The

Political Ecology

of

the

Japanese Paper Industry

Ian William Penna

Submitted in total fulfilment of the requirements of the degree of Doctor of Philosophy

School of Anthropology, Geography and Environmental Studies

The University of Melbourne

November 2002

ii

Dedication

This dissertation is dedicated to

the memory

of

Peter Rawlinson

and

Gordon Robinson

iii

iv

Declaration This is to certify that this dissertation: • comprises only my original work; • contains no material that has been used for the award of any other degree to

myself from any university or institution and no material that has been previously published or written by any other person except where acknowledgment is given in the text; and

• is less than 100,000 words in length, exclusive of appendices, bibliographies, figures and tables.

Ian William Penna

v

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Abstract The Japanese paper and paperboard industry has grown to be one of the largest in the

world. It manufactures a range of products for sale primarily within Japan, and

consumes organic fibre for these products from dispersed domestic and foreign

forests, plantations and cities.

This dissertation examines the links between the development and structure of

the industry and its use of papermaking fibre. It takes a political ecology perspective

and uses an industrial structure/consumption-production chain approach to show how

the industry’s development and structure continue to depend on company control

over fibre flows and the restructuring of products, product distribution and

manufacture, the fibre supply chain and fibre resources.

As with the modern global paper/board industry, the recent growth of the

Japanese industry has been characterised by cycles of capacity expansion, market

collapse, excess capacity and low prices and profits. Manufacturers and general

trading companies involved in the industry have tried to support growth in the use of

paper/board and counter these cycles by restructuring production, distribution,

ownership and fibre supply. This restructuring helps protect the flow of fibre

through the industry and concentrated it in particular companies.

Obtaining increasing quantities of suitably-priced fibre has been at the base of

the industry’s development. Control by manufacturers and general trading

companies over prices and fibre supply chains has been central to the exploitation of

different fibre resources. Much of the industry’s growth has depended on increasing

the use of native forests and waste paper/board. It is now expanding its use of

plantation wood.

The transnational flow of fibre through the Japanese paper industry links

dispersed economies and environments. The dissertation emphasises the importance

of all the dimensions of the characteristics of the resources – physical, political,

economic, ecological – in determining how fibre is exploited and the interactions

between these economies, environments and communities. It argues that the

expanding and diversified fibre supply integral to the industry’s growth has relied on

significant restructuring of social and natural environments to suit the interests of

pulp and paper capital. The rapid restructuring of forests to supply large volumes of

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pulpwood has been at the expense of many non-wood values. Increasing the supply

of recovered fibre involved restructuring Japan’s waste paper/board collection sector

to shift costs out of the fibre supply chain. Similar restructurings are occurring with

the establishment and use of plantation wood. Case studies explain the processes

involved.

The industry’s fibre sourcing strategies are directed by ‘shallow’ environmental

philosophies that are concerned primarily with maintaining fibre supplies. This is

reflected in the ‘environmental charters’ of paper manufacturers and general trading

companies. Environmental benefits resulting from these strategies are primarily

produced by the pursuit of economic objectives. The ability and desire of these

companies to develop and implement more environmentally-benign strategies are

limited by the political economies in which they operate and the priorities and

philosophies that dominate within the industry.

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Acknowledgements The preparation of this dissertation taught me many lessons about things other than

Japan’s paper industry. In particular, it showed me how, even though the task of

preparing a PhD dissertation is very personal and can consume much of one’s life, it

is ultimately a cooperative effort and depends on the goodwill, knowledge and skills

of many other people.

First, I want to express my gratitude and loving thanks to my parents and brother

for their love and support, not only through the years it took in preparing the

dissertation, but also through the life that led me to it. I hope they find satisfaction

and relief in seeing the dissertation finally completed.

Also, I am most grateful to Professor Michael Webber, my supervisor, who

welcomed me into the University of Melbourne, supported my decision to write this

dissertation and gave me invaluable assistance over the years I took to complete it.

Mark Wang, Peter Christoff and Geoff Missen also provided advice and

encouragement, personally and through my progress review committee. All other

staff of the School of Anthropology, Geography and Environmental Studies were

generous in their help.

During 1997, I was an Invited Guest Researcher at Kokugakuin University,

Tokyo. The financial and organisational support of Kokugakuin University allowed

me to gather much information and make important contacts. Staff were always

most helpful. Special thanks go to Furusawa Koyu for his personal support of my

research and Shimoyama Nobukatsu and other staff of the University’s International

Exchange Center for their kind assistance while I was living there.

I interviewed many employees of Japanese paper and trading companies as well

as people employed in, or close to, the paper and wood products industry in Japan

and elsewhere. Many of these people preferred to remain anonymous, so I do not

directly acknowledge them by name. They know who they are, and here I extend my

grateful thanks for allowing me to meet with them. However, I would particularly

like to thank Nakano Shogo and staff of Daishowa Paper Manufacturing Co. in Japan

and its associated companies in North America and Australia who made time

available in their busy schedules to meet me and respond to my requests.

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Kondo Tadahiro and other staff of the Japan Paper Association provided me

with introductions, interviews and copies of regular publications that supplied much

statistical data and policy information on the Japanese paper industry. Oe Reizaburo,

Emeritus Professor at Tokyo University of Agriculture and Technology, and the staff

of the Paper Recycling Promotion Center, particularly Ono Mikio, helped me gain

information on recycling of used paper/board in Japan. Iida Kiyoaki of Japan TAPPI

also directed me to useful information on a variety of issues related to paper

production in Japan.

Robert Johnston of the Australian Pulp and Paper Institute and Morita Tsuneyuki

of Japan’s National Institute for Environmental Studies kindly provided references

for the questionnaire that I sent to Japanese paper/board manufacturers and general

trading companies. Allan Jamieson of AOK Innovations and Noel Clark of CSIRO

unfailingly responded to all my requests for assistance, and provided valuable

support and advice that improved my understanding of the paper industry. Sugimura

Ken, Ryukoh Hiroto, Sawanobori Yoshihide and Narita Masami answered my

various questions, and the comments and information they provided were extremely

important in helping me understand the forestry scene in Japan.

The interpreting and translating skills of my friends Takeguchi Ryu, Ikeda

Mariko and Watanabe Masako were crucial for my interviews in Japan. Also, the

help of Matsuoka Tomohiro, Yamane Akiko and Hashimoto Yoji with translations in

Australia was very important. Michelle Hall in the University of Melbourne’s library

tracked down Japanese references for me, and Justin Wejak translated letters into

Indonesian.

My travels through North America were facilitated by the welcomes and

continuing support of old and new friends - thanks to Susan Grigsby, Sabrina Huang,

Denny Haldeman, Cielo Sand, and Ian and Theresa Urquhart who provided

accommodation, transport, introductions and good times during this period. Harriett

Swift, Keith Hughes, Peter Morgan and Judy Clark provided support, information

and ideas during the research process in Australia. My thanks and appreciation also

go to all other people listed in Appendix 4.1 whom I met or helped me in some way.

My apologies to any that I have inadvertently omitted.

The friendships I made with other students while studying at the University of

Melbourne are not only valuable to me in their own right, but helped me handle the

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frustration and angst that accompany the PhD task. In particular, my thanks go to

Terri Chala, Jenny Newton, Lesley Rigg, David Goldblum, Christina Jarvis, Ben

Miller, Paul Reich and all occupants of Rooms 414 and 415 during my stay. The

encouragement of friends around the Pacific helped me persevere – thanks to Gail

James, Susan Grigsby, Morita Tsuneyuki, Allan Jamieson, Maureen Smith, Claire

Day, Moriyama Tae, Bob and Reiko Gavey, Jonathan Holliman, Kanazawa

Mutsumi, Stephen McKay, Michael Bjorn and Randy Helton. ‘Sabah’, ‘Nigah’ and

the platypus family in the Moorabool River provided great companionship too.

The real beginnings of a task like a PhD can be found well before the formal

process starts, so there are many people in my past who may not appreciate their

contribution. They include the staff and post-graduate students of the Institute of

Agriculture and Forestry in the University of Tsukuba from 1993 to 1995, especially

Kumazaki Minoru who was my supervisor while I was a research student there.

The Australian Securities & Intelligence Commission provided annual financial

statements and reports of Harris-Daishowa (Australia) Pty. Ltd. for the years 1990-

1998 at a concessional rate. However, AS&IC is not responsible for the reliability of

any such information supplied to it, or for the way that information was used in this

dissertation. Timber Mart-South kindly provided data on the prices of pulpwood in

south eastern USA.

Permission to reproduce maps was provided by Dana Ltd. (Figures 8.6, 8.7 and

8.8), Southeast Alaska Conservation Council (Figure 8.15), Alberta Sustainable

Resource Development (Figure 8.16), Daishowa-Marubeni International (Figure

9.11), Friends of the Lubicon (Figure 9.12), State Forests of New South Wales

(Figure 9.13) and the Japan Paper Association (Appendix 1.1). Jo Sasse authorised

reproduction of the map of Japan’s forest zones in Figure 6.1, the original source of

which is the Japan Forest Technical Association. Permission to reproduce

photographs was provided by Sugimura Ken (Figure 6.16) and Nihon Consumer

News (Figure 7.7).

The frontispiece comes from the packaging for a CD Rom in the computer game

‘Riven’. I am grateful to Cyan Worlds, Inc for giving permission to use this image.

All Myst, Riven and D'ni images and text © Cyan Worlds, Inc. All rights reserved Myst ®, Riven ® and D'ni ® Cyan Worlds, Inc.

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Contents Frontispiece....................................................................................................................i Dedication................................................................................................................... iii Declaration....................................................................................................................v Abstract...................................................................................................................... vii Acknowledgements......................................................................................................ix Contents .................................................................................................................... xiii Figures ..................................................................................................................... xvii Tables.........................................................................................................................xxi Abbreviations and special terms ............................................................................. xxiii Chapter 1: Introduction................................................................................................1

1.1 International fibre resource links ......................................................................1 1.2 Japan’s paper use and the Japanese paper industry...........................................2 1.3 The research importance of Japan’s paper industry..........................................6

1.3.1 Research issues and Japan’s paper industry................................................6 1.3.2 Industrial structure and natural resources....................................................7 1.3.3 The application of environmental policies ..................................................8 1.3.4 Japan and Japanese companies as resource consumers...............................9

1.4 Research questions..........................................................................................11 1.5 Structure of the dissertation ............................................................................12

Chapter 2: ‘Political ecology’, industrial structure and resource exploitation ...........15

2.1 Introduction.....................................................................................................15 2.2 The political economy of resource exploitation..............................................15 2.3 Political ecology..............................................................................................18 2.4 The political ecology of resource-based industries.........................................20

2.4.1 An approach for analysing resource-based industries...............................20 2.4.2 The influence of resource characteristics ..................................................20 2.4.3 Global economic structures and ‘shadow ecologies’ ................................23

2.5 Political ecology, industrial structure and resource use..................................26 2.5.1 Industrial structure and the environment...................................................26 2.5.2 Industrial transformation and environmental change................................27 2.5.3 Industrial structures and ‘consumption-production chains’ ......................29

2.6 Industrial structure and socio-environmental consequences...........................34 2.6.1 Introduction ...............................................................................................34 2.6.2 The Japanese aluminium industry .............................................................34 2.6.3 Agriculture and the food industry .............................................................35 2.6.4 Forest exploitation and wood industries....................................................37 2.6.5 Application to the dissertation...................................................................38

2.7 Industrial structure and environmental protection ..........................................38 2.8 Conclusions.....................................................................................................43

Chapter 3: Papermaking and the role of fibre............................................................45

3.1 Introduction.....................................................................................................45 3.2. Fibre characteristics and properties and the papermaking process ................46

3.2.1 ‘True’ paper and fibre characteristics........................................................46 3.2.2 The papermaking process..........................................................................48 3.2.3 Characteristics and properties of papermaking fibres ...............................50

3.3 The economics of modern paper production and fibre supply........................54 3.3.1 Pulpmill operation and economics ............................................................54

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3.3.2 Fibre supply and pulp/papermill economics .............................................57 3.3.3 Wood fibre supply and pulp/paper production .........................................58 3.3.4 Recovered fibre supply and paper/paperboard production .......................59 3.3.5 Non-wood fibres .......................................................................................61

3.4 Fibre and the political economy of papermaking ...........................................62 3.4.1 The development of ‘true paper’ and the shift to wood............................62 3.4.2 The expanding use of wood and restructuring supply ..............................64 3.4.3 Industrial attitudes to fibre resources ........................................................70 3.4.4 Restructuring manufacturing and distribution ..........................................74

3.5 Conclusions.....................................................................................................76 Chapter 4: The research method................................................................................81

4.1 Introduction.....................................................................................................81 4.2 The research paradigm and approach .............................................................81 4.3 The research agenda........................................................................................83

4.3.1 Research process, topics and sources........................................................83 4.3.2 Initial information collection ....................................................................83 4.3.3 Overseas fieldwork ...................................................................................85 4.3.4 Further information collection ..................................................................87

4.4 Methodological issues.....................................................................................87 4.5 Information presentation.................................................................................91

Chapter 5: Restructuring the consumption, manufacture and distribution of Japan’s paper and paperboard ...........................................................................93

5.1 Introduction.....................................................................................................93 5.2 Paper/board use in Japan since World War 2 .................................................96

5.2.1 Post-war trends in domestic production....................................................96 5.2.2 Restructuring paper and paperboard use...................................................96 5.2.3 Overview.................................................................................................114

5.3 Restructuring pulp, paper and paperboard production..................................115 5.3.1 Trends, causes and consequences ...........................................................115 5.3.2 Industrial structure, competition, profitability and market share............116 5.3.2 Restructuring industry ownership ...........................................................119 5.3.3 Restructuring production facilities..........................................................122 5.3.4 MITI and industry policy ........................................................................129

5.4 Restructuring paper/board distribution .........................................................131 5.5 Conclusions...................................................................................................135

Chapter 6 - Restructuring domestic supplies of new fibre .......................................137

6.1 Introduction...................................................................................................137 6.2 Fibre supply to World War 2 ........................................................................140

6.2.1 Establishment of machine-made paper production.................................140 6.2.2 Exploiting resources in the ‘periphery’...................................................142 6.2.3 Impacts on forests ...................................................................................144

6.3 Growth after World War 2............................................................................145 6.3.1 Pulpwood resources and exploitative pressures......................................145 6.3.2 Restructuring pulpwood procurement - ‘keiretsu’ control......................164 6.3.3 Pulpwood logging, resource management and environmental impact ...168

6.4 Conclusions...................................................................................................175

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Chapter 7: Restructuring the supply of used fibre – ‘logging Japan’s urban forests’...................................................................................................179

7.1 Introduction...................................................................................................179 7.2 Japan’s waste paper/board resources ............................................................179 7.3 Recycling technologies and ‘recovered fibre’ products................................185 7.4 Japan’s recycling legislation .........................................................................186 7.5 Recycling economics ....................................................................................190 7.6 Restructuring the supply of recovered fibre..................................................190

7.6.1 The waste paper/board collection sector .................................................190 7.6.2 Restructuring supply - 1945 to the 1980s................................................191 7.6.3 Restructuring supply – the 1980s to 2000...............................................197

7.7 The continuing cost-price squeeze................................................................203 7.8 Recovered fibre - reducing garbage and conserving forests? .......................206

7.8.1 Recycling for garbage reduction .............................................................206 7.8.2 Recycling for fibre resource conservation ..............................................208

7.9 Future environmental benefits ......................................................................212 7.10 Conclusions.................................................................................................214

Chapter 8: Restructuring the supply of foreign fibre...............................................217

8.1 Introduction...................................................................................................217 8.2 The supply of foreign fibre since 1950 .........................................................217

8.2.1 Factors influencing fibre imports ............................................................217 8.2.2 Imported pulpwood .................................................................................218 8.2.3 Pulp imports ............................................................................................226 8.2.4 Imports of paper and paperboard ............................................................227 8.2.5 General trading companies and fibre imports .........................................231 8.2.6 Fibre imports - Overview ........................................................................232

8.3 Case studies...................................................................................................232 8.3.1 Introduction .............................................................................................232 8.3.2 Temperate forest hardwood chip supply .................................................233 8.3.3 Foreign hardwood plantations.................................................................253 8.3.4 Foreign pulpmill development ................................................................260

8.4 Conclusions...................................................................................................270 Chapter 9: Daishowa Paper Manufacturing Co. – A Case Study .............................273

9.1 Introduction...................................................................................................273 9.2 Company History ..........................................................................................273

9.2.1 Daishowa’s origin and growth ................................................................273 9.2.2 The Oji challenge and Saito Ryoei..........................................................275 9.2.3 Financial management and take-over......................................................280

9.3 Products.........................................................................................................284 9.3.1 Domestic products...................................................................................284 9.3.2 Foreign products......................................................................................286

9.4. Raw material supply......................................................................................290 9.4.1 Overview .................................................................................................290 9.4.2 Cariboo Pulp and Paper Co .....................................................................294 9.4.3 The Peace River pulpmill ........................................................................300 9.4.4 The Port Angeles papermill.....................................................................310 9.4.5 Harris-Daishowa export woodchip scheme.............................................311

9.5 Conclusions...................................................................................................334

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Chapter 10: Environmental issues and paper industry policies................................337 10.1 Introduction.................................................................................................337 10.2 The history of company environmental charters ........................................340 10.3 Company environmental charters ...............................................................342

10.3.1 General trading companies ...................................................................342 10.3.2 Paper companies ...................................................................................345 10.3.3 Charter overview...................................................................................349

10.4 Policy implementation and internal company and staff attitudes ...............350 10.4.1 Implementing environmental charters ..................................................350 10.4.2 Attitudes to fibre use and conservation issues ......................................357

10.5 Environmental charters and environmental outcomes................................367 10.6 Conclusions.................................................................................................370

Chapter 11: Conclusions..........................................................................................373

11.1 Introduction.................................................................................................373 11.2 Overview of the dissertation .......................................................................373 11.3 The subsidiary research questions ..............................................................375 11.4 The main research questions.......................................................................382

Bibliography .............................................................................................................391 Appendix 1.1: Pulp and paper mill location, ownership and production in Japan during the year 2000 .............................................................................463 Appendix 4.1: Interviewees and people who assisted with information .................465 Appendix 5.1: Japan’s early use of paper................................................................469 Appendix 5.2: Types of paper used in Japan...........................................................473 Appendix 5.3: Tissue production, waste paper use and industrial restructuring in Japan ......................................................................................481 Appendix 5.4: Recent trends in share prices of Japanese paper/board companies...483 Appendix 5.5: Oji Paper Co. – issues of structure and resource control.................485 Appendix 5.6: Mergers and acquisitions in Japan’s paper/board industry since the mid-1960s ........................................................................................505 Appendix 5.7: Japan’s general trading companies and their involvement in the Japanese paper/board industry ..............................................................509 Appendix 7.1: Statistics and terminology related to recovered fibre in Japan........519 Appendix 7.2: Public attitudes to ‘recycled paper’ products in Japan ....................523 Appendix 8.1: Diversification of foreign temperate hardwood chip supplies in the late-1980s ..............................................................................................531 Appendix 8.2: Calculations of the approximate areas of native forest needed to supply recent amounts of hardwood chips exported from Australia and south eastern USA ....................................................................545 Appendix 8.3: Extracts of interview with James Morrison.....................................549 Appendix 9.1: Saito Ryoei – a potted history..........................................................551 Appendix 9.2: Extracts of interview with Tom Hamaoka.......................................555 Appendix 9.3: Streamside reserve criteria in the Eden region ................................559 Appendix 9.4: Sawlog and pulplog criteria in the Eden region ..............................561 Appendix 9.5: The impact of woodchipping on some fauna in south eastern NSW..........................................................................................565 Appendix 10.1: Notes for Tables 10.1 to 10.10 ......................................................567 Appendix 10.2: Content of the questionnaires used to obtain information from Japanese paper companies and GTCs ....................................................585

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Figures Figure 1.1: The general flow of fibre through the Japanese paper/board industry......4 Figure 1.2: The flow of fibre for pulp, paper and paperboard production in Japan during 2000. ..............................................................................................5 Figure 2.1: Mapping the market structure of raw material industries. ......................22 Figure 2.2: The spectrum of ‘greening’ positions......................................................40 Figure 3.1: The structure of a mature softwood fibre. ...............................................47 Figure 3.2: Pulping processes and characteristics. ....................................................49 Figure 3.3: Generalised production costs and profit for a pulpmill...........................55 Figure 3.4: Simplified comparison of the profit margin between baseline and incremental woodpulp production. .............................................................56 Figure 5.1: Paper use in Japan. ..................................................................................94 Figure 5.2: Paperboard use in Japan. .........................................................................95 Figure 5.3: Paper production in Japan. ......................................................................97 Figure 5.4: Paperboard production in Japan. .............................................................98 Figure 5.5: Prices for linerboard and corrugating medium in Japan. ......................101 Figure 5.6: Production of uncoated and coated printing papers in Japan. ...............106 Figure 5.7: Prices for uncoated and coated papers in Japan. ...................................107 Figure 5.8: Annual publication of books and magazines in Japan. .........................108 Figure 5.9: Exports of paper and paperboard from Japan........................................112 Figure 5.10: Forecasts and expectations of paper and paperboard use in Japan................................................................................................................113 Figure 5.11: The average profitability of Japanese paper/board manufacturers......117 Figure 5.12: Concentration of production within Japan’s paper/board industry. ....120 Figure 5.13: Pulp production in Japan. ....................................................................123 Figure 5.14: Capital expenditure by paper/board manufacturers in Japan. .............124 Figure 5.15: Employment and labour productivity in the pulp, paper and paperboard sectors in Japan.............................................................................126 Figure 5.16: Outline of the distribution of paper/board products in Japan..............133 Figure 6.1: The forest zones of Japan. .....................................................................138 Figure 6.2: Japan and areas of pulpwood supply referred to in Chapter Six. ..........141 Figure 6.3: Pulpwood supply to Japanese pulp and paper companies from 1913 to 1945. ..........................................................................................143 Figure 6.4: Pulpwood and woodchip supply within Japan from 1954 to 1970. ......150 Figure 6.5: Hardwood product output from Japan’s native broadleaf forests. ........153 Figure 6.6: Sources of hardwood chips in Japan. ....................................................154 Figure 6.7: Prices for hardwood and softwood pulpwood in Japan from 1952 to 1976. ..........................................................................................155 Figure 6.8: Relative prices for hardwood and softwood pulpwood in Japan from 1952 to 1976, based on Figure 6.7. ..............................................156 Figure 6.9: The establishment of new plantations and the production of hardwood pulpwood in Japan..........................................................................159 Figure 6.10: Nominal and real prices for domestic and imported hardwood chips in Japan. .................................................................................................160 Figure 6.11 Sources of softwood chips in Japan. .....................................................162 Figure 6.12: Nominal and real prices for domestic and imported softwood chips in Japan. .................................................................................................163 Figure 6.13: The number, employment level and production of woodchip mills in Japan...................................................................................................167 Figure 6.14: Wood-based industry log supply centred on public forests in Nagano Prefecture from 1963 to 1983. ...........................................................170

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Figure 6.15: Log production from broadleaf forests on Amami Island. .................173 Figure 6.16: Clearfelling on Amami Island.............................................................174 Figure 7.1: Recovery of waste paper and paperboard in Japan. ..............................180 Figure 7.2: Imports and exports of recovered fibre by Japan..................................182 Figure 7.3: Rates for recovery and utilisation of waste paper and paperboard in Japan. .......................................................................................183 Figure 7.4: Composition of recovered fibre used for paper/board production in Japan. ..........................................................................................................184 Figure 7.5: Structure of Japan’s waste paper and paperboard collection sector......192 Figure 7.6: Prices paid for the main categories of recovered fibre by paper and paperboard manufacturers in Japan. ...............................................196 Figure 7.7: Community groups and collectors of waste paper and paperboard protest in Tokyo over the low price for recovered fibre during 1997.............201 Figure 7.8: Recent production of municipal garbage in Japan. ...............................207 Figure 7.9: Indicative trends for the end-use of waste paper/board to 2010, assuming the production of paper/board garbage from 1999 is constant........209 Figure 7.10: Fibre flows for newspapers and advertising inserts and theoretical financial relationships between the manufacture of newsprint and printing papers for some companies, and newspaper publishers, distributors and subscribers. .........................................................211 Figure 8.1: Imports of softwood chips into Japan. ..................................................221 Figure 8.2: Imports of hardwood chips into Japan. .................................................222 Figure 8.3: Sources of woodchips imported into Japan by fibre type. ....................223 Figure 8.4: Imports of pulp into Japan for artificial fibre production and paper production.......................................................................................228 Figure 8.5: Paper and paperboard imports into Japan. ............................................230 Figure 8.6: The location of export woodchip schemes in Australia during the late-1990s. .................................................................................................235 Figure 8.7: The location of export woodchip schemes in Chile during the late-1990s. .......................................................................................................237 Figure 8.8: The location of export woodchip schemes in south eastern USA during the late-1990s.......................................................................................238 Figure 8.9: Imports into Japan of hardwood chips from the leading suppliers by nation. .........................................................................................240 Figure 8.10: CIF prices in Japan of hardwood chips from the leading supplier nations compared to that for chips from Australia............................241 Figure 8.11: Amounts and prices of exports of hardwood chips from Australia. ...243 Figure 8.12: Amounts and prices of exports of hardwood chips from Chile. .........244 Figure 8.13: Amounts and prices of hardwood chip exports to Japan from south eastern USA...........................................................................................245 Figure 8.14: The location of Japanese-owned foreign hardwood and softwood plantation projects. ..........................................................................257 Figure 8.15: Pulpwood supply zones in south eastern Alaska for Alaska Pulp Co and Louisiana Pacific Ketchikan. .........................................263 Figure 8.16: Forest Management Areas for wood-using companies in Alberta......264 Figure 9.1: The corporate structure of Daishowa during the mid- to late-1990s. ...276 Figure 9.2: The location of pulp and paper mills and offices of Daishowa in Japan during much of the 1990s. ....................................................................277 Figure 9.3: The location of the foreign operations of Daishowa during much of the 1990s. ..........................................................................................278

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Figure 9.4: The profitability of Daishowa through the last half of the 20th century. ...............................................................................................282 Figure 9.5: The nominal value of the profits of Daishowa through the last half of the 20th century. ...................................................................................283 Figure 9.6: The nominal and real prices for Daishowa’s major products during the 1990s. .............................................................................................285 Figure 9.7: Paper and paperboard production by Daishowa within Japan. .............287 Figure 9.8: The consumption of pulpwood and recovered fibre

by Daishowa within Japan...............................................................................291 Figure 9.9: Sources of hardwood chips imported by Daishowa into Japan during the 1990s. .............................................................................................293 Figure 9.10: The area of the pulpwood supply agreement of Cariboo Pulp and Paper in British Columbia. .......................................................................296 Figure 9.11: The Forest Management Area of Daishowa-Marubeni International in Alberta. ..................................................................................302 Figure 9.12: Lubicon Indian Nation Traditional Lands...........................................307 Figure 9.13: The location of the public forests in south eastern NSW supplying pulpwood to Harris-Daishowa........................................................313 Figure 9.14: Annual woodchip exports of Harris-Daishowa...................................315 Figure 9.15: Sources of pulpwood for Harris-Daishowa.........................................317 Figure 9.16: Sawlog and pulpwood availability from the Eden region. ..................324 Figure 9.17: The amount and price of woodchip exports by Harris-Daishowa........331 Figure 9.18: The nominal and real value of the annual net profit of Harris-Daishowa..............................................................................................332 Figure 9.19: Different measures of the profitability of Harris-Daishowa . .............333 Figure 10.1: Advertisement by Oji Paper Co promoting its care for the natural environment...................................................................................338 Figure 10.2: Advertisement by Nippon Paper Industries promoting its care for the natural environment. ............................................................................339

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Tables Table 3.1: Differences between hardwood and softwood fibres

grown in Australia. ............................................................................................52 Table 3.2: Papermaking qualities of hardwood and softwood fibres. .......................53 Table 5.1: The use of corrugated cardboard boxes in Japan....................................100 Table 6.1: Ownership of Japan’s forests and plantations

at 1996 (millions hectares). .............................................................................139 Table 7.1: The theoretical upper limits for rates of recycling recovered

fibre in Japan that maintain product quality....................................................187 Table 7.2: Categories of waste paper and paperboard collectors in Japan. ..............193 Table 8.1: Preferences of Japanese papermakers for hardwood pulpwood. ............225 Table 9.1: The main products of Daishowa in Japan...............................................288 Table 9.2: The main commercial users in Japan of the products of

Daishowa during the 1990s. ............................................................................289 Table 9.3: The pulpwood intake of the DMI Peace River pulpmill

in 1996-97 (1 May-30 April)...........................................................................304 Table 10.1: Basic information on environmental protection interests

of general trading companies. .........................................................................343 Table 10.2: Main points from the environmental charters of selected

Japanese general trading companies................................................................344 Table 10.3: Basic information on environmental protection interests of

paper/board manufacturers. .............................................................................346 Table 10.4: Main points from the environmental charters of selected

Japanese paper/board manufacturers...............................................................347 Table 10.5: Awareness within general trading companies of forest

conservation issues in areas of foreign wood supply. .....................................358 Table 10.6: Awareness within paper/board manufacturers of forest

conservation issues in areas of foreign wood supply. .....................................359 Table 10.7: Attitudes of general trading companies to the establishment

of plantations and the use of plantation wood.................................................362 Table 10.8: Attitudes within paper/board manufacturers to the

establishment of plantations and the use of plantation wood..........................363 Table 10.9: Attitudes within general trading companies to the utilisation

of recovered fibre. ...........................................................................................364 Table 10.10: Attitudes within paper/board manufacturers to the utilisation

of recovered fibre. ...........................................................................................365 Table A 7.1: Japan: Waste paper product collection rates and volumes

(1992 and 2000)...............................................................................................522 Table A 8.2: Approximate area of native forests required between 1989 and

2000 to supply woodchips from south eastern USA to Japanese papermakers.....................................................................................................547

Table A 9.4: Changes in sawlog and pulplog criteria in the Eden region. ..............561

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Abbreviations and special terms AAC Annual Allowable Cut. This is the amount of wood

permitted by the forest owner or manager to be removed by logging from an area of forests each year.

Alpac Alberta-Pacific Forest Industries. ALPC Alaska Lumber and Pulp Company. BDT Bone Dry Tonne. This is a common unit of measure for

woodchips that closely expresses their net fibre content. It is equivalent to 2203 pounds or 0.918 Bone Dry Units (BDU), where a BDU is 2400 pounds and a Green Metric Tonne is 2204.6 pounds (Neilson and Flynn 1997).

Burst strength “A measure of the ability of a sheet to resist rupture when or pressure is applied to one of its sides by a specified Bursting strength instrument, under specified conditions. It is largely

determined by the tensile strength and extensibility of the paper or paperboard” (Kouris 1996)(p.45).

Cellulose This substance is comprised of a large number of repeating

sugar molecules, so has the chemical formula ‘(C6H10O5)n’. The amount of repetition, referred to as the ‘degree of polymerisation’, reflects the strength of the cellulose and any organic fibre within which it occurs. There are various kinds of hemicelluloses that are also polymers of sugars, and they contribute to paper strength (Smook 1992, Biermann 1996).

CIF Cost, Insurance, Freight. CPPEI Council for Pulp and Paper Equipment Investment. Deinked pulp Pulp made from recovered fibre that has had the ink from its

previous use removed. Dissolving pulp High quality chemical pulp used to manufacture artificial

fibres. DMI Daishowa-Marubeni International. Ecological footprint The measure of an individual’s or population’s environmental

impact determined by converting the consumed resources into a land area equivalent. The measurement is not exact and outcomes depend on the assumptions used. It helps illustrate the relative impacts of lifestyles and policies (GDRC 2000).

EDF Environmental Defence Fund. EIS Environmental Impact Statement.

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EMS Environmental Management System. Esparto The generic name given to two species of grass from southern

Spain and northern Africa which contain high levels of cellulose that can easily be extracted for making paper (Magee 1997).

FOB Free On Board. Forest residues Wood of low industrial quality below that required to meet or the commercial criteria for sawlogs at any particular time Forest wastes taken from forests or plantations. Forestry services A general term to cover the public service departments of

national or state governments with responsibility for managing publicly-owned forests.

GTC General Trading Corporation. ha Hectares. HDA Harris-Daishowa (Australia) Pty. Ltd. Hinoki The conifer tree species, Chamaecyparis obtusa, also known

as Japanese cypress. It is one of the main species in Japan’s timber plantations.

IIED International Institute for Environment and Development. ISC The Industrial Structure Council that advised Japan’s

Ministry for International Trade and Industry. JANT The Japan and New Guinea Timber Co. established to operate

an export woodchip scheme at Madang in Papua New Guinea.

JPA Japan Paper Association. kg Kilograms. m3 Cubic metres. MAI Mean Annual Increment. MITI Japan’s Ministry for International Trade and Industry, now

the Ministry for Economy, Trade and Industry.

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NGO Non-governmental organisation. This term is mainly used in the dissertation in relation to community conservation organisations.

NIPF Non-industrial private forest. This term is used in relation to

one type of owner of private forests in south eastern USA. Sawmill residues Wood produced in sawmills or veneer mills from the or conversion of a round log into sawn timber or veneer sheets Sawmill wastes that may be chipped and sold for another commercial use. ppc Per capita consumption. PPC Plain paper copier. A term used in Japan for this type of

photocopier and also to refer to the paper used in such machines – PPC paper.

PRPC The Paper Recycling Promotion Center located in Tokyo,

Japan. Pulpwood Wood used to manufacture pulp for paper, paperboard or

artificial fibres. Recovered fibre A convenient and common term used to mean waste paper

and paperboard collected for utilisation as a fibre source for reuse, such as in paper and paperboard manufacturing.

Recovery rate The recovery rate for waste paper/board is used to provide an or an idea of the amount of waste paper/board collected in a Collection rate year. It is calculated by dividing ‘the net volume of waste

paper and paperboard recovered’ by ‘the net volume of paper and paperboard supplied for domestic consumption’. ‘Net recovery’ is calculated by subtracting waste paper and paperboard imports from the volumes received by manufacturers’ mills (including deinked pulp) and adding the volumes exported. The net volume of paper and paperboard supplied for domestic consumption is ‘the volume of paper and paperboard shipped from the manufacturers’ plus ‘imports’ minus ‘exports’ (PRPC 1998b, JPA 2001c).

Refining The mechanical treatment of pulp fibres to develop their or papermaking properties. It softens the fibres and roughens beating their outer layer so increasing their bonding ability and the

strength of the paper sheet, but at the expense of the strength of individual fibres (Biermann 1996).

Refiner groundwood A form of mechanical pulping that passes woodchips between pulping two rotating discs. The wood may be softened first using

heat or chemicals. Resource An available asset that can be used to achieve an objective

(Hawkins 1988).

xxv

Ringi “The process of obtaining the sanction (of executives) to a

plan by circulating the draft prepared by a person in charge (of the matter) (Masuda 1996).

Seishi The Japanese word for ‘paper manufacturing company’. This

word is used in the dissertation mainly as part of citations for companies that provided confidential information, eg Aseishi, Bseishi.

seNSW South eastern New South Wales. seUSA South eastern United States of America. Shosha The Japanese word for ‘trading company’. This word is used

in the dissertation mainly as part of citations for companies that provided confidential information, eg Ashosha, Bshosha. Sogo shosha are general trading companies.

Senkashi The Japanese word used for a low quality paper made or primarily of recovered fibre. Senka Stumpage The price charged/paid for wood purchased from a forest or owner. Royalty Sugi The conifer tree species, Cryptomeria japonica, also known

as Japanese cedar. It is one of the main species in Japan’s timber plantations.

Tear strength “The force required to tear a specimen under standardized

conditions” (Kouris 1996)(p.303). Tensile strength “The maximum tensile stress developed in a specimen before

rupture under prescribed conditions” (Kouris 1996)(p.304). TSA Timber Supply Area. This is the term is used in British

Columbia. A TSA is “an integrated resource management unit established in accordance with Section 6 of the Forest Act” used for administrative purposes (BCMOF 1994c)(p.1).

US United States of America. or USA Utilisation rate The utilisation rate for waste paper/board is used to provide or an idea of the amount of recovered fibre used by paper/board Recycling rate manufacturers. It is calculated by dividing the ‘volume of

recovered fibre used by the manufacturers’ by ‘the total volume of domestic and imported pulp’ used by those manufacturers (PRPC 1998b, JPA 2001c).

xxvi

Washi Japanese traditional-style paper. Woodchips Pulpwood converted to small pieces by mechanical methods

that can be used for production of paper, paperboard or particleboard.

Wood containing Paper containing mechanical pulp in which lignin remains. paper Woodfree paper Paper produced from chemical pulp that has had almost all

lignin removed. WW1 World War One. WW2 World War Two. The order of Japanese personal names presented in the dissertation follows the East Asian practice of writing the family name first.

xxvii

xxviii

Chapter 1: Introduction

1.1 International fibre resource links During early 1989, almost a thousand protestors were arrested in south eastern

Australia trying to stop logging of ‘wilderness’ forests for what they said was “the

most wasteful and least beneficial of all timber products – woodchips” (Salmon

1989)(p.12).1

One morning in early November 1990, landowners from the Gogol-Naru area of

northern Papua New Guinea, angry at the destruction caused by logging of local

rainforests, began a 5-day blockade of forest roads (Gogol 1991). Coordinated

international protests against this logging during May 1991 included a demonstration

in Tokyo (Jagoff and Seed 1991).

Also in November 1990, opponents of logging in native forests claimed by

Canadian aborigines as traditional lands burnt logging machinery used to supply

wood to a large pulpmill in Alberta Province (Goddard 1992, Pratt and Urquhart

1994).

In December 1995, forest conservation activists entered a woodchip loading

facility at the port of Mobile in southern United States of America (USA). They

interrupted the loading of a ship and hung a large banner on one of the cranes that

read "STOP EXPORTING FORESTS AND JOBS" (EF! 1996, NFN 1996b).

In April 1997, Japanese collectors and dealers of waste paper and paperboard

joined concerned citizens at a rally and public meeting in Tokyo to urge greater

recycling and protest at a dramatic slump in prices for recovered fibre (NSKS 1997).

These seemingly unrelated incidents are linked by a common element - the

Japanese paper and paperboard industry.2 This industry converts organic fibre from

these and other places into paper/board for use primarily in Japan. As well as being

1 Other references on this protest include: Bailey (1989a, 1989b); Garcia (1989); and Hinchey (1991). 2 For the sake of convenience and unless otherwise stated, the terms “the Japanese paper and paperboard industry”, “the Japanese paper/board industry” and "the Japanese paper industry" are used interchangeably in general discussions to include: companies located in Japan or elsewhere but ultimately owned by companies located in Japan that manufacture and/or distribute pulp, paper, paperboard and/or products made from them; as well as Japanese general trading companies (GTCs) involved in the trade of (i) wood and other paper-making fibre resources supplied to the Japanese paper/board companies and/or (ii) products made by them.

1

controversial, this international flow of fibre links the politics, economies,

communities and environments of widely dispersed nations and regions.

The subject of this dissertation is the Japanese paper/board industry and the

relationships and links it generates within and between the processes of fibre supply,

paper/board manufacture and distribution, and product use. The objective is to

understand the role that these fibres play within the industry and how these

relationships and links operate so that fibres from such disparate sources can be used

as manufactured products.

This chapter introduces the dissertation. First, the current Japanese paper/board

industry and its use of fibre are outlined. This overview is then used to illustrate the

importance of the research endeavour. Next, the questions investigated in the

dissertation are explained. Finally, the dissertation’s arguments are presented

through a description of each chapter’s themes.

1.2 Japan’s paper use and the Japanese paper industry Every day in Japan, countless paper and paperboard products are used for industrial,

commercial, cultural, educational and personal purposes. The four main categories

of products are: ‘printing and communication papers’ for writing, magazines and

books; ‘newsprint’ for newspapers; ‘sanitary papers’ for tissues and similar products;

and ‘containerboard’ for packaging. Through much of the late-20th century, Japan

was the world’s second largest paper/board producing nation – although well behind

the USA. Nearly all the production is used within Japan, and the nation’s use of

paper/board is directly related to its gross domestic product (JPA 2001b, 2001c).

In 2000, use totalled 31.74 million tonnes; Japanese people have the world’s

third highest apparent annual per capita consumption of paper/board at 250

kilograms (JPA 2001c). However, most Japanese citizens would not actually make

physical contact with this amount. Some is used within the social and economic

infrastructure that supports each person’s lifestyle, such as in offices, factories or

transport. Of that directly ‘consumed’, some would be used for the direct service

that it provides (paper for writing, reading or sanitary uses), while some would be the

result of a demand for other goods (packaging) and some may be unwanted

(advertising leaflets).

2

Japan produced 31.83 million tonnes of paper/board in 2000, of which 1.42

million tonnes were exported. Paper/board imports totalled 1.33 million tonnes (JPA

2001c). Pulp and papermills are dispersed throughout Japan (Appendix 1.1), but

despite the large number of companies related to manufacturing paper and

paperboard products in Japan (476 in 1998), production is highly concentrated. In

2000, 5 companies produced 50.7% of the nation’s paper and paperboard output; 10

produced 67.2%. Five companies produced 91% of all newsprint, 3 companies

produced 55% of all printing and communication papers, and 4 companies produced

45% of all paperboard products (JPA 2001b). These products are distributed to

commercial converters and users through a network of agents, general trading

companies (GTCs) and wholesalers who may also be linked through shareholdings

with manufacturers (Ausnewz 1998b). Most paper and paperboard production passes

through agents; GTCs have a large share of paperboard distribution and wholesalers

have a large share of paper distribution (JPA 2001c).

The flow of fibre through Japan’s paper/board industry (Figures 1.1 and 1.2) has

specific characteristics.

• Virtually all new fibres are from wood. Non-wood fibres comprised only 0.2%

(19,000 tonnes) of new pulp used in 1999 (JPA 2001a, 2001c).

• The great majority of new fibre goes into paper products, while paperboard

production uses most of the recovered fibre. In 2000, 57.2% of the industry’s

fibre was recovered from waste paper/board. Thirty two percent of the recovered

fibre went into paper products and 68% was used for paperboard (JPA 2001c).

