Containers Packaging (CP) became 100% owned by APM in 1982 and includes all non-corrugated-box packaging activities of AMCOR, as well as significant interests in paper converting operations. AMCOR has a 60% share in the Packaging and Industrial paper market in Australia.12

Container Packaging's role in the Australasian market, and the products it produces are immense.

Sales by Product 1995(2) Beverage (Cans and PET) Film Flexibles Greeting Cards Plastics Security Systems Metal Packaging Tobacco Cartons Paper and Board

22% 26% 7% 7% 6% 12% 7% 14%

Sales by Country 1995(2) Australia New Zealand Canada Asia Europe USA * Specific Packaging Items.

66% 9% 13% 2% 8% 2%

In Australia and New Zealand, CP manufacture:

• aluminium steel and aerosol cans for beverages, food and other consumer goods.
• metal and plastic caps and closures
• flexible foil and film packaging
• rigid plastic containers
• folding cartons, tobacco cartons
• composite cans for food and industrial products
• multiwall paper sacks
• domestic wraps and foils
• security printing (2)

Please note that AMCOR are not involved with glass packaging.

AFP Overview

AFP has 66 manufacturing plants in 11 countries. It sells corrugated packaging for fresh and processed food, beverages, take away food packaging, household products and a range of industrial uses, plus point of sale display packaging and packaging for machinery systems. In 1990 AMCOR launched EcoCote, Australia's first clay coated cartonboard made from 100% recycled fibre.

AFP's worldwide capacity is 1.5 million tonnes per annum. During 1994-5 AFP made 1.2 million tonnes of corrugated boxes 2. AFP opened a new plant in the United States, China and now holds a 55% interest in a corrugated box plant in Indonesia. (2)

Sales by Region-1994/5 Australia Europe USA Asia New Zealand

31% 24% 31% 5% 9%

In 1994-5 AFP's profits rose by 18% to $2102 million 2. About 70% of sales were outside Australia. One major problem overseas is access to raw materials which considerably rose in price during the year. AFP had the weakest growth of all AMCOR's divisions over the past years due to margin pressures in Europe and Australia.

In Australia, APM supply cartonboard which is then converted by Pak Pacific.

Earnings have been hit significantly due to the rise in the price of paper over the last two years and losses by the German subsidiary Holfelder. However, AFP will have strong earnings over the next few years due to expansion into markets overseas.

AFP Fibre Sources

AFP's main weakness is in regard to the amount of fibre being used for boxes. In March 1995 AMCOR revealed that it would spend up to $100m to increase the fibre recycling capacity of its fibre recycling in its paper and box making plants. (22)

A new technology, Xitex, which uses 15% less paper but is just as strong, was introduced during 1995. If AMCOR can build a paper plant in the US based solely on waste fibre the question remains why there is no such commitment in Australia. In our opinion, this is the result of a market dominance that negates such domestic innovation.

AMCOR has been a paper maker for over 100 years. Its main specialty was in the production of packaging papers for cardboard boxes and paper sacks. AMCOR diversified to printing and writing papers in 1987, when the company converted its Maryvale #3 machine from paper bag production to photocopy paper production. This diversification was followed in 1993 with the acquisition of Australia's oldest and largest fine paper manufacturer, APPM. The destiny of the APG is now largely determined by its production and pricing of fine and packaging papers. Some 80% of the company's production is either fine or packaging grade paper.

1994-5 saw APG achieve record sales and profits. AFP sales rose by 23% to $1412 million.2 This improvement was due to record deliveries, progress in improving mill operating efficiencies and increased profits from fine papers and exports of container materials. The acquisition of APPM and the construction of AMCOR's first paper mill outside Australia (McKinley New Mexico) in late 1992, mark the beginning of a dynamic new growth phase for APG.

Products

• Container materials for fibre boxes and paper sacks
• plasterboard liners for building industry
• brown paper bags and packaging
• fine papers for uses ranging from envelopes and printing to photocopying, specialised cheque and security papers.
• carton boards for packaging food and household products
• functionally coated papers and paperboards
• softwood and hardwood pulp
• fine timber for home building.(2)

APG's Strategy

It is thought by market experts that AMCOR's general strategy is to initially establish fibre packaging and cartonboard operations overseas. AMCOR has done this to varying degrees on the west coast of America, Asia and Europe. Once these operations establish themselves and win customers from competitors, it is then expected that AMCOR will integrate backwards and build or buy papermills. Then it will have a ready market for its paper that will subsidise expansion into other paper markets. The main weakness with this strategy is access to waste materials.

The long term aim of Australian Paper is to increase fine paper capacity in Australia, which will result in import replacement and growth in market share.23

The largest threat to AMCOR's investments in printing and writing paper is mainly from the large integrated paper machines installed in Indonesia.

