- Rod Sims, chairman ACCC.
A major consolidation of the Australia cutsheet paper market got the green light from the ACCC and the thumbs up from industry guru, Tim Woods.
According to Rod Sims, chairman of the ACCC, there was no sufficient reason to block Australian Paper's proposed purchase of Edwards Dunlop Office Products from BJ Ball. Though market participants had expressed concerns that the acquisition would limit the number of copy paper suppliers in Australia, he believed there was a large enough import presence to ameliorate market operations.
"Despite the acquisition resulting in the removal of a close competitor, the majority of market participants considered that there were a number of potential alternative distributors of copy paper in Australia, and that importers of copy paper would be a strong constraint on Australian Paper," Sims said.
"Copy paper is a low margin commodity product business. More than half of Australia’s copy paper is currently imported into Australia. If Australian Paper attempted to increase prices after the acquisition, importers/distributors would face few significant barriers to entry or expansion," he said.
Australian Paper, which owns Reflex, is the only manufacturer of copy paper in Australia. The company has promised not to include any exclusivity restrictions in proposed deals with EDOP's largest copy paper customer group. "Under this arrangement, customers of EDOP remain free to source copy paper from whatever sources they choose," said Craig Dunn, Senior Marketing Manager Sustainability at Australian Paper.
In a statement, Australian Paper said it would honour EDOP's existing commercial arrangements to ensure a smooth transition. "This opportunity is good news for Australian manufacturing and the thousands of local jobs that Australian Paper proudly supports," AP said. "Australian Paper is committed to demonstrating the value of its local manufacturing offer to all new customers, and will work hard to maintain broad customer support as it continues to strengthen its domestic office paper business."
Industry guru Tim Woods, of Pulp & Paper Edge, says the EDOP purchase could lead to an increase in the use of locally-manufactured paper. "What we’re experiencing in this case is yet another instance of rational consolidation of a market that, for too long, was focused on volumes of supply rather than quality of supply and service," Woods said. "I think it emphasises the service capabilities that come from domestic producers operating as market leaders."
"What this is likely to mean is more domestically produced paper consumed in Australia, with the likely impact being lower imports and lower exports," he said.
Craig Dunn said the deal would give AP the opportunity to sell more of its production domestically rather than having to export it. "It gives us the opportunity to increase our share of the Australian market by transitioning the paper that’s currently being imported to the Victorian paper mill at Maryvale," he said.
The ACCC's review, which focused on Australia's supply of copy paper, included consultations with paper suppliers, customers and buying groups, including current and potential Australian Paper competitors. It found few differences between paper from different suppliers, with many customers regularly switching between manufacturers.