• The industry is highly dependent on foreign sources for new fibre. Of the

pulpwood used to make pulp in Japan during 2000, 70% was directly imported.

Of the hardwood pulpwood, 85% was directly imported. Of the softwood

pulpwood, 56% was directly imported, but a substantial portion of the softwood

pulpwood supplied domestically is from imported sawlogs processed in Japan.

Further, 18.5% of pulp used in Japan for paper/board production was imported;

much of this comes from mills in which Japanese companies have invested (JPA

2001a, 2001c).

3

Figure 1.1: The general flow of fibre through the Japanese paper/board industry.

4

Figure 1.2: The flow of fibre for pulp, paper and paperboard production in Japan during 2000.

Source: JPA (2001c).

Note: Some losses of fibre occur between different stages and some values were rounded off.

5

• Hardwood fibre dominates pulpwood used to make pulp in Japan (61%); 39% is

softwood pulpwood. Particular fibre types are directed to specific pulp grades.

For example, in 2000, 75% of pulp made in Japan was bleached chemical pulp,

and 85% of its fibres were hardwood pulpwood. Unbleached chemical pulp was

13.4% of domestically manufactured pulp, and comprised 94% softwood

pulpwood (JPA 2001a).

• Almost all the pulpwood used for pulp manufacture in Japan is supplied as

woodchips. In 2000, only 2.5% of pulpwood consumption was logs, which came

predominantly from within Japan (JPA 2001a).

• Most hardwood pulpwood used for pulp manufacture in Japan during 1999 came

directly from native forests (63%), while softwood pulpwood came

predominantly from sawmill chips (57%) (JPA 2001a).

• Most imported woodchips are traded through one of Japan's large GTCs (PBR

2001). These companies are shareholders in many foreign plantation and

woodchip supply projects (Neilson and Flynn 1997, JPA 2001c). They also

import pulp and paper (JP&P 1990g), are shareholders in paper and paperboard

manufacturers (TKI 1994), and are involved in foreign pulp, paper and

paperboard mills with Japanese paper companies (JPA 2001c).

1.3 The research importance of Japan’s paper industry

1.3.1 Research issues and Japan’s paper industry These characteristics of Japan’s recent paper/board use, manufacturing and

distribution, and fibre supply express the interaction of economic and other

relationships directing the flow of fibres from the site of extraction to the end-user.

The international protests focus attention on the importance of the industry’s fibre

use for three linked issues relevant to modern societies:

• the relationships between industrial structure and the flows of natural resources

and environmental impacts;

• the application by companies of policies for environmental protection and

resource use; and

• the consumption of resources and the natural environment by Japan and Japanese

companies.

6

1.3.2 Industrial structure and natural resources Complex and changing flows of capital, resources and products now stretch across

national boundaries to meet investor requirements for profits, the political objectives

of governments and market demands for manufactured goods. There is considerable

debate about the appropriate theoretical perspectives from which to analyse the

emergence of, and changes in, such transnational flows. Interactions between local,

national and international forces are particularly important (Broad 1995, Fagan and

Webber 1996, Dicken 1998).

Economy–environment interactions are important forces in creating industrial

structures, while the environmental impacts of an industry’s activities are influenced

by its structure. Many environmental impacts now extend across national borders in

association with economic linkages such as the trade in natural resources,

manufactured goods and financial services. As such, they are of major international

political concern (Brown et al 1999). For example, the national and international

trade in industrial wood products increased substantially during the 20th century

(FAO 1998). Supplying primary resources to wood products industries, particularly

in wealthy developed countries, is important to the management of the world’s

forests. Japan’s wood products industry is seen as a major force in the development

of ‘the global forest economy’, and linked to the deterioration and destruction of

forest values in some areas (Dudley 1992, Marchak 1995, Dauvergne 1997b).

Forest degradation caused by agricultural clearing, wood extraction and other

uses is of such global significance that the 1992 United Nations Conference on

Environment and Development formulated programs to reduce destructive pressures

on forests and wood resources (Quarrie 1992). Given international trade links and

the high resource use in developed countries, lower rates of logging in those

countries for conservation objectives may encourage destructive logging elsewhere

and/or the greater use of energy-intensive non-renewable resources (Lippke 1992,

Perez-Garcia 1993). Conservation interests promote reduced consumption of wood-

based products in high-use nations (Buitenkamp et al 1993, Rice 1995).

However, interpreting the contribution of economy–environment interactions to

industrial restructuring, especially at an international level, is undeveloped relative to

the effort spent on studying the organisation of production and its social implications

(Taylor 1996). Environmental factors need greater integration into theories

7

explaining patterns of industrial structure and resource use. Such factors include the

influence of: the characteristics of natural resources; control over resource

exploitation; and regulation of environmental impacts from international trade

(Broad 1995, Taylor 1996, Dicken 1998). Because paper/board companies consume

natural resources from different nations and manufacture products for national and

multinational markets (FAO 1998) they have transnational economic and

environmental links. Such links are important in shaping the future development of

the world’s paper/board companies (IIED 1996). This dissertation’s examination of

fibre use by the Japanese paper/board industry further exposes the relationships

between environment-economy interactions and industrial structures.

1.3.3 The application of environmental policies Paper production consumes large amounts of organic fibre, water, chemicals and

energy, and generates large amounts of waste (IIED 1996). However, the industry

has improved its treatment of liquid effluent, increased recycling of waste paper and

increased its efficiency of resource use (Wrist 1992, Dunwoody 1998). Also,

industrial forestry techniques, including genetic manipulation, are promoted as

improving forest quality (Ow Yang and Coleman 1998). Paper is claimed to have

“an ecocycle advantage over most competitive materials” (Colasurdo 1998)(p.77)

because of its renewable and reusable characteristics (Anon 1993, Dunwoody 1998).

Industry members also fear governments may impose stringent environmental

protection standards and regulations that will damage the use of paper and the

competitiveness of paper companies (von Ungern-Sternberg 1995, Glowinski 1997).

However, the introduction of advanced pulping, bleaching and pollution control

technologies by south-east Asian papermakers is argued to have assisted their

competitiveness and been the result of business, regulatory and community pressures

(Sonnenfeld 1998a, 1998b). In Australia, environmental protection standards that

made high waste production incompatible with low production costs encouraged

paper companies to adopt new corporate structures, products and technologies that

all assisted their competitiveness (Waitt 1997). Japan’s paper and trading companies

now promote many of their policies and actions in the fields of fibre supply,

pollution control and product development as being friendly to the environment

(Marubeni 1994, Sumitomo 1996, Nippon 1999a, Oji 1999c).

8

However, the recent study by the International Institute for Environment and

Development on the environmental sustainability of the world’s paper industries

(IIED 1996) contains little information on fibre resource management by the

Japanese paper industry. This was seen within the industry as a flaw in the study

(AP&P 1996b), but there is no detailed research that relates the environmental

consequences of the industry’s fibre use to its structure, company policies and

attitudes, and Japan’s paper/board use. This dissertation addresses this deficiency.

1.3.4 Japan and Japanese companies as resource consumers Japan’s international links are now essential for the operation of its economy and

important for the economic activity of other nations. In 1998, Japan accounted for

13.4% of the world’s gross domestic product and is a major global locus for

manufacturing, international trade, investment funds and foreign aid (Helton and

Imai 1997, Dicken 1998). It depends heavily on foreign raw materials and food

products (Kawai and Suzuki 2000). As a result, the ‘ecological footprint’ generated

by Tokyo’s population is calculated at 2 to 3 times the total area of Japan (GDRC

2000).

These international trade and aid links transfer with them Japanese economic,

political, environmental and cultural priorities. They interact with priorities in other

nations to generate impacts and shape their mutual development (Dauvergne 1997b).

The way Japanese investment and resource acquisition occurs in other countries is of

considerable research interest (Hollerman 1988, Bunker 1994a, Marques 1994).

However, the foreign activities of Japanese industries should be related to their

domestic experiences if the dynamics of international interactions are to be

understood thoroughly (Cameron 1996). For example, the pollution problems

generated by Japan’s economic growth are considered “an essential part of the

structure” of Japan’s economy (Ui 1974)(p.574).

Japan’s environmental performance has been evaluated as the worst – an

‘environmental predator’ (Maull 1991) – and as one of the best – an ‘ecological

front-runner’ (Mol and Sonnenfeld 2000). Yellowlees (1998)(p.20) states that

“(d)uring the past 15 years many of corporate Japan’s environmental efforts have

been cosmetic, public relations-related attempts at convincing the public that the

firms are eco-friendly.” However, he concludes that more recently “the substance

and the underlying forces below these efforts are becoming increasingly real” (p.23).

9

Mitsuhashi (2000) argues that Japan’s senior industrialists want to lead the world

in creating a resource-efficient society. A recent report by Japanese industrialists and

academics considers that Japanese industry will become more recycling-oriented and

construct “economic growth that is harmonious with the environment” (JCIP

1997)(p.381). However, as with other studies of Japan’s economy, it ignores the

paper industry. Detailed research on Japan’s industrial use of domestic and foreign

forests has also tended to concentrate on the supply of wood for construction rather

than paper (Handa 1988a, Nectoux and Kuroda 1989, Robertson and Waggener

1992, Dauvergne 1997b).3

Research within Japan’s paper industry on technical aspects of fibre supply and

papermaking continues. However, as articles in the journal of the Japan Technical

Association of the Pulp and Paper Industry illustrate, fibre resource issues are

primarily addressed from within a paradigm that is supportive of industrial

production.4 Major Japanese academic research on the industry concentrates on

domestic activities and wood supply, but does not detail the recent consequences for

foreign resources (Suzuki 1967, Narita 1980, Ishii 1992, Hagino 1996). However, as

the industry’s fibre supply became more international, research interest broadened to

include:

• foreign consultants examining fibre markets (Fenton 1988, Neilson and Flynn

1997, Ausnewz 1998b, Ausnewz 2001);

• Japanese government researchers concerned with the implications of foreign

environmental policies on Japan’s international relations (Morita 1987);

• non-government organisations and activists concerned with environmental and

social impacts (ACF 1987, Nectoux and Kuroda 1989, Penna 1992, Shimizu

1996); and

• foreign academic researchers studying regional forest issues (Routley and

Routley 1975, Lamb 1988, Pratt and Urquhart 1994, Dargavel 1995).

However, this literature does not integrate the long-term historical relationships

between changing industrial structure, products, and fibre supply with domestic and

3 See also issues of the irregular journal of the Japanese Forest Economics Society, ‘The Current State of Japanese Forestry - Its Problems and Future’. 4 This is the ‘Kamiparupu gijutsu kyoukai zasshi’ (or Japan TAPPI Journal).

10

foreign social and environmental issues. This dissertation helps fill this gap and

contributes to understanding the interactions of a significant Japanese industry with

domestic and foreign environments.

1.4 Research questions Thus, studying the flow of fibre associated with the Japanese paper industry brings

together issues of international social and environmental importance. This

dissertation addresses these issues by investigating several questions. The central

questions tackle the historical relationships underlying the characteristics listed in

Section 1.2:

How are the development, structure and operation of the Japanese paper industry

related to the use, management and control of its fibre resources? How do these

relationships influence both the industry's development and its use of fibre

resources?

Three subsidiary questions make the research more comprehensive. An

important consideration for how a forest is exploited is the amount of protection

given to non-wood values, as they can be diminished by wood production. It is thus

necessary to examine the interaction between the fibre demands of paper companies,

resource characteristics and the desires of forest owners or managers. The first

subsidiary question is:

How do patterns of fibre supply to the Japanese paper industry affect fibre-related

environmental values?

The attitudes of senior management and planners in Japanese paper/board

companies towards environmental problems must influence the industry’s

development. Of concern are the values and priorities that dominate within

companies and whether they are sufficient to protect fibre-related environmental

values while satisfying a company’s resource demands. The second subsidiary

question is:

How do decision-makers within the Japanese paper industry perceive fibre supply

strategies, forest management issues and waste paper recycling, and then

incorporate those perceptions into their decision-making processes to meet

corporate objectives?

11

The Japanese paper industry is heavily dependent on fibre from foreign sources.

Thus, Japanese companies and Japan’s paper use interact with changes at the

international and global levels in markets, fibre resources, and flows of capital and

fibre. The third subsidiary question is:

How do Japanese paper/board companies contribute to international economic and

environmental restructuring through their fibre sourcing strategies?

1.5 Structure of the dissertation The dissertation begins answering these questions by reviewing literature about the

relationships between industrial structure and resource use and the operation of the

paper industry and the roles of fibre in papermaking. This is done over two chapters.

Chapter Two presents the main theoretical base used in the dissertation. It

integrates perspectives on resource exploitation, industrial structure and economy-

environment interactions to develop an analytical position within the ‘political

ecology’ paradigm. This paradigm seeks to explain “the topography of a politicised

environment” through the “integration of human activities and environmental

processes” (Bryant and Bailey 1997)(p.190). The position utilises the concepts of

industrial structure and ‘consumption-production chains’, incorporating

consideration of ‘product cycles’ and ‘resource regimes’, to illustrate the links

between industrial structure and product use on the one hand and resource

management and environmental issues on the other.

This ‘political ecology’ perspective is developed further in Chapter Three, which

analyses the political, economic and environmental importance of fibre and

technologies in papermaking. The historical development of the world’s paper

industries is explained as an ongoing and integrated restructuring of production

systems, markets and fibre supply. Company control over fibre supply is important

to the industry’s organisation. Environments are restructured to help regulate the

cost of fibre and create resources desired by industry. This chapter provides the

context for the later discussions on the structure of the Japanese paper industry and

its use of fibre. Features obvious in the world’s main paper industries are contained

in the Japanese paper industry.

The dissertation’s research method is described in Chapter Four. The chapter

also considers the problems associated with the collection of information.

12

Chapter Five begins the analysis of the Japanese paper/board industry by

examining the use of paper/board in Japan and the organisation of the industry’s

manufacturing and distribution sectors. It argues that the historical restructuring of

Japan’s use of paper/board products through growth, changing products and

modifications to the fibre content of products is linked to the restructuring of its

industry’s manufacturing and distribution sectors, which in turn supports the flow of

fibre through Japanese companies.

The following three chapters (Chapters Six, Seven and Eight) respectively

examine the industry’s use of: wood resources from within Japan; recovered fibre;

and different forms of foreign wood fibre. They demonstrate how the desire of

manufacturers and trading companies to have sufficient control over fibre flows to

influence fibre costs is important in the continuing qualitative, quantitative and

organisational restructuring of fibre supply. This restructuring has been integrated

with that of manufacturing and distribution to support the use of paper/board in

Japan. The chapters argue that the supply of fibre at prices required by markets,

manufacturers and production chains continues to depend on restructuring the fibre

resources, supply methods and related social and environmental values to minimise

costs at the expense of some of these values.

The case study of Daishowa Paper Manufacturing Co in Chapter Nine shows

how the general arguments of previous chapters apply to a specific company, but are

influenced by its characteristics - in this case, a unique history and leadership. This

position within the industry, but particularly the company’s leadership, directed

Daishowa’s growth and restructuring of fibre supplies, which ultimately took the

company to its demise. The discussion illustrates the importance of control over

fibre supply at a company level and the specific social, environmental and resource

management consequences of restructuring fibre resources to suit the objectives of

one company and its different fibre suppliers.

Chapter Ten uses a questionnaire, interviews and available literature to analyse

the policies and actions of leading Japanese paper and trading companies towards

environmental issues related to fibre supply. It concludes that the environmental

policies of the major companies express ‘shallow’ resource management

philosophies, and the fibre-related environmental performance of the industry is

primarily the result of economic priorities.

13

Chapter Eleven concludes the dissertation. It integrates information from the

literature review and research to explain the roles of fibre and related environmental

factors in the development of the Japanese paper/board industry by answering the

research questions. The discussion links the historical processes of restructuring

paper/board use, the industry’s manufacturing and distribution sectors, and fibre

supply. It argues that paper/board production and use within Japan continue to be

based on restructuring fibre supply and resources to suit industrial interests and

support the use of paper/board products within a changing political economy. The

pattern of restructuring is the result of interactions between the characteristics of the

fibre resources, the interests of resource controllers, and interests and values that

dominate further up the consumption-production chain, especially in the

manufacturing sector. As such, the ability to wield control over the fibre supply

chain is critical for manufacturers and GTCs, and the environmental and social

consequences of restructuring fibre resources are directly related to the structure of

the industry. The potential for further research is discussed.

14

Chapter 2: ‘Political ecology’, industrial structure and resource exploitation

2.1 Introduction A network of dynamic relationships governs interactions between the operation of

the Japanese paper/board industry, uses of the paper/board it makes and the supply of

resources it consumes. This network mediates political, social, economic and

environmental pressures from the consumer to the site of resource extraction to

create and support particular flows of fibre with specific consequences. Of particular

concern in this dissertation are the social, economic and ecological roles of fibre

within the chain of activities from resource extraction to product consumption, and

the exercise of political power that shape the fibre flows.

Literature on resource exploitation and the political characteristics underlying

economy-environment interactions informs and directs research on, and

interpretations of, the factors influencing the use of resources by modern industries.

This chapter reviews such literature. It first investigates the implications of the

social construction of ‘resources’.5 This leads into a review of ‘political ecology’,

which provides the basic paradigm for the dissertation. Next is an examination of

literature on several related topics that develop the research approach of the

dissertation - the ‘political economy/ecology’ of natural resource industries,

‘industrial structure’ and the environment, and ‘consumption-production chains’.

Literature within these areas illustrates factors to be considered when applying the

research approach. The penultimate section examines the relationship between

industrial structure and the ‘greening of industry’, which is concerned with making

industrial activities more environmentally-benign. The conclusion integrates the

main points from this wide-ranging review.

2.2 The political economy of resource exploitation Humans use renewable and non-renewable ‘natural resources’ taken as raw materials

from ‘nature’ and ‘recyclable resources’ extracted from manufactured goods. These

resources are defined on the basis of human needs, desires, and exploitative and

processing abilities, so may change with time, place, knowledge, culture, economic

conditions and social organisation (Bruce 1981, Pearce and Turner 1990, Rees 1990,

Evans 1994). Resources are thus socially constructed, and using resources is a

5 A ‘resource’ is an available asset that can be used to achieve an objective (Hawkins 1988).

15

political act that involves restructuring natural environments, the features and

consequences of which are determined by the interaction of non-human and social

factors. The implications of this are seen in the ways resources are exploited.

The pattern by which non-renewable resources must be exploited is that of bell-

shaped normal distribution curve, a Hubbert’s Bubble. This pattern also appears

when potentially renewable resources are treated as non-renewable resources. The

most accessible high quality reserves are used first. Extraction accelerates,

production peaks, then declines as lower quality reserves are exploited. It halts when

economically exploitable reserves are exhausted or are not wanted. The physical and

economic lives of such resources or reserves may differ, but are finite. They are

influenced by changes in technologies, prices and markets (Rawlinson and Penna

1982, Hubbert 1993, Clapp 1998b).

The rate of resource use and the shape of the ‘bubble’ are influenced by

‘discounting’. The higher the discount rate, the lower the value given to the future

and the more rapid the rate of exploitation. The choice of discount rate is influenced

by perceptions of uncertainty and risk affecting the use of the resources. The choice

affects the potential benefits and costs to a society, exploiters and resource owners

(Pearce and Turner 1990, Rees 1990, Clark 1991, Hanink 2000), so is highly

political.

Issues not related to time, such as environmental damage, may be handled by

giving environmental values an economic price for use in political-economic trade-

offs (Pearce and Turner 1990). However, the economic worth of natural resources to

humans – such as the wood in forests - can be, and often is, created independently of

other characteristics of resources and environments with which they are found – such

as wildlife or water. Failure to account for the damage to, or potential economic

worth of, these other characteristics when extracting resources amounts to

subsidising the extraction process and overestimating the worth of the resource

relative to other values. Decisions to provide such subsidies are political and affect

the way resources are exploited (Hamilton 1995, Hartley 1995, Grey undated, NIEIR

undated).

If a non-renewable resource is exploited so that the rate of growth of the price of

the extracted resource equals the discount rate, the resource would be almost

economically depleted when it becomes cheaper to use alternative reserves of the

16

same resource or new resources (Pearce and Turner 1990). If exploiters maximise

the present economic value to themselves at the expense of other values using a

sufficiently high discount rate, and exploitation continues to be profitable, they may

consider depletion or extinction of a renewable resource to be rational (Clark 1973).

Improvements in technology, such as waste reduction, alone or in conjunction with

increases in the discount rate, can promote depletion of renewable resources under

socially optimal policies because of higher investment costs (Regev et al 1998).

High rates of exploitation (including those following orthodox economically

optimal time paths) of previously unexploited biological resources will fall when the

biomass accumulated in old individuals is depleted and the use of the younger and

smaller individuals begins (Sedjo 1983, Hilborn et al 1995). If the ‘renewability’ of

such resources is maintained, economic forces will operate to reduce the time for the

regenerative cycle to produce a commercial product. When commercial objectives

dominate resource management decisions in this way, values dependent on the

expression of characteristics inherent in the original resource will not return (Overton

and Hunt 1974). Sustained yield of renewable resources is a “concept that in many

cases is not attainable in an economic environment” (Sedjo 1983)(p.56).

The interpretive paradigm used to explain patterns of resource exploitation

influences the way they are perceived, described and explained (Emel and Peet

1989), so research on the factors directing resource use requires a wide framework to

expose all the relevant factors. It is necessary to examine the “way in which market

structure, corporate and institutional behaviour and government policies influence

not only the value of individual (resources), but also the proportion of the generated

wealth and growth which accrues to the producer states” (Rees 1990)(p.60). The

explanatory paradigm should also draw out conflicts between values to help explain

spatial and temporal outcomes of resource use (Emel and Peet 1989). However, it

would be a mistake to ignore how the characteristics inherent in resources influence

extraction, processing, transport, final use and disposal contribute to the

environmental impact of their use (Bunker 1994c, 1996). Ultimately, the way

humans decide to restructure ‘nature’ and social relationships so resources can be

exploited is an expression of a society’s internal political relationships, its

relationship to the non-human world, or ‘nature’, the social and economic worth of

resources, and the physical, social and ecological limits of the natural and human

17

systems from which the resources are taken (Johnston 1994, Hilborn et al 1995, Gale

1996).

Thus, an analysis of resource use, economic activities and environmental

impacts needs to consider the interactions and feedbacks between the characteristics

of the resource, its physical/biological environment and the political economies in

which the resource use, processing and product use occur. The research should be

empirical and interdisciplinary. This takes such an analysis into the political

economy of resource use or more broadly ‘political ecology’. This dissertation

adopts the ‘political ecology’ paradigm as the most appropriate within which to

frame its analysis. The paradigm and the dissertation’s associated research approach

using industrial structures and consumption-production chains are discussed next.

2.3 Political ecology Through the late 20th century, interest in the environmental implications of human

activities grew in economic geography (Castree 2000), ecology (Deisendorf and

Hamilton 1997), sociology (Bunker 1985) and economics (Pearce and Turner 1990).

Many of the thoughts within these areas on economy-environment interactions and

their underlying causes are similar, and can be expressed through the concept of

‘political ecology’.

As a research paradigm, ‘political ecology’ recognises that the biogeographical

outcomes of human activities are caused by interactions between social, political,

economic and environmental factors. It approaches issues of environmental

exploitation by examining the dynamic relationship of a society with its environment

through the processes of production and consumption.6 Political ecology grew out of

the challenges posed to a variety of disciplines including ecology, systems theory and

cultural/human ecology by political perspectives from third world peasant studies

and Marxist analysis that extended the source of environmental problems into social

organisation. It can be seen as an attempt to overcome inadequacies of ‘political

economy’ and ‘human ecology’ perspectives by integrating their strengths and

common concerns. However, application of the paradigm varies (Emel and Peet

6 This explanation is an amalgamation of a variety of definitions and positions. Latour (1998) wants to distinguish between ‘political ecology’ as a term related to discourse over the political economy of environmental issues and as a term to cover the ‘environmental movement’ or community groups that politicise environmental issues. He also uses the term to cover “the whole intersection of political philosophy of human and non-humans” (p.237).

18

1989, Bryant 1992, Collins 1992, Stonich 1993, Greenberg and Park 1994, Bryant

and Bailey 1997, Bryant 1998, Rangan 2000, Watts 2000, Bryant 2001).7

While the basic political ecology paradigm accepts that capitalist societies are

expansionist, inherently unstable and in constant need of restructuring (Swyngedouw

2000), the suitability of Marxist perspectives for analysing environmental issues is

debated (Smith 1984, Eckersley 1992, Greenberg and Park 1994, Castree 2000).

Critics argue that a Marxist perspective may propound an instrumental view of ‘non-

human’ nature as simply a source of resources for expanding the production of

‘socially-useful’ goods (Eckersley 1992, Greenberg and Park 1994). An ecosystem-

based approach to understanding organic nature helps counter this problem. This

approach recognises the limits of ecosystems to tolerate disturbance and can provide

descriptive analyses of human impacts on non-human entities and ecosystems (Gale

1997). Also, political ecology has been extended to include feminist perspectives,

‘poststructural’ analyses and a concern with the distribution of environmental

services (Stonich 1993, Greenberg and Park 1994, Peet and Watts 1996, Martinez-

Alier 1999, Watts 2000, Bryant 2001).

Political ecology may contain a strong element of advocacy (Beakhurst 1979),

seeking to explain social relationships and make them more equitable and

environmentally-benign (Atkinson 1991). However, the characteristics of required

changes are debated (Turton 2000). Political ecology research has tended to focus on

economy-environment interactions in the ‘third world’ (Collins 1992, Stonich 1993,

Peet and Watts 1996, Bryant and Bailey 1997, Brown 1998, Grossman 1998, Rangan

2000), although this is shifting to include ‘first world’ issues (Clark 1998, Martinez-

Alier 1999).

Political ecology has been criticised for a lack of a central coherent theory of

environmental use (Collins 1992, Peet and Watts 1996). This appears to be a valid

comment. Political ecology does not present a comprehensive theory on the way

societies use environments, rather it provides directions for searching out

explanations. It continues to evolve as a research paradigm in reaction to use and

7 Beakhurst (1979) traces the term ‘political ecology’ back to 1951 in a speech by the then governor of Alaska entitled ‘The Political Ecology of Alaska’. Here, it is used to promote scientific methodologies for understanding Alaska’s economic development. Atkinson (1991) considers that the early writings of the social ecologist and anarchist Murray Bookchin articulate the basic links between social organisation and ecological problems that ‘political ecology’ researchers came to acknowledge.

19

criticism, but a serious issue is its role in a world where organic nature is rapidly

disappearing (Bryant 1998, 2001). An area in which the political ecology

perspective has had limited application is the role of industrial structure in explaining

the reasons companies degrade environments for profit (Watts 2000, Dauvergne

2001). The following sections consider this application in formulating an approach

to analyse the use of environments by the Japanese paper/board industry.

2.4 The political ecology of resource-based industries

2.4.1 An approach for analysing resource-based industries Barham, Bunker and O’Hearn (1994a, 1994b) offer a research approach that links

industrial structure and environmental factors. They integrate a ‘bottom-up’ model

that recognises the changing influence of resource characteristics on industrial

strategies with a ‘top-down’ model that places industries in a global economic

hierarchy shaped historically by hegemony and alliances between dominant classes

and institutions.

The approach of this dissertation follows Barham et al (1994a, 1994b) by

incorporating the influence of resource characteristics. However, their reliance on

interpreting ‘power hierarchies’ in terms of ‘core – semiperiphery – periphery’ is not

followed. Rather, an ‘industrial structure/consumption-production chain’ approach

to interpreting the influence of power is preferred. The two models and the reasons

for this modification are discussed below.

2.4.2 The influence of resource characteristics The ‘bottom-up’ model of Barham, Bunker and O’Hearn (1994a) considers that the

operation of resource-based industries is influenced by such features of resources as:

demand; relative scarcity; geographic concentration, geographic and ecological

location; and technologies of extraction and processing.

The level of demand and the potential for product substitution influence the

price of products and resources, and the ability to forgo income for environmental

protection. The relative scarcity of a resource (the total reserves, reserve quality,

accessibility and the availability of substitutes) complements the impact of demand

by influencing competition for access and rents. The geographic concentration of a

resource contributes to the formation of industrial structure, but is influenced by the

bargaining positions and historical dynamics of relevant parties. Highly concentrated

resources, especially those of high quality, may be used by states or companies to

20

gain market power. Highly dispersed resources may assist control by purchasers,

and are a barrier to market entry.

The geographic location may isolate resource extraction from other economic

activities, and so limit the potential for economic development by linking a

community’s economic dependence purely to the characteristics of that resource. It

also influences transport mechanisms and costs. The ecological features of the

resource site affect the industry’s organisation, processes and environmental impacts.

Also, they may influence technologies used for extraction and processing, but they

will influence the competitive structure of an industry. Three factors are relevant

here: patents; economies of scale; and capital investment. The more product specific

and immovable the investment is, the greater the chance for it to be influenced by

operations in other areas. Also, applied technologies will influence linkages to other

related activities.

These characteristics can be used to map potential market structures for raw

material industries that range from monopolistic to competitive (Figure 2.1). Two

characteristics become primary in determining industrial structures and strategies –

relative scarcity and technologies. Relative scarcity modifies the impact of

geographic concentration and ecological location, and interacts with technology.

Technologies can be applied to limit competition and create barriers to market entry;

they interact with resource characteristics to help determine the potential for forward

linkages and socio-environmental problems (Barham et al 1994b).

Two processes complicate this analysis of market structures and industry

operation: resource exhaustion and accessing new, usually lower-quality, resources –

although this is not always the case for biological resources that can be selectively

bred to improve their commercial qualities. These processes can increase price

competition and reduce returns because new entrants are more interested in obtaining

market share than maintaining the existing market structure. Advances in transport

technologies mean both near and distant markets can be penetrated, so if expectations

for demand and prices are high, overcapacity can develop.

21

Figure 2.1: Mapping the market structure of raw material industries.

Source: Barham, Bunker and O’Hearn (1994a).

22

These relationships can then be applied within an analysis of the socio-economic

history of the industry. The kind of analysis depends on the industry, and ranges

from competitive microeconomic analysis to event-based descriptions that need to

integrate politics with market factors, and issues of control over resource

management, extraction and processing. The organisation and operation of the

industry are important for understanding developmental and ecological impacts

(Barham et al 1994b).

Thus, the characteristics of a resource are important in determining industrial

structure through interaction with political and socio-economic factors. This point is

illustrated further in the next chapter in relation to the development of the paper

industry, and is a continuing feature of this dissertation. In turn, industrial structure

interacts with markets and political economies to determine how social, economic

and environmental benefits and costs from industrial activity are shared. This

linkage stresses the importance of understanding how chains of resource supply,

processing and product distribution are influenced by the operation of the political

economies in which consumers, firms and resources are located.

2.4.3 Global economic structures and ‘shadow ecologies’ The ‘top-down’ model of this approach (Barham et al 1994a) is based on the

operation of ‘relational hierarchies’ between states, classes, firms and regions. The

relative strength and positions of these entities are expressed through ‘core’,

‘periphery’ and ‘semiperiphery’ relationships, as used in world systems theory (Cox

1992).

The model argues that to achieve and perpetuate their core status, economies

require resources and energy from external environments in order to increase their

social complexity and political and economic power. They establish new political

and economic structures that provide access to cheap natural resources,

accommodating the natural features of the resources and altering economy-

environment relationships through the introduction of new technologies. Economies

may use military conquest or non-military methods, including direct investment

protected by governments and/or joint ventures with local firms or governments. To

maintain the flow of resources, stronger states and firms may restructure raw material

markets, and develop ‘hegemonic trading regimes’ operating primarily in their

23

interests, but with the consent of host states that mould local conditions to support

the trade (Bunker 1992, 1995, 1999).

However, it is usually firms not nations that use non-military methods of

accessing resources. States and regional political alliances can, and do, generate

specific political and economic forces that assist such processes (Dicken 1998).

Also, Cox (1992)(p.178) argues that the understanding of ‘core-periphery’

relationships has been shifting from the geographic to the social as the “elites of

globalization merge into a common structural force” and the “relatively powerless

are fragmented by nationality, ethnicity, religion, and gender”. The notion of ‘core’

and ‘periphery’ nations appears to becoming less relevant to interpreting the modern

global economy, while the ‘semi-periphery’ status given to some entities is seen as

mystifying processes involved in economic activities without improving powers of

explanation (Fagan and Webber 1996, Dicken 1998).

Analyses now need to recognise the increasing global integration of trade,

capital flows and transnational corporations, the social, economic and political

structures within different nations, and the competitive and cooperative interactions

created between social groups of different nations through economic links (Fagan

and Webber 1996). These concerns imply the need for an approach that places

resource-based industries within a broad political economic framework that identifies

power relations affecting resource use and environmental impacts, but avoids the

application of generic ‘core-periphery’ terminology (Brewer 1980). Thus, the ‘top-

down’ model of Barham et al (1994a) is not used in this dissertation. Other

perspectives help develop a model that is more applicable.

The concept of ‘shadow ecology’ expresses the idea that nations draw on the

ecological capital of other nations and the ‘global commons’ for material resources

used in domestic economic activities. Resources from outside a nation’s borders

come from its ‘shadow ecology’ (MacNeill et al 1991, Dauvergne 1997b).

However, Dauvergne (1997b) develops the concept to clarify definitional boundaries

and boost its heuristic power. He considers that the boundaries of a nation’s

ecological shadow for a resource must consider interactions between: government

policies and actions; corporate and financial policies and conduct; and trade

conditions. These factors include activities and relationships found in: ‘hegemonic

trading regimes’ (Bunker and Ciccantell 1995); the supply of finance capital for

24

infrastructure (Barham et al 1994a); and development aid. As these factors change

over time, they need to be considered in relation to the characteristics of the resource

and national and international political economies because they will influence the

amount of the resource used, the resource’s price, locations chosen for supply and

resource management practices. Also, ‘shadows’ may transfer environmental costs

of economic activities in consumer nations to supplier nations (Dauvergne 1997b).

The ‘shadow ecology’ concept can be regarded as an environmental expression

of international ‘core’ and ‘periphery’ relationships. However, transnational

corporations may need to cast their own ‘ecological shadows’ to meet economic

imperatives and survive (Dauvergne 1997b). The extent to which conditions in

supplier nations need to be restructured to suit a corporation’s operations will be

directed by the markets, laws and conditions of its home country and those of

countries whose markets it supplies and resources it uses. Also, analytical concepts

need to address the patterns of resource exploitation within dominant or ‘core’

nations. To understand the differential environmental impacts of specific human

populations,

we analyze the interactions between population, environment, and development at specific locations and in terms of the specific resources extracted. We can only understand these local effects, however, if we consider the political and economic actions of firms that extract, process, market, and transform these raw materials, the institutions that finance these operations, and the state agencies – local, regional, and national – that regulate and promote extraction and commerce (Bunker 1994c)(p.278).

The increasing complexity of local, national and international economic linkages

(Dicken 1998) required new methodologies for understanding the changing political

and economic role of nations based on the ways their firms “plug into the global

economy” (Fagan and Webber 1996)(p.44). A firm’s attributes at national and

international levels – production, trade and investment – are used to categorise the

firm’s international economic links. Thus, transnational firms may cast different

‘ecological shadows’ across different regions, as the characteristics of their base,

markets, capital funding and processing locations interact with the politics,

economics and environments of countries in which they operate. The international

socio-environmental impact of a population’s consumption habits (Johnston 1994)

would then be interpreted through industrial structures, the political economic

activities of firms and governments, and the processes that transform natural

environments into products (Bunker 1994c).

25

Thus, it is important to analyse an industry’s structure and the chain of activities

from the supply of the resource to the consumption of the final product. However,

given the problems with ‘core-periphery’ relationships and ‘shadow ecology’ as

applied to nations, it is necessary to develop this approach and political ecology’s

interest in regional outcomes using other theoretical tools. The concepts of

‘industrial structure’ and ‘consumption-production chains’ provide such tools.

2.5 Political ecology, industrial structure and resource use

2.5.1 Industrial structure and the environment The ‘structure’ of an industry includes not only its physical characteristics, such as

the location and kinds of processing plants, employment patterns, research and

development, and pathways of resource supply and product distribution, but also the

ownership of companies and relationships between companies (Walker 2000).

Measures of economic activity – profits, value added, share price, etc. – are used to

help understand the way the structure uses capital, labour and material resources to

meet industrial objectives. In a capitalist society, the main objective is the

accumulation of profit through the production process by owners of capital for its

reproduction (Webber et al 1991). Representatives of capital seek to acquire

sufficient control over the process to ensure desired rates of accumulation and

reproduction (Le Heron 1984).

When measures of economic activity indicate that a set of relationships does not

allow the accumulation of sufficient wealth or other benefits, representatives of

capital move to restructure those relationships so that benefits might increase. There

is a shift from a failing strategy for accumulating wealth to a new, more profitable

strategy. Restructuring is stimulated by various factors, including changes in

national economies, technological changes or resource depletion. It is expressed in

new physical characteristics, such as changes in companies, location of factories,

employment levels, sourcing of resources and markets (Webber et al 1991). Thus, an

industry’s observable characteristics express the capitalist social relations between its

components, and this includes those parts of organic nature with which it interacts.

Studies of regional development, economic activity and natural resource use

often recognise the importance of control over industrial structures in explaining

socio-economic outcomes of industrial activities (Dargavel 1982). This power is

expressed through: low levels of socio-economic development in resource-extraction

26

areas where company actions and government policies only serve the interests of

capital (Peluso et al 1994, Bailey et al 1996, Bliss et al 1998a, 1998b, Joshi et al

2000); or the relocation of manufacturing plants if public investment does not help

companies accumulate profit (Webber 1986).

Natural resource extraction in capitalist economies is now at the base of

increasingly complex and poorly understood production systems that restructure

‘nature’ at the expense of human and non-human values (Castree and Braun 1998,

Castree 2000). Detailed analyses of the roles firms play in such systems would

improve expectations of the social benefits of resource extraction (Dicken and Thrift

1992, Freudenburg and Gramling 1994) and expose the relationships between

changing industrial structure and the natural environment. Such outcomes would be

assisted by using an industrial structure framework to relate processes of industrial

change to those of environmental change at the global and regional levels (Taylor

1996).

2.5.2 Industrial transformation and environmental change Several authors have proposed similar frameworks that would meet Taylor’s (1996)

proposal. Benton (2000)(p.85) proposes an ‘ecological historical materialism’

utilising the concepts of ‘mode of production’,8 social relations of production, forces

of production, means, agents, conditions of production and raw materials. However,

as well as being a mechanism for dominant classes to appropriate surplus value, he

regards the ‘mode of production’ as a mechanism for appropriating nature. As with

the ‘top-down, bottom-up’ approach (Barham et al 1994a), Benton’s framework also

includes ‘the causal powers’ of natural entities, resources and ecosystems in analyses

of industrial production to more completely identify relative contributions to

capitalist restructuring of nature.

Benton’s proposal resembles Bunker and Ciccantell’s (1999)(p.107) ‘new

historical materialism’ that recognises “the systematic expansion of the exploitation

of nature via a division of labor on an increasingly global scale”. Also, Smith

(1997b)(p.232) applied an ‘industry-centered environmental analysis’ (or an

‘environmentally grounded sector analysis’) to the American paper industry. She

8 The interacting components of a ‘mode of production’ include: ideology and consciousness; politics, state and legal systems; social relations of production; and forces of production (Drakis-Smith 1990).

27

considered it is useful for explaining environmental problems “in terms of how they

are embedded in the forces that define and influence the larger industrial system”.

Exposure of the processes by which consumption, production and economy-

environment relationships interact over time will help the development of theories of

capital-environment and labour-environment interactions that explain the

environmental impacts of mass production and consumption. The operations of

individual firms are important for this reason. Making firms the focus of research on

economy-environment interactions will help expose the network of power relations

that operate through competition, cooperation and control in relation to the use of

resources and products (Bryant 1992, Taylor 1996). These relations are seen

operating throughout the Japanese paper industry (Chapter 5 to 8), and in this

dissertation’s main case study (Chapter 9).

Taylor (1996) suggests the integrated use of five contextual propositions to

expose economy-environment linkages. He wants to ‘unpack’ the idea of a mode of

production by specifically researching business enterprises and the consequences of

their commercial interactions. A description of their ‘industrial metabolism’ would

illustrate flows of energy and materials. Allied to this is identification of specific

environmental impacts caused by a company’s production and the consumption of its

products. The inequalities in the dynamic power relationships within and between

individual enterprises with their individual metabolisms and consequent geographic

consequences need to be shown. Also, it is necessary to understand how changes in

factors that regulate and govern the daily operation of an enterprise (resource supply,

governments, markets, depreciation of capital, etc.) influence an enterprise within the

context of its networks of power.

These proposals seek to integrate the environmental impacts of a company or

industry through its structure and operation with its political economy, so require

recognition of the economic imperatives and social relations of the political economy

in which the activities occur (Bunker 1994b, 1996, Benton 2000). As Taylor

(1996)(p.1047) notes, the ‘environmental impact signature’ of an enterprise “will be

a function of power and control and may bear no relationship at all to economic

rationality or to market pressures”. What may appear as positive changes in a

metabolic signature through dematerialisation or recycling may simply increase the

“social capacity to consume ever greater amounts of raw materials” (Bunker

28

1996)(p.422), through the ‘treadmill of production’ (Pellow et al 2000). Such

apparent improvements may be based on poor working conditions, or prevent

development of more socially and environmentally desirable production systems

(Fairlie 1992, Pellow et al 2000). Hence, the need for mechanisms to explain the

interactions between manufacturing, product use, resource supply and the

environment.

Three concepts help do this: production chains; product cycles; and resource

regimes. They can be integrated to form a ‘consumption-production chain’, which

uses the characteristics of material flows to help understand the social relations

underlying an industry’s structure and operation.9 Such chains are relevant to

hegemonic trading regimes and shadow ecologies, and they are restructured when

accumulation strategies fail (Lovering 1989, Webber et al 1991, Hopkins and

Wallerstein 1994a). Realising the objectives promoted by Taylor, Benton and Bryant

means directing attention to the structure and operation of these chains.

