Buying Assetts and Inventory Agreement - PDF by nhp45843

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									                                               October 2004 Edition 3




                       Peter Sutton, Managing Director, Amcor Australasia, is restructuring Amcor
                       Fibre Packaging and Paper and Paperboard to drive better returns from current
                       assetts. However, as discussed with IndustryEdge, investment will continue in
                       these core businesses as part of Amcor’s long-term committment to the fibre
                       packaging sector. See Page 3


Price Movements More Emphatic                                          97% of capacity. This has resulted in a build of inventory, with
                                                                       stocks of hardwood pulp being greater than six weeks supply,
Pulp prices peaked at the end of June, NBSK at USD662/t
                                                                       and for softwood greater than five weeks. However, inventories
and BHKP at USD558/t, with the concensus being that prices
                                                                       of softwood pulp are rising faster than for hardwood, which
would fall slightly, and then probably flatten out depending on
                                                                       may have some price ramifications in the future by motivating
the balance of global demand and supply.
                                                                       producers to drop softwood pulp prices at a faster rate. The
It has been difficult to predict pulp prices too far out as there are   current levels of softwood pulp inventories has not, however,
a number of new external factors that are having an impact that        forced this situation yet.
were less evident a few years ago. However, from the chart it is
                                                                       The last time stocks were so high was in early 2001, when
evident prices are falling, with no indication of a slowing in the
                                                                       prices were falling from a record peak, as evident on the left
rate of decline in the short-term.
                                                                       side of the chart.
   Weekly NBSK & BHKP PIX Prices: 25 Feb ‘03 - 12 Oct ‘04
                                                                       The wider gap between NBSK and BHKP has now been
        700                                                            established for the best part of twelve months. Based on
                                                             NBSK

                                                             BHKP      historical evidence, the gap was initially considered to be a
        650
                                                                       short-term phenomenon, however, since the price peak in late
                                                                       June, NBSK has fallen 9.4% and BHKP by 12.5%, increasing
        600
                                                                       the disparity between the prices. With softwood pulp stocks
USD/t




        550
                                                                       increasing at a faster rate, it is anticipated the trend will change
                                                                       and the gap will start to close.
        500
                                                                       As discussed previously in Pulp & Paper Edge, a reasonably recent
                                                                       factor increasingly impacting global pulp prices has been the
        450
                                                                       rapid emergence of the Chinese market. In order to slow the rate
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                                                                       of growth in the Chinese economy there have been restrictions
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                          Weekly                                       introduced on trading operations, namely reduced funding and
                                                                       higher rates for letters of credit. A factor which may start to apply
   Source: FOEX
                                                                       the breaks to the Chinese economy, and particularly impact pulp
There has been a slight rise in shipments since July/August,           and paper mills, is the increasing number of prolonged blackouts
from 88% of capacity to 91%, while the level of production             caused by insufficient power supply.
during the northern late summer has continued strongly, being
The rate of increase in Chinese demand for pulp has been high, with       Major Market Pulp Capacity Changes 2004/07.
imports for the first seven months in 2004 being more than 40%                      Company/Mill          Grades      Effecive Date   000's tonnes
                                                                          Bahia Sul
higher than for the same period last year. The impositions introduced     Mucuri, Brazil                  BEK            2004            60

to slow the economy have not become evident yet in the pulp trade         Norske Canada
                                                                                                         NBSK          Q1 2004           (80)
                                                                          Elk Falls, B.C.
to China, as the majority of imports over the last few months would       UPM-Kymmene
                                                                                                         NBSK          Q1 2004          120
                                                                          Wisaforest, Finland
have been negotiated and arranged early in 2004. The full impact of
                                                                          Arauco                          BEK          Jan 2004          260
trade restrictions can be expected to show in the import statistics for   Valdivia, Brazil               Radiata       Jan 2004          340
                                                                          Cenibra
the final quarter of 2004.                                                                                 BEK          May 2004          110
                                                                          Belo Oriente, Brazil
                                                                          Zellstoff Stendal
                                                                                                         NBSK          Q3 2004           550
We saw pulp prices reach a peak in mid 2004, and as a                     Stendal, Germany
                                                                          St. Anne Nackawic Pulp Co.
consequence Chinese traders holding off buying in anticipation                                           NBHK         Sept. 2004        (260)
                                                                          New Brunswick, Canada
                                                                          APP Gold Hainan
that prices would decline. In addition imports have still been                                            BHK          Q4 2004          1000
                                                                          Hainan Island, China
arriving from previous deals. However, now that prices have               UPM - Miramichi
                                                                                                         NBSK        31 Jan 2005
                                                                          New Brunswick, Canada                                         (240)
fallen and Chinese traders want to re-enter the market, the               Mondi Ltd
                                                                                                          BEK         Early 2005         145
introduced trading restrictions will make it harder for them. As a        Richards Bay, South Africa
                                                                          Ilim
                                                                                                         NBSK          Q3 2005           100
consequence, any hope pulp producers had in waiting for China             Ust-Ilimsk, Russia
                                                                          Veracel
to push global demand up, and hence a price recovery, may not                                             BEK          Q3 2005           900
                                                                          Eunapolis, Brazil
                                                                          Rottneros                       Aspen
happen, or will be limited at best.                                                                                    Q4 2005           100
                                                                          Utansjo Bruk, Sweden           BCTMP
                                                                          As Estonian Cell                Aspen
Another factor holding off re-entry by Chinese traders will                                                            Q1 2006           140
                                                                          Kunda, Estonia                 BCTMP
                                                                          Lwarcel
be there is no indication the rate of fall in the price of pulp is                                        BEK          Q1 2006           90
                                                                          Lencois Paulista, Brazil
slowing, therefore since some buyers will have been hurt when             Arauco                         Radiata/
                                                                                                                      Mid 2006           850
                                                                          Itata, Chile                    BEK
prices were high, it is unlikely they will compound there losses          APRIL
                                                                                                          BHK          Q3 2006          (300)
                                                                          Riau, Indonesia
by buying big when prices are falling.                                    CMPC
                                                                                                          BEK         Sept. 2006         780
                                                                          Nacimiento, Chile
Spot NBSK prices in China in September were USD470-500/t,                 Portucel/Soporcel
                                                                                                          BEK          Q3 2007          (350)
                                                                          Setubal, Portugal
which is lower than for any period during 2004. In December 2003,         Bahia Sul
                                                                                                          BEK          Q3 2007          1000
the spot NBSK price was USD490-510/t. Spot prices for eucalyptus          Mucuri, Brazil
                                                                          United Fibre System
                                                                                                        Bl. Acacia       2007           600
in September was USD435-450/t, the lowest since January.                  South Kalimantan, Indonesia

