March 2008
By Robert Ryan
Australia is not usually considered the most dynamic market in the international tissue business. It certainly lacks the spectacular growth in household and sanitary grades consumption that is now taking place among some of its Asian neighbors. And Australia is a comparatively small market; for instance, almost every province of China has more people than the 20.6 million who call Australia home.
Nevertheless there is plenty to draw the attention of tissue industry insiders down under. Firstly, two top tissue producers from Europe and North America have operations in Australia, and both have a bigger slice of the Australian market in percentage terms than they have in their home continents. Secondly, tissue machine vendors have installed machines featuring through-air drying (TAD) and other leading edge technology in this part of the world. Thirdly, new product development is taking place in Australia. Fourthly, integrated manufacturing is a feature of the country's tissue industry. And fifthly, environmentally aware Australian consumers make up a good test market for innovative products with recycled content.
And finally, Australia is also home to some relatively small but interesting producers – including a tissue company that is building a strong market presence across a range of grades despite having stepped up from converting to tissuemaking just five years ago. This article outlines the main producers serving the Australian market, as well as the challenges faced by tissue producers in this part of the world.
As mentioned, Australia is a mature market in terms of household and sanitary grades consumption. Per capita tissue consumption is about 14 kg per year, which is lower than the 20 kg/yr consumed in North America. But it is close to the tissue demand levels for Japanese and western European consumers, and well ahead of the low levels of per capita consumption in much of neighboring Asia. This relatively strong level of demand on the part of affluent consumers is one of the attractions of the Australian market for global producers.
US giant down under
In the age of globalization and consumers using the same products and brands the world over, Kimberly-Clark Australia is the local face of a world tissue giant. The stable of brands includes Kleenex facial tissue, premium grade Kleenex Cottonelle toilet tissue and Wondersoft toilet tissue. Its innovative products include high absorbency, good wet strength Kleenex Viva paper towels. Kimberly-Clark Australia is the overall tissue market leader, with about 35% share of the total Australian market.
The company started operating in Australia as an importer of tissue grades in the 1930s, and began producing facial tissue at Millicent in South Australia in 1960. Kimberly-Clark Australia has four tissue machines at Millicent, including a PM that started up in 2004 at an investment cost of $230 million. With a capacity of 100,000 tonnes/yr, Millicent is the nation's largest tissue producer.
The mill also has a thermomechanical pulp (TMP) line. At nearby Tantanoola, Kimberly-Clark Australia has a magnesium bisulfite softwood pulp line and a TCF fluff pulp line. This in-house pulp capacity gives the company a cost advantage over smaller rivals who rely on imported market pulp.
The Millicent mill also has the technology and know-how needed to produce good bulk and softness in a single sheet without compromising strength. This gives Kimberly-Clark Australia the capability of producing bulky, single-ply toilet tissue, for example, an advantage over small rivals that lack the latest advances, and who can only compete by the costlier and less efficient process of combining two or more plies to deliver a product with the same properties.
European player
The other global player in the Australian household and sanitary grades business is SCA Hygiene Australasia. It entered the Australian market when Svenska Cellulosa Aktiebolaget (SCA) bought Carter Holt Harvey's tissue mills in Australia and New Zealand in 2004. Its share of the household and sanitary market is estimated at about 30%, says supply director, SCA Hygiene Australasia, Kerrin Thomson.
The company includes "Australasia" in its local name, because it has tissuemaking operations in both New Zealand and Australia. It has a tissue mill at Kawerau in New Zealand's central North Island. "Kawerau operates three machines and has 68,000 tonnes of capacity," notes Thomson.
SCA Hygiene Australasia's Australian operations are located in the suburb of Box Hill in Melbourne – Australia's second largest city and the capital of Victoria. "Box Hill operates two paper machines and has 57,000 tonnes of capacity," says Thomson.