2.5.3 Industrial structures and ‘consumption-production chains’

Production chains A production chain is “an integrated set of production, trade and related service

activities that add value and deliver particular products, commodities or capital

goods to consumers” (Edgington and Hayter 1996)(p.4). There are several main

stages in a production chain: scientific and technical inputs; resource supply;

processing; distribution; and consumption (Page 2000). However, as well as this

input-output structure that shows the flow of goods and services, there are two other

related dimensions. Territoriality describes the geographic location of activities

within the chain, and the governance structure regulates power and authority to

decide how financial, human and other resources are used (Appelbaum and Gereffi

1994, Knutsen 2000).

Two features of production chains define their organisation: coordination and

regulation; and geographic configuration. They are coordinated and regulated by

businesses and governments. Businesses coordinate the operation of chains through

a combination of markets and hierarchies within their companies. Their choices in

developing a chain are not necessarily fixed, so they may be modified to support the

9 This term is used in preference to ‘commodity chain’ (Gereffi and Korzeniewicz 1994) so as to emphasise all social, economic, political and environmental interactions as expressed through the flow of materials from the site of resource extraction to the use of the product by the consumer and beyond.

29

trade flows as conditions change. Such modifications can maintain or alter

environmental impacts from resource extraction and supply, processing, and product

consumption. Governments control the regulatory environment in which businesses

operate. Chains usually require a primary coordinator. They may be ‘producer-

driven’ by a manufacturer who may be vertically integrated forward or backward

along the chain, or ‘buyer-driven’ by a retailer, trader (such as Japanese general

trading companies) or wholesaler who may also be vertically integrated, or

controlled by a specialised manager who regulates the stages in the chain without

owning productive assets (Appelbaum and Gereffi 1994, Edgington and Hayter

1996, Dicken 1998).

Each chain is a unique collection of resources, technologies, organisational

forms and power relationships. Although there is a prime direction to the flow of

materials and services, there are also feedback mechanisms that influence the chain

by responding to internal and external changes. Models of production chains can be

simple or complex depending on the factors to be included, but the linking of trade,

manufacturing and service activities allows integrated analysis of factors that are

more commonly analysed separately (Edgington and Hayter 1996, Dicken 1998,

Hartwick 1998). The emphasis in the ‘production chain’ approach on the role of

‘nodes’ within the chain to control wealth accumulation and the application of power

allows analyses to avoid generic concepts of ‘core’ and ‘periphery’ to explain

patterns of resource extraction and their socio-economic outcomes (Appelbaum and

Gereffi 1994).

Analyses of production chains may (Hopkins and Wallerstein 1994b, Hartwick

1998, Page 2000):

• illustrate the various paths of industrial development within product groups;

• help analyse the distribution of profits appropriated through a chain;

• connect specific acts of consumption with their social and environmental

consequences ; and

• display and explain the range of relationships linking different processes and

locations in a chain.

However, there appears to be little theory that explains how the three dimensions

of a chain – input-outputs, territoriality and governance – interact to determine a

30

chain’s structure. Such an explanation requires an analysis of the division of labour

in a specific chain, and the features of its nodes, including location, labour

conditions, ownership, resource inputs, markets, competition and regulation in terms

of their contribution to the continuing existence of the chain’s coordinator/s (Sayer

and Walker 1992).

Two other concepts that need integration at either end of the production chain

complete the idea of a ‘consumption-production chain’ from the resource to the act

of consumption by an end-user. They are the ‘product cycle’ and the ‘resource

regime’.

Product cycles The ‘product cycle’ concept is used to help explain the pressures and processes

underlying the development of new products. The generalised product cycle has

several stages with specific implications for product use, industry structure,

manufacturing processes and ultimately resource use (Onkvisit and Shaw 1989,

Dicken 1998):

• An introductory stage in which only a few manufacturers operate and sales are

low. Capital intensity is low and production runs are short;

• A growth stage in which sales increase rapidly at first, but later slowly. Capital

intensity increases and the cost of the product is lowered through mass

production, and marketing. Vertical integration and the number of competing

firms increase. Product differentiation occurs later in the stage;

• A mature stage in which sales stabilise. Use is encouraged by the development

of new versions of the product. Capital intensity and labour costs are significant.

Long production runs help lower manufacturing costs. The number of

manufacturers starts declining; and

• A decline stage in which sales decline, firms leave the market and the product

becomes obsolete.

The cycle is criticised for its ‘technological determinism’ (Dicken 1998). It may

not always follow these stages, the length of a cycle is not predetermined and a

product may return from obsolescence to have other cycles (Onkvisit and Shaw

1989). The pressures determining a cycle’s pattern come from the dependence of a

company’s existence on profitability; to survive a company must extend a product’s

31

life or introduce new products. Extension occurs as a product’s competitiveness is

increased by varying the product’s qualities, finding new uses and/or cheapening

production by introducing new manufacturing technologies, increasing scale and/or

altering inputs or the location of manufacture (Dicken 1998). While products seem

to mature, relevant manufacturing technologies may continue to develop (Wilson

1996), allowing production to continue. However, when similar products lose their

differentiation they become more like commodities and competition is based on

market price (Onkvisit and Shaw 1989), so pressure to control prices will flow back

down the production chain, potentially influencing resource supply.

Products such as paper/board (Robins and Roberts 1996) are often inputs into

other manufacturing processes, so extending a product’s cycle may require action by

a manufacturer to ensure its product continues to be used. This includes transmitting

supportive social images about the product and/or those products in which it is used,

such as through advertising (Hartwick 1998), and manipulating the manufacturing

process to meet quality specifications at a price affordable by target consumers

within prevailing socio-economic conditions. Smith (1997b)(p.253) observes that

“(i)n our preoccupation with the power of demand to shape production, we have

tended to downplay the degree to which the needs of production (not to mention

advertising) can shape consumption”.

Thus, the ‘product cycle’ derives is usefulness by illustrating that the desire for a

product is not inherent in a society, but can be created and influenced by a variety of

technological and social factors. It directs attention to the needs and behaviour of

manufacturers and converters, showing that restructuring of industrial organisation

and control is needed to support a product’s use. Integrating an understanding of the

factors involved in a product cycle with ‘production chains’ can help one understand

the way material resources are used and environments exploited. The interactions of

‘product cycles’ and ‘production chains’ with local environments are expressed

through ‘resource regimes’.

Resource regimes The concept of ‘resource regimes’ was developed to describe the group of social

institutions that direct the actions of organisations and individuals involved in the

exploitation of natural resources. These regimes are influenced by governments and

32

vary over space and time, but have three main components (Young 1982, Dargavel

and Jennings 1991):

• a ‘substantive core’ that distributes the rights and responsibilities of parties

involved in the regime;

• a procedural component that regulates allocation and use of the resource; and

• an implementation process to ensure compliance with the regime.

The ‘resource regime’ concept overcomes contradictions between the

‘neoclassical microeconomic’ stance that assumes competitive markets and

minimum state involvement, and the ‘ecological’ stance that assumes the state will

take a stewardship role beyond the level of intervention assumed in the first stance to

counter environmental problems caused by market competition (Young 1982).

Resource regimes are thus dynamic and reflect political trade-offs between

priorities of resource owners and resource exploiters. Changes result from internal

contradictions and shifts in underlying power structures (Young 1982). However,

Dargavel (1988) considers the concept requires a theory of class, change or political

action for it to usefully explain how patterns of resource exploitation are linked to

industrial structures and power relationships. He illustrates how different ‘sub-

modes’ of capitalism, as expressed by different classes of companies producing

different products for different markets (and so with very different production chains

and product cycles), desire specific kinds of resource regimes. Shifts between these

‘sub-modes’ and their production chains through industrial restructuring require

changes in state activity, resource regimes and patterns of exploitation. The features

of a ‘resource regime’ vary with the characteristics of the resource, the structure of

the industry, the priorities of the resource owner, and the ability to ensure

responsibilities are met (Dargavel and Jennings 1991).

It is the ‘resource regime’ that directs the overall expression of environmental

impacts required or tolerated by using a resource within a specific ‘consumption-

production’ chain at a specific time. Changes in the chain may force changes in the

regime and environmental impacts. Similarly, changes in the resource or conditions

governing its exploitation may require modifications to the existing structure of the

‘consumption-production’ chain. Understanding the ability of the chain to tolerate

33

those conditions requires knowledge of the stages that comprise the chain and the

influence of relevant relationships within the chain.

Thus, industrial structure is the common element in the operation of the three

components of consumption-production chains through which analyses of their

interaction can be made. Organisations that gain some control over the supply of

resources and distribution of products will have a greater ability to structure chains in

their interests. The importance of control over consumption-production chains

through industrial structure is seen in three unrelated industries.

2.6 Industrial structure and socio-environmental consequences

2.6.1 Introduction The histories of the Japanese aluminium industry, the agro-food industry and the

forest-based industries illustrate the importance of understanding relationships

between industrial structures, resource exploitation and product use in explanations

of economy-environment interactions. Research on each of these industries

emphasises different aspects of the previous discussions on the application of power

in maintaining resource flows, so helps direct this dissertation.

2.6.2 The Japanese aluminium industry The increasing use of aluminium in Japan from the 1950s depended on a changing

industrial structure and the level of control by Japanese companies over the supply of

foreign bauxite (Bunker 1994a, Marques 1994). Initially, Japanese producers and

fabricators cooperated to provide a stable demand and share the financial costs of

domestic aluminium manufacture. The world’s large high-quality bauxite deposits

were controlled by foreign manufacturers, but the development of bulk ore carriers

reduced the cost of spot purchases so supporting industrial growth.

As Japanese demand increased and new manufacturers became established,

security of resource supply became more important. Although competing in

domestic markets, manufacturers cooperated, assisted by government agencies, to

secure access to foreign bauxite resources. In particular, GTCs organised the flow of

bauxite, which dispersed financial risks, and the ‘keiretsu’ banks provided cheap

finance.

However, the relatively high operating costs of Japanese smelters, lower tariffs

and a shift in economic conditions encouraged vertical integration and foreign

34

investment to secure aluminium rather than bauxite supplies. Smelters in Japan

closed. Companies diversified, invested more in fabrication and increased links with

customers to support growth. Foreign joint ventures, long-term contracts and spot

purchases now supply Japan’s aluminium.

Minority ownership of joint venture aluminium smelters formed part of the low

risk strategies of Japanese aluminium companies to secure cheap foreign resources.

Foreign governments invested directly and indirectly by funding infrastructure and

energy supply. However, lack of coordination between exporting nations created

excess capacity that broke the previous oligopolistic control of the aluminium

market. Lower prices benefited Japanese parent companies, but were not as

important to them in their joint ventures because of their minority shareholdings.

The supply of aluminium to Japan exhibits the problems for exporting economies

inherent in their positions at the bottom of the production chain – “locational

rigidities, dependence on external markets and technologies, and the imperative for

industrial capital to reduce the costs of raw materials” (Bunker 1994a)(p.292).

Thus, the growth of aluminium use in Japan depended on creating an industrial

structure that gave Japanese manufacturers and GTCs sufficient control over the

consumption-production chain to overcome established international market

structures, adapt to resource characteristics, and influence not only product use but

the supply and price of resources.

2.6.3 Agriculture and the food industry Changing patterns of human food consumption, community food security and

restructuring of agriculture and agriculture-related ‘nature’ have become increasingly

interlinked through the 20th century by the restructuring of food production chains.

The increased use of processed foods in industrialised nations has various social

roots. However, the consumption of these foods needed new production chains using

cheap agricultural outputs as raw materials for industrial processing. Local and

foreign agriculture was incorporated and restructured to expand output. Large agro-

industrial firms increased control over the supply of resources and their processing.

Agricultural ‘nature’ was restructured to suit the new production chains by altering

the genetic composition of productive species and increasing the environmental

impacts of production. In the process, social relations were also restructured

(Kloppenburg 1988, Goodman and Redclift 1991), and community food security –

35

in terms of physical accessibility, quantity, quality and cost – has been impacted by

such restructuring.

Community food security is directly related to control over food production

chains. It is linked through the chains to food processing methods, and the social

conditions and environmental impacts of agriculture. The consequences of

restructuring agricultural production systems for economy-environment interactions

and social relations are related to the location of control over the consumption-

production chain (Gottlieb 2001). Through their purchasing power, agro-food

conglomerates, food processors and retailers have great influence over not only the

price, quality and farming decisions that produce environmental impacts, but the

ability of consumers to purchase specific products in different locations. In America,

this power is reinforced by the declining share of the ‘food dollar’ available to

farmers, and the limited number of companies controlling the purchase and

distribution of agricultural crops in different areas (Halweil 2000).

The restructuring of agricultural production in south-east Asia to supply Japan

has been driven by Japanese GTCs, food processors and retail firms who took control

of major elements in production chains (McDonald 2000, McMichael 2000).

Operators of feed-lots in Australia’s Murray-Darling basin supplying Japanese

markets are structurally tied to this system of farming despite its substantial

environmental impacts. Change is difficult because of the economic and political

imperatives to intensify agricultural production under international competitive

pressures (Lawrence and Vanclay 1992, 1994).10 Such restructuring of local

agriculture to meet the requirements of international markets has contributed to

social differentiation and environmental impacts in a number of areas (Stonich 1993,

Grossman 1998).

The modern agro-food industry thus illustrates the role of manufacturers,

distributors and traders in creating and linking social and environmental impacts of

food consumption-production chains. They not only shape consumption by

developing and marketing industrial food products, but they promote growing

systems that substantially restructure environments to produce the cheap resources

required for these products.

10 Lawrence (1987) discusses the political economy of Australian agriculture and its social and environmental consequences.

36

2.6.4 Forest exploitation and wood industries A common pattern of exploiting forests for industrial wood products is seen in

countries around the world.11 That in Australia exemplifies this pattern (Routley and

Routley 1975, Rawlinson and Penna 1982, ACF 1987, RAC 1992b, Dargavel 1995,

Stafford et al 2000, Vanclay and Turner 2001).

Australia’s timber industry exploited the original diversity of the nation’s native

forests by progressively ‘mining’ their wood resources. Labour intensive

technologies were first used to extract the highest quality and most accessible logs.

As one area, species or quality of log was depleted, so another was exploited for

available markets. As forestry and wood sciences advanced, the wood products

industry exploited forests and plantations as sources of rapidly grown cellulose rather

than long rotation, high quality timber.12 Some forests were replaced with fast-

growing plantations. Access to lower quality wood and more distant forests

depended on new logging technologies, relatively low log prices (Hanson 1979,

Byron and Douglas 1981, Efron 1983), supportive public forest management

agencies (Plumwood and Penna 1985) and, in some areas, the expansion of high

volume pulpwood industries.13 Native forest wood supplies have been overestimated

and overcommitted.14

Clearfelling, thinning and ecologically short growing cycles dominate the

management of plantations and much native forest. Physical and genetic

manipulation of tree crops assists such production. Capital replaced labour. Industry

ownership has concentrated to be dominated by large, politically and economically

influential companies. They may have links to foreign wood production allowing

organisation of wood supplies to optimise profits and activities (ACF 1986).

Thus, the consequences of restructuring forests for wood production can be

understood in relation to the structure of wood fibre consumption-production chains,

including the roles of resource managers. Control over wood production and related

11 The same basic process is repeated in different countries including: Australia (Rawlinson and Penna 1982, ACF 1986); Canada (Donaldson 1961, Orton 1983, Reed 1997a, May 1998, Marchak et al 1999); Chile (Clapp 1995, 1998a, 1998c); New Zealand (Searle 1975); Sweden (Hagglund 1991); U.S.A. (Osborne 1974, Robbins 1988, Robinson 1988, Lansky 1992, Jensen et al 1995). Marchak (1995) provides a global overview of the relationships between forest exploitation and industrial structure. 12 Robinson (1988) explains why long rotations are a key feature of ‘excellent forestry’. Weetman (1971) exposes the economic reasons for the irrelevance of long growing cycles and large trees to modern industrial forestry. 13 Similar situations exist in other countries (Searle 1975, Hirt 1994).

37

flows of money and political power is linked to the power to influence ecological

change in forests (Dauvergne 1997a, 1997b, Ribot 1998, Le Billon 2000, Dauvergne

2001). Similarly, environmental improvements at one point in a wood-based

production chain may be at the expense of environmental values elsewhere

(Sonnenfeld 2000).

2.6.5 Application to the dissertation These examples illustrate the importance of analysing resource extraction and related

consequences as outcomes of interacting components of consumption-production

chains. The described patterns of resource extraction and use are linked to the

structure of the respective industries, each of which evolved to maintain a secure,

cheap flow of resources that would support product manufacturing and sales. The

characteristics of the resources, which were restructured by use, contributed to the

factors influencing industrial restructuring. The material flow and territoriality

dimensions of such chains reflect the way chains are governed, so the characteristics

of these dimensions can be used to help understand how control over a chain is

exercised within networks of power.

As explained in Chapter Three, there are strong relationships between fibre use

and the structure of the world’s paper industry. Thus, there appears potential for the

useful application of the resource-based ‘bottom-up’ model of Barham et al (1994a)

linked with an industrial structure/consumption-production chain approach to analyse

the role of fibre in the Japanese paper/board industry. Corporate attitudes to the

environment will influence such roles, so literature on this area is examined next.

2.7 Industrial structure and environmental protection Making human economic activities less environmentally destructive affects the

operation of companies (WCED 1987, IIED 1996). Outcomes of such ‘ecological

modernisation’ processes can be weak, economistic and technological, or strong,

ecological and systematic (Christoff 1996). The processes and outcomes will be

heavily influenced by the ‘networks of power’ in which companies are embedded.

These networks act to maintain commercial stability and perpetuate a company’s

level of environmental impact unless acted on by strong pressures. Such pressures

may come from several sources, including changes in technologies, knowledge,

14 One example of overcutting in Australia is that exposed by Anderson (1999, 2000).

38

government policies, community groups, and markets (Taylor 1995), and act on one

or more points in consumption-production chains.15

Institutional change, such as that in companies to improve environmental

performance, can occur through three main mechanisms (Dimaggio and Powell

1983):

• ‘coercive isomorphism’, when an organisation is required to change, such as by

political or legislative forces;

• ‘mimetic isomorphism’, when an organisation models itself on another

organisation that appears to be responding successfully to an uncertain

environment; and

• ‘normative isomorphism’, when internal professional values change in response

to external events.

Changes within a company depend on the relative strengths of internal and external

networks of power (Levy and Merry 1986, Hunt and Auster 1990, Roome 1992,

Welford 1995, Aragon-Correa 1998, Henriques and Sadorsky 1999), but the

reactions by companies depend heavily on the perspectives, interests,

responsibilities, objectives, power and values of those controlling the companies and

their activities. Outcomes will be the result of a mix of qualitatively and

quantitatively different ‘first-order’ and ‘second-order’ changes as described by Levy

and Merry (1986). First-order changes are minor, evolve with the institution and do

not challenge its core. Second-order changes are stimulated by major internal or

external events that produce substantial shifts in organisational paradigms, structure

and operation.

Welford’s (1995) ‘spectrum of greening’ illustrates the range of changes an

organisation can make (Figure 2.2). At the low end are ‘superficial changes’,

whereby companies make technological additions to meet regulatory requirements,

and ‘proactive changes’ that introduce environmental auditing and management

systems to improve performance beyond regulatory requirements. Firms that initiate

the most challenging ‘explorative changes’ make environmental protection and social

15 Dauvergne (2001) shows how the networks of power surrounding tropical forest loggers incorporate and exploit a variety of factors to resist changes to their practices, ranging from conservative paradigms embedded in the traditional science of forestry to the Asian economic crisis of the late-1990s.

39

Figure 2.2: The spectrum of ‘greening’ positions.

Source: Welford (1995).

40

equity their highest priority, and attempt to reorganise relationships inside and

outside the firm accordingly. However, such changes involve reconsidering

company structures and industrial organisation in ways that might threaten the firm’s

existence.

Companies or industries develop and implement strategies to achieve objectives

such as reducing their environmental impact. Strategies comprise three prime

elements: goals; policies; and action programs to achieve the goals within defined

limits. To be effective, strategies need to: concentrate on a few key issues and

identify opportunities; be cohesive, flexible and well coordinated; allow for the

unexpected; be supported by other strategies; and recognise the limits of the

organisation’s resources so they can be implemented. They also need to be tested

intellectually against appropriate criteria and balance corporate objectives against

ethical standards. To implement a strategy, an organisation requires: suitable internal

structures and processes through which the strategy is implemented; a uniform

understanding by staff or members of the strategy and implementation processes; and

a desire for success (Mintzberg et al 1995).

The sophistication of a company’s environmental strategy and its application

will be influenced by the company’s resource base, including financial assets,

technologies, human resources, organisational capabilities and political acumen.

Higher-level environmental strategies require that managers see environmental issues

as an opportunity and be prepared to initiate substantial changes that meet a strong

environmental and social ethic. They can also produce economic benefits (Roome

1992, Porter and van Linde 1995, Russo and Fouts 1997, Sharma et al 1999).

Sophisticated strategies would consider the best possible mix of actions for

companies to correct and prevent environmental impacts (Aragon-Correa 1998)

within their regulatory environment (Cashore and Vertinsky 2000), and promote

interaction with relevant community interests (Henriques and Sadorsky 1999).

Contradictions between a company’s seemingly high-order environmental

philosophy and low-order behaviour could be evidence of ‘greenwash’, in which a

company presents a socially-acceptable image while making little or no change

(Dauvergne 1997b, Karliner 1997, 2001). However, it might represent a company’s

inability to implement its strategy because the organisation does not understand the

implications of its position and/or does not have sufficient resources. On the other

41

hand, given that attitudes towards ‘nature’ are socially constructed (Castree and

Braun 1998), an organisation’s low-order philosophies and actions could reflect an

honestly-held ‘shallow’ perception of ‘nature’ that only recognises values that

directly benefit humans. The organisation may even lack the resources to behave

otherwise. ‘Deeper’ philosophies that appreciate less-anthropocentric characteristics

would seek protection for non-economic values (Routley and Routley 1980b).

However, seemingly high-order behaviour may not necessarily represent the

implementation of an environmentally ‘deep’ philosophy, but may be stimulated by

perceived economic benefits.

Understanding the extent to which an industry can respond to environmental

issues requires penetration of the public face of companies. The public image

presented in annual reports and others such documents may bear little relation to a

company’s behaviour because they “are an essential part of the company’s public

image strategy, representing the operational model the management has decided to

portray to the outside world” (Nasi and Nasi 1994)(p.65). Similarly, executives may

not appreciate the public’s view of their companies because they regard image

problems simply as the result of misunderstandings created by community

environment groups. This would influence the development of company policies

(Endo 1997).

Wood-based industries, with paradigms shaped by commercial pressures and

traditional interaction with forests as resources, have had difficulty handling the

challenges posed by pressures for environmental protection (Leslie 1976, Dargavel

1980). Some environmental concerns have apparently been incorporated by

Australian paper companies and influenced industrial restructuring. However, the

solutions to these concerns “are defined and adopted within a corporate cultural

paradigm dominated by developmentalist values” (Waitt 1997)(p.325). Major North

American wood-based companies responded to such pressures after executives

realised that their company’s public support had weakened and they might be

financially affected. Also, the primary responses were those that were financially

attractive. Companies resisted the imposition of regulations, but were prepared to

submit to environmental pressures or became proactive. Those with a less

hierarchical structure adapted more quickly (Cashore and Vertinsky 2000).

42

Japan consumes wood from tropical environments for construction and other

uses (Nectoux and Kuroda 1989, Shimizu 1996), but representatives of the trade

resist the idea that the environmental cost is serious (Sayer 1990). However, the

trade depends on large volumes of cheap wood that entails environmental

destruction. The environmental protection policies and activities of relevant GTCs

have been criticised as primarily concerned with protecting corporate images, being

“too diluted, inconsistent, and marginal to alter the nucleus of Japan’s shadow

ecology” (Dauvergne 1997b)(p.40).

There is little analysis of the environmental policies of Japanese paper and

trading companies on sourcing papermaking fibre. However, those importing

woodchips from Australia were found at the low end of the ‘greening spectrum’, in

contrast to Australian non-government conservation organisations that want high-

order changes in local forest management. The similarities between the companies

in their environmental policies reflect their ‘yokonarabi’ (herding/follow the leader)

instinct (Yamane 1999),16 which could be the product of ‘mimetic isomorphism’.

Thus, there are important links between industrial structure and corporate

attitudes to the environment. A structurally-based analysis that also examines the

application of attitudes and policies within companies towards fibre-related

environmental issues would help explain the environmental outcomes of a

company’s activities. The lack of research on such attitudes in the Japanese paper

industry indicates the scope for such work.

2.8 Conclusions This review of literature makes important contributions to the dissertation. It

illustrates that the social construction of ‘resources’ needs recognition by any

research paradigm used to examine the consequences of resource exploitation.

‘Political ecology’ provides such a paradigm by supporting the integration of diverse,

relevant issues so they can be understood in terms of social-economic-environment

interactions over time and space.

The literature also confirms the importance of industrial structures in explaining

patterns of resource use and environmental impacts within the ‘political ecology’

framework. In particular, the influence of the physical, social and environmental

characteristics of resources being exploited should be incorporated into industrial

43

structure approaches. ‘Consumption-production’ chains provide a useful mechanism

for examining the interaction of resource characteristics with local political and

economic factors, the position of companies using resources and patterns of product

use in a community. Analyses of such relationships in various industries expose the

trend for the manipulation of nature, resource extraction and product use to evolve

together with industrial structure in support of expanding production and

consumption.

Consumption-production chains may represent the flow of resources as linear

from the site of extraction to final consumer. However, their actual geographic

structure and the governance regimes that determine these structures and regulate the

chain’s operation can be far from simple. The environmental consequences of

consumption-production chains should be recognised as being directly related to

industrial structure and related networks of power. These relationships need

consideration if the ‘greening’ of industrial activities is to substantially reduce

environmental impacts.

Theories explaining the use of resources for industrial production and the

consequences of such use for societies and organic nature need further development,

especially to integrate the influence of resource characteristics. Paper production

serves as an example of this situation. The paper/board industry involves important

environmental issues directly related to the physical, social and environmental

characteristics of organic fibre, and the way fibre is processed and used.

Considerable potential exists for understanding the causes, consequences of, and

solutions to, these issues through an industrial structure framework, so an appropriate

step is to apply the framework to paper production. The next chapter takes this step

by examining the historical development and political economy of the modern paper

industry in relation to its use of fibre. Thus, Chapters Two and Three provide useful

direction for the following research on the role of fibre in the development of Japan’s

paper industry.

16 A literal translation would be ‘lining up side-by-side’.

44

Chapter 3: Papermaking and the role of fibre Paper is, however, far from homogeneous. It is built up of at least a million components per gram, with a great degree of heterogeneity in the distributions, shapes, and chemical compositions of the main constituents, the fibers and the fillers. From this extremely disordered assembly of components the papermaker has to make a material that behaves in a homogeneous manner. If it were not for the fact that paper exists, this task would be considered impossible by any sensible engineer. Yet paper is today made in large quantities at a production rate unsurpassed in the manufacture of any other kind of material on a single process line. Essentially, papermaking may be described as ‘making homogeneity out of heterogeneity’ (Bristow and Kolseth 1986)(p.iv).

3.1 Introduction Papermaking fibres are organic, occur naturally in plants, vary within and between

plant species, can be created by humans, and exist across a range of political,

economic and natural geographies. The roles played by these fibres within the paper

industry illustrate the importance of the characteristics of a natural resource within

the economy-environment interactions that determine patterns of resource

exploitation. Also, the development of the modern paper industry shows how the

development of technologies for converting resources into human commodities is a

social process that supports dominant political, social, economic relationships,

especially with organic nature.

This chapter applies the political ecology framework and industrial structure

approach developed in the previous chapter to expose these roles of organic fibres

and industrial technologies, as essential background for the dissertation’s analysis of

the Japanese paper industry. The discussion first briefly explains the characteristics

of papermaking fibres and technologies. These are then related to the economics of

modern pulp and paper manufacture. Next, the role of fibre in the political economy

of paper production is examined. The chapter’s conclusions explain the development

of the world’s paper industry in terms of the changing political, economic and

environmental interactions between its structure, technologies, markets and fibre

resources.

45

3.2. Fibre characteristics and properties and the papermaking process

3.2.1 ‘True’ paper and fibre characteristics Early papers were made by layering and pounding vegetable fibres, so relied on the

relatively unrefined physical characteristics of plants to form a sheet. However, 'true'

paper is radically different - it "must be made from fibre that has been macerated

until each individual filament is a separate unit" (Hunter 1978)(p.5). The

development of technologies for making ‘true’ paper exploited the characteristics of

the fundamental building block of plants - fibres - to bond and create a strong sheet.17

Plant material was broken up into individual fibres and immersed in a watery

medium. The suspension was poured over a screen leaving a wet sheet of fibrous

pulp, which was then dried for further treatment and use. This basic process is still

used in modern pulp and paper mills (Higham 1968).

The physical features of plant fibres are important in the papermaking process.

These fibres comprise a series of layers containing different proportions of cellulose,

hemicelluloses, lignin and other substances enclosing a central cavity (Figure 3.1).

Long chains of cellulose and hemicellulose molecules give the fibre its basic

structure, and their arrangement determines the fibre’s characteristics and properties

that are exploited when making paper. Lignin bonds fibres in plants, while other

substances, such as waxes, fats and tannins, give the plant material specific

characteristics (Smook 1992, Biermann 1996).

In the paper sheet, bonding occurs between the hydroxyl groups of the cellulose

and hemicellulose molecules, so the fibre’s main characteristics - composition,

length, width and cell wall thickness - influence its properties and are important for

papermaking. Generally, the shorter the fibre, the less its ability to bond to other

fibres. Cell wall thickness influences the fibre’s flexibility, resistance to collapse,

absorbency, as well as burst, tensile and tear strengths. Thin-walled fibres are more

flexible, allow a large bonding area and produce a smoother paper. To make paper,

fibres must be ‘conformable’ (able to be matted and pressed into a uniform sheet),

and bonding must be possible where the fibres touch. Mechanical treatment –

‘beating’ or ‘refining’ – improves conformability by delaminating the fibre wall and

allowing greater water entry and swelling that increase the fibre’s flexibility, surface

17 Hereafter, the adjective ‘true’ is generally not used, although the meaning is carried by the word ‘paper’.

46

Figure 3.1: The structure of a mature softwood fibre.

Source: Biermann (1996).

47

area and bonding strength. A fibre’s strength in a product depends on its properties

and treatments at pulping (Higham 1968, Smook 1992, Biermann 1996).

Thus, fibres need appropriate physical characteristics and properties for

papermaking. These characteristics and properties are expressed through

papermaking technologies and can be modified during the papermaking process to

enhance features desired in the final products. Also, because fibre resources are

organic and can be reproduced, human manipulation of the genetic base and growing

conditions can create fibres with preferred properties. These factors influence the

papermaker’s choice of fibre. The main paper making fibres are: wood, straw,

bamboo, bagasse, kenaf, hemp, jute, esparto, reeds, flax, cotton and rags, and waste

paper/board (Wayman 1977). However, wood, in its raw form and as recovered

from old paper/board, has become the world’s primary source of papermaking fibre.

Before examining the properties of different fibres in relation to papermaking, the

main stages of papermaking are outlined.

3.2.2 The papermaking process The process of papermaking has four main stages: fibre preparation; pulping; stock

preparation; and product manufacture (Higham 1968, Weiner et al 1974, Smook

1992, Biermann 1996, Ganzleben 1998).

Fibre preparation This stage removes contaminants, hinders degradation and sets the dimensions of the

raw material. It aims to limit costs, protect the efficiency of the manufacturing

process and improve the quality of the final product. The fibre and manufacturing

process influence the site of these activities and technologies used.

Pulping Two main pulping methods can be used to break fibre resources into individual fibres

- chemical or mechanical. There is also a range of hybrid chemical-mechanical

technologies (Figure 3.2). They use resources and recover wastes differently, and

each produce pulps with specific characteristics that can be blended with other pulps.

Chemical pulping cooks fibres in a chemical solution at high temperature and

pressure. Chemical pulps are strong and pure, but have low yields (40-55% of wood

volume). Different processes are preferred for wood and non-wood fibres because of

different fibre properties. Mechanical pulping grinds logs or chips to produce

48

Figure 3.2: Pulping processes and characteristics.

Source: Ganzleben (1998).

49

individual fibres so is energy intensive. Pulp yields are high (85-95% of wood

volume), but generally, mechanical pulps are weaker than chemical pulps.

Mechanical pulping mainly uses softwoods, although modern techniques for

applying chemicals and heat allow: the alteration of pulp properties; improvement of

pulp strength; and the use of hardwoods.

Stock preparation After pulping, fibres are treated to assist the efficiency of the papermaking process

and the expression of properties desired in the final products. They may be: washed;

separated; refined (or beaten); bleached; blended with other pulps; and mixed with

chemicals, clays or dyes.

Paper/board manufacture To make paper/board, pulp is placed in a dilute aqueous suspension and fed onto a

revolving wire mesh loop where the sheet forms as water drains away. The sheet is

pressed and dried, but the speed of the paper/board machine is influenced by rates of

water drainage and evaporation, and properties desired in the product. When dry, the

product may be treated to improve its quality, before being converted into the end

product.

Thus, the methods available for making paper/board need to be considered in

relation to potential interactions between the properties of different fibres and

technologies. These interactions determine the ability to physically and

economically convert a fibre resource into useable products. Preferred technologies

and mill sizes depend on fibre types, resource size, potential markets and corporate

objectives.

3.2.3 Characteristics and properties of papermaking fibres The characteristics and properties of papermaking fibres vary within and between the

three main categories of wood, non-wood and ‘recovered’ fibres. They influence the

kind of resources exploited, the pulp and papermaking technologies used and target

markets (Higham 1968, Wayman 1977, Cameron et al 1990, Gartside 1990, Higgins

1991b, Smook 1992, Biermann 1996, IIED 1996, Clark and Trajstman 1997).18

18 These references are used for the following discussion on fibre qualities, so are not continuously cited.

50

Wood fibres Softwood fibres from conifer tree species (gymnosperms) and hardwood fibres from

broadleaf tree species (angiosperms) are used for papermaking. These groupings

differ in several ways (Tables 3.1 and 3.2), but there is a high degree of technical

interchangeability. Their differences are exploited through blending to make

products with desired properties. Characteristics and properties are also influenced

by age, location in the tree, genetics and environment. The use of hardwoods,

particularly eucalypts, for some products increased because of their economic

benefits during manufacture and use (Stier 1990).

Non-wood fibres Non-wood agricultural plants have specific advantages and disadvantages. Those

with little lignin produce papers with low pollution. Hemp has durable fibres making

it suitable for recycling. Kenaf bark produces a high quality chemical pulp in

contrast to its core, but pulps using the whole plant are generally good.19 Fibre yields

of plants grown by agricultural methods can equal or exceed those of tree-growing

systems. The disadvantages of these fibres include: low bulk density; short harvest

seasons; slow draining pulps; and high ash and silica contents that require pulping

and chemical recovery techniques different to those used for wood. However,

technical problems with these fibres have generally been overcome, and for “each

grade of paper there is at least one type of non-wood fibre that is suitable” (IIED

1996)(p.73).

Recovered wood fibres Recovered fibres have properties different to new fibres. These properties depend on

the characteristics of the original fibres and changes caused by pulping,

papermaking, conversion, use, collection and recycling (Howard 1993, 1994). The

first pulping and papermaking process defines a fibre’s general behaviour when

recycled. Fibres from refined chemical pulps become harder when dry, so their

bonding ability and other qualities decline with reuse. Mechanical pulp fibres are not

greatly refined in the first manufacturing process, so reuse and refining increase their

flexibility, strength, density and bonding potential - within limits. Reuse provides

opportunities to reduce the impacts on fibres of previous processes, but fibres cannot

be reused indefinitely because some quantity and quality is always

19 According to Maddern (1990)(p.116), the “(c)ost effective utilisation of the core material is the key to economic utilisation of kenaf chemical pulps”.

51

Table 3.1: Differences between hardwood and softwood fibres grown in Australia.

Source: Higgins (1991b). Notes: 1. A few hardwood species have longer fibres.

2. These figures are for ash-type eucalypts.

52

Table 3.2: Papermaking qualities of hardwood and softwood fibres.

Source: Higgins (1991b). Note: 1. This characteristic applies particularly to lower density hardwoods.

53

lost (Higgins 1991a). The recycling process also produces its own environmental

impacts through waste disposal (McKinney 1994a).

Implications of fibre properties for papermaking economics Thus, plant fibres are the primary physical component of paper/board and form the

matrix around which the features of the final product are developed. There are many

kinds of fibres that can be exploited. Some are more suited to making specific

products than others, although their suitability is influenced by available

technologies. Fibre resources can be created with properties more desirable for

specific papermaking objectives, while fibres can be modified during the

papermaking process, and those in many products can be reused. Thus, fibre

properties strongly influence the economics of papermaking throughout the

production chain. The next section examines their economic importance more

closely.

3.3 The economics of modern paper production and fibre supply

3.3.1 Pulpmill operation and economics Figures 3.3 and 3.4 illustrate the generalised costs and profit of modern pulp

production (Wayman 1977, Smook 1992, McKinney 1994c, Biermann 1996).20

Baseline production aims at generating a revenue that covers both fixed and variable

costs and provides a profit. Incremental production increases, above baseline

production, can be very profitable because the fixed costs have usually been covered.

Modern high volume pulp and paper mills are capital intensive, so the first few

years of operation (including construction) have the greatest consequences for long-

term profitability. For mills to be cost effective, they should quickly reach their rated

capacity. The general trend is for unit production costs to decline as mill capacity

increases. However, limits on other factors, such as resources, markets and

availability of capital, constrain their size. The main commercial objective in siting

a pulp or paper mill is to place it at a location where the overall cost for the delivered

product is minimised. The cyclical nature of pulp and paper markets (discussed

below) tests the cost effectiveness of a mill’s design and its managers’ ability to

manipulate costs to be profitable. As shown through the following discussions,

many interrelated resource supply, manufacturing and market factors must be

20 Unless otherwise stated, these standard texts are used for the following discussions of the influence of fibre on the economics of pulp and paper manufacture.

54

Figure 3.3: Generalised production costs and profit for a pulpmill.

Source: Smook (1992).

55

Figure 3.4: Simplified comparison of the profit margin between baseline and incremental woodpulp production.

Source: based on Smook (1992).

Notes: 1. Labour is included as a fixed cost because a specific number of employees is needed

whether a modern mill is operating at full or less than full capacity. 2. Baseline production covers all costs, so incremental production above the rated capacity allows more income to be profit.

56

considered when establishing a new mill. Fibre supply is particularly important.

3.3.2 Fibre supply and pulp/papermill economics Fibre has long been the most significant variable cost of pulp and paper manufacture

(Hunter 1978, JP 1996, Magee 1997). Thus, a mill’s “fibre supply must be reliably

available in adequate volume for present and future (production) requirements,

technically suitable for the desired marketable products, and accompanied by

investment requirements and manufacturing costs that ensure an acceptable rate of

return” (Wayman 1977)(p.226-7). Fibre quality can be more important to the

economic operation of a pulp/paper mill than fibre cost if it adversely impacts on

mill productivity (Jamieson et al 2000, Jamieson 2001c).

For a new mill, secure fibre supplies can be obtained by long-term contracts

and/or purchasing and/or growing a resource. Fibre costs are related to the amount

of fibre extracted and method of extraction. They are influenced by the level of

economic accessibility, competition, and the ability to integrate the removal of

papermaking fibre with that of other resources. Fibre properties influence the choice

of markets, products and pulping technologies. The properties of wood fibre in

different locations were crucial to the success of products from particular areas. For

example, Scandinavian spruce produces high quality mechanical pulps for printing

papers and Douglas Fir in western USA is highly suited for paperboard (Iida 2001a).

The composition and characteristics of fibre resources determine pulp yields, the

volume of resource required and other manufacturing costs, such as the size of some

mill equipment (for example a chemical pulpmill’s digester), which affects a mill’s

capital requirements. Most paper/board becomes an input for manufactured products

(Robins and Roberts 1996), so market viability is influenced by trends in:

merchandising and distribution; product consumption; prices; competing products;

product specifications; order sizes; major users; exchange rates; and trade barriers.

The important link between resources, scale, markets, and ownership is stressed

by the inverse relationship between lower capital costs and higher costs for fibre and

delivered products (due to higher transport costs) as mill size increases.

Economically viable papermills using waste paper or non-wood fibres and serving

domestic markets can be smaller than wood-based papermills serving domestic

markets. However, wood-based pulpmills targeting export markets need to be much

larger. The economics of each mill is unique, so competing economic influences and

57

corporate objectives determine the optimal size (Grant 1978). The economics of a

project may be viewed differently by private entrepreneurs and governments. Private

investors would be expected to base decisions primarily on the rate of return, but

governments may accept a low rate of return because of other expected social and

economic benefits. Also, governments may provide financial or other incentives to

reduce the risk faced by a private investor. Such incentives can make an uneconomic

proposal profitable, but may need to be long-term.

“There is therefore a strong and continuing interplay between resources and

markets and, ... all the factors must finally be reconciled to determine economic

viability” (Wayman 1977)(p.113). The following discussions consider wood,

recovered fibre and agricultural fibres in relation to manufacturing economics.

3.3.3 Wood fibre supply and pulp/paper production For a wood-based pulpmill in the current industry structure, “(w)ood cost is by far

the most important single factor affecting ... profitability” (Smook 1992)(p.192).

“Wood is the strategic driver of the industry ... the key competitive differentiator”

(Wilson 1991).

The large capital investment for a wood-based pulp/paper mill requires a long-

term guaranteed wood supply at a suitable price from public and/or private forests

and/or plantations. High wood costs can be countered in several ways, including:

controlling wood quality and species mix (Weiner et al 1974); integrating the mill

with another wood processing facility; and making ‘high value-added’ products that

reduce wood as a proportion of total costs. The potential to reduce wood costs has

been assisted by technological developments over the last fifty years that removed

many constraints on a mill’s location. Pulping and bleaching technologies increased

the number of exploitable tree species; logging and transport efficiencies made

previously uneconomic forests accessible; and wood processing technologies allow

the use of logs, woodchips and sawmill wastes.

