Australian Eucalypt plantations: making up for lost time.

Australia, the home of the Eucalypt, has been slow to take to its native species for plantations. Since the mid 1990s, it has been making up for lost time and has amassed a plantation estate of over 630,000 hectares.

The major species Eucalyptus globulus ssp globulus--more commonly known as Blue Gum--grows well only in the high rainfall, deep soil regions of southwest Australia, southern Victoria and Tasmania. This is a natural barrier that has been identified by the growers.

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Other species of eucalyptus have been grown successfully elsewhere in the world. It is somewhat surprising that Australia has not taken to its own species with the same alacrity as other continents such as South America and Africa, or Asian countries such as China, Vietnam and Thailand.

Australia has a significant trade deficit in forest products. Despite having a production surplus of around 4 million [m.sup.3] per annum, their trade debt in forest products languishes at around A$ 2 billion dollars annually. The majority of imports are for paper and paperboard products, most notably printing and writing papers. Ironically, this is the paper grade for which eucalyptus is regarded as the premium pulping fiber.

State governments in Australia began developing major softwood plantations in the 1960s to address the country's trade deficit. The predominant species in Australia is radiata pine (Pinus radiata D. Don) which occurs naturally on the west coast of North America. The current 980,000-hectare softwood estate is still largely publicly owned.

While there were numerous intermittent attempts at eucalypt plantation development over the years, the current explosion did not commence until the late 1980s. This effort was largely driven by Dr. Syd Shea, then head of the Department of the Conservation and Land Management in Western Australia. He attracted Japanese and Korean pulp and paper companies to invest in plantations that would have a dual purpose: producing export chips and helping control soil salinity.

JAPANESE INFLUENCE

The rest is history. Japan's predilection for plantation eucalypt fiber (and Blue Gum in particular) and their declining interest in sourcing imports from natural forests has seen major Japanese pulp and paper companies develop the majority of their chip plantation projects in Australia, which currently amount to 109,000 hectares.

But the story did not end with the Japanese. Australian companies using tax driven managed investment schemes saw the opportunities and have been spectacularly successful at establishing a large plantation estate. These companies--such as Great Southern Plantations, Gunns, ITC/APT and Timbercorp--have built themselves into serious players in the Australian plantation industry. They have almost exclusively concentrated on short, 10-year pulpwood rotations. Depending on planting and growth rates, the annual harvest will climb to 10 to 13 million [m.sup.3] per annum by 2012.

Australia is currently the largest hardwood chip exporter to Japan and given its cost competitiveness is likely to remain so in the medium term.

Not only are the export opportunities bright, but there is also a "first mover" advantage for the developer of a new bleached hardwood kraft pulp mill in Australia which could secure a sizable stake in the domestic market and compete against imports.

From a slow start. Australia has made up significant ground and it has clearly entered the eucalypt plantation business in a serious manner.

Note: This article is part of a series by Jaakko Poyry Management Consulting, Tarrytown, New York, USA, which provides marketing and consulting services to the global pulp and paper industry. For more information, contact Rob de Fegely by email at [e-mail], or by phone at [phone] (Australia). For other inquiries, contact Soile Kilpi by email at [e-mail], or by telephone at [phone].