The Swedish papermaker is a latecomer in this part of the world, but its mills have been part of the Australian and New Zealand tissue business for decades. The Box Hill mill was started up in 1960 by Bowater-Scott (a company jointly owned by Britain's Bowater Paper and Scott Paper, USA). The mill became Bowater Tissue in 1987, and was then sold to New Zealand's Carter Holt Harvey in 1995 before the current owner's 2004 acquisition.
Independent producers
Apart from the big two global producers plus an expanding contender (ABC Tissue – see feature article), there are a further two players in the household and sanitary market in Australia: Encore Tissue in Victoria, and Merino in Queensland.
Encore began operations in 1998, producing 4,000 tonnes/yr of tissue on a single 1.94-m wide machine. The mill was located in Albury, a large regional centre located on the Hume Highway – the main road transport route linking Australia's two largest cities (Sydney and Melbourne).
Then in 2003, Encore made a major step up in production when it started up a 20,000-tonne/yr Over Meccanica machine – bought second-hand from Velcarta in Scafati, Italy. This 2.75-m wide unit is located in Laverton North, a mostly industrial suburb in western Melbourne. Encore director David Holckner explains that the smaller Albury tissue machine was demolished following the start-up of the larger Over Meccanica unit.
Encore produces premium grade, three-ply Envirosoft toilet tissue from 100% recovered fiber, a mix of pre- and post-consumer wastepaper.
Queensland-based Merino is another independent operator in the Australian tissue business. The firm has 15,000 tonnes/yr of capacity on a 2.4-m wide tissue machine supplied by Recard.
Merino's stable of brands includes Merino, Bouquets, Elite and Earthwise. It also makes Safe, a popular brand that has a fair level of whiteness despite the fact that it is unbleached and made from 100% recovered fiber. The Merino mill is in Crestmead, which is a good location for serving customers in nearby Brisbane and the Gold Coast region of Queensland. The privately owned company has a long history; it was set up in 1939. However its future is currently uncertain: Merino went into receivership at the end of December 2007.
Imports and other challenges
One likely cause of Merino's woes is the flood of budget-priced tissue swamping the shelves of supermarkets across Australia. The spike in imports is mainly from producers in China and Indonesia who are burdened with overcapacity following the startup of world-class tissue machines in the 1990s. While Australia imported some 10,000 tonnes/yr of tissue at the beginning of the 1990s, imports had jumped to about 25,000 tonnes/yr by the mid-1990s, and today stand at 55,000 tonnes/yr, a greater share of the Australian market than any single independent tissue company.
Doubts about environmental sustainability may prove to be the Achilles heel of some of the imported grades, however. Last year, Australia's Construction, Forestry, Mining and Energy Union (CFMEU) began campaigning against the Woolworths supermarket chain, for sourcing its Select brand of toilet tissue from an Indonesian pulp and paper producer. The union disputed claims made on the packaging of the Select brand that it is made from sustainable plantation fiber. Clearly the CFMEU, which covers Australian paper industry workers, is worried about any unfair competition that such imports pose to Australian jobs.
Unions are not the only ones worried about imports. Australia's top tissue producers share their concerns.
Milo Foster from Kimberly-Clark Australia lists competition from imports among the most significant challenges facing the Australian tissue industry in coming years. Foster also sees fiber costs as a key challenge. More specifically, he considers that the cost of sourcing sustainable fiber will pose a challenge for the industry, and notes that there are overseas competitors who take a less ethical approach to sustainability. He clearly sees fiber costs and the import threat as connected issues.
Foster also sees the maturity of demand due to demographic factors, and the introduction of the national emissions trading scheme as important issues that the industry will have to deal with in the future. This scheme has the potential for creating further cost challenges unless offsets are granted to the industry, in order to maintain a level playing field with overseas competitors.
SCA Hygiene Australasia's Kerrin Thomson also views import competition as one of the key challenges facing the Australian tissue industry, along with the rising cost of energy and environmental issues. Clearly, plenty of competitive challenges lie ahead for all tissue producers in Australia – large and small.
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