The price of wood delivered to a mill should cover the cost of the wood (termed

‘stumpage’ or ‘royalty’), extraction costs, transport costs and overheads. Some of

these are related directly to the status of the resource, being “influenced by

topography, geography, forest characteristics, climate, accessibility, social conditions

and government requirements” (Wayman 1977)(p.93). Social conditions and

government requirements may include: objectives of the owner in selling the wood;

58

land tenure and the terms of the supply agreement; the existence of other wood

industries; and the method of calculating stumpage (Leslie 1985).

If wood comes from a resource established by deliberate human activity, such as

plantations or regenerated forests, then a short rotation time or early income is

important to counteract the effect of compounding interest on investments.21 The

amount of wood and area of trees needed by a pulp or paper mill depends on the

efficiency of the production chain, the density and cellulose content of wood, and the

growth rates of tree species. Plantations or managed forests offer the potential to

create a resource that is highly desirable for paper manufacture through manipulation

of site and tree characteristics. Trees favoured for pulping are: fast growing; straight;

slow to degrade; easy to debark; and, free from abrasives. They have a high density

and pulping yield. Pulp yield has the greatest impact on pulping costs, but the

potential genetic variation for density is greater than that for pulp yield (Greaves and

Borralho 1996). This is important when considering plantation establishment

options, and calculations of net discounted cash flow per hectare can be used to

identify the economically-preferred alternatives.

Thus, fibre supply is the most important cost for a wood-based pulp or paper

mill, and there are many ways to alter these costs and those fibre characteristics that

influence other mill production costs, especially at the site of resource supply.

3.3.4 Recovered fibre supply and paper/paperboard production

The importance of fibre costs Fibre recovered from used paper/board will be exploited for making new paper/board

if a manufacturer can make a profit from its use, particularly if its overall cost is less

than that of pulp made from new fibres. Cost categories will be similar to those for

woodpulp, but reflect features specific to the production process, including the

characteristics of recovered fibres. These characteristics include: the cost and quality

of recovered products; the amount and quality of fibre in recovered products; the

amount of fibre lost by repulping and treatment; the cost of processing the useable

fibre into pulp; the efficiency of paper machines using recycled pulp; and quality

differences between products made from recovered fibres and new fibres that affect

sales. They are expressed in the following equation (McKinney 1994d):

21 Compounding a 6% interest rate will double the value of an investment after 12 years.

59

Cost of using = (Actual fibre cost x Efficiency factor x Quality factor) recovered + chemical costs + energy costs + effluent load fibre + sludge disposal

This equation would influence annual production and decisions for investments

in ‘recovered fibre’ or ‘new fibre’ pulping. Increases in the price of ‘new’ pulp or

the introduction of technologies that lower processing costs might allow the use of

more expensive or lower quality fibre. Lower prices for new pulp must be matched

by ‘recycled’ pulp prices if a particular level of recovered fibre use is to be

maintained. This emphasises the cost pressures on waste paper collection systems.

The use of recovered fibre is also influenced by markets (Morrison 1994) or

corporate objectives. If a manufacturer, distributor or end-user could make greater

profits, expand markets and/or achieve other corporate objectives by using more

expensive ‘recovered fibre’ pulp, it would make sense to do so.

The characteristics of different paper/board products introduces variations into

this general perspective. Other costs such as energy, the cost of machinery being

replaced, environmental protection and ‘over-the-machine’ costs can shift the

importance of fibre costs within the total manufacturing cost (Huston 1994,

McKinney 1994b, Morrison 1994).

The long-term use and cost of recovered fibre Harris (1995)(p.35) states that

all the evidence suggests that it is possible to make recycled papers of a quality which can match virgin fiber grades, and it is also possible to make recycled papers at equivalent, or even lower cost. The real problem is getting both factors to match the levels of virgin fiber grades at the same time, and doing this at levels of recycled paper content which make a significant contribution to overall recycling targets.22

The successful matching of commercial and technical criteria is seen in the

many products containing recovered fibre at levels previously unusable.23 However,

the quality of recovered fibre cannot be maintained over numerous cycles. As an

increasing proportion of recovered fibre comes to circulate in relatively closed fibre

markets (those with low imports and exports of new fibre, such as Japan), the

matching of technical and economic factors will become more important. The

22 According to Folke (1995), it is now technically feasible to make most grades of paper from recovered paper of the same grade. 23 See for example PPI (1992b), Robertson (1993), Srivatsa (1993), Nardi (1994), Matzke and Selder (1994), Matzke (1995) and Welsford (1995).

60

average number of generations in recovered fibre supplies increases rapidly beyond a

recycling rate of 60%. One paper technologist (Gottsching 1988) felt that in a

relatively closed ‘waste paper economy’ exceeding an average recycling rate of 60%

would threaten a ‘waste paper collapse’ because of increasing levels of poorer

quality fibres. Thus, the more recovered fibre is used, the more attention must be

given to their characteristics so they meet required standards (Gottsching 1993).

The likelihood of such a collapse depends on fibre qualities and the demands of

paper/board users. Exceeding a total 60% recycling rate may be unacceptable if the

quality desired by users is already very high, while there will be technical levels

below which quality cannot drop if products are to be effective. Technological

advances have changed parameters of fibre quality to allow higher technically and

economically acceptable recycling rates. They may continue to do so, although there

will be limits. One estimate puts the maximum technical global recycling rate at

between 65 and 73% (IIED 1996).

Thus, the influence of the qualities and cost of recovered fibre on recycling

economics is important, but is tempered by the type of paper made. Recovered fibres

can be expected to replace new fibres when the overall cost is less and/or when they

help meet another corporate objective. The influence of fibre quality on the

economics will become more important in ‘closed’ paper economies as the reuse of

recovered fibre increases.

3.3.5 Non-wood fibres The availability of agricultural fibres far outstrips global demand for papermaking

fibre (Mohta and Roy 1999), but the area of such crops grown for papermaking is

limited (IIED 1996, Wong 1997, Agripulp 1998a, 1998b). Small papermills using

agricultural fibres primarily supply less-industrialised areas and/or wood-poor

regions where per capita equivalent paper use is low, including India and China

(Olsson 1995b, Hagler 1996, IIED 1996).

High volume production of some non-wood pulp and papers in America is

commercially viable, and recently, non-wood mills have been established or

promoted in industrialised nations, while the use of non-wood fibre crops and non-

wood papers has been advocated (Kugler 1988, Wood et al 1990, Smith 1997b,

Wong 1997, Stern 1999). However, the commercial use of non-wood fibre is

61

“restrained by the dominance of wood production chains and markets” (Ganzleben

1998)(p.100), and will remain so until this power is broken.

Advancing the use of non-wood fibres might need government support to

counteract the lack of research and development of growing and harvesting such

crops and the difficulty in illustrating their profitability. Commercial acceptance

would be assisted by: a shift in demand; development of existing, technically

effective pulping technologies and cropping systems; the successful integration of

this use for such fibres with other uses; recognition of their specific values; and

promotion of any environmental benefits - although there is dispute about these

(Wollin and Baker 1990, Wood et al 1990, EDF 1995, 1996, Sheppard 1997, Smith

1997a, 1997b, Stahl 1997, Wong 1997, Alden et al 1998, Mohta and Roy 1999,

Selkirk and Spencer 1999, Krotov undated).24

Thus, while paper production using non-wood fibres can be economically viable

at a much lower scale than wood-based production, it is restricted in industrialised

nations because of a dependency on wood. This reflects the industry’s wood-based

‘technological paradigm’ that determines research and developmental trajectories

(Laestadius 2000). It illustrates the importance of reviewing the historical

development of the modern paper industry to more fully understand the relationships

between fibre use and industrial structure that occur within the industry’s political

economy. This is done in the following section.

3.4 Fibre and the political economy of papermaking

3.4.1 The development of ‘true paper’ and the shift to wood The manipulation of fibre in the papermaking process has been important for

expanding the use of paper and serving social, economic and political interests -

probably since before the invention of ‘true paper’.25 Thompson (1992)(p.35)

considers that the need to develop “a more economical, abundant, and easily used

writing medium” than bamboo strips and silk scrolls drove the invention of ‘true’

papermaking in China. ‘True' paper of that time used fibres from cloth, grasses,

hemp, mulberry, bamboo and other plants. This valuable technology spread to Japan

24 IIED (1996) and EDF (1995) concluded that overall there is little evidence that non-wood fibres are more environmentally benign than wood. Smith (1997a, 1997b) challenged these conclusions as the result of a conventional wood-based perspective. 25 The invention of ‘true’ paper is usually credited to a member of the Chinese imperial court, Ts’ai Lun, in 105AD. However, it was probably a developmental process that began before then (Western 1979, Thompson 1992).

62

in the 7th century and Europe around the 12th century AD (Hunter 1978). Recycling

also occurred early in the history of ‘true paper’ – during the 9th century AD in Japan

(Hori 1993).

It was in the western capitalist economies of the late-1700s to the early-1900s

that the availability, supply and economic potential of different papermaking fibres

interacted with changing technologies, markets and political and economic pressures

to direct the evolution of the modern industry’s basic structure. Carrere and

Lohmann (1997)(p.18) contend that the “reliance on wood and on large mills which

is characteristic of the industry’s mainstream today ... is the result of historical

momentum, not scientific or economic necessity”. However, this momentum came

from the desires and commercial imperatives of papermakers to expand markets.

The momentum began with the expansion of the printing industry from the

1700s. Paper use increased, pushing the then papermaking staples of cotton rags and

linen to the limits of economic supply. It promoted the search for new, cheap fibre

sources (Hunter 1978). However, the use of new fibres had to wait until

papermaking became mechanised in the late-1700s, increasing the control of mill

owners over manufacturing and reducing the influence of labour. Paper machines

allowed greater supply of cheaper and better quality paper. Commercial users shifted

to these papers; publications became cheaper and print runs expanded (Clapperton

1967, Hunter 1978, Rennel et al 1984, Carrere and Lohmann 1997, Magee 1997).

Greater paper use increased pressures to exploit new fibre resources. Forests

were such resources and the first useable wood-based paper was developed about

1800. Mechanical and chemical paper production processes were invented in the

mid-1800s (Higgins 1969, Hunter 1978). The main papermaking fibres became

esparto, straw and wood. Mill owners disposed of cloth processing employees, who

were mainly women, to reduce production costs. Wood required the least labour for

preparation (Magee 1997) and provided the most consistent source of pulp

(Thompson 1992).

In Britain, the introduction of steam power allowed the paper industry’s location

to be influenced more by fibre sources than when previously dependent on water

power.26 As the industry became more capital intensive, pressure increased to:

26 The northern ports of Britain and Scotland became important because they were the source of imported esparto and wood pulp (Magee 1997).

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maximise output; reduce costs; and become more vertically integrated. The

economic benefits of chemical wood pulps meant papermakers rapidly abandoned

esparto (Magee 1997). American papermakers had cheap water power, straw and

forest wood. This "made the introduction of machinery that saved on labour, but was

extremely uneconomical in terms of raw material wastage, a worthwhile venture"

(Magee 1997)(p.193). By the early-1900s, more than 60% of fibre used in American

paper came from wood. The industry’s wood supply became more integrated with

that of the timber industry, and most of the US companies that now rank highly in

global paper production were established between 1870 and 1920 (Smith 1997b).

Thus, the shift in the ‘western’ paper industry to using wood arose from the

interacting pressures for: mass production; larger, cheaper and more uniform fibre

supplies; and control over production. The ability to use wood allowed mill owners

to increase capital intensity and exploit new, cheaper fibre resources to support

greater paper consumption.

3.4.2 The expanding use of wood and restructuring supply

Restructuring global paper use Paper is a unique medium for handling information (Sellen and Harper 2002) and

paperboard is convenient for packaging. The world’s use of paper/board increased

from 14 million tons in 1913 to 242 million tons in 1990. However, the majority of

this increase occurred from the 1950s in wealthy industrialised nations (especially

North America, Japan and Europe) that use mainly domestic products and dominate

foreign trade. Foreign trade in fibre and paper products grew from the 1960s, but

developing nations increased their share of consumption, production and

international trade (Olsson 1995b, IIED 1996, FAO 1998). Global paper use is

predicted to grow through the early part of the 21st century with that in industrial

nations growing the most, but the highest growth rates are expected in Asia,

particularly China (Olsson 1995b). This will create a “new global distribution of

paper consumption” (Robins and Roberts 1996)(p.22).

The social foundations of the industry’s growth are a culture and institutions that

“like those of industrial capitalism generally, tend to be oriented toward unlimited

accumulation, economic expansion, and consumption growth” (Carrere and

Lohmann 1997)(p.47). Access to an expanding supply of cheap new and recovered

wood fibre is a major premise of this culture and critical for the industry’s growth.

64

However, the economic and political importance of wood in the papermaking chain

is being expressed through a changing industrial structure based on greater

international integration. The interactions between this culture, reliance on wood and

changing industrial structure has created a series of related problems for the industry

that are discussed next.

Wood, industry cycles and profitability High volume wood supply, particularly in developed nations, was important in

allowing papermakers and machine manufacturers to support expanding markets by

increasing the size and capital intensity of new pulp and paper mills. Large mills

were justified within the industry as providing economies of scale (Higham 1995).

During the 1950s, construction of large mills increased. In the USA the total

price for all paper-related products began to decline, and by the early-1960s

production capacity exceeded consumption levels, spurring falls in product prices;

pulp prices jumped in the early-1970s, then fell (Becker et al 1988, Higham 1995).

This began what King (1979)(p.55) says “has become enshrined in its socio-

economic literature and jargon” as “‘the cyclical nature of the industry’”. Capacity

growth then occurred mainly through the step-wise construction of large mills and

the modernisation of old mills. Expansion usually preceded demand growth, so

prices and profitability fluctuated. These cycles encouraged company take-overs,

concentration of ownership, mill closures and rationalisations to try to improve

profitability. However, most of the recent global pulp and paper capacity increase

comprised large export-oriented mills. Because of the relatively small size of the

international trade in pulp, this exacerbated the cycles, so the industry has not gained

the financial benefits expected from increasing scale (Western 1979, Becker et al

1988, Higham 1995, Navin 1997, Phillips 1997).27

Factors other than product prices are seen as important in decisions to construct

large mills – the desire of production-oriented managers to compete for markets

predicted by excessively optimistic demand forecasts, prestige for papermakers, and

profits for related consultants and machine makers (Western 1979, Becker et al 1988,

Higham 1995). Low prices were used to enter markets and build market share, but

Higham (1995)(p.74) considers such growth has created an “endemic weakness in

27 These other factors included: the greater use of recovered fibre, the trend to standardisation of pulp grades (for which the optimum mill size is generally considered to be the maximum technically

65

the market place”. This weakness of intense competition and low profitability has

the “whole industry floundering with no sharemarket support because the industry is

‘destroying capital’” (Jamieson 2001a). In the mid-1980s, a new pattern emerged of

lower earnings, lower profit ceilings and longer periods of losses (Higham 1995).

The former relationship between high operating rates and profitability diminished,

probably because the remaining companies “are able to exert more collective

influence in the market place than they had previously been given credit for, or even

thought capable of” (Higham 1995)(p.30).28 The volatility of future cycles will

depend on investment decisions by the industry’s large companies that influence its

structure across various regions (Cockram 1995, Higham 1995, Glass 1997, Navin

1997, Bingham 2000, Connelly 2000).

Thus, the ‘cyclical nature of the paper industry’ illustrates the links between

resources, scale, ownership and international integration. High volume supplies of

cheap wood were essential for developing production chains dominated by large

mills and companies to support growing but more distant markets. However, the

cycles of growth and slumps interacted with narrow management philosophies to

generate financial instability and poor profitability within the industry. These cycles

contributed to, and were influenced by, forces for greater international integration of

the industry and greater use of paper. This international integration is shifting the

economic balance of paper’s production chain within and between nations. The

place of fibre is important in this changing balance.

Fibre supply, internationalisation and globalisation Pressures for greater international integration of the paper industry include: domestic

paper use and/or production capacity exceeding local fibre supplies; changing

balances in local and international fibre supply; construction of larger pulp/paper

mills; manufacturers and fibre suppliers targeting export markets; use of ‘market

leverage’ and ‘arbitage’;29 development of new technologies; international

technology transfers; removal of trade barriers; changing transport economics;

improved communications; business cycles; and uncertainties in global economic

possible), fluctuating inventories in the distribution chain; the globalisation of some markets; and general economic changes (Cockram 1995, Higham 1995, Navin 1997). 28 Higham (1995) notes that the level of net sales generated per dollar of capital by the top 150 companies fell from the early-1980s and net earnings per total assets declined from the late-1980s. Discussions on the poor profitability of pulp and paper companies around the world are common (Navin 1997, Phillips 1997, Neilson 1998, Connelly 2000, Salonen 2000). 29 ‘Market leverage’ is the deliberate purchase of some foreign wood as competition for domestic suppliers; ‘arbitrage’ is “a greater than trade-equalised difference in prices” (Hagler 1995)(p.4).

66

relationships (Aldwell 1988, McAdoo 1994, Hagler 1995, Carrere and Lohmann

1997).

Within the context of increasing international linkages, changes in fibre

resources are important for the industry’s structure and operation, in part, because

resource size and fibre properties can influence a manufacturer’s choice of marketing

strategy. According to Cohen (1990)(p.393), “a continuous, long-term supply of

(tree) species that can produce a relatively homogeneous product and a globally

competitive price” allows a manufacturer to adopt a global marketing strategy that

sells “a standardized product line in the same way in all markets”. Such a strategy

simplifies production to achieve economies-of-scale. If the fibre is mixed, then it

might be more appropriate to use international marketing strategies that use different

fibres for different products that are sold using dissimilar methods in different

international markets. Global strategies need long-term stable markets, whereas

international strategies may exploit less stable markets for short periods.

The origins of the global restructuring of the international fibre trade emerged

during the 1960s as Japanese companies began importing woodchips and pulp to

support Japan’s growing paper use (Ikawa 1991, Marchak 1995). However, a

broader multinational shift, involving wood and recovered fibre, developed along a

north-south division with changing patterns of fibre demand and supply (Hagler

1991).

Industrial wood supplies around the world are restricted by the overexploitation

and/or reservation of native forests and/or plantations. Some countries are depleting

remaining unlogged forests; others are shifting, or will shift, from their original

forests into more intensively managed younger forests and/or plantations.30 Many

older mills in the northern hemisphere also have high manufacturing costs.

However, countries in the southern hemisphere, especially in South America,

southern Africa and south-east Asia have been expanding their exotic plantations

(Neilson and Flynn 1997). These plantations are concentrated in politically stable

30 Many references illustrate the priority given to wood production at the expense of the longer-term management of forests and their inherent non-wood values. Some describe the social conflict resulting from the differences between industrial and environmental values and priorities. Countries and regions that these references include are: Australia (Routley and Routley 1975, 1980a, Rawlinson and Penna 1982, ACF 1986, Dargavel 1995); North America (Osborne 1974, Lansky 1992, Pratt and Urquhart 1994, Jensen et al 1995, Colberg 1998, May 1998, Marchak et al 1999, Nilsson et al 1999); South America (JATAN 1993, Clapp 1995, 1998a, 1998c); temperate forests (Dudley 1992); and

67

areas, comprise a relatively small range of species, and have high growth rates,

uniform wood supplies, lower growing costs and strong local political support. The

latest processing technologies, economies of scale and cheap wood help overcome

transportation costs (Schreuder et al 1991, Neilson and Flynn 1997, Ferguson and

Cody 2000), so their products can penetrate northern markets.

Because security of resource supply is important, ‘benchmarking’ wood

resources for industrial use is now a global exercise that incorporates comparisons of

taxes, and potential for profit repatriation (Meynink 1996, Hirata undated). Carrere

and Lohmann (1997) argue that central to the globalisation of the industry is the

‘freedom to plant’ in locations of choice, with governments establishing and

protecting this privilege, sometimes at the expense of local social, economic and

environmental values. However, some doubt exists about the ability of Asian

plantations to provide predicted supplies. Neilson (1997) expects that production

from Asian plantations may be overestimated because of inaccurate estimates of

area, growth and losses. Also, he considers these plantations have a high-risk profile

and will be more expensive than anticipated, so recommends that governments

change land ownership systems and tax regimes to create conditions suitable for

investment in plantations and industrial exploitation. The longer-term biological

sustainability of tropical plantations is also an important issue (Kile 1998).

Greater global uniformity in the cost of pulpmill capital has reinforced the

influence of fibre on pulp costs (Simons and MMA 1990, Higham 1995). In both

hemispheres, competitive pressures seek to increase wood output, reduce costs and

create fibre resources with uniform, desirable properties. More intensive site

management and tree breeding, including genetic engineering, are promoted (Griffin

1996, Cotterill and Macrae 1997, Pullman et al 1998, Meadows 1999, Bird 2000,

Laestadius 2000, Sampson and Lohmann 2000). Some commentators consider that

companies wishing to be globally competitive must reduce their dependency on

imported woodchips and locate mills close to wood resources (Kuramochi 1991,

Shield 2000). The extent to which this occurs will be influenced by the economics of

integrated pulp and paper production (Ikawa 1991) and the physical and political

ability to build pulpmills near fibre and water resources. Thus, the shift in the

boreal forests (Olsson 1993, 1995a). One forestry consultant (Neilson 1997)(p.1) states that “(n)ative forests are being harvested at unsustainable rates in most countries”.

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balance of wood resources and pulp and paper mills into the ‘south’ is contributing to

the global restructuring and use of wood resources.

Industrialised countries are also experiencing large changes in the size, quality

and distribution of recovered fibre. Supplies are expanding because of new

economic and environmental priorities, sometimes supported by legislation (IIED

1996). This has international implications for fibre use.

Greater recycling does not mean exploitative pressures on forest resources must

decline. Assuming FAO forecasts of global paper use are achieved, even a 50%

global recycling rate would require construction of much new wood-based pulping

capacity (Olsson 1995b). Recycling increased in the USA, but the use of new fibre

did not decline because the production and exports of pulp and woodchips increased

(Smith 1997b). Also, it has been argued that greater recycling in America might help

lower domestic pulpwood prices so assisting the competitiveness of American pulp

and paper (Ince and Zhang 1994), but if the quality of recycled products declines,

demand for new fibre may increase (Neilson and Flynn 1998).

The USA also dominates the international trade in recovered fibre, and Asian

markets, heavily dependent on US exports, will be affected by the increasing use of

recovered fibre in America (Marcin et al 1994, McKinney 1996, Thomson 1999).

Asian markets are also targeted by European (Gottsching and Putz 1994, McKinney

1996) and Japanese (Chapter 6) exporters of recovered fibre. China could import

more recovered fibre while it expands its domestic industry and resources (Higham

1995). However, greater recycling in Asia will require stronger collection and

recycling systems plus appropriate technologies (Brooks 1999). Because consumers

often prefer recycled products for environmental reasons, encouraging their use may

damage the markets of manufacturers that use new fibre resources (Johnstone 1996).

‘Southern’ manufacturers challenge such potential restrictions in ‘northern’ markets

(PPI 1993a).

Thus, the location, size and quality of fibre resources for papermaking are being

restructured globally. The ‘production chain’ for many ‘new fibre’ products appears

to be becoming geographically longer as large manufacturers adopt global and/or

international marketing strategies. Declines in wood supplies from some regions will

be countered by expansion in others. Supplies of recovered fibre are increasing,

especially in the ‘north’. However, cheap uniform ‘southern’ wood processed by

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modern, large mills puts competitive pressures on fibre suppliers and manufacturers

in the ‘north’ and ‘south’. These pressures for lower fibre costs (Shield 2000, Clark

2001) may extend onto the cost of meeting the protective roles of public forest

management (Dewar 1996). The restructuring and corporatisation of public forestry

authorities (TMSL 1997) and the sale of plantations (Ausnewz 1990a, 1990b) by

governments to lower costs can, in part, be viewed as responses to such pressures.

Manufacturing and distribution are being restructured so the shifting resource

base can be consumed and companies survive the evolving competition. However,

before examining the interaction of these sectors with the changing fibre balance, it

is important to understand three features of the exploitation of new fibres that have

helped fashion the developmental patterns of the world’s paper industry. They are

the promotion of much pulpwood as 'waste', and the minor use of tropical forests and

non-wood fibres.

3.4.3 Industrial attitudes to fibre resources

‘Pulpwood as waste’ In 1993, of all pulpwood consumed by the world’s paper industry, 27% was

‘manufacturing residues’, 10% came from off-site chipping operations, and 63% was

roundwood pulpwood (WRI 1996). Overwhelmingly, industry literature contends

that the exploitation and processing of most pulpwood is subordinate to those of

higher quality logs. Labels such as ‘waste’, ‘residue’ or ‘by-product’ are often used

to convey a sense of economic uselessness, and the argument covers a wide

geographic and temporal range (Rawlinson 1977, Hagler 1991). It generally leads to

conclusions that sawlog production primarily drives forestry and most of “the raw

material for the pulp industry can be seen as a by-product from the sawmilling and

veneer industry”, while “the pulp industry is putting value added to a waste product”

(Nilsson 1997)(p.122). Thus, the industry’s impact on forest management and

environmental values is often presented as neutral or beneficial.

However, Morgan (1997) illustrates that the definition and position given to

‘pulpwood’ within mainstream industrial forestry are components of a ‘wood

production’ paradigm that views forests primarily as a wood resource. This helps

create the ‘regime of truth’ governing forest management, industrial wood allocation

and the wood products industry. Under this regime, controllers of resources and

companies use scientific knowledge to legitimise decisions promoting particular

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patterns of exploitation. The concept of pulpwood as ‘waste’ or a ‘by-product’

questions neither wood production regimes nor the industry’s structure and

application of technology. It tacitly accepts these conditions, so avoids important

environmental, political and economic dimensions of pulpwood exploitation (ACF

1987).

These dimensions include wood’s role in the life support functions of forests

(ACF 1990, Norton and May 1994) and the implications of ‘non-renewable’ resource

exploitation and restructuring of forests into forms suited to industrial exploitation at

the expense of non-wood values. Also, if pulpwood is seen as an unavoidable by-

product of producing sawlogs and plylogs (Leslie 1985), the cost of growing

pulpwood might be argued to be zero. However, governments have written

pulpwood supply commitments that allow the pulping of potential sawlogs (Faircloth

1978, Harwood and Kirkpatrick 1980), and made pulpwood supply commitments

independent of commitments to supply sawlogs (Rawlinson 1977, Rawlinson and

Penna 1982). Pulpwood logging can make sawlogs economically accessible (Scott

1981, Dargavel 1982), so sawlogs become a ‘by-product’ of pulpwood. Some logs

can become sawntimber or pulp depending on economic and administrative factors,

including relative log prices (Neilson 1995, Colberg 1998) and log definition criteria

(ACF 1986, Morgan 1997). Thus, sawmillers may compete with paper companies

for logs but depend on the sale of ‘sawmill waste’ chips for their survival; they may

even form pulpwood-based companies (ACF 1987). Where pulp or paper companies

rely heavily on chips from sawmills (Smith 1997b, Nelson 1999), their wood demand

acts as pressure to maintain logging rates and low sawlog prices.31 Also, sawmill

chips can become controlled by oligopsonies or monopolies (Gaston et al 1995,

Nelson 1999). Some sawntimber production can be a product of pulp demand (Lynn

1995, 1996).32 Promotion of pulpwood industries can directly influence the location,

size and management of plantations producing sawlogs and pulpwood (FCNSW

1972, Henry 1980, ACF 1986). Large paper companies can dominate the

organisation of tree growing and log supply (Dargavel 1982, Hyde and Stuart 1999).

31 Many of the USA’s public forests have been exploited at ‘below cost’ (Cortner and Schweitzer 1993, Hirt 1994, Miller 1994). However, the US paper industry considers that high fibre costs are an impediment to its long-term competitiveness (Rooks 1999). 32 In 1995, high prices for North American pulp led integrated producers to “run sawmills ‘at any price’ in an effort to generate woodchips to keep their pulpmills running, while independent lumber producers have run to take advantage of surging woodchip prices” (Lynn 1995)(p.1). In 1966, Lynn (1996)(p.2) expected “Canadian lumber production to drop because of the reduced demand for woodchips”.

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Smith (1997b)(p.71) notes that “the integration of primary wood-processing

industries around wood residues is a very strong force and a defining characteristic of

the forest product industries”. As seen in Australia, gaining control over lower

quality wood in forests and plantations increases a company’s economic and political

power. This fibre forms the foundation for restructuring wood-based industries into

more capital intensive forms with fewer but larger, integrated processing facilities

and owners who seek to cheaply exploit the changing resource base through

economies-of-scale (Gunnersen 1981). According to Gunnersen (1981)(p.67): “The

modern section of the industry is therefore the ‘waste users’ - the chip, pulp and

paper mills, the particleboard and hardboard factories and those (few) sawmills

which are integrated with them”.

Thus, pulpwood should not be regarded simplistically as ‘waste’ or a ‘by-

product’. Doing so restricts perspectives on forces driving resource exploitation. If

pulpwood is to be considered simply as a physical item, a more useful label might be

a ‘co-product’ with sawn timber (Smith 1997b). However, even this position has

limitations. As a concept, ‘pulpwood’ is fluid and multi-dimensional, defined by

changing technological, political and economic forces. In turn, these forces are

influenced by the impact of ‘pulp capital’ on the dynamic of politics-economics-

environment interactions within the wood-products industry that directs fibre use.

This interaction of pulp capital with resource characteristics to influence patterns of

fibre use is also seen in the way tropical forests and non-wood fibres are exploited

for making paper.

Tropical wood and non-wood fibre Tropical forests and agricultural crops are not major sources of fibre for the world’s

paper industry. Tropical forest wood is about 1% of the industry’s wood intake.

Non-wood fibres comprise about 8-11% of the world’s use of papermaking fibres

(IIED 1996). Several political and economic reasons contribute to this.

Once mixed tropical forests could be economically pulped, they came to be seen

as a medium for ‘economic development’ in less-industrialised regions, such as

Africa and Asia (Jacobs 1967, King 1979, Westoby 1987). However, export pulp

projects were recognised to be very expensive and risky, so delivered wood costs had

to be low. For tropical pulpwood supply to be economic, forests needed to be

clearcut and plantations quickly established as the long-term fibre source.

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Entrepreneurs were warned of the potential for nationalisation of assets in these

areas, and advised to invest only sufficiently to obtain opportunities to sell know-

how and market products. Governments were encouraged to reduce investors’ risks

by taking equity in the project, supplying infrastructure and reducing taxes and duties

(Petroff 1974, Boyhan 1975, Ekstrom 1976).

It is thus not surprising that pulping in tropical regions has developed

significantly in Brazil (Marchak 1995, Carrere 1996) and Indonesia where

government support has been strong. However, the Indonesian industry shows the

consequences of this risky industrial model – widespread, often illegal, forest

clearing with considerable social and environmental impacts, looming fibre

shortages, and extreme financial instability and mismanagement (WALHI and

YLBHI 1992, Stafford 1999, Barr 2000, Matthew and van Gelder 2002).

The potential of non-wood agricultural fibres to provide more paper and meet

other developmental objectives in less industrialised countries has long been

recognised. Advocates considered that adoption of the ‘western’ paradigm of large-

scale wood-based mills would threaten this vision through the import of technologies

and/or products (Western 1979, Becker et al 1988). However, the restructuring of

the industry in such areas for greater production is under local and international

industrial pressures, so generally relies on the large-scale wood-based model

(Rangan 1999a, 1999b, Sonnenfeld 2000).

The commercial potential of non-wood fibres in industrialised countries where

wood-based paper production dominates was reported early in the 20th century

(Lupiens 1995, Sheppard 1997). However, paper manufacture using non-wood

fibres has not been able to overcome the market dominance of wood-based papers

that has worked to protect wood-based investments.33 It is only recently that

discussion of the potential of non-wood fibres has begun to re-emerge more strongly,

mainly because of concerns over fibre shortages or the industry’s environmental

impact (Wood et al 1990, Smith 1997b, Wong 1997, Mohta and Roy 1999, Stern

1999).

33 It has been argued that hemp became marginalised as a resource for papermaking in the USA through a deliberate campaign by vested banking and industrial interests to discredit it and destroy its potential for large-scale use (Lupiens 1995, Sheppard 1997).

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Thus, discourse on the political ecology of paper manufacture should recognise

the role of ‘pulp capital’ in determining patterns of fibre supply. This is a concern of

the research on the Japanese paper industry conducted for this dissertation. The

following discussion further develops the context for this by examining the

restructuring of global paper/board manufacturing and distribution by controllers of

industrial capital in relation to changing international fibre flows.

3.4.4 Restructuring manufacturing and distribution The industry’s global production and ownership became more concentrated during

the late 20th century as manufacturers searched for greater profitability. To gain

market share, many companies sold products cheaply and sometimes purchased and

restructured distribution outlets to achieve economies-of-scale that supported such

prices (Higham 1995, Paalanne 1999).

These kinds of structural changes prepare companies for greater competition in

international and global markets. ‘Global’ paper companies are formed with the

objective of protecting production chains by controlling fibre supply, manufacturing

and market conditions, but may need new management strategies to succeed (Berg

1991, Higham 1995, Dewar 1996, Paalanne 1999).34 Countering the commodity

nature of paper products will be important,35 but attempts at cost reductions will not

necessarily improve profitability if they rely on large capital investments (Connelly

2000).36

The industry’s historical pattern of development has restricted its options for

responding to competitive, social and environmental pressures. This is because the

34 Take-overs, joint ventures, as well as establishment of manufacturing operations and purchase of fibre resources by foreign companies are occurring throughout the world’s wood-based industries (Higham 1995, Marcus 1998, Ausnewz 1999, Kenny 1999b, Payne 1999, Appita 2000, PPI 2000, Salonen 2000, McCallum 2001). The general implications of increasingly global competition for established manufacturers are seen in the case of the American paper industry, the world’s largest. According to Higham (1995)(p.6), the “easy availability of competitively-priced raw materials and energy” was “a key to the success of US producers”, but if they are to be profitable against competition from cheap imports, then they need to become more global and increase cooperation with ‘big paper producing nations’; this would require a new breed of managers. As part of its strategy to maintain its global hegemonic position, the American industry wants reductions in its taxes and costs of resources and labour as well as removal of what it sees as barriers in foreign countries to its exports (Rooks 1999). 35 For example, the real (deflated) prices for market pulps or trendlines of those prices have been declining (Higham 1995, Neilson and Flynn 1998) or rising only slightly (Phillips 1997). 36 Connelly (2000) explains that consistent “(c)ost reduction is a critical operating imperative for paper producers, but its impact on earnings is usually minor and the implications for capital returns have tended to be negative” (p.34). He says that the ability of American producers to “earn an acceptable rate of return on capital has declined more or less in step with the capital spending that made cost reduction possible” (p.37).

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industry’s increasingly concentrated, capital intensive structure based on expansion

through acquisition (Higham 1995) has, in part, been at the expense of funding

research and development of new technologies and products. Technological and

developmental options are now largely promoted by industry consultants and

technology suppliers, and so were fairly uniform across the industry. This helped

limit profits from which to fund future activities (Higham 1995, Phillips 1997).

There is also concern that it limits the technical knowledge and experience of

companies and their potential for creating more flexible structures (Iida 2001b).

Laestadius (2000) sees the paper industry as typical of a mature industry with its

developmental trajectories determined by a narrow ‘technological paradigm’ - in this

case, one based on incremental innovations and increasing economies of scale within

its established technology.

The primary physical manifestation of this situation is the continuing domination

of production by the wood-based kraft pulping process, which Higham (1995)(p.93)

sees as “an outmoded, technologically backward process reminiscent of the

smokestack-industry era”. He considers the development of favourable alternative

pulping processes requires “fundamental research at levels that the industry has long

since written out of its collective budget. It will not be easy”(p.96). The features of

such a process include: a smaller minimum economic size; suitability for different

fibres; a pulp yield and quality at least equivalent to kraft pulp; no use of chlorine or

sulphur; a closed chemical recovery and recycling system; and production of

materials for the chemical industry. Many of these may be satisfied by further

developing new chemical and biological approaches to pulping (Akhtar and Young

1998), which might be incorporated into more diverse production chains that include

the use of agricultural fibres, as suggested by Smith (1997b) in her proposal for a

more environmentally-benign American paper industry.

Pressures to reduce the environmental impact of paper production around the

world are not new.37 Higham (1995) considers they are among “a number of

dynamic, unpredictable, unconventional factors” which are acting on the industry to

make it less production-oriented and more consumer-driven. However, he also

concludes that while “(e)nvironmentally-friendly ‘Green’ products have a clear

marketing advantage” (p.2), environmental issues are a serious threat to the

37 Recent perspectives include Carrere and Lohmann (1997), IIED (1996), EDF (1997)(Blum et al 1997) and Smith (1997a, 1997b).

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industry’s long-term operation because markets usually work against passing on

investment in environmental protection. According to Higham (1995)(p.113): “From

a risk analysis standpoint, the industry is currently heavily exposed. Never before in

the modern history of the pulp, paper and board sector has any single issue been so

potentially harmful and damaging in the long-term. It is damaging because it is

pervasively wearing as an on-going financial drain on resources.”

Thus, the ownership and production of the world’s paper industry is being

concentrated and restructured into forms that companies hope will be more profitable

in the developing international and global fibre markets. The industry’s expansion

continues to be based primarily on its current ‘technological paradigm’ of large

capital-intensive wood-based pulpmills. This growth has been funded at the expense

of research and development, which limits the industry’s flexibility to respond to

changing social, economic, political and environmental pressures that threaten this

paradigm. Environmental pressures challenge the industry’s production chain and

‘technological paradigm’.

3.5 Conclusions The development of technologies for making ‘true paper’ allowed humans to exploit

organic nature at a more fundamental level than had been possible. Plant fibres

became the basic matrix for the creation of new kinds of paper goods. Initially, the

manufacture of ‘true paper’ relied on fibres that could be simply extracted and

processed. However, the complexity of these processes increased as paper use and

fibre supply grew in western capitalist economies. Political, social and economic

pressures stimulated a leap in the ‘technological paradigm’ governing paper

production. The invention of technologies for mechanical papermaking and

exploiting wood fibre allowed costs to be reduced, markets to expand and mill

owners to gain greater control over production.

Although the basic papermaking process has remained unchanged, technological

developments have increased the ability to manipulate and reuse fibres. This has

expanded the diversity of exploitable fibres, the range of products and product uses.

The ability to reproduce papermaking fibres permits restructuring and creation of

fibre resources with preferred characteristics and properties. Fibre is the most

important physical component of paper, and usually the largest production cost in the

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modern papermaking process. Gaining some control over fibre supply is thus

important for manufacturers.

Wood fibre is now the world’s primary papermaking resource because of its

abundance, growth habits, physical characteristics, and ability to easily fit into the

technological paradigm of large-scale, capital intensive papermaking that now

dominates global paper manufacture. The concept of the paper industry as simply a

user of waste fibre is misleading. The industry’s capital strength makes it an

important force directing the value and use of forests, plantations and other fibre

sources. It is contributing to the restructuring of forests that degrades associated

social and environmental values. Recycling has increased primarily for economic

reasons, but also for perceived environmental benefits. The technical and economic

importance of recovered fibre will increase as more lower quality fibre is recycled.

However, greater recycling will not always lessen pressures to log forests. The

political strength of the wood-based industry has been a factor restricting the use of

agricultural fibres in developed nations. The use of wood fibre is likely to increase

in developing countries with limited wood resources and/or low per capita equivalent

consumption because of global restructuring.

Paper production, trade and consumption have been dominated by ‘northern’

industrialised nations and companies throughout the 20th century and this situation

will probably continue. However, paper consumption is growing rapidly in Asia and

other ‘developing’ areas, changing the structure of global paper use. The supply of

new wood fibre is also being restructured globally to support paper use. As the area

of unlogged forests shrinks, supplies from young forests and plantations are

expanding, especially in areas where fibre growth is fast, costs are relatively low and

resources are perceived as secure. The industry prefers relatively few tree species,

and controllers of the new resources seek to reproduce the fibre properties desired by

papermakers and keep fibre extraction cheap. These new low cost plantations,

predominantly in the southern hemisphere, are pressuring other areas to reduce

supply costs.

The cycles of profit and production growth and slump that the industry

developed in the latter part of the 20th century are the product of the interaction

between the dominant ‘technological paradigm’ of large-scale capital intensive

production and narrow management philosophies based on the competitive desire for

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growth. It has brought financial instability to the industry, and at its base is the

demand for high volume supplies of cheap wood. The desire for financial stability

has been behind the progressive mergers and take-overs that have been concentrating

the industry’s ownership and control over fibre flows. This is now extending into

preparation for greater internationalisation and globalisation as companies seek to

restructure and control consumption-production chains. The commodity nature of

pulp and paper products in international markets means strong competitive pressures

will exist to maintain low fibre costs from all fibre sources. This has implications for

management and protection of environmental values linked to those resources.

The impact of ‘environmental pressures’ on the industry’s structure and

operation will depend on their interaction with commercial, social, technological and

political factors from the local to the global levels. They can bring benefits and/or

costs. The use of new fibre raises issues for the quality of the management of forests

and plantations. Modern, large-scale pulpmills representative of the industry’s

current ‘technological paradigm’ may be able to become environmentally ‘cleaner’,

but they require large volumes of wood (Higham 1995, Sonnenfeld 2000). Such

demands for cheap fibre, especially by commodity grade mills operating in

competitive markets, challenge the expected ability of ‘certification’ programs to

supply wood from forests at costs desired by the mill within the context of long-term,

ecologically-conservative forest management.38 Also, recovered fibre can be used by

papermills with severe local environmental impacts (Smith 1997b).

As the quote at the beginning of this chapter (Bristow and Kolseth 1986)

illustrates, paper production is about ‘making homogeneity out of heterogeneity’.

Much of the paper industry’s recent growth has depended on removing diversity

from all parts of the production chain in line with the dominant ‘technological

paradigm’ of large-scale production using cheap wood. Consequently, much of the

industry is now destroying its financial capital and depleting and/or homogenising its

resource base to the detriment of environmental and social values. Another major

shift is needed in the industry’s ‘technological paradigm’ if it is to restructure in

38 There is a growing literature on forest certification programs (Bourke 1996, Elliot 1996, Ahlgren 1997, Elliot 1997, Wallis et al 1997, Hansen and Juslin 1999). These programs are supposed to act as “a market based incentive to promote sustainable forest management” (Wallis et al 1997)(p.225) by guaranteeing forest management practices meet specific standards. Several administering bodies now exist and compete for legitimacy, including the Forest Stewardship Council (http://www.fscoax.org). The first paper company to produce FSC-certified paper in North America was Lyons Falls Pulp & Paper (Pierce and Phillips 1999).

