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Hydro Tasmania says it cannot guarantee water supplies to the $2 billion Gunns Limited pulp mill.

The news comes as water flows in the South Esk basin plummet because of drought.

As well, Hydro Tasmania has reduced generation and thus water releases from Great Lake.

The level of the lake has dropped to 15.9 per cent of capacity ahead of a weekend of high evaporation because of hot weather.

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According to James Kirby in The Age today:

The commercial logic of Tasmania’s new pulp mill is crumbling by the day. If only Environment Minister Malcolm Turnbull could have delayed his approval for the monster mill a few more months, he might have saved himself a lot of bother.

It’s extraordinary really, but in the six weeks since Turnbull signed off on the application from Gunns Ltd, bankers to the mill are dithering, while the builder doesn’t think it will go ahead.

While Gunns chief executive John Gay has been looking over his shoulder threatening court action against environmentalists, he should have been looking straight ahead, because some stockbrokers have been losing faith in the company and are now arguing the mill could be a flop.

The backlash against Gunns from inside the market is based on fears that current high pulp prices cannot be sustained; forecasters believe pulp prices will begin a steep plunge in two year’s time, just as the mill is set to open.”

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