A new fine paper machine is due to start operation in late 1998. It will have an initial capacity of 160 000 tonnes, expanding Maryvale's output by nearly 40% 27 but will be capable of increasing to 220 000 tonnes per year if there is customer demand. AMCOR intends to use the new machine to manufacture all its photocopy paper, freeing up space on its other paper machines.(26)

Plantations

APG is Australia's major plantation owner, with 85 000 hectares of freehold and leasehold land. AMCOR plans to double its eucalypt plantations in Victoria in the next few years to about 30 000 hectares. This is being done in order to feed the enlarged capacity of the new fine papers machine at Maryvale, partly insulating itself from pulp price movements.23 In the Latrobe Valley AMCOR has established 40 000 hectares of softwood and have no plans for major expansion.28

AMCOR currently has about 10 000 hectares of eucalypt plantations with about 4000 hectares being established since 1990.28 Plantings prior to 1985 are predominantly E. regnans, with E. globulus accounting for most of the plantings subsequently. Currently there is a stock of 350 000 m3 (not per annum) of chiplogs in AMCOR plantations greater than 30 years of age.28

More than 70% of the raw material used by APG is either recycled or from plantations. In our opinion, it is not impossible for APG to commit itself to beginning an immediate phase out of its native forest operations. Unfortunately, this scenario is hampered by AMCOR's continued expansion of virgin paper production.

Sales rose 18% to $1354 million in 1994-5.2 This was primarily due to price increases for paper and the contribution of APPM fine papers businesses. With the acquisition of APPM, AMCOR has become the only producer of writing and printing papers in Australia. The amalgamation of APPM's printing and writing papers capacity with that already existing at AMCOR is leading to reduced costs and thus a greatly increased contribution to AMCOR's total profits.

AP is a totally integrated paper manufacturer, which sources its own pulp requirements, meaning that AP substantially benefits from rising white paper prices. This integrated structure means that paper price rises flow through AMCOR almost to the bottom line.

Timber Sources

Virgin fibre for Australian-made plain office paper is sourced overwhelmingly from native forest eucalypts from Victoria and Tasmania.(29)

AP's Maryvale plant is predominantly supplied from native forest eucalypts amounting to over 500 000 cubic metres.30 Fibre inputs include whole logs, thinnings and sawmill residues from mainly ash species. The Central Highlands forests are dominated by ash species regrowth from the 1939 bushfires, although pockets of old growth survive mainly in gullies. Under the 1996 Woodpulp Agreement the company has a legislated right to eucalypt pulpwood from state forests until 2030.29 The Central Highlands are home to the nationally endangered Leadbeaters Possum, Spotted Tree Frog, Sooty Owl, Tiger Quoll, Powerful Owl as well as rare vegetation types.

Broadleaved virgin fibre input into Australian Paper's Maryvale Mill, which manufactures much of the plain office paper consumed in Australia:

Eucalypt resource in Tasmania is supplied from North Forest Products (NFP, a wholly-owned subsidiary of North Ltd, vendor of the APPM assets, as arranged on sale of the APPM businesses). NFP was created in November 1993, when APPM's paper manufacturing and merchanting assets (in particular the Burnie and Wesley Vale paper mills, The Paper House and Dalton Fine Papers) were sold to Australian Paper, the paper-making division of AMCOR Ltd for $413 million.(16)

NFP is involved in the clearfelling of native forests across Tasmania, and is the world's largest exporter of hardwood eucalypt woodchips, with a current Federal export licence of 1,878,000 tonnes per annum.17 North's Hampshire woodchip mill currently supplies 310,000 tonnes of woodchips for AMCOR's Australian Paper mill in Burnie, 70,000 tonnes for the latter's Wesley Vale mill and 17,000 tonnes for export. The mill is able to process tree lengths of up to 18 m and log circumferences of nearly one metre - bigger logs are generally split lengthways in the forest.18 Supplies to AMCOR may rise to 500,000 tonnes.(19)

Market experts believe that the terms of arrangement are for fixed eucalypt prices for each year until 1999. Thereafter an evergreen contract between the companies exists, with prices to be arranged. This supply arrangement with APPM represents a cost savings for AMCOR in raw material costs over its previous arrangement of buying eucalypt from sawmill offcuts and state owned forests, as is the case in Victoria.

When North sold its paper-making interests to AMCOR, the latter acquired the rights to continue producing the well-known brand of copy paper Reflex, previously produced by APPM (a North subsidiary). North Forest Products supplies Australian Paper with native forest woodchips, which are converted into the Reflex brand of copy paper. In our opinion, it is this direct relationship between North, AMCOR, Reflex and clearfelled forests that has brought AMCOR into conflict with environmental interests.