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ways that protect its financial capital, human capital and the natural capital

associated with its fibre resources. As the following chapters show, these issues are

pronounced in the Japanese paper industry.

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Chapter 4: The research method

4.1 Introduction As seen in Chapter One, the Japanese paper industry comprises large and small

companies using fibre from domestic and foreign sources to manufacture a range of

products for domestic and foreign markets. This has produced a geographically and

temporally broad terrain from which research on the flow of papermaking fibres

must extract and integrate a diversity of information.

This chapter explains the methods used to gather information presented in the

following chapters. The discussion begins by considering the implications for the

research methods of the research questions, the political ecology paradigm and

industrial structure/consumption-production chain approach. It then describes the

main stages of the research effort and explains how account was taken of the

problems involved in collecting information.

4.2 The research paradigm and approach This dissertation’s research questions are concerned with interpreting the Japanese

paper industry’s pattern of fibre exploitation for which I could not identify a specific

theoretical explanation. This places my research methods within the topic of

‘grounded theory’ for which an explanatory theory is deduced from data collected

systematically by a study of the subject (Glaser and Strouss 1967, Strauss and Corbin

1990, Dey 1999). The research method relies heavily on analyses of qualitative data

but can incorporate quantitative data analysis. The main strategy of grounded theory

is to provide explanations by “breaking down, conceptualising and reconstructing

data”, but researchers should maintain an open mind to new insights and not apply a

theory too early (Yin 1993)(p.62). This is similar to the strategies promoted by

researchers working within the ‘political ecology’ paradigm (Chapter 2).

Case studies are important in this research method. A case study “is an

empirical inquiry that investigates a contemporary phenomenon within its real-life

context, addresses a situation in which the boundaries between phenomenon and

context are not clearly evident, and uses multiple sources of evidence” (Yin

1993)(p.59). Thus, this dissertation can be considered a case study of human

economy-environment interactions, while specific aspects of the fibre flow can

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become case studies to help understand the Japanese paper/board industry as a

whole.

The political ecology paradigm and the industrial structure/consumption-

production chain approach help direct the research effort. In particular, the research

should:

• take an historical approach that seeks to identify how the changing flows of fibre

from the resource site to the end-user reflect variations in the networks of power

relations between and within relevant markets, governments, state organisations,

businesses and controllers of fibre sources;

• seek to understand the main characteristics of, and relationships between,

papermaking fibres, the social and environmental conditions of the places

supplying the fibre and the technologies used for fibre extraction, processing,

distribution and use;

• try to explain how resource management and environmental issues surrounding

the extraction and supply of different types of fibre influence particular fibre

flows and power relations;

• recognise that changes in ‘non-human nature’ produced by political and

economic forces can feedback to influence the social relationships that generate

those forces;

• appreciate that the attitudes and behaviour towards ‘nature’ and ‘the

environment’ of actors influencing the flow of fibre will be important in

generating and expressing the political and economic forces directing fibre flows;

and

• as far as possible, identify the social, economic, political and environmental

factors influencing the characteristics of the links between the different nodes

within the consumption-production chains that help explain the changing patterns

of fibre flow.

Account was taken of these issues when gathering and presenting information.

The dissertation attempts to reach its objectives through a synthesis and analysis of

information on general trends, important events and relationships, and case studies.

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4.3 The research agenda

4.3.1 Research process, topics and sources The research process comprised three stages: initial information collection; overseas

fieldwork; and further information collection. To answer the research questions

within the industrial structure approach, information was gathered on several main

topics:

• the development and use of paper products in Japan;

• the operation of the paper/board manufacturing and distribution sectors;

• the influence of technological change;

• the influence of fibre characteristics on product development and fibre supply;

• actions by the Japanese government and public service that influence industrial

development and fibre supply;

• fibre supply strategies of manufacturers; and

• factors influencing the supply of fibre at the source.

Information sources included: published and unpublished literature and statistics

(including that available on the World Wide Web) and communications and/or direct

interviews with local and foreign researchers, academics, industry staff, government

employees and representatives of non-government conservation organisations

(Appendix 4.1). My strategies, techniques and targets for information evolved

together with the types of information desired as I improved my understanding of

relevant issues and information during the research process.

4.3.2 Initial information collection My main activities in this stage were:

• identifying topics to be investigated and their appropriate levels of detail;

• gathering information on the industry's history, structure, production, markets,

sources and fibre supply;

• using this material to identify information deficiencies;

• increasing my understanding of those issues that would not or could not be

deeply examined; and

• preparing for foreign and domestic fieldwork.

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In particular, I could find little information on the attitudes and policies of

Japan's major paper companies, general trading companies, commercial paper users

and general consumers towards fibre resource management. Also, there was a

scarcity of English language information on the history of the paper industry in

Japan, the structure of domestic fibre supply and the patterns and impacts of

domestic pulpwood supply. To overcome the first of these deficiencies, I decided to

prepare separate questionnaires for the major paper/board manufacturers and general

trading companies on their policies and activities towards fibre resources, and follow

this with personal interviews in Japan. A period of fieldwork in Japan also allowed

me to fill other information gaps.

I identified the potential for two illuminating research tasks about which

information was needed. The first was a major case study to illustrate how the

interaction of social, environmental and other forces along the consumption-

production chain influenced the development and resource use of a leading

paper/board manufacturer. I chose Daishowa Seishi (Daishowa Paper Manufacturing

Co.) for several reasons. It was a large, independent and well-known company. It

had investments in, and sourced fibre from, Japan, North America and Australia.

Also, I had some knowledge of the company’s activities and had met some company

staff. The second useful research task was to examine the supply of hardwood chips

from the industry’s three main foreign sources – Australia, south eastern USA

(seUSA) and Chile – all of which were controversial because of their use of native

forests. As such, I decided to visit appropriate areas in North America, but because

of financial and time limitations I collected information on Chile’s woodchip

industry from available primary and secondary sources. I knew that useful

information on the Australian situation could be obtained relatively easily.

Preparation of the questionnaires formed an important component of this stage.

Because of time constraints, I decided to send questionnaires only to those

companies with substantial control over either fibre supply and/or product

manufacture. These were the twenty largest manufacturers (JPA 1996) and the nine

largest general trading companies dealing in paper products and their raw materials

(Penna 1992). This introduced a bias away from smaller companies, but did not

detract from the questionnaire’s objectives, as the top twenty manufacturers

produced about 75% of the nation's paper and paperboard output (JPA 1997b). I

prepared the questionnaires in English, and a Japanese national who is fluent in

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English translated them into Japanese. I checked the Japanese versions and sent

them to the twenty-nine target companies in November 1996. The covering letter

asked that responses be returned by mid-January 1997. Appendix 10.2 contains the

English versions of the questionnaires.

Five paper/board companies (one of which produced only paperboard) provided

replies - a response rate of 25%. Six general trading companies sent replies to me in

Australia and one replied after I contacted its staff in Japan - a response rate of 78%.

The manufacturers that responded were primarily among the largest, perhaps

reflecting not just an interest in responding, but also the organizational ability.

Altogether, they produced about 39% of Japan’s total paper and paperboard

production at that time (JPA 2001b).39 I translated the responses, sometimes with

advice from a Japanese national, and entered replies into a database for use during

the fieldwork in Japan.

The questionnaires played several roles in the research process. They sought

basic information about important fibre resource management issues - forest

conservation and waste paper recycling. Also, they alerted the companies to the

research and gave them an opportunity to participate. Responses indicated which

companies might be willing to be interviewed. Specific replies were useful for

interviews. The questionnaires did not seek data for statistical analysis. Rather, they

searched for general trends and shared or contrasting opinions that would elucidate

the thoughts and behaviours within the main Japanese companies closest to the

exploitation and use of fibre.

Also, I stored details of information to be collected in Japan, North America and

Australia, and made initial contacts with relevant companies and individuals to

organise interviews and information collection. Preparation for my North American

fieldwork continued in Japan.

4.3.3 Overseas fieldwork I had two main periods of gathering information in Japan. The first was from mid-

April to mid-October 1997 when I was a guest researcher at the International

39 Due to time constraints in Japan, I only contacted two companies that did not respond to the questionnaire – one paper company and one trading company. They were prominent members of the industry, and staff of both companies participated in my research to differing degrees. Thus, the paper/board companies that participated made about 41% of domestic production, more than half of the output of the 20 companies who received my questionnaire.

85

Research and Exchange Center of Kokugakuin University in Tokyo. The second was

one month from mid-December 1997 to mid-January 1998 after fieldwork in North

America.

My main task during the first period in Japan was to collect information that

expanded on the questionnaire topics. I interviewed representatives of all companies

that provided responses to the questionnaire and one paper company that did not. In

most cases, I met with staff twice, which allowed me to delve more deeply into

issues raised at the previous meeting or learnt about during the intervening period.

Interviewees were generous with their time. However, some interviews were limited

by the schedule, expectations and knowledge of the interviewees and commercial

confidentialities. This meant that I could not raise some topics of interest. Where

possible, I used meetings with company staff to collect information on company

activities, history and other issues for which information was scarce. Also, I was

often introduced to staff in the same or other companies who provided information

on other topics. Following the interviews, I sorted and entered relevant information

into a database for later use. I provided copies of interview notes to these

interviewees and amended them as requested.

I also interviewed individuals in industry associations, the waste paper collection

sector, government departments, research organisations and non-government

conservation organisations on topics related to the dissertation’s objectives. I

provided and amended interview notes as necessary. I collected statistics from

government and industry sources, plus a variety of relevant literature. During the

second period in Japan, I collected further statistics and conducted interviews.

The fieldwork in North America occurred over nine weeks from mid-October to

mid-December 1997. I visited Canada (British Columbia and Alberta), seUSA

(Tennessee, Alabama and Mississippi), and Washington state in the USA.

Information from the research conducted in Japan and Australia was applied

throughout this period both in interviews and literature searches. I primarily

collected information on the export woodchip industry in seUSA and pulp and paper

mills connected to Daishowa Paper Manufacturing Co. in Canada and the USA. I

also obtained information on other aspects of fibre supply to Japanese markets from

North America. However, because of time and other constraints, I was unable to

collect detailed information on some topics. Interviewees included staff of Japanese

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and other paper and wood products companies, relevant government department

employees, representatives of non-government conservation organisations, university

academics and wood products industry consultants. The main interviews were tape-

recorded, and where necessary I provided and amended copies of interview notes.

4.3.4 Further information collection This stage involved a variety of tasks, including organising material collected

overseas and compiling further information necessary to achieve the research

objectives. Upon returning to Australia, I transcribed tapes of recorded interviews,

translated foreign language literature into English, arranged the translation of some

literature, sent notes of interviews to interviewees, sent questions to people who

could not be directly interviewed and entered information into databases.

I also interviewed staff of relevant Australian companies, including Harris-

Daishowa (Australia) Pty. Ltd., which supplies Daishowa in Japan, and employees of

government departments. Where necessary, I provided and amended copies of

interview notes. I collected statistics and information on Australian and other

schemes supplying fibre to Japanese markets, reviewed and integrated previously

collected material, and expanded my collection of data on environmental and

management issues surrounding relevant forestry operations.

This stage was long and overlapped with time spent writing the dissertation, so I

continued to communicate with various people to obtain the latest information on the

industry’s activities. I reviewed new issues of relevant journals, and two short visits

to Japan during this stage allowed me to up-date some information.

4.4 Methodological issues The nature of the research task raised several methodological issues that influenced

the research process. I made considerable efforts to overcome these problems.

The international dispersion of relevant sites and people was handled by

concentrating on three main areas – Japan, North America and Australia. I relied

heavily on electronic methods (the World Wide Web and e-mail) to obtain

information from areas and people I could not visit. I used the software ‘Spanish

Assistant’ (Globalink 1994) to translate reports from Chile into basic, but

understandable, English.

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The use of interviews and a survey generated several issues for consideration.

The interaction between a researcher and people supplying information in interviews

and questionnaires is inherently artificial (Walker 1985). This was potentially

complicated by the controversial nature of the environmental issues encompassed by

the dissertation’s topic. Bliss (1996) argues that company officials may be reluctant

to acknowledge the influence of environmental pressures on their activities.

Corporate interviews were an important tool for information collection,

especially because of changing company strategies and behaviour. Potential

problems for researchers in such interviews include loss of control over the

interview, understanding the meanings of language within the context of that

industrial and national culture, and validating the collected information. These

problems can be minimised by the researcher making the interview a ‘collaborative

dialogue’ (Schoenberger 1991), or ‘depth interview’ (Walker 1985), in which the

researcher engages the interviewee/s in a conversation that works through the

questions and allows interviewees to provide relevant answers in their own terms.

Thus, the researcher needs a good understanding of the topic.

Most of my interviews can be placed in this category. Walker (1985) rates such

interviews as of low value when the replies are constrained by social norms.

However, he considers they are of moderate value for research in which objectives

are descriptive, action-oriented or explanatory, the research topic is concerned with

process, or interviewees may be suspicious. Their value is high if the research topic

is complex and sensitive, and the interviewees are inhibited or of high or low status.

My interviews ranged across these conditions.

Cameron (1996) felt that problems surrounding interviews might be

compounded in Japan by cultural traits and sensitivity to possible criticism over

environmental issues. Sugimoto (1997) warns foreign researchers in Japan to be

aware of ‘double codes’ used in the language to disguise the actual conditions of a

situation to people outside the social group to which interviewees consider they

belong.40 He (p.27) recognises that such dichotomies exist in other cultures, but

40 These codes are (Sugimoto 1997)(p.26) : i) Tatemae and honne “Tatemae refers to a formally established principle which is not necessarily accepted or practiced by the parties involved. Honne designates true feelings and desires which cannot be openly expressed because of the strength of tatemae.” Thus, the proponent of a seemingly altruistic position may do so because it serves that person’s private interests.

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argues that “(these) particular forms of duality are invoked in public discourse time

and again to defend the publicly unacceptable sides of life as realities to be

accepted”. As a result, Cameron (1996)(p.78) concluded that there are clear

methodological dangers in "basing research on the expression of attitudes alone".

Also, a low response rate is typical of surveys in Japan (Lock 1989).

I decided that these problems could not be avoided as my dissertation is

addressing a socially sensitive topic. Consequently, I took steps to reduce their

impact.

To maximise the potential response rate of the survey and the reliability of

answers, I used advice on the survey’s layout and language from its translator and

staff in the Japanese language department of the University of Melbourne. Also, the

survey questions sought a mix of both facts and opinions/attitudes. I phrased some

questions in ways I considered would limit the potential benefit to a respondent in

providing a self-promotional answer. Respondents could have their name and that of

their company kept confidential. However, the questionnaire requested the name of

the person responsible for preparing the replies and the name of the most appropriate

person to contact in relation to follow-up interviews. Thus, I could approach relevant

individuals as necessary.

At the beginning of all interviews I explained my research project, information

requirements and reasons for interest in this topic. I allowed the interviewees to ask

questions about my history of work and study, and in some cases provided articles of

potential interest written by myself or others. Also I kept the format of interviews

flexible to create the opportunity for a constructive dialogue. However, the

interviews were not unstructured. Interviews are given structure by the interviewer's

interests, objectives, prior assumptions and knowledge of the issue (Jones 1985),

while during interviews the interviewer uses information to form new questions to

gain desired information (Walker 1985).

ii) Omote and ura “Omote represents the correct surface or front which is openly permissible, whereas ura connotes the wrong, dark, concealed side which is publicly unacceptable or even illegal.” iii) Soto and uchi “(This) dichotomy is used to distinguish between outsiders and insiders, or between members of an out-group and those of an in-group.” It is acceptable to discuss sensitive issues and break confidentialities in uchi (the in-group), but not with people in soto (the out-group).

89

Despite Cameron’s (1996)(p.79) concerns, he found that ‘depth interviews’ were

useful in Japan and that "the strong group mentality in Japan, meant that group

interviews proved to be of greater benefit than was predicted in the Western

literature, particularly when examining sensitive issues." As with Cameron, I found

individual interviews were very useful and members of some group interviews

provided a level of detail well beyond my expectations. My experience indicated

that the potential for self-promotional answers in Japan was not identifiably greater

than elsewhere.

Other potential problems with language were tackled in several ways. The

questionnaires were translated from English to Japanese by a Japanese national and

checked by another Japanese national and myself. Responses were translated by

myself and parts checked by a Japanese national. Interviews in Japan were either

conducted in English or used Japanese nationals as interpreters. Sometimes they

were tape-recorded. Where necessary, notes of interviews were provided to

interviewees for confirmation and alteration.

My own Japanese language skills and knowledge of people either in or close to

the paper industry helped me collect information and make new contacts. However,

possible sources of error are translations of Japanese information into English by

myself and Japanese colleagues. Others include some statistics produced in Japan,41

English articles written or translated by Japanese and the reliability of views

expressed by anonymous articles in such journals.42 Where doubts about such

information occurred, I relied on my own experience of English language problems

of Japanese people and/or I sought advice.43 I also sent drafts of some chapters or

chapter sections to relevant individuals for comment.

Confidentiality was an important issue. Requests by interviewees for anonymity

have been respected in the dissertation through the use of appropriate citations and

41 The wood products industry consultant, Robert Flynn (1997) found that the conversion factors used in Japan to convert between mass and volume measurements are not always clear from data lists. He also discovered mistakes in original data recording sheets for woodchip imports, in which for example, imports of small amounts of woodchips were recorded from Austria and Columbia, even though it is well known within the industry that no such imports occurred. It is possible that such mistakes arise because the names of these countries are similar to Australia and British Columbia, two exporters of woodchips. 42 Such articles include those in the journal ‘Japan Pulp & Paper’, later known as ‘Asia Pulp & Paper’, on which I relied heavily for information on the Japanese paper industry. 43 I lived in Japan for nearly 7 years and throughout that time primarily earned my living by editing English versions of Japanese texts translated by Japanese nationals, editing English writings of Japanese nationals and teaching English.

90

language. I received some documents on the condition that their source remain

confidential. The inability to obtain some information because of commercial or

political confidentialities limited the investigation of some issues. I was not able to

gather information on some issues because appropriate individuals or literature were

not accessible. In such cases, my research efforts concentrated on written references

that sometimes provided only superficial information. Also, some statistical data

could not be found. Thus, it was difficult to compile very detailed pictures of all the

stages and ‘power relations’ in the flow of fibre through the industry. This seems

common in research using the consumption-production chain approach (Gereffi and

Korzeniewicz 1994).

4.5 Information presentation The methods directing the research phase of this dissertation were influenced by the

nature of the dissertation, its objectives and the theoretical issues discussed in

Chapters Two and Three. Also, the methods used to accumulate information

attempted to minimise problems and be comprehensive within identifiable

limitations.

The industrial structure/consumption-production chain approach also influences

the presentation of information in the dissertation. Even though the flow of fibre

from the source through the Japanese paper/board industry to the end-user is linear,

the ‘network of power relations’ surrounding the flow is complicated, with pressures,

interactions and feedbacks changing over time and space. To keep the provision of

information simple but also focussed on issues surrounding fibre supply, the

following chapters trace the basic flow of fibre from the consumer to the fibre

sources, and where necessary link the story to issues discussed elsewhere in the

dissertation. Much statistical data is presented using figures and tables. Units of

volume and weight have generally been converted to metric units, while ‘nominal’

units of price in time series figures have mostly been deflated using Consumer Price

Indices to show their ‘real’ value.

The next chapter describes the interrelated evolution of paper/board use in Japan

and the paper/board manufacturing and distribution sectors. Thus, it provides the

historical context for the following three chapters that respectively examine each of

the industry’s main categories of fibre supply – domestic pulpwood, waste paper and

paperboard, and imported pulpwood, pulp and paper. The main case study (Chapter

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9) also provides an historical account of the development of Daishowa Paper

Manufacturing Co. to which the detailed examinations of its fibre supply activities

can be related. Chapter Ten, on the attitudes to fibre-related environmental issues

within the industry, integrates information from the survey, interviews and available

literature.

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Chapter 5: Restructuring the consumption, manufacture and distribution of Japan’s paper and paperboard

5.1 Introduction Japan’s history of making and using ‘true’ paper starts from the 7th century AD

(Appendix 5.1). The use of machine-made paper/board began in the late-1800s, and

grew slowly to WW2, but rapidly from the 1950s (Figures 5.1 and 5.2). Per capita

equivalent use of paper/board grew from 21.1 kilograms in 1954 to 250.1 kilograms

in 2000 (PRPC 1992, JPA 2001c). Thus, population growth is not a sufficient

explanation for Japan’s expanding use of paper/board. However, each citizen does

not personally use all the calculated per capita consumption. Rather, paper use

supports the economic activity within which personal consumption occurs.

Expanding gross national product explains the general environment within which

paper/board use occurs (JPA 2000b), but it does not explain the interactions at the

personal and industrial levels that influence such use.

This chapter begins the analysis of the relationships between Japan’s

paper/board use, the structure of its paper/board industry and fibre supply to answer

the dissertation’s questions. It extends the understanding of paper/board use in Japan

beyond the general explanations of changing economic activity and population

growth by examining the restructuring of consumption, manufacturing and

distribution since WW2. The chapter provides the primary component of the

political-economic context for interpreting the use of fibre described in the following

chapters.

The chapter has four sections. The first examines Japan’s use of paper/board

products. The second considers the changing structure of the manufacturing sector,

which processes the fibre into a form ready for conversion into final products. The

third discusses the distribution sector, which provides paper/board to commercial

users. The final section integrates the main points from these discussions and

provides the link to the following chapters that explore the industry’s use of fibre.

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Figure 5.1: Paper use in Japan.

Sources: Suzuki (1967), JPA (2001c).

94

Figure 5.2: Paperboard use in Japan.

Sources: Suzuki (1967), JPA (2001c).

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5.2 Paper/board use in Japan since World War 2

5.2.1 Post-war trends in domestic production Paper/board production and use were limited immediately after WW2 by government

controls over economic activity. Paper was low quality, and generally made in small

papermills from recovered fibre and mechanical pulp. When government restrictions

were removed from 1949, demand grew and some manufacturers began producing

higher quality papers. The Korean war stimulated consumption in the early-1950s,

and demand for pulp came from paper/board manufacturers and the chemical

industry, which used it for making artificial fibre (JP&P 1968h, Shinomiya 1995).

Because paper/board imports and exports were limited, domestic production

grew from the 1950s in line with consumption (Figures 5.3 and 5.4). Different

products dominated the per capita equivalent use of paper/board through different

periods - cardboard in the 1960s; newsprint in the 1970s; printing paper through

much of the 1980s; and coated paper from the late-1980s (Nomura 1994). Forces

specific to each product influenced their use, and to understand them, the following

section examines the history of major product categories.

5.2.2 Restructuring paper and paperboard use

Paperboard The use of paperboard expanded from 0.18 million tonnes in 1950 to 12.52 million

tonnes in 2000 (JPA 2001c, undated 1). Two products illustrate the different ways

the use of paperboard developed in Japan - corrugated containers, the largest volume

paperboard product and made primarily in Japan; and drink cartons, one of the

smallest volume paperboard products and made from imported board.

The domestic containerboard industry was stimulated when corrugated

cardboard boxes became the designated packaging for transporting supplies from

Japan to the Korean war. They replaced traditional straw-based packaging and

wooden crates for fruit and vegetable transport as they could be used for new

automated packaging systems (JP&P 1971g, 1985f).

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Figure 5.3: Paper production in Japan.

Sources: JPA (2001c, undated 1).

97

Figure 5.4: Paperboard production in Japan.

Sources: JPA (2001c, undated 1).

98

Through the 1960s, the corrugated box makers depended on the expanding use

of relatively low valued packaging. Profits came from high volume production, but

were considered unsatisfactory. To increase prices and income, companies began

developing and seeking markets for new value-added products, including heavy-duty

boxes, coloured boxes and waterproof boxes (JP&P 1966a, 1968a, 1968k, 1969a).

The major growth areas for corrugated packaging were initially fruit and vegetables

and later processed food (Table 5.1). Factors contributing to increasing box use

included: greater consumption of canned and bottled drinks; smaller fruit and

vegetable boxes; larger boxes for appliances; increased mail order and parcel

delivery; and growing product sales (Hoshino 1989, Inaba 1989). However, box use

stagnated with the economic conditions of the late-1990s.

Corrugated boxes are made from linerboard and corrugating medium, which

together comprised most paperboard production since 1950. From the mid-1960s,

their nominal prices grew to the early-1980s and then declined; in real terms, they

declined continuously (Figure 5.5). Their manufacture increasingly used recovered

fibre, so declining prices and more efficient use of paperboard (JapanJ 1997)

increased pressures on prices for recovered fibre (Chapter 7).

The use of paperboard drink cartons in Japan was stimulated by foreign

investment. The Swedish firm Tetra-Pak introduced them to Japan in 1956 and

domestic production began in 1962 (JP&P 1977d, Anon 1997). Until this time, milk

was only available through schools, home delivery or small milk shops (Aseishi

1997). Milk companies saw the potential for replacing glass bottles to restructure

and extend distribution (Anon 1997).44 The use of cartons was encouraged through

the 1960s by promotions in schools and shops, the 1964 Olympic Games and

growing milk consumption (Anon 1997, Aseishi 1997). Also, the Ministry for

Agriculture, Forestry and Fisheries (MAFF) decided to promote milk cartons

(Takahashi 1995). The milk distribution system was restructured (JP&P 1975b,

1975d), so by the mid-1990s cartons comprised about 85% of milk containers and

39% of fruit juice containers (Takahashi 1995, AP&P 1997e).

44 The cartons provided milk companies with several advantages: they required less storage space per volume of contents; there was no collection and washing required; and, they were light. Material costs were high, but when labor and distribution costs were included cartons were cheaper than glass bottles. In addition, they suited supermarkets, which were spreading, and the increasing home use of larger refrigerators (Aibe 1972).

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Table 5.1: The use of corrugated cardboard boxes in Japan.

Sources: Kadoya (1977), JPA (2001c).

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Figure 5.5: Prices for linerboard and corrugating medium in Japan.

Sources: JPA (2001b, undated 1).

Notes: 1. Prices were converted to 1995 values using the Consumer Price Index for Japan

(MPMHAPT 2002). 2. The terms ‘Kraft linerboard’ and ‘Kraft linerboard K’ are terms used for the same product, but earlier products contained less recovered fibre. ‘Special corrugating medium’ is made from recovered fibre.

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Since then milk consumption has declined and the greater use of plastic bottles

has limited the use of paper cartons in the fruit juice market (AP&P 1997e, 1998g).

Board prices are higher, but carton makers have been trying to diversify the use of

their products (Nippon 1996a) as well as promote their “friendliness to the

environment” and the potential for carrying advertisements (AP&P 1998g)(p.20).

The amount of board used for drink cartons is still insufficient to support profitable

domestic carton board machines (Aseishi 1997).45

Thus, as Japan’s population and general consumption grew, paperboard became

important in packaging and distribution systems essential for mass production and

consumption. The use of fibre resources is directed by domestic profitability, and

recovered fibre is the sector’s main resource.

Newsprint After the government ceased price controls and newsprint rationing in 1952,

newspaper companies re-established the pre-war system of competitive home

delivery. Newspaper circulation grew as economic and social activities increased,

publishing technology advanced, advertising expanded and pager numbers increased

(Matsumura 1961, JP&P 1967e, Haruhara and Amenomori 1997). The daily

publication level and dispersion rate of Japan’s morning and evening ‘dailies’ grew

from 19.94 million copies and 3.89 people per newspaper in 1947 to 71.69 million

and 1.72 respectively in 1992 (JNP&EA undated).46 Newsprint use grew from

around 0.41 million tonnes in 1953 (Matsushita 1988) to 3.82 million tonnes in 1991,

but then stagnated (JPA 2001c).

Sale prices for newsprint to specific publishers are confidential, but are reported

to be exceptionally profitable to newsprint makers. Indicated prices are above those

of many printing papers (Ausnewz 1998b, JapanA 2000). The relationship between

newspaper content and price influence use. Newspaper content is modified to suit

particular regions, while price and distribution costs are controlled to support sales

and advertising revenues. Newspaper publishers set uniform national retail prices,

and competition for subscriptions is intense (Dunnett 1988, Haruhara and

Amenomori 1997).

45 Carton board imports reached only 0.261 million tonnes in 2000 (JPA 2001c). 46 The morning and evening editions of newspapers are counted separately and not as sets (Haruhara and Amenomori 1997).

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A strong relationship exists between subscription rates and newsprint prices

(JP&P 1981e), but advertising revenue helps keep subscription rates down and has

helped drive newsprint use. Advertising occupied an average of 35.3% of Japan’s

newspapers in 1964 (JNP&EA undated), and 40-44% from the early-1970s

(Yamaguchi 1994, Haruhara and Amenomori 1997). In the mid-1980s, greater

competition led the nation’s five leading newspapers to increase page numbers

(JP&P 1986d, Chao 1988, JP&P 1988b, Julian 1988, JP&P 1989f, Omori 1989) and

introduce larger printing presses (Asahi 1997). Total advertising volume and the

number of colour pages increased (Julian 1988, Yamaguchi 1994). Increased

advertising revenue is considered essential to the long-term future of newspaper

companies (Haruhara and Amenomori 1997). Advertising funds free local

newspapers whose numbers, roles and circulation expanded with economic and

social changes, allowing businesses to target more specific consumer markets

(Yamanaka 1994).

Expanding newspaper circulations generated important changes in fibre use.

Pressures for increased pagination and cost reductions led to the use of increasingly

lighter newsprint (Haruhara and Amenomori 1997), which allows production of more

pages from a tonne of newsprint.47 The recovered fibre content of newsprint grew in

response to increasing pollution control and energy costs (Oye 1994b, Nakajima

1995). Newsprint imports increased (JPA 2001c). Also, newspaper delivery

services put advertising pamphlets into newspapers before delivery. This provides

them with income and helps the publishers control delivery costs and subscription

rates (Dunnett 1988, Asahi 1997), and is discussed in Chapter Seven in relation to

the use of recovered and new fibres.

Thus, within Japan’s changing economy, newsprint use grew in response to the

interacting demands of: readers for information; newspaper companies for sales and

advertising revenue; and advertisers for reader responses. It has been assisted by

restructuring the product’s qualities and supply including, reducing newsprint

weight, incorporating recovered fibre and importing newsprint.

47 Changes in the standard weight of newsprint can be found in PRPC (1992). Lighter newsprint uses less resources, reduces transport and delivery costs and requires less labour (JP&P 1986j). There have been pressures to introduce even lighter newsprint since the mid-1990s (Asahi 1997), but this could limit the recovered fibre content of newsprint.

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Printing and communication papers Commercial printers and publishing companies are the largest users of paper in Japan

(43.8% and 19.1% of use) (JPA 2001c). The use of higher quality printing and

communication papers grew from about 0.48 million tonnes in 1953 (JPA undated

1)48 to 11.1 million tonnes in 1996 and then stagnated (JPA 2001c). These papers

have fibre contents ranging from 100% new fibre chemical pulp to 100% recovered

fibre (Appendix 5.2). There are two main groupings - uncoated papers and coated

papers; both comprise ‘wood-free’ and ‘wood-containing’ papers. About 70% of this

category’s domestic production is coated and uncoated wood-free paper which uses

chemical pulp made from new, predominantly hardwood fibres (JPA 2001a, 2001c).

This discussion considers the growth in production of these papers (Figure 5.6) and

factors influencing the main uses to which they are put - publications, advertising

and office papers.

Uncoated papers formed the majority of this category until the mid-1990s. In

the early 1980s, B-grade uncoated paper (with 10-30% mechanical pulp) grew at the

expense of higher quality uncoated woodfree paper because it was: cheaper; suitable

for light-weight printing; and its characteristics could be changed during manufacture

(JP&P 1986c). The use of uncoated wood-free paper grew from the mid-1980s with

the ‘bubble economy’ and the demand for higher quality papers (JPA 2001c).

Different grades of coated paper were introduced progressively from the late-

1950s.49 Use increased because of their qualities and price. Greater use in

publication markets, direct mail and leaflet advertising was assisted by progress in

colour printing.50 Production increased from the early-1980s (JP&P 1986a), and the

48 This estimate is based on production data from the JPA using classifications that have since been changed. 49 Standard woodfree coated paper was introduced in 1958. Its use surpassed that of art paper in 1963 and increased up to the 1973 oil crisis. Light-weight coated paper and standard ‘wood containing’ coated paper were introduced around 1965, but steady growth did not occur until the oil shock. (JP&P1986e). By 1980, coated paper comprised 36% of all printing papers (JP&P 1980a, 1984b). Slightly coated paper was introduced prior to the second oil crisis. Its quality was low, but its profitability was high. Use was stimulated from the late 1970s by the second oil shock and its inclusion in text-books. By the mid-1980s, its main market was commercial printing where it helped reduce printing costs (JP&P 1986e, 1986g). Slightly coated woodfree paper (bitokoshi) was introduced in 1982 in an effort to increase the demand for woodfree paper, and papermakers soon began to develop new uses for it (JP&P 1986e, 1986g). One commentator argues that bitokoshi was introduced to avoid government restrictions on the production of other coated paper grades (Ausnewz 1998b). 50 The release of the first Japanese edition of “Playboy” generated the impetus for publication of magazines comprising only coated paper. By 1980, 60% of coated wood-containing paper was used for colour advertising leaflets, while most of the remaining 40% was used in books and magazines (JP&P 1980a, 1984b).

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high growth in their use from the mid-1980s (JPA 2001b) helped stimulate

investment in new production capacity during 1995 (Isaka 1995, Hoshino 1996, PPI

1996d). Most coated and lightweight coated papers use new woodfree fibres,

whereas most ultra-lightweight coated papers use groundwood and recovered fibres

(Takeyama 1992).

From the early-1970s, nominal prices for the major printing and communication

papers increased from the early-1970s until the chip and oil shock of 1979-80, then

declined. Real prices declined almost continuously (Figure 5.7). In companies that

make both newsprint and fine papers, the high profits from newsprint sales

apparently support fine paper manufacture (Ausnewz 1998b, JapanK 1999). Japan’s

highly concentrated printing industry uses almost half the production of this

category. The domination of the printing industry by two companies is considered

important in controlling prices (Ausnewz 1998b), but high prices may be paid for

some papers to ensure stability of supply (JapanA 2000). The major printing

companies began expansions and rationalisations from 1998 (AP&P 1998b) with the

apparent aim of taking work from small and medium sized printers. This could limit

the potential of paper manufacturers to increase prices (JapanA 1999).

The use of these papers for publications and advertising overlaps because many

publications contain advertising. Several interacting factors influence publication

sales. The demand for books and magazines grew strongly from 1953 when quotas

on printing papers were removed (Figure 5.8). Improved social conditions, greater

interest in news and events, moderate prices and sensationalist covers encouraged

magazine sales (JP&P 1968h). The average number of pages in magazines increased

by 85% between 1975 and 1993, while advertising content reached 25% (Yamaguchi

1994).

Japan’s comic (‘manga’) culture grew from the 1950s, and in the mid-1990s

comic books and magazines were 39% of all published material, being extremely

profitable (Kinsella 1996, Kurihara 1996). Also, computer-related publications grew

from the early-1980s with the increasing sales of personal computers (Ozaki 1996),

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Figure 5.6: Production of uncoated and coated printing papers in Japan.

Sources: Fenton (1988), JPA (2001b, 2001c).

106

Figure 5.7: Prices for uncoated and coated papers in Japan.

Sources: JPA (2001b, undated 1).

Note: Prices were converted to 1995 values using the Consumer Price Index for Japan (MPMHAPT 2002).

107

Figure 5.8: Annual publication of books and magazines in Japan.

Source: Kurihara (1996).

108

rapid changes in computer technologies (JPPC 1996) and declining publication

prices (AP&P 1996a).

The continuing regulation of book and magazine prices by publishers may have

restricted sales (JBN 1993, Ausnewz 1998b, Stafford 1998). However, despite years

of publishing experience, the wastage factor built into print-runs, as expressed by

‘return rates’, has increased (Kurihara 1996), indicating that the size of print-runs is

not dictated by a concern for an inefficient use of fibre.51 Returned publications are

either rebound for sale or pulped for recycling.

The use of printing papers also increased because of marketing strategies that

incorporated paper-based advertising. Mail-order markets grew substantially with

some companies distributing free catalogues (Yamamoto 1997b). However, the use

of direct mail slowed in the early-1990s because it was less effective in the recession

(Yamaguchi 1994). The use of newspaper advertising inserts grew because they are

effective (Isaka 1995), and contribute to multi-media advertising campaigns

(Yamaguchi 1994). The average number of such sheets delivered to Tokyo

households increased from 3,394 in 1986 to 6,053 in 1996 (Ooshima 1997).

Newspaper inserts, direct mail catalogues, automobile catalogues, travel pamphlets,

and computer-related manuals and publications were estimated at 24% of all sales of

printing and communication paper in 1995 (JPPC 1996, JPA 2001c).

The use of ‘office and business’ papers was stimulated by expanding economic

activity, electronic technologies and advances in papermaking. Greater use of

facsimile machines was encouraged by liberalisation of telephone line use in 1973

(JP&P 1977a, 1986f), and thermal paper and printing technologies that made them

cheap and easy to use (JP&P 1985b, 1986f). Greater computer use required more

business forms and printing paper (JP&P 1985b, Ozaki 1996). Japan’s expanding

production of Plain Paper Copier photocopy paper (PPC) – 7% of printing and

communication paper production in 2000 (JPA 2001c) – has similar origins. The

number of copiers increased in shops and homes, while higher copy speeds permitted

the use of more paper (JP&P 1988a, 1991a). More efficient fibre use (by lowering

the paper weight from 81.4 gms/m2 to 64 gms/m2) reduced production costs (Iida

1996).

51 In 1995, the return rates for books and magazines were 38.8% and 27.1% respectively (Kurihara 1996).

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The recovered fibre content of copy papers increased from the early-1980s, and

by the early-1990s manufacturers were investigating, and in some cases making,

other products with higher recovered fibre content (JP&P 1990a, 1990e, 1990f,

PRPC 1998c). Government purchasing policies could encourage greater production

of ‘recycled’ papers (Japan 1995, Tokyo 1997, 1999), and this may assist

competition against cheap imported paper (Ausnewz 2001).

Thus, the use of printing and communication papers grew with the expansion of

commercial printing, publishing and new paper-using electronic equipment, but

advertising, both direct and within publications, is now a major use. This growth has

been assisted by the restructuring of paper qualities to create new paper types in

response to changing prices, costs and user requirements. Expanded use of the major

grades since the early-1980s is linked to continually declining prices, but some

production may be supported by profits from newsprint sales. The printing duopoly

is expanding control over the printing industry, which could help restrict paper prices

and limit the potential for increases in fibre prices. The foundation for the growth in

the use of these papers has been the expanding supply of new fibres, particularly

cheap hardwoods, as shown in Chapters Six and Eight. However, the use of

recovered fibres is increasing, and this is discussed further in Chapter Seven.

Tissues and household paper products Growth in the use of tissue products depended on the entry of foreign capital into

domestic manufacturing during the 1960s to restructure production, lower costs,

improve quality and increase advertising (Appendix 5.3). Per capita equivalent use

grew from 1.7 kg in 1960 to 13.7 kg in 2000 when total use was around 9% of

domestic paper production (JPA 2001c).52 The use of fibre in these products was

also restructured. Facial tissues are generally 100% new fibre. However, higher

living standards supported the growing inclusion of new fibres in toilet paper (JP&P

1986d, 1987a), so the proportion of recovered fibre in this product declined (Oye

1994b).

Export demand Exports of pulp, paper and paperboard are all small. Pulp exports were 120,837

tonnes in 2000 (JPA 2001c). Paper and paperboard exports have fluctuated with

changing economic conditions (Figure 5.9). Growing paperboard exports slumped in

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the mid-1980s because of the high yen, and have only slowly increased. Exports of

paper jumped in the early- and late-1990s when the domestic economy slumped and

manufacturers needed to balance production.

Manufacturers may export production cheaply to gain cash flow and/or prevent

surpluses influencing domestic prices (Hirata 1996b, Ashosha 1997). However,

Japanese manufacturers are reported now to be more interested in receiving

profitable export prices, and the recently weakened yen assisted some exports.

Exports may be encouraged by increased paper/board use in the USA, Europe and

elsewhere that prevents other manufacturers supplying Asian markets (AP&P 1995a,

1997c). Most domestic fax paper production used to be exported because Japan

supplied many of the world’s facsimile machines. However, the high value of the

yen encouraged foreign production either directly or by licensing other

manufacturers (JP&P 1988a).

Paper/board use and planning Forecasts and surveys of the expectations for Japan’s paper/board use held by

industry members were prepared from the late-1960s (Figure 5.10). They have three

important related features. They are largely inaccurate; most were overestimates and

often could not predict even short-term changes. Their reliability did not increase

over time. Many are almost extrapolations of consumption during the few years

prior to their year of publication, so appear to be influenced by economic trends at

those times.

These features are illustrated by three surveys of the expectations of industry-

related personnel for consumption conducted in 1984, 1988 and 1992 - before,

during and after the ‘bubble economy’. Expectations of longer-term paper/board use

were low before the ‘bubble economy’, but increased and became even stronger as it

progressed (KPGYK 1989, 1993). This anticipation of strong economic and demand

growth probably reinforced expansionist decision-making. Consequently, as

described below, domestic production capacity increased, while some companies

invested in takeovers or new fibre supply projects.

52 A change occurred in the definitions of paper categories during the late-1980s, so these values may not be strictly comparable (JPA 2001c, undated 1).

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Figure 5.9: Exports of paper and paperboard from Japan.

Sources: PRPC (1998b), JPA (2001c).

112

Figure 5.10: Forecasts and expectations of paper and paperboard use in Japan.

