Special Edition: Disruption unpacked for Australian and New Zealand paper and board industries

MELBOURNE, AUSTRALIA: Friday 17th April 2020. As the impact of the pandemic continues to reverberate throughout societies and economies, IndustryEdge has issued a mid-month special edition of its flagship Pulp & Paper Edge. Delivered in a ‘fast-to-market’ slide-deck format, the edition addresses the significant questions asked by many of the firm’s subscribers and clients.

The following is an edited extract from Edition 176 (April 2020) of Pulp & Paper Edge.

The International Monetary Fund (IMF) expects Australia’s economy to shrink 6.7% in 2020, with unemployment averaging 7.6% over the year. The global recession will be the worst since the Great Depression, with the world economy decreasing by 3%, but by more than 6% on average among the advanced nations.

Forecasting from the IMF suggests Australia’s downturn (-6.7%) will dwarf other global economies, the USA should contract -5.9%, Japan (-5.2%) and the United Kingdom (-6.5%). Most of the economies should bounce back in 2021, but how fast is another question.

Unemployment in February remained stable at 5.1%, but is forecast to hit 10% by June. That will eat into slumping consumption across the economy.

Local industry associations have pointed to printed material imports (valued at AUD938M on a free-on-board basis for the year-ended February) as one of the opportunities for import replacement.

But it is hard to go past fibre’s role in delivering personal protective equipment – masks, gowns, wipes and so on – for a real self-sufficiency opportunity.

Tissue companies stepped up production to meet the rush on toilet paper. They and others, including importers, can sustain the nation’s hygiene needs. Despite some media attention, the Australian industry has been able to assure the public the imported pulp (23,132 tonnes in February – right on the monthly average) from which it makes tissue and other products comes from Brazil, Canada and New Zealand. Supply lines are not yet disrupted.

The disruptions are compounding. New Zealand’s logs are not moving to China due to the country’s lockdown, but Australia’s logs and woodchips are still flowing to export markets – but woodchip exports have slowed to a few vessels per month.

That is understandable because pulp inventories in China are high, even as recovered paper shipments from both Australia (mainly to China) and New Zealand (mainly to Indonesia)  continue.

Expect further inventory management for raw resources in coming months.

Bulk trade aside, shipping containers are in short supply right now. That is impacting some exports, a situation that will continue as the bottle-neck ripples to the edge of the global trade pond.

Printing and communication paper imports continue to decline, but the pandemic effect was not especially evident in February. March imports will be another matter.

Production of newspapers and catalogues have slumped in recent weeks. The plain fact is that like some High Street retailers, plenty of moth-balled publications will not return, especially smaller and regional news mastheads.

Whether in Australia or New Zealand, we are concerned for the future of Coated Woodfree (CWF) papers. Markets for these grades may be collapsing. If they do, they will not recover.

With home deliveries of goods, and food (and more food) a key element of social distancing, packaging businesses are all busy at a household level. They are busier still at a wholesale level.

Supermarkets are operating at near double-time, so are their suppliers and the packaging producers are working 24/7 to keep up-to-date. At least to the end of February, they had also continued their exports.

There will be further disruptions, but for now, activity continues in most paper and packaging sectors, albeit at reduced levels.

 

This item was first published in Pulp & Paper Edge in mid-April 2020 (edition 175)

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