Pulp supply over the next three years is set to increase, which
                                                                          Source: TerraChoice Market Services Inc.
will limit long-term opportunities for demand-driven price
increases. The following table lists new pulp mills, both certain         In Europe, the price rises have not been as successful yet, CWF

and intended, between 2004 and 2007.                                      (100gsm reels) were Euro723/t in second quarter, then Euro725/t
                                                                          in August. However, producers are determined to push through
At the end of 2003, world bleached market pulp capacity was
                                                                          rises of 5 to 8% in the fourth quarter. Demand in Europe is definitely
36.6 Mtpa. From the table it can be estimated that it will increase
                                                                          strengthening, which will assist the intended rises.
by at least 10% within three years.
                                                                          Recently announced price increases in Australasia have been met
Paper Price Rises
                                                                          with resistance, but if merchant costs from overseas rise, and there is
The success of announced paper prices in Australia has been               further resistance to price increase announcements, then merchants
disappointing for the merchants. The term ’disappointing’                 and printers will need to take some tough decisions.
may be an understatement.
                                                                          Working against the intent of paper producers to raise prices
The difficulty faced by merchants is that paper prices overseas            are the falling pulp prices. This stage of the pulp price cycle has
have started to be effective, thereby raising costs for the local         come at an inopportune time for producers, just when there is a
merchants. Price rises in the USA have started to flow through - as        concerted effort to raise paper prices. There is no denying there is
an example UWF (50lb reels) average price in second quarter was           a direct correlation between the two, and that lower pulp prices will
USD703/t, then in August reached USD 770/t.                               have a negative impact, however, rising energy costs have been
                                                                          sufficiently significant to offset some of the lower pulp prices.




Page 2
                    Amcor Australasia Driving Fibre Packaging Harder


Amcor Australasia floated off PaperlinX more than                   The restructuring to focus on core packaging assets continued
four years ago. This caused some concern by those                   with the sale of Amcor’s 50% interest in the Millicent tissue mill
interested in the pulp and paper sector that Amcor, from            in June 2002, to its joint-venture partner K-CA.
the global perspective, may have been moving away
                                                                    Share Price
from fibre based products towards PET and other forms
of modern packaging. However, Amcor Australasia still               The chart shows the Amcor share price since 1999/00, with a
has a strong commitment to fibre based packaging,                   clear indication that there has been a 25% loss in value during
including ongoing restructuring to drive better returns             the last twelve months.
from its existing facilities.                                        Amcor’s Share Price Movements: 3 Jul ‘00 - 12 Oct ‘04

Background                                                                       9.25

                                                                                 8.75
Prior to purchasing Associated Pulp & Paper Mills (APPM)
                                                                                 8.25
in 1993, Amcor already managed facilities with a combined
                                                                                 7.75
capacity for 900 ktpa of pulp and paper. After the acquisition of
                                                                     AUD/share




                                                                                 7.25
APPM, and the commissioning of Maryvale PM5, capacity rose
                                                                                 6.75
to over 1.5 Mtpa.
                                                                                 6.25
Leading up to 2000, Amcor had a virtual monopoly in the                          5.75
production of printing and writing grades, was dominant in
                                                                                 5.25
the production of corrugated container materials, the sole
                                                                                 4.75
producer of cartonboard and had a 50% interest in the
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Kimberly-Clark Australia (K-CA) tissue production facility at
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Millicent in South Australia. While this range of facilities and                                Week

products positioned Amcor at the top of the pulp and paper          Source: ASX
sector in Australia, it also created a wide range of operations,
                                                                    The major driver behind the strategy to consolidate assets and
some of which were not core to the packaging sector.
                                                                    increase returns has come from recognition by the company of
In 2000, Amcor de-merged its printing and writing paper             its very significant growth in size from acquisitions over a short
merchanting businesses and production facilities into               period of time and the need over the next two years to focus on
PaperlinX. However, it was not possible at the time to              maximising the performance of existing operating businesses.
separate the pulping and packaging paper machines (PM1,
                                                                    Over this period, the Australasian business has played an
PM2 and PM4) at Maryvale from the white paper machines
                                                                    important role by generating strong cashflow to assist the funding
(PM3 and PM5) due to the complexity of water supply, power,
                                                                    of new acquisitions, while at the same time achieving ongoing
drainage and other systems servicing all five machines
                                                                    performance improvement. In 2003/04, Amcor Australasia
and the pulp mill. As a consequence, PaperlinX, through
                                                                    recorded its fifth consecutive year of profit improvement.
Australian Paper, took ownership of the packaging paper
machines at Maryvale, with Amcor sweetening the offer in            Current Operations
the float by including a ten-year off-take agreement to be a        An article on page 8 of the September edition of Pulp & Paper
major customer of PaperlinX.                                        Edge informed readers of the restructuring of Amcor Australasia
In the de-merger, Australian Paper also assumed ownership of        from six divisions to four. Two of these divisions will be focused
the assets at Burnie, Wesley Vale and Shoalhaven.                   on the packaging paper and paperboard sectors.




                                                                                           Page 3
Fibre Packaging                                                         paper mills, Petrie cartonboard mill and Amcor recycling

Fibre Packaging Division, managed by Group General                      businesses. These are primarily the resource processing and

Manager Darryl Roberts, will consist of the Australasian                manufacturing operations.

Corrugated Box, Folding Cartons and Specialty Board                     The following table lists the Amcor Paper & Board Locations:
businesses. In essence, these businesses are the converting                         Buisiness                   Location              Region
operations for both corrugated materials and cartonboard                                            Botany
                                                                                                    PM7 (120) semi-chem fluting       NSW
and sales of the respective products.                                                               PM8 (130) linerboard
                                                                                                    Fairfield
The following table lists the Amcor Fibre Packaging Locations:
                                                                                                    60 ktpa DIP
                                                                        Packaging Paper Mills                                          Vic
     Business                    Location                  Region                                   PM6 130 ktpa linerboard,
                                                                                                    whitetop, plasterboard medium
                     Townsville, Rocklea, West End           Qld                                    Spearwood
                     Smithfield, Revesby                    NSW                                     55 ktpa semi-chem., linerboard,    WA
                                                                                                    unlined box board
                     Box Hill, Scoresby, Brooklyn            Vic
Fibre Packaging                                                                                     Petrie
                     Launceston                              Tas        Cartonboard                 Pulp 20 ktpa                       Qld
                     Athol Park                              SA                                     PM 140 ktpa coated cartonboard
                     Bibra Lake                             WA                                                                         All
                                                                        Recycling                   National Recycling Service
                                                                                                                                      states
                     Zillmere                                Qld
                     Botany, Enfield                        NSW
                                                                        Source: Amcor
Cartons              Moorabbin, West Heidleberg              Vic
                     Regency Park                            SA         The three packaging paper mills are situated in metropolitan areas,
                     Mount Wellington, Lower Hutt,                      however, Amcor has no packaging paper mill in Queensland,
                                                             NZ
                     Christchurch
                                                                        Packaging materials are shipped there from the other states.
Kiwi Packaging       Wiri, Hastings, Christchurch            NZ
                                                                        Botany, Fairfield and Spearwood slush up wastepaper and
Source: Amcor
                                                                        board for recycling back into corrugating medium and testliner
The market for corrugated containers is susceptible to a number of      or multiply. Kraftliner comes from Maryvale (Australian Paper)
factors, mainly the economy and the weather. The strength of the        under the ten year agreement. This arrangement does not give
economy is directly reflected in the level of shipment and consumption   Amcor the advantage of being integrated, such as Visy at Tumut,
of goods. However, the effect of drought on demand for corrugated       or control over kraftliner production. However, there is a very
containers can be reasonably significant. During extended dry            close working relationship between Amcor Paper & Board and
periods the loss of production of dairy, fruit and produce reduces      Australian Paper in maintaining specifications for production.
demand, however, the impact of this is often reduced by livestock
                                                                        Board rationalisation has been a constant process, with a
reductions at the same time and increased meat sales.
                                                                        reduction program in the range of boards implemented in
In 2000/01, new corrugators were commissioned in Sydney                 2001/02 being sufficient to off-set rising costs.
and Melbourne to increase productivity and quality.
                                                                        All three packaging paper mills are reasonably old, with a number
In the same year, the folding carton business was adversely             of projects to upgrade the Botany mill having been started and
impacted by the loss of a major tobacco account, which was              dropped, the most recent one being undertaken in 2003/04.
fortunately partially off-set by the increase in popularity of
                                                                        In contrast, the cartonboard mill at Petrie has a monopoly in
multipacks for alcoholic beverages. In 2002/03, improvements
                                                                        domestic production, but needs to compete against imports.
through restructuring of the folding carton business resulted in
                                                                        The mill has a record of good performance, and in 2003/04,
a 6% saving in staff numbers. In 2003/04, the restructuring of
                                                                        AUD55M was invested in a major upgrade of the mill’s Wet
this business continued, especially on the east coast, resulting
                                                                        End. Prior to the investment, Petrie cartonboard did not have
in further efficiencies and cost reductions.
                                                                        the consistent quality to effectively compete at the value added
Paper and Board                                                         end of the market, especially in pharmaceuticals and cosmetics,