Sources: 1. KPGYK (1989) (67.2%), KPGYK (1993) (52.7%); 2. KPGYK (1989) (19.6%) KPGYK (1993) (42.3%); 3. JP&P (1990h); 4. MITI (1994a); 5. KPGYK

1984 survey cited in (KPGYK 1989) (40%); 6. KPGYK 1984 survey cited in (KPGYK 1989) (46%); 7. CPPEI (JP&P 1969c); 8. ISC (JP&P 1981a); 9. ISC (JP&P

1973q).

Notes: 1. Numbers taken from KPGYK (1989) and KPGYK (1993) are expectations based on surveys of paper/board industry personnel. Percentages listed in sources indicate the proportion of respondents holding that expectation of consumption. 2. Expectations from the KPGYK 1984 survey cited in KPGYK (1989) are actually for 2001. 3. CPPEI is the Council for Pulp and Paper Equipment Investment. ISC is the Industrial Structure Council.

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Subsequently, the ‘bubble’ burst, paper use stagnated and companies were left

with excess capacity and poor profitability. Later estimates put consumption at 32.9

million tonnes in 2000 (MITI 1994a) and about 41 million tonnes at 2010 (KSKK

1996, Hisada 1997b). Concern has been expressed that consumption will decline

around 2010 because the expected reduction in Japan’s population cannot be

countered (Ikuta 1993). This perception that domestic demand is maturing,

especially for some high quality papers (Nagai 1993), prompted the call for new

industry strategies. Further expansion into regional markets was promoted (MITI

1994a), but companies have been slow to adopt this because of their financial

situation and the poor regional economic situation (Whitham 1994, 1995).

5.2.3 Overview The use of paper/board in Japan has grown substantially since WW2. However,

excessively high expectations and forecasts of consumption made unreliable

planning guides. Japan’s recent stagnant economic growth plus a stable or declining

population indicate a low probability for high consumption growth.

The past use of different paper/board products changed with general economic

growth and factors specific to each product. Growth in the use of paperboard is

directly related to the expansion of high volume packaging systems. The main use of

paper is for the transmission of information, but much of this is for advertising, either

directly or within publications to support their sale. Also, the development of

electronic information-related technologies stimulated the use of printing papers.

Growth in the use of major paper/board products was supported by declining

nominal prices from the early-1980s and declining real prices from the 1970s.

Manufacturers of newsprint and printing/communication papers can use profits from

newsprint to help support the production of high quality communication papers for

which the printing ‘duopoly’ has some potential to restrict price increases.

Manufactures have used a variety of strategies to encourage paper/board use. They

restructured product qualities and fibre content to help control production costs and

sales. Also, they established joint ventures with foreign capital to introduce new

technologies and marketing strategies to stimulate the use of some products.

However, industry analysts note that the prices of some papers made in Japan

have been high when compared with those in Europe and the USA using US dollar

equivalent values. These analysts contend that such prices are possible because

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manufacturers influence the distribution system and have reduced a variety of

manufacturing costs, so they can pay prices for fibre that are relatively high

internationally (BS 1997, Cameron 1997, Ausnewz 1998b, 2001). These arguments

indicate the importance of industrial structure to Japan’s paper/board use. The next

sections develop this theme by examining the historical restructuring of the

manufacturing and distribution sectors to control costs, generate profits, and expand

fibre supply and product sales.

5.3 Restructuring pulp, paper and paperboard production

5.3.1 Trends, causes and consequences Factors internal and external to the industry interacted to direct restructuring of

Japanese pulp, paper and paperboard manufacturing from 1950. Changing national

and international political economies provided the context for restructuring

relationships between demand, production and resource supply. Critical to these

relationships is the fact that Japan’s papermakers are relatively high cost producers

with high fibre and energy costs. To some extent, such high costs have been

permitted by low paper imports and prices for domestic papers made relatively high

on an international basis by changing exchange rates (JP 1986, Simons and

Associates 1990, Ausnewz 1998b).

In the early-1970s, wood was estimated to be 50-55% of production costs

(Narita 1980). Companies competed and cooperated to try to reduce costs and

expand fibre flows, prices and profits, but generated cycles of overinvestment and

market slumps. Availability of fibre resources changed as supplies were depleted

and political, economic and technological developments made new resources

available. GTCs became a force in the restructuring process and now influence fibre

supply and product distribution. Japan’s MITI also regulated the industry’s activities

to try to provide stability.

Restructuring production to reduce costs and support fibre flows had a number

of consequences, including: concentration of control over production; relocation of

mills for convenience to changing fibre supplies; more efficient energy use and

pollution control; and employment reductions. Also, foreign investment and

business tie-ups increased to secure cheap fibre supplies for domestic and foreign

markets. The following discussion explains the interactions between these causes,

influences and consequences of restructuring.

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5.3.2 Industrial structure, competition, profitability and market share As with the global paper/board industry, the recent growth of the Japanese industry is

characterised by cycles of competitive capacity expansion, market collapse, excess

capacity and low prices. These cycles were primarily generated by the interaction of

economic pressures, such as changes in paper use and/or energy and fibre costs, with

the characteristic that leading manufacturers competed for market shares at the

expense of profitability (Tajima 1974, JP&P 1981e, Shima 1994b).

The cycles began during the late-1950s after “the so-called golden age of the

industry” when growth and profits were high (JP&P 1969g)(p.12). Companies

installed larger machines to counter high wood and labour costs, but often old

machinery continued to be used, so total capacity remained greater than sales (JP&P

1973h). Also, as the demand for artificial fibre began to stagnate in the 1960s,

makers of dissolving pulp increased their production of paper (Maruyama 1965).

The cycles impacted on profitability, which was already restricted by the industry’s

high dependence on loans.53 Despite the high growth rates, profit rates at the end of

the 1960s were about half the average for manufacturing industries because of high

pulpwood costs and interest rates, low prices and intense competition. The

industry’s average share price dropped by 40% from that in the ‘golden age’ (JP&P

1968c, 1969g, 1972a).

Figure 5.11 and Appendix 5.4 present the recent profitability and share prices of

selected manufacturers. The recession of the early-1970s followed a short period of

high demand and resource shortages. It brought substantial financial losses to many

paper companies. The industry altered its general priority from production to

marketing, but continued to overinvest in capacity (JP&P 1973d, 1973i, 1975a,

1977c). The shift in production from dissolving pulp to paper pulp (JPA 2001c) also

53 Much of the expansion of investment in the industry through the 1960s and 1970s was financed by loans with high interest rates because companies did not have sufficient of their own funds. This involved high rates of production and sometimes the cheap sale of products to produce a return. However, the use of corporate reserves increased and, for example, in 1966 73% of investment in plant and facilities came from company money (JP&P 1967c, 1973h). Nevertheless, a reported feature of paper companies at the time was that they had low net worth and bad debt ratios (JP&P 1967i). As part of their strategy for increasing production, much new capacity investment was conducted so that it was greater than the value of depreciation write-offs. The JPA found that the high level of investment in capacity expansion during the 1970s resulted in some companies having weak financial structures and excessive borrowings (JP&P 1977c). In 1980, 33 companies with a total turnover of ¥2,850 billion had loans of about ¥1,200 million. This was seen as restricting paper company profits (JP&P 1981e). Part of the explanation for the apparent eagerness with which companies decide to increase capacity may be Japan’s tax code, which is considered to encourage low earnings and high capital expenditure (Ausnewz 1998b).

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Figure 5.11: The average profitability of Japanese paper/board manufacturers.

Sources: JP&P (1973h), JPA (2001c).

Note: This graph includes data for “pulp and paper companies’ published by the JPA (2001c) but gathered by other sources. The values for 1973 to 1980 were for 29 companies and came from the Japan Development Bank, except those for ‘net profit (after tax) to total assets’ from 1978 that came from the Bank of Japan. Values from 1981 to 1987 came from the Bank of Japan and were for 13 companies, expect for those for 1987 that were for 14 companies. Subsequent data came from the Mitsubishi Research Institute, but the number of companies used was not disclosed. Thus, there may be some differences between the calculation methods used to provide the data. However, years where data overlaps shows similar estimates, so differences are not great. This data also showed that generally, the pulp and paper industry’s profitability was below that of the manufacturing industry as a whole over this period.

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contributed. Profits slumped with the oil and chip shock of 1979-80, but, despite

higher chip prices, grew to the mid-1980s because of guidance from MITI, improved

operating rates, increasing demand and higher paper prices. Profits continued to

grow through the ‘bubble economy’ of the late 1980s even though paper prices fell,

because paper demand expanded and chip prices declined - assisted by the increasing

value of the yen (JP&P 1985d, Shima 1994b, 1997b). Manufacturers increased

production capacity.

When the bubble burst in the early-1990s, domestic sales had worsened,

production capacity was excessive, fibre prices rose and profits slumped again

(Shima 1997a, 1997b). Higher demand through the mid-1990s helped counter a

jump in fibre costs and low paper prices, so profits improved. This encouraged more

capacity investment from the mid-1990s. Companies adopted plans to increase

profits, but profits declined as demand, mill operating rates and the value of the yen

all fell while paper/board price increases were limited (NFD 1996b, 1996c). Losses

followed in the late-1990s (JPA 2001c), and companies again reorganised by closing

mills and rationalising production to improve their financial positions (AP&P 1999e,

Gallagher 1999a, PPI 1999a, 1999b, Kudo 2000b). Manufacturer’s profits were not

expected to improve before 2001 (Gallagher 1999a). They are still low because of

overcapacity and intense competition in poor economic conditions (Paperloop

2001a).

To remove these cycles, industry executives wanted “powerful price leaders”

(JP&P 1972a)(p.19).54 Company take-overs and mergers were considered the main

mechanism by which they could be created. Banks and trading companies played

important roles in advancing this process. It was also a theme of the Pulp and Paper

Subcommittee of MITI’s Industrial Structure Council that prepared

recommendations for the industry’s future (JP&P 1972a, 1973h). However, the

cycles continued despite a concentrating ownership of production.

54 According to an article in Japan Pulp & Paper (1981c), one large paper company president was reported as saying: ‘If we are relieved from the threat of expansion races, our capital investment can be concentrated in the rationalisation of production process. It is indeed hoped by all of us’ (p12). The article went on to say that “all of paper industry executives admit the fact that the Japanese pulp and paper industry could not survive under the intensifying international competition unless some drastic measures are taken for the control of capacity” (p13).

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5.3.2 Restructuring industry ownership The major structural feature of Japan’s paper industry soon after WW2 was the

break-up of the monopoly of Oji Paper by the American occupation administration

(Appendix 5.5). Oji was divided into three companies in 1949 - Oji Paper, Jujo

Paper and Honshu Paper - which did not have equivalent production capacities or

company fibre resources. However, they controlled 42.7% of domestic paper/board

production in the mid-1950s, while the ‘Oji group’ (including related companies)

produced 52.5% of output (Oriental 1955).

In the early-1960s, Japan had 558 pulp, paper and paperboard companies with

655 mills (Ausnewz 1998b), while the largest 10 companies in each of the pulp,

paper and paperboard sectors produced 60.8%, 64.1% and 42% of domestic output

respectively (Figure 5.12). At the other end of the production scale were the small

mills with less than 300 employees. In 1960 and 1970, these mills numbered 570

and 547 respectively. They comprised about 86% of all mills, but produced 11% of

all pulp and 20% of paper (JP&P 1973h).55

The underlying pressures for an oligopolistic industry structure emerged in the

1960s when mergers and collaborative activities began in earnest (Narita 1980).

Over the next 40 years, cooperation and competition amongst manufacturers

concentrated company ownership and control over fibre supplies, production and

distribution (Appendix 5.6). A variety of factors interacted, including: poor

economic conditions; attempts to stabilise production and markets and gain control

of chemical pulping technologies; company mismanagement; overinvestment; the

desire for higher profits; concern over international competition; and moves to

rationalise production and secure cheap fibre supplies. Manufacturers also made

cooperative agreements to increase efficiencies, assist resource acquisition and limit

competition (JP&P 1968i, 1972f, Narita 1980). Much of this activity centred on Oji

Paper (Grossman 1991). However, Japan’s anti-monopoly law prevented the Oji

group from acting strongly in relation to paper production and sales, so it

concentrated on controlling and reducing wood supply costs (JP&P 1969d). As

shown in Chapter Ten, this impacted on competitors.

55 Most of these are small mills that make specialised ‘Japanese papers’ including high quality toilet papers, paper for calligraphy, and ‘senka’. They are low capital, low capacity, labour intensive mills primarily located in the centres of traditional hand-made papers, Shizuoka, Kyushu and Shikoku. Most were built since WW2. Their main fibre resource is waste paper, but they also use non-wood plant fibres. Their products tend to be more expensive than high-volume products (Hori 1964).

119

Figure 5.12: Concentration of production within Japan’s paper/board industry.

Source: JPA (2001c).

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During the 1990s, several important mergers created two leading manufacturers,

Oji Paper and Nippon Paper Industries, that in 1999 made 40.4% and 22.4% of

domestic paper/board respectively (JPA 2001c). Restructuring in the paperboard

sector during the late-1990s was considered a response to the fall in paperboard

prices and concerns that the new recycling law could influence the economics of

using recovered fibre (AP&P 1999f). In 1997, there were still 480 pulp, paper and

paperboard companies, but by 2000 control over domestic production had

concentrated substantially. The largest 10 companies in each of the pulp, paper and

paperboard sectors respectively manufactured 90.1%, 81.1% and 68.4% of

production (Figure 5.12)

Concentration increased from 2001 with the merger of Nippon Paper and

Daishowa to form Nippon Unipac Holdings, currently Japan’s largest paper

manufacturer with about 32% of domestic sales and the second largest paperboard

manufacturer with 18% of domestic sales. The merger is expected to provide

financial benefits through rationalisation of resource supply and manufacturing

(Nippon 2000b, 2000c). In response, two other major but smaller papermakers,

Mitsubishi Paper and Hokuetsu Paper, with 9% of Japan’s paper production,

exchanged shares to form a business alliance (TAPPI 2000). The success of future

mergers may depend on how Japan’s anti-monopoly legislation is applied (Kenny

1999a). However, more major take-overs may not be needed to develop price

leadership because in 2002, Oji, Nippon and Mitsubishi announced 10-15% increases

in the prices of some of their main products (Paperloop 2002).

GTCs have been important to this restructuring process (Appendix 5.7). Prior to

WW2, they imported pulp and exported paper. After the war, their role expanded

because they handled related goods, such as paper machines, and were interested in

high volume trade (JP&P 1964b). When many paperboard companies overexpanded

in the 1970s, MITI required decommissioning of 15% of boxboard capacity. This

promoted capital restructuring in the paperboard sector through take-overs and

business tie-ups (Narita 1980). GTCs provided financial and managerial assistance

and in return gained rights to product sales. They also financed the expansions of

many paper companies, so often became their raw material supplier or sales agent.

By 1975, GTCs traded 13% of domestic paper production and 33% of paperboard

production. They also invested directly in some manufacturers, and became

organisers of wood chip imports and foreign joint ventures, dealers in domestic

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recovered fibre (Sugaya 1964b, JP&P 1972a, 1978d) and importers of recovered

fibre, pulp and paper (Chapter 8).

5.3.3 Restructuring production facilities

Domestic investment Capital investment

The industry’s capital expenditure since the 1950s has been cyclical. New pulping

technologies were introduced during the 1950s to use previously unexploited

domestic hardwoods and softwoods (Nakazima 1965, Ooshima 1991). Chemical

(‘kraft’) pulp came to dominate production (Figure 5.13), and the industry shifted

from batch pulping to continuous pulping and integrated pulp and paper

manufacture, which increased mill size. Also, companies invested in faster, wider

paper machines and equipment to add value for high quality papers (Narita 1980).

Production of dissolving pulp shrank because of limited demand and import

competition (JPA 2001c, JapanD 2002). Production of synthetic paper (Copelman

and Jacquelin 1971) was inhibited by the 1973 oil shock. Investment in recycling

facilities increased with changes in relative energy, fibre and capital costs (Nakajima

1995). Manufacturers have also had to respond to high and increasing quality

demands of commercial users (Iida 2001b)

Most capital investment from 1970 has been on capacity expansions,

rationalisation and modernisation (Figure 5.14). Major expansions occurred in the

late-1980s and mid-1990s when consumption and profits were higher.

Rationalisation and modernisation were maintained between these times when

overcapacity was higher. The high investment in pollution control eventually shrank,

but that in energy conservation remained relatively important.

Towards the end of the 1980s, about 41% of paper production capacity was

more than 20 years old (JPA 1988). Capacity expansion and paper machine rebuilds

in the late-1980s were stimulated by the growing demand and profits of the ‘bubble

economy’, the removal of MITI’s capacity controls plus a desire to counteract

increasing labour costs. The combination of excess capacity and planned expansions

generated concerns that the threat of oversupply might continue for at least some

grades (JP&P 1988b, 1988c, 1988d, Kawake 1991).

122

Figure 5.13: Pulp production in Japan.

Sources: Fenton (1988), Ooshima (1991), JPA (2001a).

Note: This figure includes interpolation of values in some years during the 1970s for which data was

not available.

123

Figure 5.14: Capital expenditure by paper/board manufacturers in Japan.

Source: JPA (2001c).

124

In the mid-1990s, after a period in which there were no large capacity

expansions because of overcapacity, major companies announced plans for new

expansions over the following four years totalling 11% of 1995 production. These

were mainly to produce papers with large requirements for new fibre (Isaka 1995,

PPI 1995a, Shima 1996c, AP&P 1997c) and some expansions, such as that of

Hokuetsu, were heavily reliant on foreign wood supplies (Ueda 1996).56 Some

expansions did not eventuate and production was rationalised (AP&P 1999e,

Gallagher 1999a, PPI 1999a, 1999b, Kudo 2000b), but in 1999 and 2000, there were

larger capacity investments to expand the use of recovered fibre (AP&P 1999a,

Fujiwara 1998e, 1999d, Kudo 2000a). Industry observers expected that such

investment would soon end and a new phase of rebuilding kraft pulping facilities

would begin from 2000 (AP&P 1999g). This will be influenced by recent poor

market conditions (Paperloop 2001a).

Despite continuous production growth, many of Japan’s paper/board machines

are old or small. Production efficiency and product quality have been maintained by

research and development and high levels of technical expertise. The use of much

larger machines has been inhibited by the small market shares of each company, life-

long employment policies and the urban location of many mills. Some observers

consider this a disadvantage for longer-term international competitiveness. The need

to replace many older machines and the social consequences are recognised within

the industry (Ausnewz 1998b, JapanA 2000, Iida 2001b).

Employment and energy Companies continue to shrink employee numbers to try to improve profitability.57

Total industry employment increased from around 82,000 in 1958 to almost 107,000

in 1965, then declined to about 44,200 in 2000. Over this period, production

increased in all sectors, so output and value added per employee increased (Figure

5.15).58

56 All the chips for Hokuetsu’s new pulp line at its Niigata mill were to come from the forests of seUSA. Some of the main reasons it expanded production were to replace imported pulp, and give Hokuetsu more control over input costs and more security in the fluctuating international market (Ueda 1996). 57 Discussions of plans by paper/board companies to reduce employee numbers are numerous (AP&P 1999e, Gallagher 1999a, 1999b, PPI 1999a, Oji 2002). Generally, employment reduction in the industry occurs by attrition, encouraging early retirements and reducing the number of new employees (JP&P 1981e, JapanB 1999). 58 Jamieson (2001a) notes that large numbers of contract workers are used in Japanese mills, but normally are not counted in company employment statistics.

125

Figure 5.15: Employment and labour productivity in the pulp, paper and paperboard sectors in Japan.

Source: JPA (2001c).

126

The industry’s total energy use has increased, but the trend has been towards

greater cost efficiency (JPA 2001c). The use of oil increased to the late-1970s then

declined, while the use of coal declined to the late-1980s then increased to replace

more expensive oil. The greater use of coal may be linked to higher recycled paper

production (Kudo 2000a), but raw pulpwood provides energy cost savings because

lignin is burnt (Shield 1998). The use of purchased energy and energy from burning

manufacturing wastes has increased, but the total energy input per tonne of

paper/board production declined by about a third from 1980 (JP&P 1992a, JPA

2001c).

Mill location and fibre resources The changing characteristics and location of fibre resources combined with other

restrictions on manufacturing to generate major shifts in the location of pulp and

paper mills. These restrictions included mill size and inefficiencies, pollution

problems, limited water supplies and expensive land (JP&P 1967d). In the 1960s

and 1970s, mills were built closer to unutilised domestic broadleaf forests and/or on

the coast close to ports in anticipation of increased woodchip imports.

Such production relocations were often linked to mergers or business alliances

aimed at increasing a company’s competitive strength. A clear example was Jujo

Paper’s decision to expand production in north-eastern Japan. Planning began in

1961 when Jujo relocated part of its Tokyo papermill to Nakaso in north-eastern

Japan. In 1966, it decided to shift the whole pulp and paper mill as it could not

expand and was causing pollution problems. The new location was closer to public

forests, but other paper companies had begun moving into the region, creating

competition for wood. Jujo established a business agreement with Tohoku Pulp,

which had two mills in the region, to avoid competition for pulpwood, then took it

over in 1968. Jujo had been negotiating for pulpwood from Australia and

investigating ventures in Canada, so this take-over secured domestic wood resources,

increased its capital strength, and allowed rationalisation of pulpwood transport and

product sales. Also, Tohoku Pulp's Ishinomaki pulpmill could expand, was close to

forests and a port, and water supply and pollution were less problematic. Jujo

concentrated pulp production at this mill and paper production at Nakaso, while

continuing some paper production in Tokyo. The merger also made Jujo Japan's then

largest papermaker (JP&P 1967a, 1969g).

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Recently, some decisions have been influenced by advances in papermaking

technologies that allow greater use of recovered fibre. In the late-1990s, Daio Paper

assessed its future investment needs in relation to its competitors’ positions. It

concluded that it did not need trees but could use more recovered fibre, so built its

new paper/board mill near the ‘urban forests’ of Tokyo (AP&P 1998f).

Foreign investment Foreign investment by Japanese paper and trading companies since the end of WW2

has occurred in pulpwood production, waste paper supply, pulp/paper/board

production and converting. The primary concern has been to obtain secure, cheap

high quality fibre for use in Japan, and the importance of security is reflected by the

location of most large investments - North America, South America, Australia, South

Africa, New Zealand (Whitham 1994, 1995, JPA 2001c).59 However, companies

also participate in local and/or international markets.

Changing demand, supply and economic pressures meant that most foreign

investment in manufacturing and converting occurred from the mid-1980s. At this

time, demand was growing, the value of the yen was high and the need for new,

competitive, high quality foreign fibre supplies was evident (Whitham 1995, Neilson

and Flynn 1997, JPA 2001c).60 Chao (1988)(p.21) argues that foreign investment in

lower-value newsprint and pulp permitted Japanese companies to use “their lower

cost of capital advantage to capture the wood and manufacturing economies of scale

advantage inherent in North America, South America and Oceania”. Investments in

foreign paper production counters unprofitable exports; supplies Japan with mass

production grades over which Japanese companies have quality control; and serves

profitable regional and international markets (Kawake 1991). Such investment

included: joint ventures and take-overs for production and sales of facsimile paper in

North America and Europe (JP&P 1988g, 1989d, 1989e, 1989h, 1991c, 1992b,

AP&P 1995e); production of newsprint in North America for supply to Japan (Omori

59 The direct foreign investment by Japan’s pulp, paper and wood products sectors has been concentrated in two main regions - North America and Asia. Since the early 1980s at least, the number of investments in North America has generally been less than in Asia, while the total value of the investment generally has been much larger (JPA 1996). This seems to indicate the use of Asia as a source of sawlogs and semi-processed timber (Nectoux and Kuroda 1989, Dauvergne 1997b), whereas the fibre resources and political security of North America was more conducive to large paper and timber manufacturing investment (Haas 1979a, Pratt and Urquhart 1994)). 60 Investment in the 1960s and 1970s was mainly for woodchip and pulp supply (Whitham 1994). The lack of foreign investment in higher value processing before the mid-1980s was caused by: excess capacity in Japan; financial difficulties; general conservativeness of paper companies; and concern about profitability (JP&P 1988g).

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1989); and direct investments and joint ventures for paperboard manufacture in Asia

for local markets (JP&P 1989c, 1991b, AP&P 1995d, Shiota 1995). Manufacturers

also realised that the export markets being developed by foreign companies would

influence their exports (AP&P 1993a). In 1990, Oji and Jujo each released business

plans aimed at making them ‘global’ enterprises, and securing fibre supplies was

important (JP&P 1990c, 1990d).

Through the early-1990s, trading companies and banks came to hold the view

that Japan’s paper/board industry could only survive if it expanded into Asia (Future

1994), and MITI (1994a) supported this. Some GTCs and leading paper distributors

developed their own strategies for greater involvement in the Asian region. They

aimed to exploit the perceived growth potential for production and market integration

in the region and globally to expand their own activities, including increasing

imports to Japan (AP&P 1995c).

Such investment has progressed slowly, but has been targeted. Paper and

trading companies used technology transfers, business tie-ups and direct investment

to become involved with large Indonesian pulp and paper manufacturers who have

cheap fibre supplies and large mills producing for export markets, including Japan

(AP&P 1997b, 1999c). Lack of suitable infrastructure, low potential profits and

limited fibre resources restricted investment in China until the mid-1990s (Whitham

1994, AP&P 1995b, Shiota 1995, Whitham 1995). However, this is changing

because of growing paper/board use and the potential for export-oriented production

(Oji 2002).

5.3.4 MITI and industry policy MITI has influenced the development of the industry through its regulatory powers

and policy support. It used ‘administrative guidances’ and ‘equipment controls’ in

response to situations that threatened stability of production and/or prices, many of

which were generated by companies in their quest for growth. These regulations

were not necessarily imposed unilaterally. Many were requested by industry sectors

(Shinomiya 1995), but the industry could be divided on their need (Oriental 1969).61

61 For example in the early 1960s, when the industry anticipated that international competition would increase, kraft papermakers expanded capacity to gain economies of scale and market share. When demand slumped in 1962, these manufacturers asked MITI to introduce production restrictions, which lasted from 1963 to 1964 when prices improved. Shinomiya (1995) indicates that the request for MITI to intervene at this time came through a meeting of company presidents. MITI reportedly became directly involved in the rescue of the kraft papermaker, Toyo Pulp, in the early-1980s,

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To facilitate communication between the industry and MITI, ex-MITI officials

headed the Japan Paper Association until recently (JapanC 1999), and MITI’s

Industrial Structure Council produced ‘visions’ for future development (JP&P 1972b,

1978b, 1980d, 1981a, 1981b).

MITI’s use of its powers is notable from the late-1950s when it controlled

investment in new pulping facilities to regulate increases in pulpwood prices

resulting from competition. It prevented manufacturers increasing capacity unless

they established plantations for their future wood supply (Iguchi 1988). It also

placed limits on fine paper production to help raise prices, but companies did not

reduce production at the same rate (JP&P 1973l, Shinomiya 1995).

In the mid-1960s, investment in papermaking capacity, except newsprint and

tissues, was overseen through a joint industry-MITI committee. In 1968, MITI

announced that it would remove this restriction during the early-1970s and work

towards free competition.62 Observers considered that MITI’s objective was to

promote the development of large companies and strengthen medium-sized

companies so their ability to compete with imports would improve. However, with

the continuing pulpwood shortages and the perceived threat of greater foreign

investment, it was felt that if investment controls were removed and the industry

could meet paper demand and reduce costs through economies of scale, then

profitability would still be restricted by high pulpwood costs. This strengthened the

perceived need for long-term access to low cost foreign fibre supplies. After the

restrictions were removed, MITI worked with the industry during the economic

recession to make production cuts and restrict price increases (JP&P 1968i, 1969d,

1970a, 1974a, Shinomiya 1995).

After the 1980 rise in oil and chip prices, MITI classified the industry as

‘structurally depressed’ and from 1981 to 1988 imposed a moratorium on the

installation of new or supplementary production capacity and some capacity was

because its president was a former MITI official, although this was seen as a unique situation (JP&P 1981e). 62 This was a major change in policy and said to be brought on by the changing industrial structure, the approval of foreign investment in domestic joint ventures, and reductions in some tariffs. MITI had been criticised for its use of equipment controls because they were perceived as overprotection and contributing to poor profitability at times of high pulpwood prices, while MITI’s previous opposition to joint ventures was not seen as compatible with a free economy. MITI supported the merger application of Oji, Jujo and Honshu. To counteract the potential impacts of the increased concentration and generate international competition, it advocated removal of import duties and

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removed. One observer commented that if the industry had been more regulated

during the ‘bubble economy’ period, the industry’s slump after the ‘bubble’ burst

might not have been so bad (Fukida 1992).63

MITI’s importance in regulating the industry’s behaviour declined from the mid-

1990s as a philosophy of less direct government control of industry rose in

prominence (Nakajima 1992, MITI 1994a). Through the early 1990s when industry

profits were low because of excess capacity and poor domestic sales, MITI avoided

direct industry control. It stopped using administrative guidances in the mid-1990s

(JapanC 1999), and established the Study Committee on Basic Issues of the Japanese

Paper Industry, comprising representatives from the industry and banks, to encourage

the industry to develop strategies for restructuring and penetration of international

markets without heavy government support (Whitham 1994, 1995).

Thus since WW2, MITI helped direct the industry’s behaviour and ameliorate

the impacts of broader economic changes and internal industry competition that

brought overinvestment, market slumps and high wood prices. While advocating the

development of an internationally competitive industry structure since the late-1960s,

MITI supported and stabilised fibre flows, often at the request of the industry, which

assisted companies that might have gone bankrupt. This traditional role declined

during the 1990s as pressures on the industry increased for greater integration into

international markets. Overall, MITI’s intervention permitted the process of

restructuring industry ownership, production and inputs to operate at a pace more

suited to manufacturers in their changing circumstances. This process extended into

the distribution sector because marketing relationships are important in determining a

manufacturer’s fibre flows and profits.

5.4 Restructuring paper/board distribution The distribution sector links manufacturers and end-users almost directly or through

intermediary distributors (Figure 5.16). Paper agents hold product inventories for

manufacturers and sell to commercial users or the next merchant in the distribution

chain who are usually wholesalers; wholesalers then sell to commercial users.64

supported investment by foreign companies in domestic joint ventures. There were other criticisms (JP&P 1968i). 63 The removal of controls in 1988 made the industry feel insecure, so between 1988 and 1991, MITI required companies to submit capital spending plans that increase their capacity by 20% or production by 20 tonnes a day (Julian 1988, PPI 1991c). Production capacity still increased. 64 One interviewee (JapanA 1997) considers that the roles of the primary “dairiten” (the primary distributor or sales agent) are to: be the sales department of paper manufacturers and so speak for

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Japan’s distribution system seems complex, so is regarded by some as a non-tariff

barrier for imports (JP&P 1965b, 1965d). However, the influence over fibre flows is

not in the system’s apparent complexity. Rather, it resides in the ability of

manufacturers to influence the distribution chain through paper agents with whom

they have strong financial and historical links, and the reluctance of distributors to

break these traditional relationships (JapanA 1997).65 Understanding this influence

requires an historical perspective.

Dealers in hand-made papers operated before the establishment of the machine-

made paper manufacturers, and some became their agents from the late-1800s (JP&P

1970g). The relationships that developed are described as having a “large amount of

flexibility, consideration, and assistance”. However, Oji used its virtual monopoly

from the late-1930s to force agents “to center their orientation towards the mills

rather than the marketplace” in a feudal “‘lord and retainer’ type relationship”;

agents became “an arm’s length marketing division for the mills” (Yasu

1979)(p.47).66 During WW2, the influence of papermakers, especially Oji, over the

distribution sector strengthened. Government required wholesalers to merge and

compete using a coupon system that regulated their sales, so a trade in coupons

developed (JapanA 1997). When this regulation was removed after the war,

wholesalers were more subservient to the manufacturers.

The number of agents and wholesalers then increased to handle expanded paper

production. Distribution patterns were also influenced by historical relationships

between agents and other traders or end-users, which helped restrict the entry of

GTCs into paper distribution (Yasu 1979, JapanA 1997). The involvement of GTCs

in distribution increased with their involvement in paperboard manufacturing. While

there might be up to three or more stages in a distribution chain, the diverse market

of large and small commercial users, general assistance, the reliance on promissory

notes and flexible prices (that could be negotiated and reset even after a sale) mean

them on related issues; make “window-dressing” purchases that boost a manufacturer’s end-of-year sales figures; entertain clients; accept staff family and customers of manufacturing companies into the industry as a favour; and to be misunderstood as being independent of the paper companies. 65 One commentator (Sugaya 1965) claimed the argument that “he who controls distribution controls everything” was historically accurate. 66 This perspective was supported by JapanA (1997).

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Figure 5.16: Outline of the distribution of paper/board products in Japan.

Source: JPA (2001c).

Note: Values above the arrowed lines are the percentage of paper production flowing in the direction

of the arrow, while values below the arrowed lines are the percentage of paperboard production.

133

that at a finer level business can be more intricate.67 As production increased, the

sector came to be regarded as inefficient and contributing to the industry’s low

earnings (JP&P 1968f, 1970g). Paper companies could not obtain price leadership,

so in the late-1960s and early-1970s they merged and rationalised paper agents to

gain greater control over sales and prices. Much of this activity centred on the Oji

group (Narita 1980).

Restructuring slowed from the early-1970s, impeded by the strong historical

business relationships (JP&P 1991d). However, after the ‘Oji group’ companies

strengthened their control over distribution channels in the late-1970s (Narita 1980),

affiliations between manufacturers and distributors became clearer (AP&P 1993a,

1995f, Ausnewz 1998b). The merger in the mid-1990s between New Oji and

Honshu was expected to make Oji Paper “a more influential customer at the two

largest dealers, Japan Pulp & Paper and Daiei” (Shima 1996a)(p.6), in which Oji and

Nippon have significant shareholdings (Ausnewz 1998b). DaiEi and another agent

for the Oji group, Nichia, merged in late 1999, so strengthening Daiei’s position

(AP&P 1999b). The merger of Nippon Paper and Daishowa might also influence the

distribution sector’s operation.

During the 1990s, manufacturers again restructured distribution to protect fibre

flows. Japan’s Fair Trade Commission investigated the nation’s paper/board

distribution in 1993 and considered that the practice of post-sale price renegotiations

could strike problems with anti-trust laws (AP&P 1993c). Also, in response to

overcapacity, declining prices and greater competition in the mid-1990s (Maeda

1997), leading manufacturers discarded some traditional relationships. They stopped

the use of promissory notes and flexible prices that had been limiting profitability

(JP&P 1965b, Yasu 1979, AP&P 1993a, JapanA 1997). Some manufacturers by-

passed distributors, and in conjunction with agents and/or trading companies,

printing houses and related businesses began offering cheap package deals to

commercial users. They supply a completed product if the purchaser agrees to use

67 Until very recently paper manufacturers, agents and wholesalers did not use fixed price lists. Although there were nominated prices, the use of promissory notes and a high degree of trust between the relevant parties allowed the price to be negotiated or amended down at times of economic hardship or excess production. This system limited the potential profit to all parties in the distribution chain (Yasu 1979, JapanA 1997).

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the manufacturer’s paper (Maeda 1999).68 This novel approach helps protect a

manufacturer’s fibre flows, prices and profits.

Thus, the structure of the distribution sector, and consequently the flow of fibre

as paper/board from manufacturers to commercial users, has been influenced

strongly by the capital strength and commercial situation of the manufacturers.

Pressures for greater restructuring of the sector to protect manufacturers’ markets and

profits will strengthen if competition from imports increases.

5.5 Conclusions This chapter’s examination of the consumption, distribution and manufacturing

sections of the Japanese paper/board consumption-production chain illustrates the

importance of industrial structure to patterns of product use. The growth in

consumption of paper/board in Japan since WW2 involved the interrelated

restructuring of the uses, qualities and fibre content of paper/board as well as the

manufacturing and distribution sectors of Japan’s paper/board industry.

This restructuring helped protect the flow of fibre through the industry and

increase it through particular companies. Integral were the related objectives of

concentrating ownership, expanding market share, improving profitability,

counteracting cycles of overinvestment, and strengthening control over prices and

resources. Restructuring products altered manufacturing costs and characteristics to

support their use. Restructuring ownership concentrated control over distribution,

manufacturing and resources; restructuring manufacturing and distribution sought to

control manufacturing costs, product prices and markets. Manufacturers primarily

conducted the restructuring, but GTCs, MITI and funding institutions played

important roles. Cycles of overcapacity continued until recently, cost-price pressures

are high and profitability remains poor. However, the concentration of ownership

recently allowed leading manufacturers to increase the prices of some products.

There is a low probability of large increases in domestic paper/board use, and

pressures continue for the industry to restructure and formulate new strategies to

survive in more internationally integrated fibre markets (Onabe 1993, MITI 1994a,

1994b). Some observers contend that more capacity must shift overseas to gain

68 Ausnewz (1998b) cites MITI data showing that between 1990 and 1997 the sale of printing and communication papers through the distribution system grew from 7.3 million tonnes to 8.45 million tonnes, while direct sales grew from 1.64 million tonnes to 2.48 million tonnes.

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economies of scale (Hirata 1996a, 1996b, Ausnewz 1998b, Shield 1998). Further

rationalisation of domestic mills and paper machines can be expected, and will

produce local social impacts. However, the extent of a shift overseas will be

determined by corporate objectives and production economics, particularly as

influenced by: potential markets; the supply of suitable resources; and the

willingness of manufacturers to abandon much domestic capacity, dependent

employees and efficiencies of domestic integrated pulp and paper mills (JapanB

1999, Jamieson 2002). Now that two companies control most paper production,

substantial changes can occur.

Obtaining increasing quantities of suitably-priced fibre to allow expanded

production has been at the base of the industry’s development. The following three

chapters explain how this growth required that the industry extend its resource base

from domestic forests into waste paper/board and foreign forests and plantations.

Control by manufacturers and GTCs over prices and fibre supply chains is seen to be

central to the exploitation of different fibre resources, and the discussions emphasise

the influence of resource characteristics and the importance of environmental

restructuring in supporting increased fibre supply. The ability of Japanese

papermakers to maintain internationally high fibre prices (Ausnewz 2001, Stafford

2001b)69 will become more important to manufacturers, fibre suppliers, consumers

and the condition of the environments that supply fibre, if the industry is further

integrated into international markets and/or the value of the yen declines.

69 These sources state that the ‘cost-of-wood-in-pulp’ for mills in Japan is estimated at US$375 per tonne, while that for a new world-scale pulpmill is US$100-120 per tonne (Ausnewz 2001, Stafford 2001b).

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Chapter 6 - Restructuring domestic supplies of new fibre

6.1 Introduction This chapter begins the analysis of fibre supplies to the Japanese paper industry by

examining the industry’s use of wood from within Japan. It explains how wood

resources in Japan’s forests became the foundation for the industry’s growth before

and after WW2, and how they and the supply systems were restructured to increase

pulpwood supply, but then lost importance as the industry outgrew them.

Forests and plantations cover about 25 million ha (41%) of Japan in four zones –

sub-tropical, warm temperate, cool temperate and sub-alpine (Figure 6.1). The

dominant trees in sub-tropical forests are mainly evergreen broadleaf species, with

some tropical species. Warm temperate forests are dominated by evergreen

broadleaf species, but have been mostly destroyed. The cool temperate forests on the

main islands are dominated by broadleaf species – mainly beech and oak, while on

Hokkaido they mix with conifers from the sub-alpine forest zone. Sub-alpine forests

in Hokkaido and high elevation Honshu are dominated by mixed conifer species with

broadleaf stands in some areas. Plantations primarily comprise two native conifer

species – ‘sugi’ and ‘hinoki’ – valued for high quality timber. Plantation forestry has

a long history in Japan, but most plantations were established after WW2 (Totman

1989, Sasse 1998). Most forests and plantations are privately-owned (Table 6.1).

Most public forests and plantations are managed by Japan’s Forestry Agency (JPA

2001a). Human economic activities have altered the condition of Japan's forests and

their wood resources, but the term 'native forests' is used below to include primary

forests and exploited secondary forests (EAJ 1992).

The chapter first describes the growth and impact of the supply of domestic

papermaking fibres until WW2. For convenience, this discussion also includes

supply from Japan’s then colonies. Then follows a longer examination of pulpwood

supply after WW2, including two case studies of the impacts of fibre supply on

resource management and environmental values. The chapter’s conclusions discuss

the shared and contrasting features of the pre- and post-WW2 periods.

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Figure 6.1: The forest zones of Japan.

Source: Sasse (1998).

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Table 6.1: Ownership of Japan’s forests and plantations at 1996 (millions hectares).

Source: JPA (2001c). Notes: 1. This includes cut-over land, bamboo forests and grasslands.

2. Managed by the Forestry Agency of Japan. 3. This includes areas owned by prefectures, wards and municipal bodies.

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6.2 Fibre supply to World War 2

6.2.1 Establishment of machine-made paper production That the paper industry could grow in Japan as it did to the 1940s depended on two

main factors: land-ownership changes by the Meiji government to help promote

capitalist economic development; and the expansion of the Japanese empire into

north-eastern Asia. As production increased over the ten to twenty years from the

industry’s establishment in the late-1880s, shortages of the initial fibre resources of

cloth and rice straw developed. Domestic papermakers realised that to grow and

compete with imports, they needed wood-based technologies (Suzuki 1967, Ooshima

1991). However, such technologies would not have been successful had not the

Meiji government already forced changes in forest ownership and policy (Tsurumi

1978, Roberts 1989, Ninan 1996). The new structure, including 'national' forests

managed by the Forestry Agency, permitted large-scale forest exploitation (Cox

1988, Funakoshi 1988, Handa 1988b, Kumazaki 1988, Sugahara and Ouchi 1988).70

In 1890, Oji Paper Co. and Fuji Paper Co. built wood-based pulp and paper mills

in rural areas and relied on national forests for supplies of softwood logs that could

be converted by available technologies.71 However within ten years, accessible

resources were becoming depleted. Imported pulp was expensive, and while the

companies established some plantations, it was cheaper to ship logs from Hokkaido

(Figure 6.2). The government encouraged migration, agriculture and industry to

Hokkaido so that Western governments would recognise it as part of Japan.

Exploitation of the island’s forests was promoted, and Honshu-based papermills were

soon the largest users of Hokkaido wood. Soon, pulpmills were established, and Oji

and Fuji dominated industrial wood use (Appendix 5.5)(Suzuki 1967, Ooshima 1991,

Howell 1995). However, Hokkaido's importance for pulpwood declined as Japan’s

empire expanded.

