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Paperlinx faces $150 million clean-up bill for Tasmanian mill

Tuesday, 08 December 2009
By Print 21 Online Article

Mercury decontamination could cost Paperlinx over $150 million in clean-up costs if its Burnie paper mill is closed down.

The paper giant sent shockwaves through Tasmania this week when it announced plans to close its Wesley Vale operations and part of the Burnie mill, resulting in the loss of 252 jobs.

Media reports claim that chlor-alkali mercury cell houses at both the Burnie and Wesley Vale plants each contained about one tonne of mercury, meaning that if the remaining operations at Burnie are sold, Paperlinx may face costs of up to $150 million in cleaning up the operations, along with redundancies.

On the other hand, PaperlinX said it expected the net cash cost to be around $10-20 million. Also, within the $120 million total cash closure costs before recovery of working capital and the sale of assets, the environmental remediation cost is approximately $20 million.

This week’s news means that Paperlinx will now be solely a merchanting company, with businesses distributing paper, sign and display and graphics materials ad industrial packaging to customers in Australia, New Zealand and Asia, Europe and North America.

Tom Park, (pictured), managing director of Paperlinx, said that exiting the Tasmanian manufacturing operations was a “difficult decision to make” but necessary for the company’s future.

“While this was a difficult decision to make, it provides greater certainty for all of our stakeholders and removes one of the key uncertainties that has been overhanging the Company and its employees. To reach this point has been a complex exercise and we will now work to conclude this process expeditiously in the interests of all parties.

“Throughout this process we have received strong support from our Tasmanian employees, even in the face of this great uncertainty. I would like to thank them for their efforts whilst we have pursued the full range of options for these operations. Thank you also to our customers, suppliers and all levels of Government who have worked closely with our team throughout the review process.

“From a PaperlinX perspective, we are pleased to have been able to significantly reduce the net cost of our exit from Tasmania from the initial estimates,” added Mr Park. “It is unfortunate that it was not possible to create a scenario where the Tas Paper business could be sustainable over the long term, but a more positive outcome for the Burnie Mill will depend upon the outcome of current discussions with a potential purchaser and the level of support any new owner receives from the wider community.

“The operations at Burnie and Wesley Vale are together currently substantially loss making and this level of loss, exacerbated by the current high Australian exchange rate and business configuration, is unsustainable.”

Stage one of the exit will be completed by March 2010 and will see the closure of the number 4 paper machine at Burnie and the number 11 and 12 machines at Wesley Vale. Stage two, expected to be complete by the end of June 2010, will involve either the sale of the balance of the Burnie Mill, including the number 10 paper machine and converting operations, or closure.

Meanwhile, Printing Industries is making urgent representation to the Minister for Innovation, Industry, Science and Research Senator Kim Carr, to remove the tariffs (5 per cent) payable on imported paper as a matter of urgency following Paperlinx’s decision.

The rationale for the existence of the 5 per cent duty is to assist local industry but following Paperlinx’s plans to close most of its manufacturing plants in north-west Tasmania the raison d’être for the 5 per cent tariff has now ceased to exist.

Printing Industries CEO Philip Andersen, said that imported paper that has no locally available substitute should be automatically permitted to enter Australia duty free. Andersen believes that such an initiative will help improve the competitiveness of the local printing industry given that paper costs can account as high as 45 per cent of total manufacturing costs.

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