As local packaging giant, Amcor, enters the end game for its Petrie recycled coated cartonboard mill in Queensland, one of the factors that impacted the site’s profitability – the strength of the Australian dollar – is looking at a turnaround, casting doubt on the rationale behind the closure, Pulp & Paper Edge reports.
In February, Amcor said it would cut around 160 jobs with the closure of its Petrie recycled paperboard mill in Queensland, following the facility’s struggle to cover it’s own operational costs amid falling earnings and international competition in the sector.
In its half-yearly financial report, published on 18 February, the packaging giant said it would close the Queensland plant (pictured) by the end of December this year.
According to the latest issue of Pulp & Paper Edge – published by Industry Edge – the irony of the closure, which was driven in part by the sustained high value of the Australian dollar, is the decline in the exchange rate since the closure announcement was made. By the time Petrie closes permanently at the end of the year, it is expected the Australian dollar will have further devalued.
IndustryEdge has long considered that at A$1.00 to US$0.80, or thereabouts, the Petrie Mill and Amcor’s supply of coated cartonboard from it would be a profitable business. Whether the Australian dollar will depreciate that far by the end of the year remains to be seen.
After production ceases, the mill will continue to convert and finish its cartonboard stocks before they are delivered to fulfill final customer orders. The full closure of Petrie is not expected until the end of 2013, when final supplies are due to be delivered.
Customers with whom IndustryEdge has contact, continue to sing the praises of Amcor’s team for the professionalism of their delivery and the quality of their products and service.
Some customers have suggested they are already finding managing relationships and issues with new suppliers far more challenging, especially as the importers are viewed as having ‘less skin in the domestic game’ than Amcor had.
As the chart (pictured above right) shows, Australia has a long history of coated cartonboard imports filling a domestic supply gap.
While imports have played their part to date, it is domestic supply that has supported some of the largest and most brand dependent businesses in Australia. This seems to apply especially to those involved in food supply businesses where quality, hygiene and consumer safety considerations are interwoven with brand and identity.
Buyer concern has turned to the relatively small size of the Australian market and the potential for importers of cartonboard to move in and out of the market as conditions change.
The major supply nation continues to be New Zealand, with shipments coming from the Reynolds Group’s Whakatane Mill (formerly owned by Carter Holt Harvey). The USA and Korea both have solid supply positions, but in different sub-grades with an emphasis on different end-uses.
These long term and consistent suppliers are considered stable and reliable. It is new entrants about whom most sleep is being lost and in respect of whom greatest assistance is being sought.
This month sees Pulp & Paper Edge celebrate its 100th issue, and features an in-depth interview with IndustryEdge founder, Robert Eastman and former AusNewz publisher, Brian Stafford.