Fax paper

Australia has one fax paper manufacturer, Mark Sensing, which uses base paper produced by Australian Paper at Maryvale. The company now boasts output of more than 1300 tpa - 18% of the market. In 1994/5 Mark Sensing signed an exclusive agreement with Spicers Paper Limited to market Mark Sensing facsimile paper in Australia. Spicers will use the Mark Sensing product in its Tudor range of fax paper.(20)

"Woodfree" Paper

AMCOR is predominantly an uncoated woodfree paper producer which is used mainly for photocopying. Maryvale is budgeted to produce 90 000 t of photocopy paper in 1996, compared to 86 000 t in 1995. Amcor's major grade is uncoated woodfree paper (220 000 t), followed by uncoated mechanical paper (60 000 t) and coated woodfree paper (23 000t).

Woodfree paper is paper in which the fibre source is chemical pulp only, ie all the Lignin is removed.

Mills and Resources

AMCOR owns pine and eucalypt resource in the Gippsland Valley. Pine is used for packaging papers (linerboard, corrugated medium). Eucalypt is used for printing and writing papers.

The company is self sufficient in pine for its packaging papers. Company management cites that pine forests owned are sufficient for its own needs in Australian papermaking activities.

Gippsland Wood and Paper Products witnessed a new pulp production record of 418 000 tonnes. The aggregate paper and board production rose 7% to 404 000 tonnes. Pulpwood and sawlog sales reached a record 1.7 million tonnes in 94-5 and eucalypt and pine plantations expanded by 2000 hectares.

Machines from the company's central mill in Maryvale, Victoria provide all virgin fibre requirements for packaging papers, including all papersack production

All of AMCOR's paper machines and pulp mills are working at full capacity, seven days a week.

Mill Capacities

As well as the mills listed on this page, AMCOR own the following mills:

Functional Coatings(VIC)
40 000ktpa
Coated Paper/Board

McKinley Paper(USA)
150 000ktpa
Paperboard

Morwell Sawmill (VIC)
245 000 cubic metres
Sawn Timber

Canberra Sawmill(A.C.T.)
85 000 cubic metres
Sawn Timber

Pulpwood

Total domestic consumption of hardwood pulpwood is around 1.5 m cubic metres, largely from native forest. From these figures it is evident that AMCOR take 2/3 of hardwood pulpwood used in Australia. Please note that these figures do not include the hardwood used at KCA.

The current users of this resource are:(31)

Victoria AP Maryvale - Pulp Bowater - Pulp CSR Bacchus Marsh - Hardboard	700 000 10 000 80 000	Tasmania AP Burnie - Pulp AP Wesley Vale- Pulp ANM Boyer - Pulp	310 000 80 000 160 000
Queensland CSR Ipswich - Hardwood	85 000	NSW CSR Raymond Terrace - Hardboard	53 000

In January 1996 AMCOR made moves to clear 3000 hectares on 170 allotments of native vegetation in five localities in the Latrobe Valley, in order to create 30 000 hectares of eucalypt plantations to support the proposed multi million dollar expansion of Australian Paper's Maryvale mill. The recent moves were regarded by the AMCOR group general manager for Gippsland Wood and Paper Products as "vital to wood security" for the Maryvale mill.32 AMCOR has approximately 85 000 hectares of land south of Warragul to east of Sale, 15 000 of which is native vegetation. The area is habitat for lyrebirds, koalas, parrots, reptiles, platypus, etc., and many local residents and conservation groups were outraged by AMCOR wanting to clearfell these areas.

The company has also come into conflict with local communities in the Strzelecki Ranges in Victoria, on account of plans to clear 2000 ha of koala habitat for Blue gum plantations.

AMCOR is faced with a dilemma that - given its exisiting eucalypt plantation resources and its claims to converting half the waste paper recycled in Australia - experts predict that this will not be enough to supply adequate quantities of raw material for the new paper machine that will be built. AMCOR will be reliant on government and third party forests, which will no doubt be granted by state governments in Victoria and Tasmania. These governments will be wanting to gain from the economic benefits of a new paper machine, even at the risk of outraging the general public.

In regards to photocopying paper, AP needs to compete with imported paper which in some cases is cheaper than that made in Australia. Indonesian copy paper is by far the most competitive due to cheaper access to resources, cheaper labour and energy. South African paper is the next most competitive with cheap labour, distribution and fixed costs. US and Brazilian paper is competitive due to energy, chemicals and scale, but not as competitive as Indonesian paper. To be more competitive Australian fine paper production needs to reduce costs to about $200 a tonne. This will be done through product rationalisation, increased capacity utilisation, reduced labour costs etc.

In our opinion, it would be advisable for AMCOR to begin diversifying its white paper feedstock immediately. This could be done by importation of environmentally acceptable plantation pulp until domestic sources are available and by utilising the wide range of alternative fibres technologies now available.