Australia could be on the cusp of a pulp production expansion over the coming years, as domestic demand for pulp increases.
Australia's pulp consumption rose 3.3% in 2014-15, reaching a new record of 1,730,000 tonnes.
Local production was supplemented by an important 291,000 tonnes of imported pulp. Imports accounted for just less than 17% of total pulp consumption.
All but 3,000 tonnes of the imported pulp was chemical pulps of various types. In total, chemical pulp accounted for around three quarters of pulp utilisation for the year, as it does in most years.
Australia's current pulp supply deficit is set to expand in 2016 and again in 2017, pushing out to approximately 400,000 tonnes per year, on conservative estimates. The main driver for the growth is the expansion of tissue production announced recently by ABC Tissue.
IndustryEdge's estimate is that the tissue sector already uses more than two-thirds of Australia's imports of pulp. That will rise to around three quarters (300,000 tonnes) by the end of 2017.
On that basis alone, and without taking into account general growth in demand, pulp imports will increase over the next two years, but that does not have to be the case. In fact, for local tissue producers, access to domestically produced pulp could prove to be a significant advantage.
Currently, tissue producers are paying more for their pulp, largely due to the depreciation of the Australian Dollar, although that is being tempered somewhat by lower global pulp prices. Secure domestic supplies of pulp would be welcomed by at least some producers, and would, as a minimum, reduce currency risks.
IndustryEdge's analysis, based on the detailed data in the 2015 edition of the Pulp & Paper Strategic Review, shows that Australia's total pulp needs could be supplied locally, with only modest additional investments.
To be clear, that doesnt necessarily involve the building of a new pulp mill, although that would of course be welcome.
Instead, expansions of existing pulping capacity at mills in New South Wales and Victoria could deliver the required additional pulp. In addition, there is the opportunity for more de-inked recycled fibre to be produced and supplied to the tissue sector.
There are two significant challenges to this opportunity.
The first challenge is that even with additional capacity, pulp bleaching remains a limitation in Australia and requires investment.
The second and more complex challenge is establishing the conditions in which investment in expanded capacity and pulp bleaching would be viable. Translating demand into specific and bankable sales may require some form of longer term supply agreement between a pulp producer on the one hand and a paper manufacturer on the other.
That would result in the tentative development of market pulp capacity in Australia, but with a difference.
Australia's abundant wood resources and excellent fibre recovery and recycling credentials, makes the opportunities all the more tantalising. What is certain, is that importers are ready to meet the new supply opportunities.
Working in part with the data from the 2015 Pulp & Paper Strategic Review, our feature in this month's edition of Pulp & Paper Edge will consider pulp markets in Australia, New Zealand and the Asian region more generally.
To examine a sample of the Strategic Review, as well as the full Table of Contents and Lists of Charts and Tables, click here