Paper and Board Division, managed by Group General                      however, apparently the upgrade has managed to improve

Manager, Malcolm Shield, will consist of the three packaging            quality as anticipated.




Page 4
Recycling remains a hard business, and for Amcor it is no                businesses at the expense of expansion of the PET, and
exception. The two major difficulties are that most of the waste          other businesses overseas, is not correct.
stream is commingled, thereby limiting its use and downgrading
                                                                         The following table shows major capital investments by Amcor
its value, and the other is low prices for exports. In addition to
                                                                         Australasia since 1999/00.
poor prices, the strength of the Australian dollar has made the
export business even harder.                                               Business      Investment AUDM             Comments
                                                                         Glass                 210         Will reach AUD250M by the
St Regis Bates                                                                                             end of 2004
                                                                         Petrie                55          Wet end rebuild
The sack business has been placed in the Flexible Packaging                                                New corrugators at Brooklyn,
                                                                         AFP                   150
Division headed by Group General manager Graeme                                                            Rocklea and Revesby
Moncrieff. Similar to container materials, the sack business             AFP Preprint           22         Scoresby
                                                                                                           Includes AUD16M for Dairy
is susceptible to down turns in the dairy industry, and like the         Sacks                  20
                                                                                                           Sack Line at Keon Park
cartonboard business to good quality imports. An AUD12M                  Flexibles              80         New extruders and presses
upgrade to PM1 at Maryvale in 2003/04, was insufficient to
improve the quality of the product to match imports with                 Source: Amcor
better specifications. A further AUD 35M will be invested by
                                                                         The capital expenditure in the above table amounts to
Australian Paper in upgrading PM1.
                                                                         AUD537M, or 72% of the total capital investment made by
St    Regis     Bates       is   at     the     following   locations:   Amcor Australasia since the merger of Fibre Packaging and
     Buisiness                        Location               Region      Containers in 1999/00. Of the AUD537M, AUD247M (46%)
                Revesby                                       NSW        has been spent on the fibre-based industries.
 St Regis Bates Keon Park                                      Vic       Speaking recently at Amcor Limited’s Full Year Financial
                Kewdale                                        WA        Results announcement, Peter Sutton, Managing Director
                                                                         Amcor Australasia, said that Amcor’s capital commitment to its
Source: St Regis Bates
                                                                         Australia and New Zealand businesses since 1999/2000 had
Sales vs Capital Expenditure                                             significantly exceeded depreciation. With capital investment

Since the de-merger of PaperlinX from Amcor Australasia, AFP             of approximately AUD750M over the last four years, Peter

revenue has been growing at an average annual rate of almost             said that, “even if you take out expenditure for the glass plant

8%, and for cartons at over 7% pa. As a proportion of total              of around $200 million...we have consistently spent above

revenue for Amcor Australasia, the two divisions combined                depreciation (AUD400M).” He added that, “we will continue

have increased from 45.8% in 1999/00 to 54.5% in 2003/04.                to spend capital at above depreciation levels provided we

The indication being that the fibre based packaging paper and             can continue to deliver good returns.”

paperboard businesses have been performing and supporting                While Amcor Australasia has made significant investment
the increased sales of Amcor Australasia.                                since 1999/00, it should be noted, that no major funding has

Sales revenue of Amcor’s Fibre and Carton businesses (AUDM)              been directed at the Botany, Fairfield or Spearwood mills,

and as a % of total revenue for Amcor Australasia:                       despite their age and condition. There is unlikely to be any
                                                                         change in this situation with the statement by Russell Jones,
     Y/E June            Fibre           Cartons       % of AA total
                                                           sales         Chief Executive Officer of Amcor, that company businesses
      2000                807                 215          45.8
                                                                         will be driven harder to consolidate and raise returns without
      2001                828                 218          45.8
      2002               1 016                225          52.4          any major capital investments being undertaken for at least
      2003               1 077                292          55.7          another two years.
      2004               1 096                286          54.5
                                                                         During the last financial year, Amcor Australasia increased

Source: Amcor Australasia                                                sales to AUD2 538M (3%), raised PBITA to AUD317M
                                                                         (12%) and reduced number of employees to 6 756 (-5%).
The impression by some that there has been under-
                                                                         However, Sutton will continue with restructuring to maintain
investment by Amcor in the fibre based packaging
                                                                         competitiveness and improve performance. He has already




                                                                                               Page 5
reduced the number of divisions from six to four, and has                 Newsprint - Imports Up / Prices Down
cut the extent of support businesses and services to gain
                                                                          Demand for newsprint continued to recover in 2003/04, with
overhead efficiencies.
                                                                          imports rising just above 300 kt, an increase of more than 10%
Sutton told IndustryEdge: “We remain positive about the                   against the previous year.
future prospects of our business. Apart from the reasonably
                                                                                 Newsprint Imports by Country of Origin: 1995 – 2004 (kt)
healthy external environment, we continue to do much work
internally to improve our competitiveness. For example, we
                                                                                          350
have just completed a major review of our overhead cost                                                                                                                       Other

