Import disruptions minimal to date: COVID-19 Update

[Up to date at 5pm, AEDT: Wednesday 25th March 2020]

At the time of writing IndustryEdge was not aware of any significant import supply disruptions in the paper and paperboard sector in Australia. The  focus is on imports of Printing & Communication papers and the trade in Packaging & Industrial grades.

The chart below shows the value of total imports of these grades, by region since January 2019. The blue line includes the total value of these imports in US dollars.

What the chart accentuates is that imports in January 2020 were relatively strong on a value basis, albeit after a lacklustre December. At AUD109.4M, January 2020 saw imports 5.6% higher than in January 2019. Perhaps more telling is that in US dollars, the value of imports was down 2.3% over the same period and amounted to USD73.5M in January 2020.

It is less obvious, but if it were not for January 2020, the year-long decline in the value of imports – in both Australian and US dollars – would be more evident.

 

Value of Australia’s Printing & Communication and Packaging Imports by Region: Jan ’19 – Jan ’20 (AUDM & USDM)

Source: ABS & RBA

 

Drilling into the import data in more detail, we can see below that over the same thirteen months, the proportional value of Printing & Communication paper imports diminished marginally. This was despite higher imports of Newsprint in December 2019 and January 2020 following the closure of the Albury mill.

 

Import Value of Printing & Communication v Packaging Imports: Jan ’19 – Jan ’20 (%)

Source: ABS

 

Export value declined over 2019

In aggregate, the value of exports declined over the last year. In January 2020, exports were valued at AUD76.1M or USD51.2M. A year earlier, exports in each currency were valued 21.8% and 27.6% higher. Exports are dominated by Packaging & Industrial grades.

The chart below shows that export values declined very similarly in both Australian and US dollars, recording a 99.0% correlation over the thirteen months, making it most likely export volumes were lower. We will explore this issue in an upcoming edition of Pulp & Paper Edge.

 

Value of Australia’s Printing & Communication and Packaging Exports by Region: Jan ’19 – Jan ’20 (AUDM & USDM)

Source: ABS & RBA

 

While there are some evident trends from 2019 and January 2020 trade data, none appear to go to the impact of COVID-19. In short, we will need to see the February data – and possibly the March data – to identify any significant changes in trade arising from the novel coronavirus.

 

Merchants report delivery lags

Importers of Printing & Communication papers, including the main merchants have reported a three to four-week lag in supply due to production and freight disruptions. However, each of the major merchants, Ball & Doggett and Spicers, indicated they are able to meet all customer demand.

Given the general economic slowdown that was already underway, our expectation is that most merchants were over-stocked to a greater or lesser extent. The slowdown is unlikely to impact them significantly in the short term.

The situation is not so rosy for future orders. We are aware that orders involving significant volumes of imported paper have been cancelled, with some printers also seeking additional payment terms from suppliers. Printing firms will be among those feeling the pinch.

Looking a little further down the track, production inputs, including spare parts, are beginning to be under stress. The reliance on supplies from China for most equipment spares mean there are already delays, with more anticipated in coming months. At the time of writing, IndustryEdge had not been advised of any significant parts-related production or converting outages.

 

This item first appeared in Pulp & Paper Edge (Edition 174) in March 2020.

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