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Annual Reports to Australian Securities and Investments Commission
South East Fibre Exports Pty Ltd (SEFE) is the owner of the Eden woodchip mill. It is a subsidiary of Japan’s biggest paper manufacturing company, the Nippon Paper Group Inc.
Eden was Australia’s first woodchip mill, set up in 1969 by the Daishowa Paper Manufacturing Company of Japan and was the first overseas operation of that company. Woodchip exports commenced in December 1970.
Nippon Paper took over Daishowa in 2001 and the Australian subsidiary changed its name from Harris-Daishowa to SEFE in 2003. Nippon Paper is the majority shareholder with about 60% of the shares. The remainder are owned by the Itochu Corporation.
The Eden chipmill uses only native forest trees, most cut down solely for woodchipping. It does not use waste wood and, indeed, cannot process branches, butts or crowns. It can only chip whole tree logs.
Eden is the only region in New South Wales where trees are felled solely for woodchipping. This has led to very large scale logging operations, with virtual clear felling the norm.
Since its establishment it has exported over 35 million tonnes of native forest chips, mostly to Japan and mostly to paper mills owned by its parent company in Japan.
The 2007 Annual Report to ASIC reported near record profits
After Tax profits in $A
| 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
| 9,348,609 | 8,199,570 | 6,292,798 | 6,084,308 | 6,038,351 | 10,347,751 | 12,981,967 | 6,839,580 | 9,063,146 | 11,775,732 | 5,983,063 | 7,763,403 | 6,446,910 | 6,264,013 | 7,265,748 | 6,060,015 | 7,968,447 | 6,859,580 | 9,063,146 |
In recent years, however, improved environmental policies and quality standards by Nippon Paper have placed the Eden operation under some pressure and are forcing it to adjust to a changing market.
Exports of woodchips in Green Tonnes
| 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
| 700,123 | 666,830 | 704,264 | 712,758 | 760,993 | 711,378 | 794,433 | 838,600 | 854,550 | 1,060,407 | 1,071,841 |
Nippon Paper has a policy to import only
‘plantation’ or ‘certified’ chips by the year 2008. Unfortunately the
company policy does not state what form of certification will be
acceptable.
Eden chips do not yet meet the ‘certification’ requirement, although the
company policy may yet prove ‘flexible’ enough to enable recognition of
the disreputable Australian Forestry Standard, a business-as-usual
outcome devised by former Federal Forestry Minister, Wilson Tuckey.
Even without the strictures of a reputable form of certification, NP’s
quality standards are also causing some problems for SEFE.
From 2004, Nippon Paper has advised SEFE that it will only buy highest
quality chips, from the younger trees of regrowth forest.
The paper industry pays a higher price for regrowth or plantation chips
because these have a longer fibre length, are stronger and lighter
coloured, more suitable for producing high quality bright white paper.
Pale coloured timber requires less bleach.
SEFE has announced it will process and export 150,000 tonnes of plantation softwood chips per year. This is a move in the right direction, but because they intend to install a new chipper to do this, it will mean entrenching hardwood chipping.
One of the two chip stockpiles will be used for the pine chips in order to segregate them from the native forest chips.
SEFE has achieved a near record profit for 2007 and has managed this because it pays next to nothing for its native forest logs. To maintain its market position, SEFE has had to find new buyers for its cheaper, low quality chips. It has made shipments to China, Taiwan, Korea and Indonesia and to other paper companies in Japan, but will need to get long term contracts if it is to have a secure future.
Australia’s chips are among the cheapest in the Pacific and Eden chips are the cheapest in Australia. While the low quality Eden chips are less valued in the paper industry, there has so far been a continuing market for them because they are so cheap.
The low price is made possible by extraordinarily low royalty payments charged by both Victorian and NSW State Governments. The royalty prices (payments for logs) are well below market rates and have made the Eden chips competitive against higher priced plantation chips.
How SEFE fares in the future will depend on the extent to which the Pacific Rim paper industry grows.
2007
2006