Pulp, Paper and Paperboard Manufacturing in Australia
Industry Report
Pulp, Paper and Paperboard Manufacturing in Australia
The Pulp, Paper and Paperboard manufacturing industry is anticipated to continue experiencing difficult trading conditions over the next five years.
OVERVIEW
Industry revenue is influenced by demand fluctuations from domestic downstream markets in the following industries: paper product manufacturers, printing industries, paper product wholesalers, food and beverage manufacturers and publishing industries.
Demand for printed reading materials has declined over the past decade due to the availability of electronic and online alternatives, this has limited demand for major players supplying this market.
Increased awareness of environmental issues can negatively affect consumer demand for paper products. Industry operators have responded by upgrading facilities to reduce water usage, increase renewable energy usage and reduce the industry's carbon footprint. Major players Visy and Opal have embraced the use of recovered materials such as pulp and recycled paper and paperboard products to replace inputs that would otherwise be purchased from third parties. These efforts help to create a positive image for operators and the industry, supporting demand for industry products manufactured from recycled materials.
The value of the Australian dollar influences industry demand in international markets. A depreciation of the Australian dollar reduces the cost of industry products for overseas buyers, typically leading to a rise in demand for industry exports.
OUTLOOK 2020 - 2025
Slowing domestic demand and ongoing product substitution in downstream markets are projected to place further downward pressure on industry revenue. The industry’s operators are expected to increase their focus on export markets and produce higher value-add products, such as recycled paper and paperboard, to help offset declining demand.
Demand from newspaper and book publishers will continue to fall as circulation and readership continues to decline due to rising competition from digital media and ongoing pressure from electronic devices. Additionally, demand from printing services is projected to decrease as Australian offices continue to shift towards paperless operating models.
Food and beverage manufacturers represent an important downstream market and demand from this market is anticipated to increase. The construction sector is forecast to grow, boosting demand for paperboard used to produce gypsum plasterboard products and other paper-based construction materials.
Recovery from COVID-19 is anticipated to support profit margin growth, as operators can increase output in response to higher demand from downstream markets, reducing per unit costs of production. Increased investments to reduce energy consumption is also expected to support industry profit margins.
International paper manufacturing sectors are anticipated to expand, which represents both an opportunity and a threat to industry operators. Export volumes are projected to increase as China, New Zealand and the United States are anticipated to continue to generate significant demand for industry exports. A projected appreciation of the Australian dollar is forecast to support rising import penetration, challenging local players. Additionally, the quality of imported products is expected to improve over the period, as paper-producing countries upgrade their technology and increase capital investments. As a result, competition from imports is expected to rise.
The industry's major players are anticipated to upgrade facilities to increase productivity and efficiency. These developments are anticipated to deliver greater economies of scale to the firms and strengthen production output over the next five years. Furthermore, both companies have announced plans for further expansion over the period. Visy announced that it intends to invest $2.0 billion over the ten years through 2027-28 in the domestic market, creating approximately 5,000 jobs.
Source: Ibis world | pulp, paper and paper board manufacturing in Australia, June 2020
