Naomi Edwards
THE financial viability of Bell Bay is regularly assessed by institutional analysts and by the ANZ due diligence team considering financing the pulp mill. These analyses can tend to focus on positives of the mill, and assume that Bell Bay will have similar cost structures to the very large South American pulp mills now being built. They also see only positives in ongoing government subsidies to the mill.
A new research paper by Naomi Edwards looks at some aspects of competitiveness that the market may be understating. While the Bell Bay pulp mill will benefit from public subsidies at many different levels, its financial viability is still not assured. Bell Bay will be in direct competition with low cost South American pulp producers, who have significant cost advantages over Bell Bay, including access to very large, close and cheap plantation fibre resources. Although Bell Bay has a freight distance advantage into China, this advantage is rapidly eroded when one considers Bell Bay’s additional cost to build loading and its additional costs of production. World pulp prices are at record levels, but many forecasters are expecting the cycle to turn, at which point Bell Bay’s cost disadvantages will come into stark relief, probably to the on-going detriment of the Tasmanian public purse.
Download analysis: naomiGNS_April_2008_Naomi_Edwards.pdf
