Page 11 - Packaging News Sep-Oct 2020

September-October 2020 | www.packagingnews.com.au INDUSTRY INSIGHT | PAPER & BOARD 11
RATIONALISATIONS ADD NEW VALUE
The creation of Opal from the merger of Australian Paper and Orora’s fibre busi- ness was, in many respects, a long overdue re-merger. The businesses, now owned by Japan’s Nippon Paper, were previously integrated within Amcor prior to a demerger in 2000.
This rationalisation integrates Australian Paper’s supply of virgin linerboards, sack kraft, and other packaging papers, with Orora’s recycled paperboard capacity and extensive conversion and distribution net- work. Strong in corrugated boxes, domi- nant in industrial sacks, and significant in other fibre packaging formats, Opal was an overdue creation.
Opal is in a stronger position than the separate operating businesses were. In par- ticular, for Nippon Paper and its Australian Paper unit, it cements an Australasian pivot towards packaging. In that regard, they continue to follow New Zealand’s Oji Fibre Solutions. Oji manufactures corrugated boxes in Australia from supplies it delivers from its manufacturing facilities in New Zealand.
When it bowed to the inevitable end of newsprint manufacturing at its Albury mill, Norske Skog might have been expected to shut the facility entirely, dismantle the woodchipping plant, the pulp mill, and the paper machine. Instead, it ended its opera- tions entirely and sold the facility to Visy.
At first blush, that might suggest Visy was getting into the newsprint sector just as the sector enters its death throes. Not so. Globally, the mills being repurposed to sup- ply expanding demand for corrugated boxes and similar packaging are mainly retired newsprint mills.
Visy has not announced any specific plans for the Albury facility, but its acquisi- tion provides it with options that include joining the growing list of packaging giants that have converted newsprint machines to make recycled grades for corrugated boxes.
That it also acquired access to an annual supply of softwood fibre reasonably adja- cent to its fibre-hungry Tumut mill was doubtless also a driver of the Albury mill transaction.
It may not be the case just yet, but the Albury mill acquisition places Visy in prime place should it decide to add capacity to the domestic market. The pandemic will likely slow consideration of that option. In part that is because of general demand uncertainties, but also because net overseas migration for at least 2020 and 2021 will not add their typical 175,000 people per year to the Australian population.
CONSIDER THE BOX
There is a reason corrugated boxes are ubiqui- tous in the Australian economy, and indeed worldwide: they work. Protecting goods for transfer from business-to-business and increasingly from business-to-consumer.
Relatively light, made from renewable resources, easily recycled and even reus- able, corrugated boxes do, despite their obvious advantages, face their challengers. The means by which they have maintained their competitive edge has been the con- tinued emphasis on reducing the weight and the cost of boxes on an almost continu- ous basis over the last two decades.
Light-weighting of the corrugated box has come in phases, usually made possible by the latest technology installation, gener- ally in a new or significantly upgraded
mill, or as a result of other significant tech- nological innovations.
By bringing corrugated box weights down, the local producers have been able to deliver more boxes per tonne of board, allowing them to maintain cost structures that make Australian corrugated boxes cheaper than in some other developed countries.
None of us should be under any illusions about the challenges ahead. The Australian economy is in a deep recession and the road to recovery is difficult and uncertain. Consumption of many products will be suppressed for a number of years.
The factors set out here are what makes the fibre packaging sector quite different to some others. Its growth is not assured over the coming year – what is certain right now? – but it is more likely to grow than contract. In the cur- rent financial year, we expect to see modest consumption growth for corru- gated boxes – but that depends entirely on the shape and quality of the recovery from the pandemic.
When the corrugated box sector does grow again, it seems certain local produc- tion will continue to dominate supply.
Tim Woods is managing director of IndustryEdge, Australia’s leading fibre- packaging market analysis and consulting firm. IndustryEdge provides subscription data, market intelligence, and related busi- ness services. www.industryedge.com.au
GROWTH IS FORECAST FOR FIBRE PACKAGING BY MATERIAL VOLUME
Each year, in its annual Pulp & Paper Strategic Review, IndustryEdge provides demand forecasts for the coming five years, for all major grades of paper and board in Australia and New Zealand. The annual review will be available to subscribers in early October, but preliminary growth estimates for 2020-21 compared to 2019-20 are set out below:
• Corrugated box consumption +0.5 per cent to +1.0 per cent • Folding carton consumption +1.0 per cent to +1.5 per cent
• Sack & bag consumption +2.2 per cent to +3.0 per cent