Page 18 - Print21 Nov-Dec 2020

Paper Prospects
...continued from page 16
Australia as a stable, transparent market and they’re conservative investors,” he said.
“They’re not here to make a
quick buck. They bring a level of sophistication and stability to the market and are prepared to invest. At this stage it’s by acquisition but they will invest in production when it’s appropriate.”
The Japanese have also embraced the Australian corporate culture, what Woods terms the DNA of the system. This is the trend of having two major players dominating in any one sector along with a number of smaller actors; think Woolworths and Coles, Qantas and Virgin, News Corp and Nine; even in the printing industry, Ovato and Ive. (Were it not for the government’s four pillars policy, undoubtedly we would have two major banks instead of the current four.)
The most significant Japanese takeover happened in 2009 when Nippon Paper Industries bought Australian Paper, owner of the Reflex brand, from the PaperlinX basket case. Last year the business
Data centric: Tim Woods, Industry Edge
Packaging is different
Industry Edge also tracks details of imports and exports for packaging grades in Australia and New Zealand. As much of the printing industry is coming to realise, the labels and packaging sector has
a different dynamic and destiny to communication printing. The statistics tell the story.
For the first time in three years, P&PE reports that imports of packaging and industrial paper grades declined, but under markedly different circumstances from the printing and communication sector. Despite this year’s 9.6 per cent fall, the year-on-year trend since 2010 is one of import growth at 2.3 per cent, from 251,000 tonnes to 314,000 tonnes. According to Woods, this year’s fall was due to a singular combination of events.
“Lingering drought was met by devastating bushfires and ultimately joined by the novel coronavirus, Covid-19, to complete a triple-set
of disruptive factors across the financial year. Each of these events provided a particular disruption,
arise because Australia’s population growth will be stagnant, thanks to the absence of migration. That will impact demand and therefore both local and imported supply. Saying much more than that requires a crystal ball,” he said.
A trusted source
Consumption projections for the next five years are included in Woods’ current (29th) issue of
Pulp & Paper Strategic Review, the definitive dataset for the printing and packaging industries. Notably the Review, P&PE, and the Industry Edge organisation as a whole are free of conflicts of interest. He is scrupulous in ensuring they are not only independent but seen to be too.
“We don’t take ads and we won’t. We’re totally data centric and we have to be crystal clear about our advice. I can tell if someone wants real strategic advice or is simply looking to have their opinions verified. Economics is a dismal science but we’re always looking for the kernels of opportunity,” he said.
While Woods surveys the sector with a quizzical eye, he is not a doom
was renamed Opal Australian Paper before buying its main customer
(and erstwhile subsidiary), Orora Fibre for $1.72bn. This transforms
it into a fully integrated cardboard box manufacturer as well as paper manufacturer. It allows it to face off against Anthony Pratt’s Visy, as one of the two main packaging producers in Australia, with Oji Group in New Zealand, owned by the eponymous Japanese pulp and paper corporation, as the complementary third.
The same dynamics are at play in the paper merchanting space, where the two major businesses now also belong to Japanese paper traders. Ball & Doggett, the largest merchant was bought by the OVOL Group, a subsidiary of Japanese corporation, Japan Pulp & Paper starting in
2017, while Kokusai Pulp & Paper (KPP), another major Japanese paper distributor, bought out Spicers, the second largest local merchant for $146.7 million in July.
“There are strengths and limitations in this situation. It’s likely to be good for the local market as they are all stable long-term owners who are not trying to make quick growth for an IPO,” woods said.
“They have the resources to invest when required and will also look after the long-term interests of the market. They bring a level of market sophistication that will serve the local industry well.”
especially to end markets such as food. The impacts were both domestic and export,” he said.
Recognising trends is important but predicting the future, especially now, is another matter. The current climate is unlike any in recent memory, and it would take extraordinary egoism to predict what the world will look like on the other side of the pandemic. Hubris is not a condition that afflicts the unflappable Woods.
“It is difficult to get a handle on the markets of 2020-21. We can
look forward all we like, but the sense that our biggest economic challenges, in this case consumption, are yet to come, is difficult to escape,” he said.
“Despite occasional shifts up and down, the long-term declines are now locked in.”
“What I observe is that fundamentals will return markets to normalcy at some point. Leaving aside specific demand profiles for grades of paper, what will drive imports to Australia are relative exchange rates, the size of local markets and whether there is capacity for them to be supplied locally and the extent of pain being felt elsewhere in the world.
“On local markets, we can expect them to stagnate, in aggregate, over the next few years. That will
merchant by any means. Recognising there are few market signs to guide participants in the use and viability of print he projects real world experience onto events and their likely results. The decision of Coles to cease circulating its multi-million- dollar catalogue is a case in point.
“It’s difficult to gauge asymmetrical results and it’s hard
to prove the negatives. But are they just cutting costs or are they losing
a communication channel to a lot
of their customers? It depends on how long the pandemic lingers. Behaviours can become locked in and now we’re looking towards Christmas without catalogues. You have to ask, is it a good thing for Coles?” he said.
As a respected researcher, Woods finds himself ever more in demand
to work on upcoming projects as an analyst by the industry’s leading corporations. He is fiercely protective of the reputation of Industry Edge as a confidential consulting organisation. He quotes with relish one of his heroes, the Elizabethan Sir Francis Bacon, the founder of the English secret service: He that would keep a secret must keep it secret that he hath a secret to keep.
No matter what the future may hold for the printing as well as the broader packaging and pulp sectors, participants can confidently rely
on Industry Edge and Tim Woods for sound reality checks to guide business decisions. 21
18 Print21 NOVEMBER/DECEMBER 2020