70 National forests included 'imperial' forests that often contained very high quality timber stands. Other forests were owned privately or by local governments (Ninan 1996). 71 The pulping technologies of the time required softwoods - momi (Japanese fir) and tsuga (Japanese hemlock). Although these two species of tree were common on Honshu, they were not easily accessible, nor were they in concentrated strands, but rather dispersed throughout the forests. By the late-1890s and early-1900s, new pulping technologies were being used to process a broader range of Honshu's softwood tree species (Suzuki 1967, Ooshima 1991).

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Figure 6.2: Japan and areas of pulpwood supply referred to in Chapter Six.

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6.2.2 Exploiting resources in the ‘periphery’ By 1910, Japan’s military successes against China and Russia gave it new colonies

of southern Sakhalin Island, Korea and Manchuria, expanding the natural resource

base to which the nation had access. Cloth and straw became of minor importance to

papermakers, and facing more expensive, distant and poorer quality wood on

Honshu, the companies increased their dependence on Hokkaido and Sakhalin

(Figure 6.3). Fuji, Oji and Karufuto Kougyou (Sakhalin Industries) gained long-term

logging rights over national forests, and built pulpmills on Sakhalin from 1914

(Suzuki 1967).

Sakhalin’s forests became the industry's major source of fibre until 1944,

supplying wood and pulp for artificial fibre and paper to mills on Sakhalin, Hokkaido

and Honshu. Through their Sakhalin pulpmills, Oji, Fuji and Karafuto controlled

69% of Japan’s pulpwood output in 1929. They used most of the cheap Sakhalin

wood themselves and restricted sales to competitors who then had to either use more

expensive pulpwood from elsewhere or buy imported pulp. This power was

concentrated when Oji took over Fuji and Karafuto in 1933, gaining a monopoly

over Sakhalin’s forests and domination of pulp manufacture in Korea, Manchuria

and Hokkaido (Suzuki 1967, Shinomiya 1997).

Resource use problems appeared from the mid-1930s. Concerns were expressed

about the condition of Sakhalin’s forests, and wood prices increased. Some

companies responded by purchasing private forests on Honshu or using wood from

sawlog plantations. Also, the worsening political relationship between China and

Japan, and growing pulp imports strengthened the desire for greater resource security

(Suzuki 1967). Pressure increased to restructure the industry's resource base.

Oji responded by researching pulping technologies to expand the range of tree

species that could provide pulpwood. Problems were overcome, so red pine and

some hardwood species were used in limited amounts by 1939. Also, a plan was

developed for future fibre supply that relied on heavily on Manchuria and Sakhalin,

while establishing pulpwood plantations on Japan’s main islands was considered

important. In 1936, Oji sponsored a research expedition to south-east Asia to

investigate the potential for exploiting tropical forests (Suzuki 1967, Ooshima 1991).

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Figure 6.3: Pulpwood supply to Japanese pulp and paper companies from 1913 to 1945.

Source: Suzuki (1967).

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War in China and the Pacific stopped these efforts. Supplies from Manchuria

declined, but Sakhalin and Honshu increased production dramatically. However,

paper production, pulp imports and pulpwood use plummeted after 1941. Until after

the war, logging in Japan proper was primarily for timber production and

reforestation was not given a high priority (Handa 1988b, Iguchi 1988, Matsushita

1988).

Thus by the 1940s, Japan’s growing but highly concentrated paper industry had

become dependent on fibre resources at the empire’s periphery after exceeding the

capacity of closer supplies. WW2 forced the industry’s contraction. However,

ambitious long-term plans dependent on expanding resource access re-emerged as

Japan recovered after the war. Before examining this post-war growth, it is

important to understand the impact on these forests of the pre-war exploitation of

pulpwood.

6.2.3 Impacts on forests For many years, the annual volume of pulpwood taken from Japan’s forests after the

industry began was a very small proportion of Japan’s wood use (Kumazaki 1967).72

Pulpwood supply was the major objective of some logging, but it was also integrated

with other economic activities, such as clearing for agriculture. The intensity of

logging varied as did the type of regeneration, producing a range of impacts.

Ooshima (1991) reported the existence of attractive forests resulting from pulpwood

logging on Honshu. However, in some areas, the impacts were severe.

On Hokkaido, the first pulpmills greatly influenced patterns of wood

exploitation because of their large wood demands. Private forests were purchased,

but often landowners just sold the trees, leaving behind a ‘wasteland’. Forests were

leased or purchased from the government until the early 1920s. Cleared land was

also purchased for plantation establishment (Ooshima 1991).

Forestry dominated Sakhalin’s economy because of the pulpmills. Pulpwood

from national forests was supplied cheaply, and initially, pulp companies had no

obligation to regenerate (Suzuki 1967). Forests were often burnt, but "(e)qually

damaging to the forests was the reckless exploitation of timber". "Within six years

72 In 1943, pulpwood comprised only 3.7% of Japan’s total wood use (Kumazaki 1967).

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(of the first pulpmill), bare hills and log-clogged rivers became a common sight"

(Stephan 1971)(pp.88 & 89).

By the 1920s, Sakhalin’s forests had been devastated by fires, disease and over-

exploitation, so "unscrupulous companies began illegally acquiring land reserved for

agriculture. Pseudo-immigration by hired 'peasants' and the outright bribery of

officials enabled the paper concerns to devastate hitherto protected forests" (Stephan

1971)(p.89). The corruption was exposed in 1924 and the government strengthened

controls on forest use, so over the next fifteen years paper companies were required

to replant. Indiscriminate cutting resumed in the early war years "when the demand

for wood became insatiable” (Stephan 1971)(p.113). The characteristics of resource

degradation and strong company control over fibre supply were features of the

industry’s development after WW2.

6.3 Growth after World War 2

6.3.1 Pulpwood resources and exploitative pressures Pulpwood supply through this period was greatly influenced by the condition of

Japan’s forests and plantations at the end of WW2 and the changing ability of

Japan’s wood-based industries to exploit available domestic and foreign resources.

The priorities and ambitions of the Forestry Agency of Japan were also important.

The following discussion explains how these factors interacted with the political and

economic strength of paper companies to restructure wood resources and the

methods of fibre supply to support changing paper/board production. It also

describes the environmental and resource management implications of these changes

at the local level.

The decline of native softwood pulpwood resources WW2 destroyed Japan’s wood supply, manufacturing and distribution structures.

Large areas of tree-covered land were denuded and needed replanting (Handa

1988a); Sakhalin, Manchuria and Korea were no longer colonies (Murashima 1988).

Japan needed new policies to guide forest use while wood-based industries

reorganised in response to the evolving economic circumstances and changed

resource availability. As pulp and paper mills were rebuilt and restrictions removed

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on production, growing pulpwood demand contributed to pressures for expanding the

exploitation of native forest.73

During the late-1940s, the demand for pulpwood was almost double the

permitted domestic supply, but low on the government’s priority for wood

production. Domestic wood pulp was made almost exclusively from softwoods. The

larger pulp companies expanded their plantations and pressured the government for

greater access to native forests, but they only received small allocations of

hardwoods, which could not be used commercially in large volumes. However,

manufacturing capacity increased beyond the allocations (Hagino 1996), and as

production grew into the 1950s, manufacturers intensified competition for softwood

mining timber logs and sawlogs (Koide 1990, Ooshima 1991).

Domestic forestry became extremely profitable through the 1950s (Kumazaki

1988) because wood demand grew while supply was limited by law or accessibility

(Akai 1988, Handa 1988b, Kawamura 1988, Murashima 1988). Log production in

the early-1950s greatly exceeded estimated growth rates (Matsushita 1988, Ouchi

1988). Pulp and paper companies became more dependent on private forests and

increased their ownership of forests and plantations (Ooshima 1991). They

recognised that softwood resources were limited, and this interacted with changes in

pulp markets and the development of new pulping technologies to impact on forest

exploitation.

Pulp manufacturers continued to pressure the Forestry Agency for greater access

to public broadleaf native forests. In October 1953, the Japan Pulpwood Cooperative

joined with the Japan Flooring Industry Association, the Japan Plywood Industry

Association and the Forest Resources Comprehensive Countermeasures Committee74

to seek increased exploitation of remote forests assisted by stable wood prices,

extension of roads and promotion of the use of beech wood. They also wanted a

sales system that guaranteed specific volumes at low prices. Such a system was

adopted and later became dominated by pulp companies (Koide 1990), as discussed

below.

By the mid-1950s, pulp production was stressed by the increasingly limited

supplies of softwood fibre and growing demands by manufacturers. However, the

73 In 1953, pulpwood consumption was 7.3% of Japan’s total wood consumption (Kumazaki 1967). 74 Forestry historian Hagino Toshio (1996) calls this committee a proxy for pulp capital.

146

situation eased with the salvage logging of forests flattened by a strong typhoon, the

beginning of expanded forest exploitation (Ouchi 1988) and the introduction of new

hardwood pulping technologies (Ooshima 1991).

Forestry in the early post-war years thus came under strong pressure to become

more responsive to growing industrial wood demands and rising prices, and so move

away from its restoration and protection role to increase wood output. Hagino

(1996) argues that the large forest owners and pulp companies played leading roles in

restructuring national forestry objectives. Asset-conserving forestry was derided as

unprogressive, inadequate for changing wood demands and in need of modernisation.

These arguments received political acceptance. Forestry planners decided that

Japan’s future wood use should be able to be supplied domestically. Forestry

objectives shifted to increasing access to public forests and raising the productivity

of Japan’s tree-covered lands. In 1957, the national government introduced its plan

to increase the productivity of the nation’s forests. This included the conversion of

broadleaf forests to softwood plantations and the logging of accessible forests to 600

metres above sea level (Ouchi 1988, Sugahara and Ouchi 1988, Shimotori 1992).

More hardwood pulpwood was sourced from increased forest logging plus plantation

expansion.

Japan’s softwood plantation program The plan for expanding softwood plantations was based on using private forests close

to urban areas and less-accessible, more distant, but mainly public forests.

Plantations were then planned to cover 8 million ha of private land and 3 million ha

of public land by 1995 - about 45% of Japan’s tree-covered area (Yamauchi 1971,

MAFF 1996a).

Plantation expansion was directed by: expectations of future wood use; the high

profitability of forestry in the 1950s, which was expected to continue; and the

expanding demand for hardwood pulpwood (Matsushita 1988, Ouchi 1988, Sugahara

and Ouchi 1988, Robertson and Waggener 1992).75 Government subsidies and loans,

and profit-sharing schemes between companies, landholders and afforestation groups

helped promote plantation establishment. Also, in 1957 MITI directed that

75 Japan’s total industrial wood demand was expected to be 136 million m3 in 1995 and the expanded plantation area was to make Japan about 80% self-sufficient in industrial wood fibre (Yamauchi 1971).

147

paper/board companies establish their own plantations to support capacity

expansions (Iguchi 1988).

According to a former Forestry Agency official, at the beginning of the

plantation expansion, native broadleaf trees were given away free to papermakers as

they were regarded as waste, although as demand increased and their economic value

was realised, a price was imposed. Forestry planners apparently expected that when

new plantings stopped and hardwood supplies became limited, the paper industry

would revert to using softwoods; they foresaw no technical or economic problems

(Morimoto 1997). Yet, the main species used for plantation expansion - sugi and

hinoki - are not favoured for pulp production (Oye 1993).76

Company forests and plantations Pulp and paper companies had been purchasing forests and plantations through the

1950s (Ooshima 1991). They were the largest recipient of loans from the

Agriculture, Forestry and Fisheries Finance Corporation for plantation establishment

until 1965, and used them to fund the conversion of native forests to plantations of

suitable softwoods (Iwai 1988). They also sought the introduction of laws

facilitating land acquisition and profit-sharing plantation schemes (Iguchi 1988).

With the introduction of legislation to encourage profit-sharing plantation

schemes in 1958, it was expected that pulp companies would participate as capital

suppliers. This occurred for a few years. The area of forests and plantations owned

by paper companies grew from 98,000 ha in 1946 to 251,000 ha in 1960. However,

over the next ten years, it grew to only 285,000 ha before declining slightly

(Ooshima 1991). The companies lost interest in plantation establishment because of

worsening economic conditions, higher plantation establishment costs and the

expanding availability of alternative cheaper domestic and foreign pulpwood (Handa

1988b, Iguchi 1988).

New technologies and the shift to native hardwoods During the 1950s, the industry introduced several new technologies that allowed it to

expand production by exploiting untapped hardwood pulpwood in native broadleaf

forests. From 1951, pulp manufacturers began installing Swedish-made Kamyr

digesters for continuous pulp production (Shinomiya 1995). This pulp was cheaper

76 In 1986, of the softwoods taken from Japan’s forest and plantations for pulp, none were sugi or hinoki and only 11% of woodchips were sugi or hinoki (Robertson and Waggener 1992).

148

than that from batch cooking, and manufacturers could integrate pulp production

with paper/board production to avoid competitive pulp markets (Ooshima 1991).

However, continuous digesters required large production runs and large volumes of

wood from one or similar tree species (Aldwell 1988), which meant companies

needed large wood supplies.

Before the war, kraft pulping technology had been modified for Japan’s

broadleaf species, and was used commercially for paper production from 1952. It

became the dominant pulping process over the next twenty years, and the use of

other pulping technologies that could handle native hardwoods also grew. Hardwood

pulpwood provided other benefits to paper manufacturers. Compared with softwood

pulpwood, it was cheaper – at least until the early-1970s - and less was needed to

produce a unit of several pulp types (Ooshima 1991, Shinomiya 1995).

These new technologies assisted the growth of pulp and paper markets, and

allowed manufacturers to exploit a new cheap fibre resource at a time when Japan’s

economy was about to grow rapidly. More wood was needed, and the widespread

application of woodchipping technologies helped reduce costs and access fibre. The

industry’s intake of chips began in a large way from the late-1950s (Figure 6.4). The

technology was first applied to sawmill wastes (Ooshima 1991, JPA 1997a), and then

to forest logs as pulpwood demand increased (MAFF 1997).

Native forest logging for hardwood pulpwood The restricted supply of native softwood pulpwood from the late-1950s was offset by

the use of native hardwood pulpwood from the early 1950s (Figure 6.4). To meet the

industry’s growing wood demands, the national government advanced the

exploitation of unlogged forests by funding road construction and promoting

mechanised logging.77 The output of national forests increased markedly and the use

of clearcut logging expanded (Yorimitsu 1988).78

77 For example, the plan to construct 440 kilometres of forest roads in the four prefectures of Nara, Wakayama, Mie and Tokushima between 1956 and 1958 was justified by pulpwood shortages and the increasing demand for hardwood pulp (Kawamura 1988). 78 The use of clearcutting increased from the late-1940s to the mid-1950s (25% to 40%) while the use of selective cutting, and successive-regeneration (shelterwood) cutting declined (53% and 22% to 46% and 14% respectively) (Kurimura 1988).

149

Figure 6.4: Pulpwood and woodchip supply within Japan from 1954 to 1970.

Source: MAFF (1972).

150

By 1964, the target plantation area had become 56% of Japan’s tree-covered

area. However, domestic forestry’s profitability worsened through the 1960s

because of higher costs, changing wood use79 and growing log imports.80 Also,

public disapproval of large-scale clearcutting was growing, so emphasis shifted to

managing existing plantations (Handa 1988b, Kumazaki 1988). Plantation

establishment declined, the national forests began losing their importance in the

timber market and the Forestry Agency’s long period of financial losses began in the

late-1960s. The government then aimed to use the construction of forest roads for

regional development, which stimulated the extension of roads into more remote

unexploited forests, especially for pulpwood (Handa 1988b, Kawamura 1988).

Many national forests were in such areas, and their output increased steadily to the

early-1970s supported by management and log sales policies (Koide 1990), as

discussed below.

As regional pulpwood supplies became committed through the 1960s, pulp and

paper companies shifted into areas with available forests, for example north-eastern

Honshu (Tohoku), which contains 25% of Japan’s forests, of which 70% are

publicly-owned. However, companies expected pulpwood supplies from public

forests to become restricted (JP&P 1967a).

The role of Japan’s native fuelwood forests declined rapidly from the early-

1960s with the increasing use of fossil fuels. Native broadleaf forests were a

relatively small supplier of sawlogs and plylogs compared to softwood plantations

(MAFF 1962, 1997),81 and the growing production of broadleaf pulpwood as

woodchips and pulplogs exceeded that of broadleaf sawlogs and plylogs in the early-

1960s. Sawlog output began to decline in the late-1960s. However, pulpwood

79 The use of wood-based products in Japan - timber, fuelwood and charcoal, as well as paper - began to change dramatically from the mid-1950s. Changes in the use of sawn timber and plywood were caused by several factors. They included: a reduction in the growing stock of domestic forests caused by previous overcutting; rising forestry establishment and tending costs (particularly because of more expensive labour); government decisions to promote timber imports; plus, the ability to purchase large volumes of relatively cheap foreign temperate and tropical logs (and to a lesser extent processed timber) from eager sellers with the assistance of Japan’s general trading companies (Handa 1988b, Kumazaki 1988, Morita 1988, Murashima 1988, Nectoux and Kuroda 1989, Dauvergne 1997b). The demand for fuelwood and wood for charcoal fell by 92% to the early-1970s as Japan’s energy supply shifted to imported fossil fuels. Also, the demand for other forest products fell substantially (Matsushita 1988), as steel or concrete products replaced wooden railway sleepers, mining timbers and telegraph poles (Kumazaki 1988). 80 The size of this increase in timber imports was not anticipated by forestry planners who had seen only minor changes in imports after tariffs on foreign wood were removed as part of the post-war reconstruction program (Morimoto 1997).

151

output, especially for woodchips, increased until the early-1970s dominating

production from Japan’s forests (Figure 6.5). Forest logs became the primary source

of hardwood chips (Figure 6.6).

Resource supply, costs and planning Pulpwood costs were the primary factor increasing resource costs of the paper

industry until at least the early-1970s (Narita 1980). The price of domestic softwood

pulpwood increased from the 1950s through to the early-1970s. Hardwood

pulpwood was cheaper than softwood pulpwood in the late-1950s, but this advantage

shrank through the 1960s as demand increased (Figures 6.7 and 6.8). In the mid-

1960s, pulpwood comprised about 50% of pulp production costs and the industry

used this to justify the need for pulp and paper tariffs (JP&P 1966d). In 1962, all

paper grades were reported to be unprofitable because of low paper prices and

expensive pulpwood (Sugaya 1964a). However, the shift to hardwoods was

estimated to have reduced wood costs for a range of papers by an average of 30%

between 1955 and 1965 (Narita 1980).

Efforts to increase pulpwood supply and reduce costs in the early-1960s were

considered within the industry to be insufficient as companies were reported to be

unable to supply their wood demands even in highly-forested Hokkaido (JP&P

1965c). The Comprehensive Forest Policy Council, which advised MAFF, estimated

large volumes of pulpwood could be supplied if the forest road network was

maintained (Maruyama 1966), and the paper industry lobbied the Forestry Agency to

extend roads into unexploited forests (JP&P 1966d).

The claim was also made in the mid-1960s that the paper industry was in the

process of reorganising its domestic wood supply system so that by the mid-1970s

fibre supply would no longer be a problem. However, woodchip imports began, and

the strong expectation within the industry was that the only feasible long-term

solution to fibre shortages was to use more foreign wood. Also, there was concern

that foreign pulp and paper makers would target Japan (JP&P 1965c, Maruyama

1966).

81 For example in 1960, Japan produced 28.39 million m3 of softwood sawlogs and plylogs, but only 5.96 million m3 of hardwood sawlogs and plylogs (MAFF 1962, MAFF 1997).

152

Figure 6.5: Hardwood product output from Japan’s native broadleaf forests.

Sources: MAFF (1962, 1999).

153

Figure 6.6: Sources of hardwood chips in Japan.

Sources: MAFF (1997), JPA (2001a).

154

Figure 6.7: Prices for hardwood and softwood pulpwood in Japan from 1952 to 1976.

Sources: MAFF (1972, 1982).

Note: Prices were converted to 1995 values using the Consumer Price Index for Japan (MPMHAPT

2002).

155

Figure 6.8: Relative prices for hardwood and softwood pulpwood in Japan from 1952 to 1976, based on Figure 6.7.

156

In the early-1970s, domestic wood was still regarded within the industry as the

basis for planning future fibre supplies. The 1972 ISC report for MITI on the

industry’s future expected that domestic pulpwood use would increase through the

1970s but saw supplies being restricted over the long term. It decided that the

industry should maintain a strong demand for local pulpwood to assist domestic

forestry (JP&P 1972b, 1973l, 1973q). Thus by the early-1970s, the industry was

feeling the limits of domestic pulpwood supplies and pushing for greater access to

domestic forests. As seen in the following chapters, pressures also increased for

greater use of foreign fibre and domestic recovered fibre, and the use of domestic

hardwood pulpwood declined.

The decline of domestic hardwood pulpwood The use of domestic pulpwood became greatly influenced by the convergence of

several factors in the early-1970s. In 1973, the government auditor criticised the

Forestry Agency for selling wood from national forests to pulp and paper companies

without tender. This combined with concerns over the Agency’s growing financial

losses and community pressure for more forest protection. Consequently, the

Agency introduced new national forest management policies incorporating

reductions in log output and changes to the wood sales system (Narita 1980, Fukao

1988, Kawamura 1988, Yorimitsu 1988). Also, after a short period of high paper

demand and high wood prices (Narita 1980) as well as the 1973 ‘oil shock’, Japan

became increasingly dependent on relatively cheap foreign logs, timber and

pulpwood provided through supply networks controlled by GTCs (Matsushita 1988,

Morita 1988, Dauvergne 1997b, JAWIC 1997).

Japan’s wood use and forestry changed significantly (Narita 1980, Ishii 1992).

The profitability of domestic forestry plunged, and new plantation establishment

began to fall (Handa 1988a, Iguchi 1988). The total production of native broadleaf

logs declined, but pulpwood production as a proportion grew. The use of public

broadleaf forests declined and the paper industry’s dependence on private forests

increased. The importance of domestic hardwood pulpwood declined with growing

hardwood chip imports (Narita 1980, Koide 1990). Nevertheless, criticism over the

environmental impact of logging continued (Handa 1988a, Iguchi 1988, Kurokawa

1988, Yorimitsu 1988).

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The decline in the use of domestic pulpwood slowed during the 1980s,

particularly from the mid-1980s with a jump in imported pulp prices (JP&P 1985e),

higher paper demand, expanded manufacturing capacity and better paper company

profits. The rate of plantation establishment continued to fall, so forest logging was

being driven to a great extent by more immediate pulpwood demands (Figure 6.9)

(Hirofumi 1990). However, the price of imported hardwood chips fell through the

1980s (Figure 6.10), so increasing competitive pressures on domestic chipmillers.

The chipmillers’ situation worsened in the early-1990s with the slump in the paper

industry. They were stuck in a cycle whereby the relatively higher costs of domestic

pulpwood contributed to the paper companies’ declining use of their products,

further reducing the chipmillers’ production, so adding to cost pressures and the

industry’s preference for foreign chips (Akai 1993).

The overall importance of domestic hardwoods to the paper/board industry

shrank from 41% of the industry’s pulpwood intake in 1971 to 10% in 1999 (JPA

2001c). However, pulpwood comprised 80% of the broadleaf forest industrial wood

output, most of which was from private forests. Now, maintaining a supply structure

for hardwood pulpwood provides paper companies with security for times when

supplies of foreign fibre are limited. This substantial fall however contrasts with the

change in ‘domestic’ softwood pulpwood use.

Softwood pulpwood supply The industry’s sources of softwood pulpwood diversified in the late-1950s from

native forest logs to include suitable plantation logs and woodchips. However, its

primary source of softwood pulpwood has been sawmill chips (Figure 6.11), and

contrary to the expectation of forestry planners in the 1960s, the paper industry is not

heavily using domestic softwood plantations. This raises important issues related to

the management of domestic softwood plantations, the supply of sawmill chips and

long-term softwood pulpwood use.

Sawmills are an attractive source of chips because wood and transport costs are

less important than forest logs, although chip supply and demand imbalances may

occur if sawlog processing declines (Akai 1993). However, most chips come from

sawmills converting softwood logs that are imported to supply sawntimber.

Imported logs comprise about 52% of logs processed domestically for timber (JPA

2001a). In the late-1960s and early-1970s, log handling facilities and large sawmills

158

Figure 6.9: The establishment of new plantations and the production of hardwood pulpwood in Japan.

Source: JPA (2001a).

159

Figure 6.10: Nominal and real prices for domestic and imported hardwood chips in

Japan.

Source: JPA (2001a).

Note: Prices were converted to 1995 values using the Consumer Price Index for Japan (MPMHAPT

2002).

160

were established at Japanese ports and adjacent industrial estates to process imported

logs. They produce large volumes of relatively cheap uniform timber, so paper

companies were not reliant on expensive chips from inland sawmills and forestry

operations. Manufacturers could access concentrated sources of cheap woodchips so

reducing chip production and transport costs (Narita 1980).

These ‘domestic’ softwood chips compete directly with imported softwood

chips. Production increased after the 1973 ‘oil shock’, then fell through the 1990s as

softwood log processing declined (JPA 2001a) (Figure 6.12). The total volume of

sawlogs and plylogs imported into Japan increased to 1980, but then declined as

imports of processed timber increased (Matsushita 1988, JAWIC 1997). The JPA

expects that the supply of softwood sawmill chips will become tighter (JapanC

2000), but the extent will depend on the proportion of available chips currently used.

The very small role played by paper company forests and plantations in the

supply of softwood pulpwood declined even further after 1973. Their total area

remained relatively constant at about 270,000 ha, but the area logged fell

dramatically from 1984 (JPA 2001a). The standing volume of wood in these forests

and plantations in 1997 was 33.5 million m3 (JPA 2001a), so they could not provide

the equivalent of one year’s total pulpwood supply to the industry.

A particular problem for the management of Japan’s plantations has been the

low demand for small logs, often used as pulpwood. Steep terrain, expensive labour,

ownership diversity and the small size of private plantations makes such wood

expensive (Robertson and Waggener 1992). Also, the two main plantation species

are not preferred for pulping.82 By the end of 1989, about 1.9 million ha of

plantations urgently needed thinning to encourage growth of the remaining trees, but

only 310,000 ha was thinned in 1988, and there was concern that their capacity for

protecting soil and water would decline (Ito 1988, EAJ 1992). This problem

continues (CFA 1997).

Thus, paper companies: abandoned earlier moves to expand the area of domestic

softwood plantations under their ownership or control and did not reorient supply to

use expensive domestic softwood pulpwood resources as forestry planners

82 However, Nippon Paper was reported to have based expansion of some pulping capacity on the supply of Japanese cedar sawmill chips (PPI 1996c).

161

Figure 6.11 Sources of softwood chips in Japan.

Sources: MAFF (1997), JPA (2001a).

162

Figure 6.12: Nominal and real prices for domestic and imported softwood chips in Japan.

Source: JPA (2001a).

Note: Prices were converted to 1995 values using the Consumer Price Index for Japan (MPMHAPT 2002).

163

unrealistically anticipated. Instead, manufacturers rely on cheaper sawmill chips

mainly from domestically processed imported sawlogs. This helped restrict

plantation exploitation, while more imports of processed timber could restrict future

sawmill chip supplies and increase pressure for greater softwood chip imports.

Control over domestic supply chains continues to be important to manufacturers.

6.3.2 Restructuring pulpwood procurement - ‘keiretsu’ control Pulp and paper manufacturers began increasing their control over pulpwood supply

systems from the 1950s. According to Ooshima (1991), during the early-1950s, they

directed logs away from previous uses to pulpmills by bringing sawmillers and

loggers into their pulpwood supply systems through financial assistance and log

trading.

From the mid-1950s, rationalisation of sawmills encouraged the economic use of

sawmill chips. However, pulp companies had few direct links to the chipping

process, so began planning to use Japan’s network of sawmills to increase chip

supply, particularly cheaper hardwood chips. The hardwood industry was small, and

pulp companies competed for control over sawmills, pulpwood producers and

collectors. They gained influence over these businesses by bringing them into their

company group (‘keiretsu’) through: the provision of loans; supply of machinery and

materials; dispatch of staff for quality control and advice; and setting purchase

volumes and prices for chips (Narita 1980, Koide 1990). In 1979, financial

assistance by papermakers to chipmills totalled ¥13.2 billion (JP&P 1981b).

Pulp manufacturers could sell wood to these sawmills and chipmills for chipping

and repurchase, or use the mills to purchase forest logs. Pulpwood supply became

integrated with timber distribution, so pulp companies used their capital strength to

restructure wood supply, processing and distribution to reduce costs as their needs

changed. They could trade resources with smaller logging and sawmill companies,

shift the functions, risk and costs away from themselves onto other companies, and

then, using corporate and/or financial links, promote efficiencies and task

specialisation to reduce the sub-contractor’s costs. The manufacturers established

core areas of pulpwood supply to limit competition, and their ability to influence

domestic chip supply strengthened as foreign chips became cheaper and imports

increased (Narita 1980, Koide 1989, 1992, JPA 2001a).

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Thus, through their keiretsu, pulp companies could optimise the structure of

wood supply for their benefit. However, beyond this, there was also another level of

cooperation to regulate pulpwood prices. In 1970, 32 pulp-related companies formed

the Joint Pulpwood Purchasing Co. to ensure “reasonable prices” for pulpwood

(JP&P 1970e). National forests became important, particularly in Hokkaido and

Tohoku, as they were a relatively stable source of pulpwood for many years (JP&P

1975g).

National forest pulpwood supply The wood output of national forests grew after the release of the 1957 plan to

increase forest productivity, and by 1965 was twice the earlier sustained yield. This

high rate of logging was credited as resulting not just from implementation of

management objectives, but also the method of selling logs. Pulp and paper

companies received ‘privileged cheap sales’, primarily of standing trees through

designated contracts and nominated contracts. These methods limited competition

for wood that might have increased prices, so helped paper manufacturers control log

distribution (Narita 1980, Koide 1990).

There were three basic contract types for the sale of wood from national forests

(Narita 1980, 1999):

• ‘General competitive contracts’, using a bidding system for which any wood

business could submit a tender;

• ‘Designated contracts’, for which the forestry service and a specific company

would negotiate a contract; and

• ‘Nominated contracts’, for which participants, chosen by the forestry service,

would compete through a bidding system.

Designated contracts were supposed to be used in limited conditions - when a

forest was in need of special protection - and specific methods had to be used to cut

the wood; or, when a local business that used resources from a national forest was in

need of special assistance. In the case of mixed broadleaf-conifer forests, these

contracts were often provided to ‘cooperative purchases’ where different companies

worked together. However, paper manufacturers came to rely heavily on ‘designated

contracts’ and received many ‘nominated contracts’. They were also involved in

‘cooperative purchases’ using their capital strength to control resource disposal,

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rationalise wood supply operations and increase economies of scale. In Hokkaido,

where national forests formed the basis of pulpwood supply, ‘designated contracts’

supplied 85% of pulpwood sales in the early-1970s (Narita 1980, 1999).

More conservative management of national forests from 1973 reduced wood

output. Also, Japan’s Forestry Agency was stopped from negotiating contracts with

paper companies in 1976 after criticism from the government’s auditor. “Limited

public sales”, including competitive tendering, increased, and authorised chipmillers

were permitted to participate. However, as chipmillers were usually in a paper

company keiretsu, papermakers maintained an influence. At this time, the expansion

of competitive woodchip imports destabilised domestic pulpwood markets by

restricting price increases.

In response to these changes, paper companies increased their dependency on

private forests and foreign woodchips. This allowed them to avoid reviewing

pulpwood prices and escape criticisms that they were destroying Japan’s native

forests and were too close to the Forestry Agency, which was in serious debt (Narita

1980). However, control of domestic chipmills by paper companies through their

keiretsu remained important for regulating woodchip supply and prices (JP&P

1977b, Koide 1989).

Chipmill numbers and employment There are two kinds of chipmills - those attached to sawmills and ‘stand-alone’ mills.

‘Stand-alone’ chipmills primarily chip hardwood logs; attached mills mainly chip

wastes from softwood sawmills (Akai 1993). Detailed national data on the relative

changes in chip production by these mills is not available. However, during the late

1960s more large stand-alone mills were used to increase chip supply in Hokkaido

(Narita 1980).

The number of chipmills grew steadily through the 1960s before declining, but

mill employment declined from the mid-1960s. Production declined from the mid-

1970s (Figure 6.13), so by the late-1990s, chipmill productivity had increased

substantially. In 1999, paper/board companies consumed 78% of domestic

pulpwood production (JPA 2001a), so they dominated the future of chipmills.

166

Figure 6.13: The number, employment level and production of woodchip mills in Japan.

Sources: Matsushita (1988), MAFF (1996b), JPA (2001a).

167

A report prepared for woodchip producers in the early-1990s on their economic

situation (Akai 1993) argued that their future depended on their ability to respond

quickly and appropriately to their changing commercial environment. This required:

better supply/demand information for which they had been reliant on the paper

industry; better industry statistics; cooperative action so that they could act as a

group; cost reductions; development of new markets; and improvement in working

conditions. Thus, the future did not look promising, and their economic strength

declined as paper companies used more recovered fibre and foreign wood, as

discussed in Chapters Seven and Eight. The environmental impacts from domestic

pulpwood logging also changed with the composition of fibre supply.

6.3.3 Pulpwood logging, resource management and environmental impact The expanded exploitation of forests from the late-1950s generated great public

criticism of Japan’s forestry policies (Handa 1988a). The Forestry Agency was

targeted for its unsustainable management of national forests (Yorimitsu 1988), its

growing financial losses and wood sales policies that were seen to benefit pulp and

paper companies (Narita 1980).

The new national forest management plan introduced in the early-1970s reduced

logging rates, changed logging practices and placed more emphasis on management

for public benefits, including expanded national parks (Narita 1980, Fukao 1988,

Kawamura 1988, Yorimitsu 1988). In the national forests, logging declined (Koide

1990), and in Hokkaido and Tohoku, selection logging systems replaced some

clearfelling (Hiyane 1993).

However, although wood production declined, the area of unlogged native

forests shrank, while logging was excluded from only small areas of ‘protection

forests’ (Yorimitsu 1988) and continued in some national parks.83 Forest

conservation concerns continued, but it appears that substantial areas of public

forests were not reserved until the late-1980s, when domestic forestry was declining

83 ‘Protection forests’ (forests in which management for soil and water protection was given major importance) increased in area from 4.05 million ha to 7.52 million ha between 1963 and 1983, but the area in which all logging was prohibited was only 210,000 ha, while selective logging was required in 1.65 million ha (Yorimitsu 1988). ‘Protection forests’ totalled 8.98 million ha in 1994, and Zorn (1996) argues that: the function of this forest designation is unclear; management of these forests has been dominated by an economic perspective; there is “no interest” in applying such a designation over forests that have good economic forestry potential; regulation of water conservation forests is weak;

168

and much virgin forest had been logged (Suzuki 1986, Koide 1990, Nicol 1990,

Penna 1991, Mitsuda and Geisler 1992, Yoshida 1996, Natori 1997).

Two case studies illustrate how the national trends comprised significant local

changes. The first describes the processes by which pulpwood production dominated

regional forest exploitation. The second explains the impact of pulpwood logging on

wildlife, but the pattern of logging in this example is similar to the first. Despite

widespread logging, detailed studies of its impact on flora and fauna seem rare. Only

one such research project could be found.84

Native forest logging in Nagano prefecture Ariki (1985) exposed the processes by which papermakers dominated logging and

wood supply from native broadleaf forests of northern Nagano prefecture in central

western Japan from the 1950s to the 1980s (Figure 6.2). At the time, about 75% of

these forests were privately-owned, but public forests were more economically

attractive because they contained higher densities of commercial wood than private

forests that had been heavily exploited for fuelwood.85

After WW2, Nagano’s forests were logged on a small scale for charcoal

production and wood for skis, laquerware and carving. Large-scale exploitation of

northern Nagano’s public broadleaf forests began in the early-1950s, after Oji Paper

opened a papermill on Japan’s Pacific coast. From the mid-1950s, other paper

companies began taking hardwood pulpwood, so in 1960, they agreed to avoid

competition by restricting their logging to specific areas. It appears that Jujo and

Honshu had left the area by the early-1980s, but Hokuetsu Paper joined with a local

wood-using company during the 1970s after changes in the national forest wood

sales system prevented paper companies using negotiated contracts.

Through the mid-1960s, sawlogs were the largest product from Nagano’s public

native forests, but sawlog output declined as pulpwood production increased. The

supply of both declined from the early 1970s (Figure 6.14). These trends express the

operation of logging and timber processing primarily in the interests of papermakers.

and Japan’s Protection Forest Policy is influenced by the potential for conducting erosion control engineering work. 84 I questioned various forestry and wildlife researchers about the existence of detailed studies of the impact of pulpwood logging on forest values, but could not find other relevant work. 85 Private forests had an average standing volume of 50m3/ha versus public forests with 142m3/ha (Ariki 1985).

169

Figure 6.14: Wood-based industry log supply centred on public forests in Nagano Prefecture from 1963 to 1983.

Source: Ariki (1985).

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On entering Nagano, paper companies linked into the local hardwood industry

via logging contractors whom they brought into their keiretsu. The main objective of

the logging companies became pulpwood supply, and some established woodchip

mills with the financial assistance of paper companies. Also, some began sawing

higher quality logs removed with the pulpwood. With its relatively large wood

demands, Oji developed the strongest wood distribution network. For example, in

1981 its group bought 71,750 m3 of logs, of which 78% were hardwood. Sixty

percent of the hardwood logs became pulpwood and were sold to Oji, while 40%

went to sawmilling. In 1981, the Hokuetsu group bought 24,670 m3 of wood.

Almost all the logs came from private forests; 80% became woodchips and 20%

went to sawmills. However, only about 30% of the final output went to Hokuetsu,

the remainder going to other companies, including Oji.

The high rate of logging from the 1950s created sawlog shortages by 1970.

Wood prices increased and sawmillers used more logs from outside the prefecture.

Also, the paper companies’ greater use of imported woodchips reduced the demand

for Nagano’s pulpwood, affecting the whole local industry. Logging slowed and the

supply of sawlogs declined, contributing to price increases. The first ‘oil shock’ in

the early-1970s added to cost pressures, but the ability to increase prices for timber

products was limited. The second ‘oil shock’ and poor economic conditions in the

early-1980s also reduced demand. Rationalisation left sub-contractors with little

support, but papermakers helped those companies in their ‘keiretsu’ to restructure

and base their operations on supplying woodchips.

The high rates of logging combined with plantation establishment to severely

affect regional wood resources. By 1970, accessible forests had been cut over except

for two areas. The volume of logs removed from one district in northern Nagano

during 1981 was estimated at four times the growth rate, while the prefecture’s beech

wood resources were expected to be depleted early in the 21st century.86 This

example of rapid forest exploitation illustrates the national trend by which

papermakers organised logging and wood supply to primarily suit their interests.

Such logging also had substantial impacts on wildlife, as the second case study

shows.

86 In 1994, all broadleaf log removals from Nagano prefecture totalled 95,000 m3 (MAFF 1996c), about 2/3 of total output in 1983.

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Pulpwood logging and faunal impact Pulpwood logging has adversely affected the forest wildlife of Amami Island in the

Nansei Archipelago, south of Kyushu (Figure 6.2) (Sugimura 1988, 2000, Sugimura

et al 2000). This island has broadleaf forests, and some were selectively cut for

sawlogs early in the 20th century. However, the old forests in the island's centre

were fairly undisturbed until the mid-1950s, when construction of new logging roads

began as part of the island’s economic recovery project.

The pattern of logging from the mid-1950s was similar to that in Nagano.

Sawlogs were the main initial product, but rapidly declined as pulpwood dominated

forest production (Figure 6.15). It was planned to log the forests once by the year

2000 to maximise wood production, forest engineering works and logging-related

activities. By the mid-1980s, clearfelling had reduced primary forests and secondary

forests from earlier logging to about 2.6% of the island’s tree cover (Figure 6.16).

Construction and public engineering works were important to the local economy and

heavily dependent on funding from local and national governments. This money was

important for exploiting the island’s forests as it financed logging roads and forest

engineering works for erosion and flood control. In 1983, 79.5% of government

expenditure on the forestry sector was for logging roads (Sugimura 1988). This

counteracted the high cost of transporting wood to pulpmills on Japan’s main islands.

Government expenditure on forestry construction activities grew from the mid-

1950s, and began to increase more in the late-1960s as sawlog supplies fell. It then

jumped in the early-1970s after the first ‘oil shock’ when sawlog output declined

even further. As total wood production was much lower from this time, the support

per unit of total forest economic output grew and eventually government expenditure

exceeded the value of all commercial forest products, including plants and animals.

However, this economic activity was at the expense of local fauna.

Sugimura (1988) determined the impact of this logging on wildlife endemic to

the Nansei Archipelago by comparing their abundance in different successional

stages of the forests. All the species he studied are ‘natural monuments’ - a status

that protects them from hunting and collecting, but does not protect their habitat. In

the mid-1980s, Amami’s central mountainous region contained a mix of regrowth

forests and most of the island’s remaining mature forests. The regrowth was mostly

172

Figure 6.15: Log production from broadleaf forests on Amami Island.

Sources: Sugimura (1988, 2000).

173

Figure 6.16: Clearfelling on Amami Island.

Photograph generously provided by Sugimura Ken.

174

regeneration from logging, but characteristics found in primary forests were expected

to take more than 100 years to return. The research concluded that:

• clearcutting had substantially reduced the populations of the Great White's

Thrush, Owston Whitebacked Woodpecker and the Long-haired Rat, so if the

remaining primary and old secondary forests forest were clearfelled, then these

species would probably not survive;

• the impact of clearcutting had not been as great on the Ryukyu Robin, but if the

loss of mature forest continued, numbers would decline considerably, although

small populations might survive in secondary forests;

• the Amami Rabbit may have been favoured where logging created a mix of

mature and regrowth forests, although the further loss of mature forests would

probably reduce its population ; and

• impacts on the Purple Jay and Spinous Rat were not obvious, so short rotation

management was not expected to greatly affect these species.

