Red Stag Timber is promising its Rotorua expansion will lead to a 10 percent drop in the price of timber.

The company is planning to spend $60 million building the Southern Hemisphere's largest sawmill, capable of putting through 1.2 million tonnes of logs annually.

Red Stag group CEO Marty Verry says, while smaller sawmills have been closing in the last 10 years, it's down to the larger and more efficient operations expanding.

He says the increased competition from their expansion is good news for customers, as it could lead to the price of timber falling up to 10 percent.