the Christchurch rebuild will see a lift in timber demand, but the industry also needs to see a lift in timber selling prices," Mr Hill said.
"Otago Lumber is constantly talking with its log suppliers about the availability of logs at viable price levels, but we fully understand that the plantation owners must seek the best available price for their forest product.
"Most of Dunedin's log harvest is currently either exported for processing overseas, or is trucked out of the district for milling elsewhere."
Otago Lumber processes about 29,000 tonnes of mainly radiata pine a year.
"If the company was ever forced to close, that would not only mean another 27 workers in Dunedin out of a job, but also another 1000 truck and trailer loads of logs passing through the city each year for export out of Port Chalmers," Mr Hill said.
"We are determined not to allow those things to happen."