                                                                                          300                                                                                 South Africa
structure and have developed plans to further centralise and
                                                                                                                                                                              Norway
share service functions and reduce the number of operating                                250
                                                                                                                                                                              NZ
groups.”                                                                                  200                                                                                 Korea




                                                                          kt
                                                                                                                                                                              Indonesia
Even though Amcor Australasia has performed well since                                    150
                                                                                                                                                                              Finland
the de-merger, and last financial years results for the division                           100                                                                                 Canada

continued to be strong, assisted by the fibre packaging paper                                           50
and paperboard divisions, there appears to be no indication
                                                                                                        0
any of the three mills will receive significant capital expenditure
                                                                                                        95


                                                                                                                   96


                                                                                                                         97


                                                                                                                               98


                                                                                                                                     99


                                                                                                                                            00


                                                                                                                                                   01


                                                                                                                                                             02


                                                                                                                                                                   03


                                                                                                                                                                         04
                                                                                                       19


                                                                                                                 19


                                                                                                                        19


                                                                                                                              19


                                                                                                                                    19


                                                                                                                                           20


                                                                                                                                                  20


                                                                                                                                                         20


                                                                                                                                                                  20


                                                                                                                                                                        20
in the foreseeable future.                                                                                                            Y/E June


Conclusion                                                                       Source: ABS

During the course of the last five years, Amcor Australasia has            New Zealand continued to be the dominant source, accounting for
divested itself of PaperlinX including the Australian Paper facilities,   64% of imports. However, in second place was Korea with 20%,
and the 50% joint venture with K-CA. This has enabled Amcor               from where shipments increased by 72% during 2003/04. Imports
Australasia to focus on its core business of packaging.                   from Indonesia rose by 9%, achieving 10% of total imports.

The packaging paper and paperboard manufacturing facilities at            Combined imports from New Zealand, Norway and Canada,

Maryvale could not be split from the whitepaper machines. As              countries where Norske Skog has mills, rose by only 3.4 kt, as a
                                                                          result, as a proportion of total imports, supplies from Norske Skog
a result Amcor remains the paramount customer for Australian
                                                                          overseas mills fell from 70% in 2002/03, to 64% in 2003/04.
Paper for the off take from PM4 and PM1.
                                                                          Newsprint imports have been increasing at an average rate of
The Fibre Packaging businesses are reasonably well located in
                                                                          2.4% since 1994/95.
Australia and New Zealand, but they are susceptible to down
turns in the economy and periods of extended drought.                            Newsprint Four-Quarter Moving Average: SQ’94 – JQ’04

However, the Paper and Board Division lacks a packaging paper
                                                                                                       150
machine in Queensland and its mills at Botany, Fairfield and                                                                                                                     Newsprint

                                                                                                                                                                                CPI
Spearwood have been running for a considerable time without                                            140
                                                                                                                                                                                PPI
                                                                           Index (Base: JQ'94 = 100)




any significant upgrades or investment. Amcor Cartonboard
                                                                                                       130
has completed a successful upgrade so as to position itself at
                                                                                                       120
the value-added end of the cartonboard market, ostensibly to
compete against the high valued cartonboard imports for the                                            110

pharmaceutical and cosmetic industries.
                                                                                                       100

It is evident capital expenditure has continued in Amcor
                                                                                                        90
Australasia, with investments in Petrie, AFP and sacks,
                                                                                                                     '96




                                                                                                                     '99




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however, after the period of consolidation and improved returns                                                                Four-Quarter Moving Average
from current assets, it is likely a review for upgrading, or even
replacing, one of the packaging paper mills will not be delayed
                                                                                 Source: RBA, ABS and IndustryEdge Research
for too long.




Page 6
The previous chart shows the four-quarter moving weighted             and legal documents, while not being classified, may well be
average newsprint import price, indexed as at SQ’94, against the      extremely sensitive and as such should require destruction
four-quarter moving average CPI and PPI for the same period.          under accredited systems.

Working from the base of a decade ago, the chart illustrates          To keep value in the recovery chain, and hence make the
that newsprint import prices rose sharply during the                  process more viable, commingling of office paper with general
1995/96 distortion in the market, then fell back along with           waste must be avoided. The collection of residential wastepaper
other printing and writing grades. Between 1997/98 and                in a single stream with other recyclable materials, has devalued
2001/02, import prices rose slightly faster than increases            the wastepaper stream to such an extent that it is increasingly
in CPI and PPI, however, since then they have fallen, while           rejected by some Asian countries for environmental reasons. To
the PPI has remained reasonably flat and the CPI has risen            encourage commingling of higher value office wastepaper to
a further 10%.                                                        reach a volume benchmark, rather than separating at source to
                                                                      achieve a quality benchmark, will be a missed opportunity to lift
EPR, Recycling and Security
                                                                      recovery rates by improving the value chain.
In the major states, policy consideration of whether Extended
                                                                      Policy development for EPR, and ultimately legislating to keep
Producer Responsibility (EPR) should be enforced or encouraged
                                                                      office papers out of landfills, will require a lot more thought
is being developed, with the indication in NSW at least being
                                                                      and work than setting recovery rates and possibly passing
that there is a preference for legislation. As stated in the August
                                                                      the costs back to the consumers. It will be difficult to separate
edition of Pulp & Paper Edge, an EPR Priority Statement, which
                                                                      the responsibility of collecting and recycling paper, while also
identifies 16 waste streams of concern, is being developed and
                                                                      maintaining the security of the information involved.
should be released in 2005.
                                                                      There are government initiatives to encourage consumers to
The industries associated with the nine waste streams of
                                                                      buy office papers with high recycled content - as an example
immediate concern have been placed on notice to implement
                                                                      the NSW Department of Environment and Conservation has
end-of-life management schemes for their products, or face
                                                                      recently published a guide to encourage the use of recycled
regulation. The remaining seven industries, of which office paper
                                                                      paper titled Know Your Printing Paper.
is one, has the same responsibility, but an additional six months
or so to complete the task.                                           To support policy development for improved paper and board
                                                                      recovery and recycling, and to provide informative insight into
The indications for reducing the quantity of office papers
                                                                      the issues surrounding the challenges of improved recovery,
going to landfill are that some type of mandatory EPR is
                                                                      IndustryEdge will be publishing a bi-monthly market intelligence
going to be introduced. It is still too early to even speculate
                                                                      report titled Paper2Paper Edge. The first edition will be available
how this will work, the costs involved or how they will be
                                                                      before the end of 2004.
allocated. However, there has been little discussion to date
on the appropriate level of legislationon the issue of security       Maryvale Management Changes
of office paper during the recycling process.
                                                                      David Goldthorp, Executive General Manager, Australian Paper,
Wastepaper is a low-priced commodity, and therefore attracts          has announced senior management changes at Maryvale.
unskilled labour with reasonably low employment costs. Office
                                                                      Tony Purdy will continue in his current position, however, the
paper can be collected, sorted and stored under relatively
                                                                      four general managers reporting to him will be:
insecure conditions. Often the final destination is overseas,
where there may be even less security before the fibre is              Ken Henderson, GM Paper Mills, will be responsible for

eventually pulped and recycled.                                       lifting operational efficiency and implementing a program for
                                                                      continued improvement.
If there is to be legislated recovery of office paper in
Australia, then there also needs to be accreditation for the          Wayne Clark, GM Pulp Mill, will assume the responsibility of

destruction of office papers. Currently, the Australian Security      the pulpmill operations. In addition Clark will also manage

Intelligence Organisation (ASIO) charges up to AUD20k                 customer service, primarily matching customer supply

to endorse the procedure for transporting and destroying              requirements with production, and the implementation of a

classified documents. However, payroll, industrial relations          new computer system at Maryvale.




