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(A note to readers: I will be keeping readers of PaperMoney up to date with what is happening in our industry in Australia, New Zealand, and, from time to time, our near neighbors in Oceania.)

As with North America and Europe, the headlines over recent years have seemed to provide relentless evidence that the industry is in terminal decline, with the global financial crisis the final nail in the coffin. This finality seemed to be confirmed by PaperlinX with their recent announcement that no buyers could be found for their mechanical papers mill at Wesley Vale and their fine paper mill at Burnie, both in Tasmania. Wesley Vale has been shut and Burnie closes forever on June 30.

What is left of the industry also has changed significantly. PaperlinX last year formally signaled their exit from paper manufacturing with the sale of their Maryvale and Shoalhaven mills to Nippon Paper. Some years ago, Fletcher Challenge sold their New Zealand and Australian newsprint mills to Norske Skog. Perhaps Fletcher Challenge predicted future trends better than others!
International Paper also gave up a presence in this part of the world after considerable capital expenditure at the Kinleith mill in New Zealand, selling out to the privately owned Rank Corporation. At least that was a New Zealand company. Even Amcor, which just a decade or two ago saw itself as a papermaker to the World, has been transforming itself so that papermaking represents only a very small part of its overall business.

Capacity rationalization has been the catch cry of the new order of business. Amcor closed its Spearwood mill in Western Australia and announced that the Fairfield mill in metropolitan Melbourne will close in a couple of years. Norske Skog shut down PM1 at its Tasman mill, Merino Tissue Company went out of business in Brisbane, KCC shut PM1 at its Millicent mill, and SCA shut PM1 at its Box Hill mill.

And it has not just been mills, but also the infrastructure that supports the industry. Both companies making machine clothing have closed their manufacturing facilities in Australia and now all clothing is imported.

But the statistics, in fact, show that it has not been all downhill. The industry in Australia consists of more than 440 enterprises directly employing nearly 19,000 people. The industry generates around AUD 12.6 billion in domestic demand, produces total value added of about AUD 2 billion, earns more than AUD 1 billion through exports, and imports nearly AUD 3.5 billion in goods.

Reference to the authoritative Pulp & Paper Strategic Review for 2009, published by Industry Edge, also shows a more positive picture, or at least a less depressing situation. Despite the fact that 2008-2009 was a difficult period because of the global financial crisis, consumption of paper and paperboard over the decade reached a modest 1.0% per annum growth (against an average annual GDP growth of 3.0%).

Even newsprint consumption has grown, albeit by a microscopic 0.2% per annum on average over the decade, but production actually increased by 1.5% per annum. Coincidentally, this is the same net growth rate recorded by tissue products. Tissue production increased 0.6% per annum.

Printing and communication papers recorded a surprisingly strong growth of 2.3% per annum over the decade, somewhat ahead of a production increase of 1.5% per annum.

Demand for packaging grades increased by 0.6% per annum over the decade. Production increased by 2.4% per annum, resulting in a significant increase in exports.

For New Zealand, both production and consumption increased by 1.3% per annum for all grades.

To put this all into perspective, the annual consumption of paper and paperboard in Australia is approaching 4 million metric tons in a "normal" year, but annual domestic production is only a little more than 3 million metric tons.

New Zealand, on the other hand, produces more than it uses. Typical annual production is in excess of 900,000 metric tons per annum (tpa) and annual consumption is a bit more than 800,000 tpa.

So it seems that despite the negative headlines, the industry in this part of the world is not performing too badly. Yes, there have been closures, but significant new capacity also had been added in Australia.

Most significantly, Visy has not only built a greenfield kraft liner mill (yes, kraft liner), but doubled the capacity recently to about 700,000 tpa.

Other capacity additions in recent years include a major rebuild and expansion of the Maryvale bleached hardwood pulp mill, a 35,000 tpa tissue mill for ABC Tissue, a 50,000 tpa tissue machine for KCC, and major rebuilds at Albury newsprint mill, Petrie Cartonboard mill, Maryvale PM1, and a new thermomechanical pulp facility at Boyer mill. In addition, after more than a decade of deliberation, Amcor has finally started constructing its big new AUD 500 million containerboard machine at its Botany mill in Sydney.

At the 64th Annual Appita Conference in April 2010, Senator Kim Carr, the federal minister for Innovation, Industry, Science, and Research, released the outcome of a strategic review of the Australian pulp and paper industry. Despite modest growth of the industry over the past decade, the report concludes that the industry is at a tipping point and significant positive actions will be needed to prevent the industry from slipping into an abyss.

These actions include the need for appropriate policy in areas such as plantation investment, renewable energy, trade, skill development, infrastructure, and investment facilitation. These will build on natural advantages and assets of Australia (and New Zealand) to provide a platform for a sustainable pulp and paper industry into the future. These include vast plantation wood resources, generally competitive energy costs, and skilled labor.

We'll look at the implications of the strategic review in a future column, but readers with a pressing interest can find the report at www.innovation.gov.au/Section/Industry/Pages/PulpandPaperIndustryStrategyGroupFinalReportMarch2010.aspx.

We'll also examine the prospects for some of the high profile projects that have been well publicized, but have not quite got there, such as the Gunn's pulp mill (now spun off as Southern Star Corporation) in Tasmania, which if it proceeds will be a world-scale bleached eucalypt pulp mill.

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