                                                                                             Page 7
Gavin Jones, GM Engineering, is currently at Wesley Vale and                                          Coated Woodfree Market Prices
will relocate to Maryvale. Jones will take over maintenance
                                                                                                      According to the Publisher Information Bureau in the US, advertising
schedules and practices while also lifting the profile of the
                                                                                                      pages in consumer magazines in the USA have increased by 8.5%
maintenance function.
                                                                                                      from twelve months ago. To support this data, the American Paper
Howard Lovell, GM Shoalhaven, Wesley Vale and Burnie, will                                            & Forest Products Association reported a jump of 15.4% in August
relocate from Shoalhaven to Tasmania.                                                                 shipments of coated woodfree grades to magazine publishers, with

The change in reporting lines has been structured to achieve a                                        a year to date increase of 7% over the same period last year.

clearer line of responsibility and accountability for the success, or                                 While the same statistics are not available on such a timely basis
otherwise, of major capital expenditure programs at Maryvale. In                                      in Australia, it is possible to create comparable figures.
2002/03, AUD12M was spent on PM1 and now a further AUD32M
                                                                                                      Advertising expenditure in 2002 was reported as being
will be spent to make the sack products competitive against quality
                                                                                                      approximately AUD8.875 bn, with an increase in 2003 of just
imports. There are projects underway reviewing opportunities for
                                                                                                      over 8%, bring the estimated total for last year to AUD9.585 bn.
improvements to PM4 and the pulping facilities, with submissions
                                                                                                      Magazine advertising expenditure has consistently attracted close
for significant capital expenditure on upgrading these assets are
                                                                                                      to 6.4% of consumer advertising for at least the last five years.
expected to go to the PaperlinX board before the end of 2005.
                                                                                                      Based on these figures, expenditure on magazine advertising
IndustryEdge understands the level of senior management now
                                                                                                      in 2002 was approximately AUD568M, and in 2003 AUD613M.
responsible for operations at Maryvale is a clear indication of the
                                                                                                      The extent of this growth is supported by comments in PBL’s
importance of focused management of these capital intensive
                                                                                                      annual report that there had been strong upswing in the
facilities and programs. There will be more emphasis on successful
                                                                                                      advertising cycle which “contributed to a strong advertising
implementation and ensuring projects meet all expectations. With
                                                                                                      revenue environment” for PBL.
some major investments at Maryvale looking more likely to happen
than at any time in the last five years, Australian Paper has restructured                             This rate of growth has reportedly increased during 2004,
to clearly define those responsible for success, while lifting the focus                               which will drive up magazine pagination and demand for
on customers and maintenance.                                                                         coated woodfree grades.



                                       Main Trading Countries: 7 Jan ‘04 - 6 Oct ‘04                         World-19 Producers: Jan ‘99 - Aug ‘04

                                      105                                                                  4450
                                                                                       Australian                                                                    Shipments
                                      103                                              Dollar
                                                                                                                                                                     Inventories
Index (Base: 7 Jan '04 = 100) (USD)




                                                                                       Canadian
                                      101                                              Dollar              3950
                                                                                                                                                                     Production
                                                                                       European
                                       99                                              Euro
                                                                                       British             3450
                                       97                                              Pound
                                                                                                      kt




                                                                                       Japanese
                                       95                                              Yen
                                                                                                           2950
                                                                                       New Zealand
                                       93                                              Dollar
                                       91                                              South Korean
                                                                                       Won                 2450
                                       89

                                       87                                                                  1950
                               4
                             04

                     ay 4
                               4
                             04




                     ep 4



                               4
                     an 4




                     ug 4
                 -M 04




                      ct 4
                     ul 4
                     un 4


                             04




                                                                                                               ay 2
                                                                                                               ug 99




                                                                                                             A 004
                                                                                                             O 03
                                                                                                             Se 001




                                                                                                             M 003
                                                                                                                         9
                                                                                                             Ju 00



                                                                                                             A 000




                                                                                                                        4
                                                                                                             D 002
                                                                                                             Fe 001

                                                                                                              Ju 02
                                                                                                             N 000
                 -M 00



                -M 00

                2- 200




                             0



                            00
                             0




                -A 00



                6- 200
                             0
                             0




                                                                                                             M 00
                                                                                                                      99




                                                                                                                      00
              21 r-20
              18 -20




              15 -20
              28 -20



             10 b-20




               14 -20
              23 -20



               4- -20




                                                                                                                      9




                                                                                                                      0
                                                                                                                    20




                                                                                                                    20
             31 r-2



             12 r-2




                         -2
             25 g-2




                                                                                                                   -2
                                                                                                                   -1




                                                                                                                   -2
                                                                                                                   -2
                                                                                                                   -2




                                                                                                                   -2
                                                                                                                  -1




                                                                                                                  -2




                                                                                                                  -2
                                                                                                                 l-2
                                                                                                                    2
                                                                                                                    2
                         -




                        -




                                                                                                                 n-
                       n




                                                                                                                p-

                                                                                                                b-
                                                                                                                n-
                      n




                                                                                                               ec
                      a

                      a




                                                                                                                ar




                                                                                                                ar
                      p




                                                                                                               pr




                                                                                                                ct
                                                                                                               ov




                                                                                                               ug
                    Ja




                     u
                     e




                   Ju




                   O
                 -A




                                                                                                              Ja
                   -J
                  -J

                 -F




                 -S
                  A
                  -J




                                                                                                            M
                7-




                                                                                                                  A




                                                                                                                                  Month
                                                          Weekly




                                      Source: Uni of BC                                                    Source: Pulpwatch


Since mid-September the AUD has recovered against the USD, and                                        Utipulp and Norscan data is now withheld, so until there is some agreement
moved in sync with the rise in the NZD. The JPY and KRW both failed                                   on available pulp data by pulp producers in Europe and North America,
to strengthen against the USD, while the GBP lost earlier gains during                                IndustryEdge will run with monthly production, inventories and shipments
the first week of October. Compared to the exchange rate at the start of                               by the world’s top 19 producers. For August ‘04, inventories rose 850 kt
2004, the AUD is still down more than 5%.                                                             above shipments which, as we have seen, will drive prices down.




Page 8
With local production of coated woodfrees (CWF) by Australian                                             Imports for year ending June 2001 and 2002 remained
Paper being relatively constant in the region of ±75 ktpa, and                                            almost flat at just above 250 kt. A market recovery is evident
exports being less than 5 ktpa, changes in apparent consumption                                           in 2002/03, with imports rising by 11% (27 kt) and then
will be evident in changing levels of imports.                                                            a strong increase in 2003/04, with shipments increasing
                                                                                                          by 20% (56 kt). The trend in import volumes is in line with
The following chart shows imports of coated woodfrees by
                                                                                                          the increase in local advertising expenditure and the trend
selected grades since 1995.
                                                                                                          in the USA.
    Selected Imports of CWF by Grade: 1995 - 2004 (kt)
                                                                                                          From the chart it is evident the increase in consumption
                                                                                                          of coated woodfree over the last two years has not been
        350
                                                                                       Cut Reams          spread evenly as a percentage between the grades.
        300                                                                            Sheets > 150 gsm
                                                                                                          Import statistics are showing increased consumption has
                                                                                       Reels > 150 gsm
        250
                                                                                       Sheets < 150 gsm
                                                                                                          been driven by sheets, rather than reels, predominately
        200                                                                            Reels < 150 gsm    < 150gsm. This is surprising in that buyers and industry
kt




        150
                                                                                       Cast Coated        analysts have been reporting consumption of reels rising

        100
                                                                                                          faster than sheets. The initial indication to IndustryEdge
                                                                                                          as to why the statistical trend from the ABS data may be
         50
                                                                                                          different to reported changes in demand is misclassification
          0
                                                                                                          of imports of CWF by grade.
          95


                96


                        97


                                  98


                                        99


                                                00


                                                          01


                                                                02


                                                                        03


                                                                               04
         19


               19


                      19


                              19


                                       19


                                               20


                                                         20


                                                               20


                                                                       20


                                                                              20




                                        Y/E June
                                                                                                          Based on the available data, the average annual weighted
                                                                                                          import prices (AUDFob/t) of CWF grade are set out in the
                                                                                                          following chart over the page.
Source: ABS and IndustryEdge estimates




         PIX Packaging Indexes: 7 Jan ‘04 - 12 Oct ‘04                                                       PIX Paper Indexes: 7 Jan ‘04 - 12 Oct ‘04

        450                                                                                                          900

                                                                                                                     850
        430
                                                                                                                     800
        410
                                                                                                                     750
        390
                                                                                                                     700
                                                                                                             EUR/t
EUR/t




        370
                                                                                                                     650

        350                                                                                                          600

        330                                                                                                          550

                                                                                                                     500
        310
                                                                                                                     450
        290
                                                                                                                                           04



                                                                                                                                   ay 4
                                                                                                                                             4



                                                                                                                                     n 4




                                                                                                                                             4
                                                                                                                                   ug 4

                                                                                                                                   ep 4
                                                                                                                                            4



                                                                                                                                    ar 4




                                                                                                                                -O 04
                                                                                                                                   eb 04




                                                                                                                                           04
                                                                                                                                   un 04



                                                                                                                                            4
                                                                                                                              -M 00
                                                                                                                               -A 00


                                                                                                                              8- 200




                                                                                                                                          00
                                                                                                                              -A 00

                                                                                                                                           0
                                                                                                                             3- 200



                                                                                                                               -M 00




                                                                                                                              -A 00
                                                                                                                             6- -20




                                                                                                                            21 -20

                                                                                                                            12 -20
                                                                                                                            24 b-20




                                                                                                                             20 -20
                                                                                                                            29 -20
                              04



                      ay 4

                        n- 4




                                4




                                                                                                                           18 pr-2
                      ug 4

                      ep 4




                                                                                                                            27 r-2
                               4




                                                                                                                                       -2
                               4




                                                                                                                           31 g-2
                       ar 4




                   -O 04
                              04




                                                                                                                           16 -2
                      eb 04




                      un 04



                               4




                                                                                                                           10 l-2
                 -M 00




                                                                                                                                      -
                 8- 200




                             00
                 -A 00

                              0
                  -A 00




                                                                                                                        n-
                3- -200



                  -M 00




                 -A 00




                                                                                                                                    ct
                6- -20




               21 -20

               12 -20
                20 -20
               24 b-20




               29 20




                                                                                                                                    p




                                                                                                                                    u
                                                                                                                                   u
                                                                                                                      Ja
                                                                                                                                 Fe




                                                                                                                                 Ju
              18 pr-2




                          -2
              31 g-2
               27 r-2
              16 -2




              10 l-2




                                                                                                                                 A




                                                                                                                                 -J
                                                                                                                               -F




                                                                                                                               -S
                                                                                                                                -J
                         -




                                                                                                                   -
                       ct
         an




                                                                                                                13
                       p




                       u
                      u
                    Fe




                    Ju
                    A




                    -J
        -J



                  -F




                  -S
                   -J
   13




                                                                                                                                                Weekly
                                            Weekly                                                                   A4 B-grade copy paper     CWF Reels   LWC   Newsprint
                     Kraftliner              Testliner              Recycled Fluting




        Source: FOEX                                                                                        Source: FOEX


European benchmark packaging prices have all risen since mid-September.                                   European benchmark prices for communication grades rose by very
The benchmark price for Kraftliner is up 1.7%, to Euro445.8/t, Testliner up                               small margins during the first week of October, indicating a possible
1% (Euro349.1/t) and Recycled Fluting up 0.6% (Euro316.1/t). Prices are                                   change in the trend of weakening prices since early August. The
expected to strengthen further with October being the peak demand period                                  benchmark price for A4 B-grade copy paper rose by 0.5% against the
for packaging in the lead up to the Christmas retail peak.                                                benchmark price mid-September.




                                                                                                                                             Page 9
                                                                                                                    The above chart shows AUDFob/t average prices in money
     Selected Imports of CWF by Grade: 1995 - 2004 (AUDFob/t)
                                                                                                                    terms, however, if the chart is redrawn and indexed, with the
                                                                                                                    inclusion of the CPI, from base year 1994/95, then the falling
            1750
                                                                                                 Reels < 150 gsm
                                                                                                                    price of CWF in comparison to the CPI undermines the gains of
            1650                                                                                 Reels > 150 gsm    increased apparent consumption.
                                                                                                 Sheets < 150 gsm
            1550
                                                                                                 Sheets > 150 gsm
                                                                                                                         Index Prices for CWF by Grade: 1995 – 2004
 AUDFob/t




            1450


            1350
                                                                                                                                                130
                                                                                                                                                                                                                                       CPI
            1250                                                                                                                                125
                                                                                                                                                                                                                                       Reels < 150 gsm

            1150                                                                                                                                120                                                                                    Reels > 150 gsm




                                                                                                                      Index (Base 1995 = 100)
                                                                                                                                                115                                                                                    Sheets < 150 gsm
            1050
                                                                                                                                                110                                                                                    Sheets > 150 gsm
                    95

                           96

                                  97

                                        98

                                               99

                                                     00

                                                            01

                                                                    02

                                                                               03

                                                                                     04
                   19

                          19

                                19

                                       19

                                              19

                                                    20

                                                           20

                                                                   20

                                                                           20

                                                                                    20




                                                Y/E June                                                                                        105

                                                                                                                                                100

                                                                                                                                                 95

     Source: ABS and IndustryEdge estimates                                                                                                      90

                                                                                                                                                 85
In 1994/95, there was more than an AUD300/t spread between
                                                                                                                                                         95

                                                                                                                                                                96

                                                                                                                                                                         97

                                                                                                                                                                                98

                                                                                                                                                                                       99

                                                                                                                                                                                              00

                                                                                                                                                                                                      01

                                                                                                                                                                                                             02

                                                                                                                                                                                                                    03

                                                                                                                                                                                                                           04
                                                                                                                                                       19

                                                                                                                                                              19

                                                                                                                                                                       19

                                                                                                                                                                              19

                                                                                                                                                                                     19

                                                                                                                                                                                            20

                                                                                                                                                                                                    20

                                                                                                                                                                                                           20

                                                                                                                                                                                                                  20

                                                                                                                                                                                                                         20
the grades, with sheets being higher value and priced accordingly.                                                                                                                     Y/E June

By 2003/04, the situation is dramatically different. There is only an
AUD75/t spread between the four grades, with the price differential                                                      Source: ABS, RBA & IndustryEdge research
based on grammage rather than value adding. This means that the
cost of converting rolls to sheets has been absorbed by merchants                                                   The chart on the next page shows the indexed CPI as a constant,
in recent years to maintain sales, supporting the argument margins                                                  and discounts the indexed prices of the grades for CWF to ascertain
for merchants are too low to be sustainable.                                                                        the real prices over the last decade taking 1994/95 as the base.



            Imports of Converted Tissue Stock: 1995 - 2004 (kt)                                                                                 Imports of Non-Sanitary Products: 1995 - 2004 (AUDM)


     70
                                                                                                    Other                        100
                                                                                                                                                                                                                                             Toilet
     60                                                                                             USA                                         90
                                                                                                                                                                                                                                             Facial
                                                                                                    Taiwan                                      80
     50                                                                                                                                                                                                                                      Serviettes, etc.
                                                                                                    New                                         70
                                                                                                    Zealand
     40                                                                                                                                         60
                                                                                                                    AUDM




                                                                                                    Korea
kt




                                                                                                                                                50
     30                                                                                             Indonesia
                                                                                                                                                40
                                                                                                    China/HK
     20                                                                                                                                         30

                                                                                                                                                20
     10
                                                                                                                                                10

            0                                                                                                                                   0
                                                                                                                                                     5


                                                                                                                                                              6


                                                                                                                                                                       7


                                                                                                                                                                                8


                                                                                                                                                                                       9


                                                                                                                                                                                               0


                                                                                                                                                                                                           1


                                                                                                                                                                                                                  2


                                                                                                                                                                                                                           3


                                                                                                                                                                                                                                  4
         95


                     96


                             97


                                       98


                                               99


                                                      00


                                                              01


                                                                          02


                                                                                  03


                                                                                            04




                                                                                                                                                   9


                                                                                                                                                            9


                                                                                                                                                                        9


                                                                                                                                                                                 9


                                                                                                                                                                                        9


                                                                                                                                                                                                0


                                                                                                                                                                                                         0


                                                                                                                                                                                                                  0


                                                                                                                                                                                                                            0


                                                                                                                                                                                                                                   0
                                                                                                                                                19


                                                                                                                                                         19


                                                                                                                                                                     19


                                                                                                                                                                              19


                                                                                                                                                                                     19


                                                                                                                                                                                             20


                                                                                                                                                                                                      20


                                                                                                                                                                                                               20


                                                                                                                                                                                                                         20


                                                                                                                                                                                                                                20
       19


                   19


                           19


                                     19


                                             19


                                                    20


                                                            20


                                                                        20


                                                                                20


                                                                                          20




                                              Y/E June                                                                                                                                 Y/E June




      Source: ABS                                                                                                          Source: ABS


The rise in tissue stock imports since 1994/95 has been reasonably consistent,                                      Analysis of converted tissue products is normally undertaken by value
at an average annual rate of 18%. Between 1999/00 and 2002/03, the rise                                             rather than volume, due to the bulk and low density of the items. The value
in imports was sourced from China/HK, however, for 2003/04 the additional                                           of non-sanitary converted products imported in 2003/04 rose by 49% to
volume was sourced from Indonesia. Imports of SCA stock from New                                                    AUD92M. The rise was largely driven by a jump of AUD26.4M (136%) in the
Zealand accounted for 8% of shipments in 2003/04.                                                                   value of imported toilet tissue.




Page 10
                                                                                                                            ABB to Maintain Tasman Mill
                     Real Index Prices for CWF by Grade: 1995 – 2004
                                                                                                                            ABB has been awarded a five year contract for maintenance
                                                                                                                            and reliability services at the CHH Tasman mill at Kawerau New
                          125                                                                                               Zealand. The smooth transition of maintenance responsibility
                                                                                                    CPI
                          120                                                                                               to ABB is in sharp contrast to the difficult, but successful,
                          115                                                                       Reels < 150 gsm

                          110                                                                       Reels > 150 gsm         process in 2003 at the CHH Kinleith mill. ABB has announced
Index (Base 1995 = 100)




                          105                                                                       Sheets < 150 gsm        the contract is worth USD29M, which is in addition to the USD50M
                          100                                                                       Sheets > 150 gsm
                          95
                                                                                                                            for the contract covering the Kinleith mill.
                          90
                          85
                                                                                                                            Brice Landman, Pulp & Paper Chief Executive, CHH, oversaw
                          80                                                                                                more than three months of negotiations with maintenance
                          75
                          70
                                                                                                                            employees at the Tasman mill. At mid September there were
                          65                                                                                                114 employees involved with maintenance at Tasman, with
                                     95

                                           96

                                                 97

                                                       98

                                                             99

                                                                    00

                                                                             01

                                                                                   02

                                                                                         03

                                                                                               04




                                                                                                                            the announcement stating that 63 had agreed to accept the
                                    19

                                          19

                                                19

                                                      19

                                                            19

                                                                   20

                                                                            20

                                                                                  20

                                                                                        20

                                                                                              20




                                                             Y/E June
                                                                                                                            transition to ABB. It is understood ABB already had 11 of their
                                                                                                                            own employees working under the contract with CHH, and
                     Source: ABS and RBA                                                                                    there was a need for a further 9 vacancies to be filled.

The calculation and charting of real prices for the four grades                                                             As a result of the restructuring and the out-sourcing of services at
of CWF, after discounting for CPI, shows that, compared                                                                     Kinleith, CHH has announced efficiency gains have been achieved.
                                                                                                                            For example, CHH has managed to restructure an export orientated
to a decade ago, CWF prices are down by up to 30% in
                                                                                                                            kraft pulp and paper mill from being marginal by world standards, to
real terms. The extent of this fall should be of considerable
                                                                                                                            being export-competitive.
assistance in taking some cost out of general commercial
printing and magazine production.                                                                                           The Tasman mill produces 270 ktpa of specialty pulp for
                                                                                                                            communication grades and tissue manufacturing.



                           Imports of Sanitary Products: 1995 - 2004 (AUDM)                                                      Exports of Converted Tissue Products: 1995 - 2004

                                                                                                                                 50                                                                          125

                                                                                                                                 45                                                                          115
                            90
                                                                                                      Other                      40
                            80                                                                                                                                                                               105
                                                                                                      Babies Nappies             35
                            70                                                                                                                                                                               95
                                                                                                      Other Napkins, etc.
                                                                                                                                 30
                            60
                                                                                                                                                                                                                   AUDM
                                                                                                                                                                                                             85
                                                                                                                            kt




                            50
                                                                                                                                 25
                                                                                                                                                                                                             75
                            40                                                                                                   20
                                                                                                                                                                                                             65
                            30                                                                                                   15

                                                                                                                                 10                                                                          55
                            20

                            10                                                                                                    5                                                                          45

                                0                                                                                                 0                                                                          35
                                                                                                                                        95

                                                                                                                                               96

                                                                                                                                                      97

                                                                                                                                                             98

                                                                                                                                                                    99

                                                                                                                                                                           00

                                                                                                                                                                                   01

                                                                                                                                                                                          02

                                                                                                                                                                                                 03

                                                                                                                                                                                                        04
                                                                                                                                      19

                                                                                                                                             19

                                                                                                                                                    19

                                                                                                                                                           19

                                                                                                                                                                  19

                                                                                                                                                                         20

                                                                                                                                                                                 20

                                                                                                                                                                                        20

                                                                                                                                                                                               20

                                                                                                                                                                                                      20




                                                                 Y/E June
                                                                                                                                                                      Y/E June
                                                                                                                                                           Quantity         Value (RHS Axis)



                          Source: ABS                                                                                            Source: ABS


In 2003/04, the value of imported sanitary products fell by only 2%,                                                        Exports of converted tissue products increased by 8.8% to 45.7 kt in
however, in the previous year it dropped 9%. The major grade by value for                                                   2003/04, however, the value of the exports jumped 19.5% to AUD117.5M.
imported sanitary grades is Other Napkins, which includes incontinence                                                      The volume of tissue exports has increased at an average rate of 17%
and feminine care products, and makes up 65% of shipments.                                                                  pa since 1994/95, while the value has risen by an average of 13% pa.
Shipments of babies nappies increased by 13% to AUD21M.                                                                     Exports of tissue stock are less than 0.5 ktpa.




                                                                                                                                                               Page 11
                           Pulp & Paper Market Edge October 2004

            Grade                             Specification            Weight    Form       Monthly Prices       12 months
                                                                      (gsm)              Current     Previous     ago
Printing & Communication
Newsprint                  Norske Skog Announced Price                  45      Reels        $ 945      $ 945      $1 010
                           S/C Mech Offset (Sweden)                     56      Reels      $1 210      $1 210      $1 125
Uncoated Mechanicals
                           Norske Skog Norstar                          52      Reels      $1 055      $1 055      $1 100
                           LWC (Finland)                                54      Reels      $1 500      $1 500      $1 580
                           LWC (Finland)                                65      Reels      $1 550      $1 550      $1 580
Coated Mechanicals
                           MWC (Finland)                                80      Reels      $1 500      $1 500      $1 650
                           Local Acclaim Lick-coated Offset           54 - 60   Reels      $1 450      $1 450      $1 380
                           2/S A2 Art (Local, flagged)                  100      Reels      $1 760      $1 750      $1 640
                           Ditto (Europe/Japan)                        100      Reels      $1 760      $1 750      $1 630
                           Ditto (Korea/Indonesian)                    100      Reels      $1 710      $1 700      $1 570
Coated Woodfree
                           2/S A2 Art (Local, flagged)                  150      Sheets     $1 875      $1 850      $1 730
                           Ditto (Europe/Japan)                        150      Sheets     $1 875      $1 850      $1 730
                           Ditto (Korea/Indonesian)                    150      Sheets     $1 830      $1 800      $1 670
                           Local                                        80      Reels      $1 770      $1 750      $1 680
                           Asian/Brazil Offset equivalent               80      Reels      $1 770      $1 750      $1 650
Uncoated Woodfree
                           Local                                        80      Sheets     $1 880      $1 850      $1 750
                           Asian/Brazil Offset equivalent               80      Sheets     $1 880      $1 850      $1 750
                           Reflex (Premium)                              80       A4        $2 180      $2 120      $2 120
                           Local                                        80       A4        $1 870      $1 870      $1 870
Copypaper
                           Indonesian                                   80       A4        $1 905      $1 905      $1 920
                           Recycled                                     80       A4        $2 010      $2 010      $2 100
Packaging Grades
                           1/S Solid Bleach Board (USA)               350um+    Reels      $1 600      $1 610      $1 735
                           Local (Artcote White)                      400um+    Reels      $1 712      $1 712      $1 712
                           Local (Artcote Grey)                       400um+    Reels      $1 369      $1 369      $1 369
                           Local (Eco-cote)                           400um+    Reels      $1 311      $1 311      $1 311
                           Pearl Kote® Ctd Kft Back                   356um+    Reels      $1 370      $1 315      $1 712
Coated Cartonboard
                           Pearl Kote® Ctd Kft Back                   457um+    Reels      $1 355      $1 300      $1 369
                           Aqua Kote® Ctd Kft Back                    508um+    Reels      $1 505      $1 450      $1 311
                           FormakoteTM Natura GC2                     350/244   Reels      $1 394      $1 394      $1 394
                           FormakoteTM Spectra CNK                    450/312   Reels      $1 544      $1 544      $1 544
                           FormakoteTM White GCI                      400/280   Reels      $1 398      $1 398      $1 398
                           Kraftliner                                  200      Reels        $ 898      $ 898        $ 864
Container Materials
                           Testliner                                   150      Reels        $ 775      $ 775        $ 749
                           Semi extensible                             70/80    Reels      $1 300      $1 290      $1 380
Sack kraft
                           Flat Sack Brown                              80      Reels      $1 250      $1 240      $1 340
Fibre Resource
                           ONP - No 8 De-inking Australia into Asia                          $ 147      $ 142        $ 130
                           ONP - No 8 De-inking USA into Asia                            USD $140    USD $136    USD $125
Wastepaper
                           ONP - No 8 De-inking Japan into Asia                          USD $126    USD $121    USD $125
                           ONP - No 8 De-inking Europe into Asia                         USD $133    USD $126    USD $120
                           NBSK Landed                                          Bales    USD $600    USD $650    USD $515
Pulp
                           Bleached Eucalypt Landed                             Bales    USD $500    USD $540    USD $495




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