Thus, clearfelling of Amami Island’s forests for pulpwood reduced the

populations of endemic, protected wildlife. Continued rapid logging was expected to

further reduce their numbers, threatening some with extinction, and recent research

(Sugimura et al 2000) concluded that the number of Amami Rabbits has declined.87

6.4 Conclusions The history of supplying domestic pulpwood to Japan’s papermakers is one that

reflects the companies working to exploit wood resources as cheaply as possible

through the restructuring of wood resources and supply systems within the context of

changing resource availability, product demand, competitive pressures, government

policies and technological changes. Within this process, the industry’s early history

and that after WW2 show important common themes, while having their own

specific features. The characteristics of the domestic wood resources are a major

influence.

In both periods, government action changed the characteristics of the resource

base upon which the industry based its growth, but the nature of that action was

87 The introduced mongoose eats the Amami rabbit and probably contributed to this decline by using forest roads to extend its range (Sugimura et al 2000).

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different in each period. Expansion to WW2 was permitted first by the restructuring

of land ownership by the Meiji government, then by Japan’s military expansion into

north-eastern Asia. After WW2, the industry’s growth was permitted when the

government removed traditional ‘sustained yield’ management, introduced the

softwood plantation program and expanded forest logging to increase wood

production. Pulp and paper interests contributed to the pressure for these policy

changes. Government also provided financial encouragement for plantation

expansion, and MITI required plantation establishment by papermakers wanting to

increase production.

In the early stages of both periods, the application of innovative pulping

technologies freed the industry from the restrictions of limited fibre supplies

allowing production to grow. In the late-19th century, the use of wood-based

pulping technologies overcame the limits of cloth and straw supplies. After WW2,

the commercialisation of hardwood pulping technologies and the dispersion of

woodchipping technology expanded the industry’s potential resource base beyond

limited and expensive native softwood supplies.

In both periods, pulpwood logging expanded to include the available geographic

range of wood resources. The first wood-based mills soon depleted nearby supplies.

Companies made small attempts to establish their own plantations, but preferred

cheap wood at the periphery of Japan’s empire supported by government

developmental policies. After WW2, papermakers exploited wood resources made

available by the restructured forestry policy. Papermakers initiated their own

plantation ventures, but then abandoned expansion when new technologies and

forestry policies allowed them to increase the use of hardwood resources.

Consequently, pulpwood supply came to dominate wood production from Japan’s

broadleaf forests.

Publicly-owned national forests were important sources of pulpwood in both

periods. They provided the first wood supplies to pulpmills, and were important for

expanding pulpwood production from Hokkaido and Sakhalin. From the late-1950s

until the early-1970s, they were a stable and expanding source of hardwood

pulpwood. Pulpwood supply dominated wood production from national forests, and

papermakers received large volumes of cheap pulpwood through negotiated or

limited-tender contracts that supported high rates of logging.

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The importance of softwood pulpwood supplies shifted between the two periods.

Softwoods were the only source of pulpwood throughout the first period. After

WW2, as native softwoods became limited, manufacturers increased their use of

cheaper softwood sawmill chips, much of which came from imported logs processed

in Japan. The ability to use these chips depends on foreign resource regimes from

which the logs come and the supply system that brought them to Japan. If imports of

sawntimber continue to increase, access to such chips could be restricted or shrink,

stimulating a shift to other fibre resources. The exploitation of domestic softwood

plantations for pulpwood is still not large because species are not favoured and

logging costs are high. It is unlikely these plantations will be used much without

significant economic changes.

The limits of domestic pulpwood resources within then technological and

economic contexts were recognised in both periods. Whereas plans to extend the

industry’s use of foreign resources was interrupted by WW2, the post-war overseas

expansion occurred. The use of domestic hardwoods declined from the early-1970s

as manufacturers increased their use of foreign wood and national forest policy

changed in response to criticisms over high rates of logging, pulpwood supply

contracts and the environmental impact of logging. Domestic hardwoods now

supplement foreign supplies.

In the post-war period, wood distribution systems were restructured to meet the

papermakers’ interests. Pulp and paper manufacturers brought loggers, sawmillers

and woodchip producers into their ‘keiretsu’ to ensure control over wood supplies,

quality and price, and used them to acquire pulpwood. Competition from foreign

chip supplies forced domestic chipmillers to rationalise, shed employment, increase

productivity and reduce output. The economic and political strength of domestic

chipmillers in the wood supply chain is weak.

Government organisation, expenditure and financial assistance of various kinds

has been important for accessing domestic pulpwood resources, but the monetary

value cannot be determined. To some extent, it would be reflected in the enormous

loss accumulated by Japan’s Forestry Agency of ¥3.3 trillion at 1995 (CFA 1997).

At the base of domestic pulpwood supply has been the rapid restructuring of

native forests. Widespread clearfelling became of significant public concern earlier

this century and after WW2 because it depleted wood supplies and environmental

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values. Although all the impacts could not be identified for this dissertation, in some

cases they appear severe, depleting wood supplies and endemic wildlife. The

relationships between control over fibre supply and issues of resource management

and environmental impacts seen in this chapter are also important in the following

two chapters discussing the supply of recovered fibre and new foreign fibre.

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Chapter 7: Restructuring the supply of used fibre – ‘logging Japan’s urban forests’

7.1 Introduction Japan’s cities and towns have become a major source of fibre for the nation’s

paper/board industry (JPA 2001c). This chapter aims to understand the process that

created this situation and the consequences for the industry’s development.

The analysis begins by describing Japan’s resource of waste paper/board and the

manufacture of ‘recycled’ products. It then discusses two factors that influence

recovered fibre use - legislation and economics. As the economic use of recovered

fibre depends greatly on its cost, the analysis examines how the waste fibre

collection system has operated in relation to changing demands of paper/board

manufacturers. The implications of using recovered fibre for the use of new fibres

and the disposal of Japan’s garbage are also addressed.

7.2 Japan’s waste paper/board resources The potential resource of waste fibre available for collection and recycling each year

in Japan varies with the annual supply of paper/board and the uses to which it is put.

It is equivalent to the annual net supply of paper/board less: i) the amount that is too

contaminated to reuse; and ii) the amount stored or lost (such as books, office papers

and household papers) or used as a resource for other industries (eg pulp cement or

fire resistant material). As the production of paper/board in Japan has grown, so has

the amount of used fibre. However, the amount collected for reuse is less than that

theoretically available (PRPC 1994, Oe 1995).

About 20% of Japan’s recent paper/board waste is estimated to be too

contaminated to reuse, while another 14.3% cannot be collected because it is stored

or used (PRPC 1994, Oe 1995). This means about 66% of Japan’s annual paper and

paperboard supply could theoretically be collected (Oshima 1985, Oye 1994a),

although the amount of contaminated fibre might be reduced with more careful use

or disposal. The paper/board industry’s use of recovered fibre has grown. Its overall

rate of including recovered fibre in new products was around 16% in 1950, but 58%

in 2000 (Figure 7.1). Thus, about 88% of Japan’s theoretically available waste

paper/board is being collected. The remaining 12% is a mix of high and low quality

fibres in dispersed locations. Currently, this 12% and the contaminated 20% enter

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Figure 7.1: Recovery of waste paper and paperboard in Japan.

Sources: PRPC (1992, 2002), MITI (1998).

Note: Values prior to 1960 are approximate because of data variability.

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the waste stream, and a long-standing concern within Japan has been to use recycling

to reduce the large volumes of unrecovered fibre that becomes garbage (JP&P 1974h,

Haas 1979b).

Small amounts of recovered fibre have been imported and exported since the

1950s (Figure 7.2). Exports often increased when imports declined in response to

changing domestic and export markets. Domestic recovery and utilisation rates

increased together since 1950 (Figure 7.3). The utilisation rate was below the

recovery rate to the mid-1980s as paper/board production grew without relying

greatly on imported recovered fibre. From the mid-1980s, the rates reversed

positions as more recovered fibre was imported. In the late-1990s, exports exceed

imports.

The domestic use of all categories of recovered fibre increased from the 1970s

(Figure 7.4). The greatest increase in volume collected occurred with old corrugated

containers (OCC), while magazines had the greatest proportional increase (PRPC

1998b, 2000a). The rates of recovery for the major categories have also been

increasing (PRPC 1999b). When allowances are made for statistical problems

(Appendix 7.1), the recovery rate for old newspapers increased from 63% to 87-92%

of production between 1992 and 2000, that for OCC grew from 72% to around 86%,

and that for fine papers rose from 42% to around 45% (PRPC 1999b, 2000c).

Thus, there is still some potential for increasing the collection of printing and

information papers, particularly high quality office papers (Iwasaki 1990, CJC

1991a), but this will depend on the amount stored by users. Smaller amounts of

newspapers and cardboard boxes (OCC) still become waste. Collection of this fibre

could increase with expanded markets, the application of suitable pulping

technologies, appropriate legislation, or further changes in the economics of disposal,

collection and recycling. The quality of the resource would change with the rates of

fibre reuse and the quality of the fibre collected (Yamamoto 1997a).

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Figure 7.2: Imports and exports of recovered fibre by Japan.

Sources: PRPC (1992, 2002), JPA (JPA ).

182

Figure 7.3: Rates for recovery and utilisation of waste paper and paperboard in Japan.

Sources: PRPC (1992, 2002), MITI (1998), JPA (2001c).

Note: Values prior to 1960 are approximate because of data variability.

183

Figure 7.4: Composition of recovered fibre used for paper/board production in Japan.

Sources: PRPC (1992, 1998a, 2002).

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7.3 Recycling technologies and ‘recovered fibre’ products Advances in recycling technologies, particularly those for making deinked pulp, have

been crucial for expanding the industry’s use of recovered fibre over the last 40 years

(Hata 1994).88 A variety of problems were overcome, including strength, opacity,

contamination and cost, but the removal of photocopying and laser printing ink has

been an important technical problem for recycling high quality papers (Okada 1992,

Oye 1993, Virta 1993, Oye 1994a, Hobbs 1995b). Technological advances continue

to be made (Hosomura 1994, Arai 1997, Kanazawa 1997, Egawa 1999, Yamamoto

1999), although new issues develop with the changing fibre supply and market

demands. Greater cooperation between manufacturers and commercial users to

develop products that are easier to recycle is important (Yamamoto 1997a), and has

been occurring (Oye 2001).

The long-term use of recovered fibre has been concentrated in cardboard

production, but from the early-1970s, increasing amounts were included in newsprint

as technologies allowed (PRPC 1998b).89 During the 1990s, the recovered fibre

content of newsprint and printing and writing papers increased, supported by new

deinking and manufacturing facilities (Fujiwara 1999a, 1999c, PRPC 2000c). The

rate of inclusion in paperboard approached a limit. Recovered fibre in tissue

products declined before increasing in the late-1990s, although statistical refinements

contributed to this variation (PRPC 1994, 1998a, 2000a, 2000c). Public and

government interest in the use of ‘recycled’ papers has strengthened, as discussed

below, and the Paper Recycling Promotion Center (PRPC) publishes lists of the

names, manufacturers and recovered fibre content of various paper products (PRPC

1998c). However, as there is no nationally-accepted definition of a ‘recycled’ paper

product (Oye 1994b), the term can cover products containing little recovered fibre.90

A committee of the JPA calculated the technical upper limit for the recovered

fibre content of paper/board products while maintaining quality requirements (Table

7.1). The recovered fibre content of printing and information papers, and to a lesser

extent newsprint, could still be increased. Reaching these limits would mean an

88 A variety of articles in industry journals illustrate the expanding production of products containing recovered fibre in Japan (Clarke 1993, PPI 1993b, AP&P 1994a, Hobbs 1995a, 1995b, Yonezawa 1995). 89 At first, manufacturers included recovered fibre in newsprint without telling newspaper publishers. This helped protect newsprint prices (JapanD 1997).

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overall rate of recovered fibre in paper/board of 68%, requiring all theoretically

available waste fibre. However, this rate represents the addition of estimates for each

category (Ooi 1997), so would not consider the deterioration in the quality of fibres

over several cycles of reuse. Thus, the implications of such deterioration are unclear.

The ability to maintain a high utilisation rate may depend on further technological

advances. Nevertheless, technical potential exists to increase the use of recovered

fibre. Legislation and the economics of collection and utilisation will be important in

achieving this potential.

7.4 Japan’s recycling legislation Paper/board manufacturers could use more old paper/board if required by strong

legislation. However, Japan’s major recycling laws are not sufficient to force the

maximum theoretical use.

“The Law for the Promotion of Utilization of Recyclable Resources” was

enacted in 1991 and is based on the premise that the increased use of unused

“recyclable resources” would curb the generation of waste, contribute to

environmental protection and so promote the healthy development of Japan’s

economy.91 However, the law and regulations have little direct strength and appear

designed to use moral persuasion, goodwill and cooperation, rather than strict legal

requirements (CJC 1991a, 1991b).

Businesses are required to “not only make efforts to utilize recyclable

resources”, but also “promote the utilization as recyclable resources of” their

products (CJC 1991b)(p.3). Consumers “shall not only make efforts to promote the

utilization of recyclable resources but shall cooperate with the Government, local

governing bodies and Business Entities in the implementation of measures to achieve

the purpose of this Law” (CJC 1991b)(pp.3 & 4). These phrases are basically polite

requests, and the method of enforcement is not explained.

90 For example, Oji Paper has an objective of “raising the percentage of recycled paper products (products containing used paper) to more than 70% of all products sold by 2010” (Oji 1999c)(p.24). Yet, this includes products that contain any amount of recovered fibre (JapanE 2000). 92 In this legislation, ‘recyclable resources’ are classified as: “articles usable or possibly usable for raw materials (except radio active materials or those contaminated thereby) which are useful and exist among articles collected, used or unused, disposed of, or among articles obtained secondarily in the process of manufacture, processing, repair and sale of products; in the process of supply of energy, or; in the process of construction involving architecture and civil engineering” (CJC 1991b)(p.1).

186

Table 7.1: The theoretical upper limit for rates of recycling recovered fibre that maintain product quality.

Source: Nakajima (1995). Note: 1. This increase is based on 1993 production levels.

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The activities of the paper industry under this legislation are regulated by a

Ministerial Ordinance (CJC 1991a), which allows a manufacturer’s economic

situation to determine the extent to which it increases its use of recovered fibre. A

manufacturer, in order

to comply with consumer demands for color, strength, water-absorbing capacity, printability, and other characteristics of paper, shall increase the ratio of waste paper (As determined by the percentage of weight of waste paper in raw materials used to produce paper, hereinafter the same.) used in paper it manufactures in a range to the extent technically and economically possible. Taking into consideration that the low ratio of waste paper used in printing paper, information related paper, and wrapping paper, and the different uses of waste paper depending on the kind of paper, a business shall in cooperation with consumers as well as central and local governments, strive to increase to 55 percent of waste paper used in domestic paper production by 1994 (CJC 1991a)(p.30)(emphasis added).

Clearly, the legislation is not meant to force paper/board manufacturers to use a

particular level of recovered fibre. Pappens (1992) indicates that the reason for this

wording was industrial lobbying. Because of increasing community concern about

waste disposal, the paper industry proposed to try to voluntarily increase its rate of

using recovered fibre. In 1989, the JPA launched its ‘Recycle 55’ project that sought

to increase this rate by 1% per year from 50% in 1989 to 55% by 1995. The

government accepted that reaching this rate would not be easy, so did not make it a

compulsory target. The industry did not reach the 55% target because of economic

pressures, as discussed below, and the target was amended to 56% at 2000 (Sakai

1997).

Another relevant law is ‘The Basic Environment Law’, which was enacted in

late 1993 (Japan 1993). This law was thought necessary to provide Japan with a new

legal framework that would describe basic principles for policies and actions to

tackle increasingly complex environmental problems (Funago 1992). It contains

worthwhile, but general objectives and statements, including responsibilities of

governments, business and citizens for environmental protection. It should be seen

more as a guiding philosophy rather than strictly enforceable legislation. For

example, Article 8 of the law (Japan 1993)(p.4) states that corporations have

responsibility for:

taking necessary measures for ensuring proper disposal of the wastes generated from products and other goods related to their activities; ….

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making efforts to reduce the environmental loads resulting from the use or disposal of the products and other goods related to their activities; and for making efforts to use recyclable resources and other materials and services which contribute to reducing the environmental loads in their activities, so as to prevent interference with environmental conservation, pursuant to the basic principles.

Despite such ambiguous phrasing, it seems that the law’s principles underpin

recent legislation to increase the recycling of packaging. The ‘Law for Promotion of

Sorted Collection and Recycling of Containers and Packaging’ was passed in early

1995 (CJC 1995) and aims at increasing the reuse of packaging waste to reduce

landfill problems and exploit unused resources (DY 1994a). This legislation makes

manufacturers and distributors responsible for recycling packaging in proportion to

the quantity of those products produced or sold. Local governments must develop

plans for collecting wastes under guidelines prepared by relevant ministries.

Collection costs are borne by local governments, while recycling costs are covered

by product manufacturers, packaging manufacturers and distributors.

The law did not come into force until 1997 and did not apply to paper-based

packaging until 2000 to allow time for the introduction of relevant recycling and

processing technologies (CJC 1995, DY 1995c, 1995d). It promotes the collection of

lower grade paper/board packaging. However, the use of recovered fibre in

paperboard packaging is already high and the use of paper packaging is not large

(JPA 2001c), so the potential for increasing their use domestically is not great. The

legislation avoids the papers that have the greatest theoretical potential for more

collection and use - printing and information papers and newspapers.

In 2001, Japan’s government also introduced legislation that encourages

government institutions, businesses and citizens to use ‘eco-friendly’ goods and

services (Japan 2001). Such products include those containing a component of

recycled materials, such as paper. The legislation requires government institutions to

prepare plans for the procurement of such products within the context of their

budgets, so even within legislative directions, cost influences the use of ‘recycled’

papers.

Thus, the use of recovered fibre by Japan’s paper/board manufacturers increased

without any directive legislation until the 1990s. However, manufacturers are still

not subject to strong legal requirements to increase their reuse of those products with

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the greatest theoretical potential for collection and use. The increased supply of

lower quality paperboard promoted by recent legislation may lower paperboard

prices, if there is no compensatory increase in demand. The most important factors

directing the collection and use of waste paper/board continue to be economic.

7.5 Recycling economics According to the former president of Oji Paper (Ohkuni 1995)(p.16), “(b)asically,

wastepaper utilization can be promoted only when it is economically feasible in our

industry”. The general economic relationship determining whether a Japanese

manufacturer uses ‘recovered fibre’ pulp rather than imported or domestic pulp is

similar to that presented in Chapter Three. It says that a manufacturer would use pulp

made from recovered fibre if it is cheaper than new pulp after making allowances for

quality considerations (Oye 1993):

(Waste paper price + Processing cost) + Quality handicap ≤ Virgin pulp price Yield

The influence of this relationship is discussed below. For example, it has driven

both the long-term increase in the overall use of recovered fibre and the decline in

the recovered fibre content of toilet paper (Appendix 5.3). The availability of cheap,

new fibre helped retard the growth of recycling during the late-1980s.

The relative profitability of ‘recycled’ papers and ‘new fibre’ papers will

influence the price of recovered fibre. One investigation of recycling economics

argued that manufacturers would not invest in new recycling technologies unless the

price for recovered fibre declines (Nakajima 1995), and such pressure continues.

The operation of the waste paper collection sector is fundamental to the cost of fibre.

As with the supply of domestic wood, much effort has been directed towards

reducing and stabilising the cost of collecting used paper/board and increasing the

volume and stability of supply for manufacturers who increased their control over the

supply chain. The next section explains how this occurred.

7.6 Restructuring the supply of recovered fibre

7.6.1 The waste paper/board collection sector In contrast to the massive capital investment and concentration of ownership in

paper/board manufacturing, the waste fibre collection sector comprises a variety of

small and large collectors, dealers and wholesalers with differing efficiencies who

collect and trade in old paper/board (Figure 7.5). Paper/board manufacturers

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purchase recovered fibre from wholesalers or GTCs. A manufacturer may use

several competing wholesalers; some manufacturers have their own collectors. The

wholesalers obtain their supplies of recovered fibre from collectors with whom they

usually have exclusive contracts, but the prices received by collectors fluctuate with

those received by wholesalers (Nozaki 2000).

The collectors are at the base of this chain, and can be characterised as the

‘loggers’ of the ‘urban forests’. Several kinds of collectors have evolved since WW2

to suit the sources of fibre supply, changing economic conditions and, in particular,

the pressures for restructuring the collection and use of waste paper/board that

developed from the 1970s (Table 7.2).92 This restructuring process was important for

increasing the supply of recovered fibre to manufacturers. However, it put the

collection sector under great economic pressure.

7.6.2 Restructuring supply - 1945 to the 1980s From the end of WW2 to the mid-1950s, the amount of used fibre recycled each year

was relatively small. The collection rate in 1950 was around 16% (MITI 1998), but

reached 27.7% in 1956 (PRPC 1992). The increased use of recovered fibre to the

mid-1960s was assisted by the introduction of technologies for using recovered fibre

to make corrugated containers (Oye 1994b). The other users of recovered fibre at

this time were small manufacturers producing ‘senkashi’, toilet papers and traditional

Japanese papers (Hori 1964, JP&P 1966e)

Household waste paper was primarily collected by purchasers/wholesalers, but

Japan's increasing economic wealth produced more waste. The growing use and

supply of used fibre created opportunities for small, independent collectors - 'the

Toilet Paper Man’ (Anon 1990b, Ueda 1993).93 Such collectors employed few young

people, and because of their size and legal status, their associations were poorly

funded and weak. Weather conditions influenced work patterns, often disrupting

fibre supplies and prices (JP&P 1971h, 1973m).

92 The titles used for these collectors do not exactly match those used in Figure 7.5 due to differences in translations and information sources. 93 Many of these collectors had probably been working in poorly-paid, insecure jobs (Anon 1990b). Also, homeless people in Tokyo collected waste paper/board to earn money (Jamieson 2001b).

191

Figure 7.5: Structure of Japan’s waste paper and paperboard collection sector.

Source: PRPC (2002).

192

Table 7.2: Categories of waste paper and paperboard collectors in Japan.

Notes: 1. At the beginning of the 1990s, 10 kilograms of waste paper was traded for a packet of

pocket tissues (Anon 1990b, Oye 1993). 2. Printers and binders generate a lot of waste paper, which if not collected would disrupt the firm's operations. The collectors used to purchase this, but now receive a payment from the business to remove it (Anon 1990b). 3. This paper has no ink and so is of high quality and high value; it is also produced in large quantities (Anon 1990b).

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The collection sector’s complicated structure and related supply and price

fluctuations became widely regarded as impediments to planning the increased

supply of old fibre. Other problems included: a lack of specialised collection in rural

areas; high labour intensity; fluctuating labour supply; and a lack space for storing

collected paper/board. It was considered that supply and prices would stabilise once

the sector was simplified. National cooperation was promoted to help the collection

sector increase its productivity and economic strength, and so remove itself “from the

status of dependency on (the paper/board) maker and get an equal independent place

in the relationship with makers” (JP&P 1971h)(p.23).

Restructuring efforts began in earnest from the early-1970s. MITI sponsored the

Waste Paper Demand-Supply Stability Council comprising representatives of

paper/board manufacturers and wastepaper dealers.94 The Council had 4 objectives:

increase the stocks of recovered fibre held by manufacturers; establish storage areas;

stabilise prices; and begin a support fund to stabilise the demand-supply balance

(JP&P 1971h, 1973m). Support for rationalising the collection sector came from the

Pulp and Paper Subcommittee of the Industrial Structure Council that advised MITI.

The council saw this as necessary if collectors were to respond to the growing

capacity and strength of manufacturers, but it also sought government assistance and

direct involvement by manufacturers in the restructuring process. The Council

wanted increased collection and use of waste fibre to counter resource shortages and

reduce garbage disposal problems. However, suburban collection was expensive and

highly labour intensive; it was the first to be reduced when demand and price fell

(JP&P 1972b, 1973h, 1974h).

Financial assistance was soon forthcoming. In 1973, MITI announced that ¥7.36

million would be spent on improving the collection system. Some of this was used

for trial cooperative collections in suburbs involving citizens, municipal governments

and collectors. This was considered to be the first concrete action to rationalise

collection (JP&P 1973e), and appears to be the origin of the group collection system

that relies on volunteers and local government financial support (Table 7.2). The

national government also passed legislation to establish a centre for promoting paper

94 An important role of the Council was to remove distrust and promote cooperation between these parties. It came to regard the kind of collector that dominated the sector at the time as a particular impediment to achieving cooperation for structural change, increased mechanisation and modernisation (JP&P 1971h, 1973m).

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recycling (which became the PRPC) and a warehouse for storing recovered fibre

(JP&P 1973f).95

Fluctuations in paper consumption and the demand, supply and price of waste

paper in the early 1970s (Figure 7.6) augmented these pressures for structural

change. The 1971 economic depression caused the slump in the manufacturer’s

purchase price to around ¥10 per kilogram. This price was said to be at or below that

necessary for collectors to cover their costs, so many collectors stopped operating

(JP&P 1971h). The Waste Paper Demand-Supply Stability Council wanted a

guaranteed minimum price of ¥14 per kg with a standard price of ¥16-18 per kg

(JP&P 1973r). However, by 1973, a paper shortage had developed. This was caused

by: a sharp increase in demand after the preceding depression; raw material price

increases with the first ‘oil shock’; a lack of water due to drought; and restrictions on

production because of government regulations and pressure to limit pollution (1973d,

JP&P 1973n). Manufacturers’ demands for recovered fibre grew, and prices hit

record levels of around ¥60 per kg, then plummeted in mid-1974.96 The number of

collectors, which reportedly had risen to 20,000 in the 'boom period', fell by two-

thirds (JP&P 1974g).

These extreme fluctuations stimulated attempts to stabilise supplies and prices.

The Waste Paper Demand-Supply Stability Council recommended increasing

imports of recovered fibre to limit shortages and save manufacturers from buying

fibre at “recklessly high prices” (JP&P 1973s)(p.9). Some paperboard manufacturers

expanded their own storage facilities and/or incorporated dealers into their keiretsu to

gain greater control over the collection process (JP&P 1973m).

The fluctuations also exposed the differences between the interests of the various

groups involved in waste paper/board collection and use. They all wanted

government intervention to provide stability. However, collectors demonstrated

against what they saw as a failure by MITI to promote market recovery and maintain

a minimum price even though it had controlled the maximum price at the time of

high demand. They called on the government for a relief fund and compensation for

95 The centre and warehouse were funded jointly by government (¥1 billion) and industry (¥3 billion). The centre was also to act as a guarantor for loans taken by collectors to modernise their operations (JP&P 1973f). 96 The increased use of recovered fibre allowed paper manufacturers to reduce the cost of energy and pollution control (JP&P 1977e). Newsprint producers and other papermakers who previously completely relied on pulpwood began to use recovered fibre (JP&P 1975c, 1975e).

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Figure 7.6: Prices paid for the main categories of recovered fibre by paper and paperboard manufacturers in Japan.

Sources: MITI (1975, 1998), PRPC (1992, 1998a, 2002).

Notes: 1. Prices are those paid in Tokyo, except for those for Old Colour Printed Paper (papers

printed with colours), which are from the Shizuoka area. 2. Prices were converted to 1995 values using the Consumer Price Index for Japan

(MPMHAPT 2002).

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the difference between their desired ‘floor price' and the actual price (JP&P 1974g,

1975f). The Waste Paper Dealers Association wanted floor prices for old cardboard

and newspapers of ¥25-28 per kg and ¥30-33 per kg respectively, which it argued

were necessary to sustain its members (JP&P 1975f).

Manufacturers said that they were not willing to invest in new recycling

equipment until the supply of recovered fibre was stable. They wanted government

action, arguing that Japan might have to import pulp because paper demand would

grow. MITI argued that if recovered fibre was to be considered an essential

resource, then the government should secure a stable, reasonably-priced supply. It

wanted increased financial assistance from the national government and cheap land

from local governments on which the PRPC could expand waste paper storage so it

could influence the market (JP&P 1975f).97

Thus, at the end of the 1970s, the industry considered that restructuring the

waste paper collection system had not progressed sufficiently. However,

technological advances in deinking had increased the value of old newspapers,

especially to newsprint manufacturers. Demand for old newspapers increased and

suburban collections became more important. The spread of cheaper group

collection allowed greater access to household waste paper/board. The PRPC also

encouraged waste paper imports to satisfy what it saw as a growing demand that

could not be met domestically (JP&P 1979a). By this time, the overall collection and

utilisation rates for waste fibre were 43.4% and 41.2% respectively (PRPC 1992).

7.6.3 Restructuring supply – the 1980s to 2000 In 1981, the Pulp and Paper Committee of the Industrial Structure Council released

its vision for the paper industry during the 1980s. It argued that higher raw material

prices and the long lead-times needed to establish foreign pulpwood supply ventures

made greater domestic collection of recovered fibre the most reliable way to increase

the industry's fibre supplies and international competitiveness (JP&P 1981b). It

considered that the structural problems of the collection sector still needed

addressing, but raised the importance of waste paper/board collection to a new level

within the industry.

97 At that time, it could only store a volume equivalent to 30% of the nation's monthly use of recovered fibre. MITI said that this was insufficient to control the market and should be increased to at least two months supply (JP&P 1975f).

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In the early-1980s, a number of factors destabilised the collection sector, so

intensifying pressures for restructuring. The nation’s second ‘oil shock’ pushed up

prices for recovered fibre (Figure 7.6). Many small collectors entered the business

because of the potentially high incomes, and some paper manufacturers also

established their own collection companies (JP&P 1979a, 1982b).

Prices then slumped with the fall in paper/board consumption, but the ‘oil shock’

triggered greater investment in recycling facilities in the early-1980s. Deinking

technology had improved so much that the amount of recovered fibre in newspapers

and magazines increased substantially from the late-1970s. The increased capacity

for making deinked pulp (DIP) and the greater demand meant that recovered fibre

prices peaked again between 1982 and 1985. Manufacturers reduced their energy

costs from 1983 and the price of competitive mechanical pulp declined. Also,

imported recovered fibre became an important long-term manufacturing resource

because it contained strong, high quality, long fibres, and could be used to counter

domestic prices (JP&P 1985i, Nakajima 1995).98

Paper and paperboard prices declined from the early 1980s (Chapter 5) and

manufacturers complained about recovered fibre prices (JP&P 1986i).99 Dealers

were accused of having “a habit of seeking profits through their speculative

transactions not by reasonable margins”, and in the mid-1980s manufacturers took

further steps to stabilise prices through “cooperative efforts to purchase wastepapers

at reasonable prices” (JP&P 1985i)(p.46)(sic). Containerboard manufacturers had

previously been organised into seven groups to facilitate reductions in production

capacity, and they apparently used these groups to increase joint purchases of

recovered fibre. The stabilisation of the market for old newspapers resulted from

better estimation of demand and supply, and the influence of the large newsprint

manufacturers “who can easily control the balance of demand and supply relations”

98 An example from the early-1990s illustrates this. The Tomakomai mill of Oji Paper in Hokkaido began importing recovered fibre from the USA in 1991 when domestic supplies were tight. At that time, it imported about 5,000 tonnes per month, but in the mid-1990s, it imported about 1,000 tonnes per month. In the mid-1990s, its sources of recovered fibre were: Hokkaido - 22%; Tohoku-20%; Kanto (Tokyo) - 45%; Kansai (Osaka/Kyoto) 10%; and, imports - 3%. However, the delivered price for recovered fibre from Hokkaido was about ¥15 per kg, while that from Kanto was ¥20.5 per kg. The CIF price for imported fibre in Hokkaido was ¥16 per kg, and even when delivery costs were included, imported fibre could still be purchased for less than recovered fibre from Kanto. Importing the small volume from the USA also maintained trade links and gave the mill opportunities to increase imports when domestic supplies were restricted (Yamada 1994b). 99 Kraft linerboard manufacturers argued that they could not compete with imported kraft paper when the exchange rate was under ¥150:US$1 and the price of waste paper was more than ¥20 per kg (JP&P 1986i).

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(JP&P 1985i)(p.47). It was from this time that prices for the main categories of

recovered fibre began their steady decline (JPA 2001b). The smaller collectors and

waste paper dealers were thus put in progressively weaker economic positions,

assisted by events in the late-1980s and the 1990s.

Despite expanding paper/board use and manufacturing capacity in the late

1980s, the collection and use of domestic old fibre stagnated under a combination of

pressures. These included: increased imports of fibre and paper/board made cheaper

by the high yen; low recovery of office waste paper because of difficulties with

collection and deinking; and a great demand for ‘new fibre’ papers, especially when

compared to paperboard (Iwasaki 1990, Yonezawa 1995). The collection rate

slumped, and this cut the ground from under the Pulp and Paper Committee’s plan to

base the industry’s competitiveness on recovered fibre.

When Japan’s economy slumped in the early-1990s, paper/board consumption

plateaued, manufacturers had excess capacity and profitability deteriorated.

Manufacturers sold paper cheaply to compensate (Hagiwara 1994, Shima 1994a),

and wanted ‘in-house’ pulp to replace more expensive purchased pulp. Because DIP

facilities were cheaper than mechanical pulp plants, manufacturers increased their

use of recovered fibre. However, from 1992 to the mid-1990s, the difference

between the price of deinked pulp and alternative pulps was negligible. Although

DIP facilities were cheaper than new pulp plants, there were no incentives to invest

because paper/board consumption slumped. The collection rate plateaued through

the early to mid-1990s, although the utilisation rate increased slowly using imported

recovered fibre (Nakajima 1995, JPA 2001c).

Two other factors encouraged fibre collection during this time. The first was the

increasing use of the group collection system, supported by voluntary collectors

(including citizens associations and handicapped people's groups),100 low salaries

(Konno 1994a) and financial assistance from local governments wanting to reduce

their waste disposal costs (Hagiwara 1994, Yamada 1994a).101 The other was the

JPA's "Recycle 55" publicity campaign, which stimulated community interest in

recycling (Pappens 1992). However, the increased collection promoted by these

100 The growing involvement of citizens groups in such recycling activities was criticised by some small waste collectors because it was seen to impinge on their livelihoods (Fuke 1995). 101 Local government financial assistance to volunteer collectors was about ¥4-6 per kg in the mid-1990s (TNW 1994c).

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activities was unrelated to the demands of manufacturers. They probably contributed

to lower recovered fibre prices and longer-term concerns over the possible collapse

of the collection system (Anon 1990b).

The impact of demand-supply imbalances became acute. In 1994, two large

municipal councils stopped collecting waste fibre for recycling and burnt it.

Collectors were also reported to be charging for collection (TNW 1994c). In that

year, the price for OCC reached ¥13 per kg even though the minimum price

necessary for cardboard collectors to operate effectively was considered to be ¥17

per kg (Shima 1994b). This situation recurred in Tokyo during 1997 when declining

industry use (PRPC 1997a) and increased supply combined with lower paperboard

prices (TNW 1997b). It generated a surplus of recovered fibre (Yoshida 1997),

another slump in prices for recovered fibre and community protests (Figure 7.7).

The increased supply was encouraged by municipalities introducing fees for garbage

collection (Miyakawa 1997). A paper industry spokesperson blamed market

principles. Prices, he said, would not improve until citizens' enthusiasm for

recycling ‘cools’ (NKS 1997).

Growing collection and utilisation rates through the late-1990s to 2001 were

caused by export sales and greater domestic use (JPA 2001c). Export sales at low

prices were possible for some traders because domestic sales covered their fixed

costs (JapanL 1997).102 Nominal prices continued to decline, and in the late-1990s

fell to, or below, those of the early-1970s. Prices for the major grades of recovered

fibre improved slightly in 2000 with greater domestic use, but then were forced down

as domestic production dropped and exports increased (Figures 7.2 and 7.6).

Consequently, the collection rate reached the 2000 target of 56% in 1999, and

jumped to 62% in 2001 when the utilisation rate reached 58% (PRPC 2002).

While declining prices made recovered fibre more attractive to manufacturers

and exporters, it impacted severely on collectors and dealers. Collectors and dealers

had to adapt as profit margins disappeared and other collection systems became more

widespread during the late 1980s and early 1990s. The number of full-time

independent collectors declined and many became attached to other collection

systems. Collectors had to handle larger volumes of waste just to stay in business

102 In late 1997, export prices for recovered fibre were reported to be less than half the domestic prices (TNW 1997b).

200

Figure 7.7: Community groups and collectors of waste paper and paperboard protest in Tokyo over the low price for recovered fibre during 1997.

The banner reads: “Rescind the excessive price drop. Protect citizens and collectors”.

Photograph generously supplied by Yoshida Takuya of the ‘Nihon Consumers News’.

201

(Higashi 1995), but for many, profitability was at, or close to, zero (PPI 1993b,

Konno 1994a, Yamada 1994b). The number of dealers in Tokyo fell from around

1200 in 1982 to 300 in the mid-1990s (Carbonnier 1995). Some dealers cooperated

to overcome the economic and political limitations of scale, increased their storage of

recovered fibre and coordination of supply and demand, and expanded exports to

help balance inventories (JP&P 1986i, Anon 1990b, Oye 1993, JapanL 1997).

However, despite changes in the collection sector, especially the creation of the

group collection system, several important features from the early-1970s existed in

the 1990s. There were still many small to medium-sized enterprises; working

conditions and wages remained poor; the work was still regarded as dirty and

dangerous with few new employees; collectors' had little influence on prices; and the

sector's financial strength relative to manufacturers was weak. It was considered the

sector would lose any remaining ability to influence prices if collectors could not

cooperate to remove these features (JP&P 1992d).

Manufacturers increased their links into wholesaling (JP&P 1992d), and several

have direct contracts with collectors to supply ‘recovered fibre’ (Aseishi 1997).

Their use of recovered fibre also concentrated from the 1980s. In 2000, five

companies used 45.1% of recovered fibre and ten used 63.8% (PRPC 2001b).

Clearly, prices for recovered fibre are central to the condition of the collection

sector. An increase in the price of recovered fibre would help stimulate recovery

(Ausnewz 2001). However, the plans for a restructured, economically stronger

collection sector that could negotiate such prices have not eventuated because control

over prices became concentrated with paper/board manufacturers. Under pressures

from declining prices for paper, paperboard and pulpwood, manufacturers forced

down prices. Low prices are also encouraged by export markets, but they inhibit the

ability of collectors to: invest in modern facilities; offer good employment

conditions; increase their economic strength; and probably collect used fibre from

more expensive sources. The financial assistance provided by local governments and

the greater reliance on the group collection system saves manufacturers paying

higher prices, but helps perpetuate the comparative underdevelopment of the

collection sector as a commercial entity.

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7.7 The continuing cost-price squeeze A mix of domestic and foreign economic and political pressures will continue to

impact on the collection, use and price of waste paper/board through the early part of

the 21st century. The conclusions of the JPA's Paper Recycling Engineering

Committee are indicative (Nakajima 1995). This committee argued that

manufacturers would not make major investments in recycling facilities without

substantial reductions in prices for recovered fibre, and considered this would not be

possible within the recent structure of the recycling system. For example, it said that

some paper manufacturers would need the price of recovered fibre to drop by ¥9 or

more per kilogram to break even on investments in new recycling facilities; a decline

of ¥20/kg or more would be needed for a profit of 20%. Such reductions are

unrealistic and would mean manufacturers are paid to use recovered fibre.

Also, the committee concluded that if greater recycling to achieve social and

environmental goals meant a loss of international competitiveness for domestic

manufacturers, they would either close or shift overseas where such obstacles do not

exist, causing the recycling system to collapse (Nakajima 1995). While this

conclusion might accurately reflect the thinking of manufacturers, the legitimacy of

the calculations for required price reductions depends on the assumptions used in the

calculations. These assumptions were not published so could not be checked, but

their reliability would be related to: the cost of pulping technologies; the supply and

cost of recovered and alternative fibres; future markets and product prices; and

desired profit levels. According to one industry member (Aseishi 1997), the

calculations include compensating for the cost of existing pulping capacity made

redundant by using more recovered fibre. However, if recycling facilities are

included in new capacity expansions, then costs would be lower, and the desired drop

in the price of recovered fibre would be less. Since then, investment in new

recycling facilities occurred as prices for recovered fibre declined, although the

decline is less than that said necessary by the committee (Nakajima 1995).

There are a variety of other pressures on the collection sector and prices of

recovered fibre. The strong control by manufacturers over the price of recovered

fibre since the 1980s has isolated it from major fluctuations as in the USA and

Europe (PRPC 1998b, 2000b). However, domestic prices have sometimes been seen

within the industry as high internationally and needing to be subject to international

market pressures so the collection costs are lower and the sector is internationally

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competitive. Potential actions suggested by industry members to achieve this are:

charging disposers of garbage for disposal; greater financial support by local

communities for collection; and expanding exports of recovered fibre into Asia (Ooi

1997). More efficient fibre use in paper and paperboard products would reduce the

need for recovered fibre per unit of product. The expanding use of wood from

foreign plantations will increase the supply of high quality fibre (Chapter 8); if

quality differentials that reduce the price of lower quality pulpwood from native

forests are introduced (Ausnewz 2001), this could alter relative prices. In turn

however, lower domestic recovered fibre prices could be used to influence prices of

imported woodchips and/or pulp (Oye 1993). Penetration of domestic paper markets

by suitable cheap imported papers would increase competition with ‘recycled paper’

products.

If recovered fibre is to be exported then lower prices may be necessary to be

competitive in foreign markets. The expansion of recovered fibre exports into Asia

will depend to a great extent on demand from Asia and the size and price of US, and

possibly European, exports of recovered fibre which in turn are influenced by

domestic demand for recycled paper products (Hobbs 1994, Cesar 1995, Cesar and

Ervasti 1995, Moore 1996).

If Japan’s paper/board consumption increases, then larger volumes of waste fibre

will need to be collected to maintain recent collection and utilisation rates. The

collection infrastructure - roads, trucks, storage yards, etc. – will need to efficiently

handle increased collection and delivery to limit costs.

Within the industry, it was thought that the widespread application of a fee-

based waste collection system would assist rationalisation of Japan’s recycling

system (Yamada 1994a) by providing some stability for waste paper/board collection

and allowing manufacturers to pay lower prices for recovered fibre (Shima 1994a).103

The new packaging recycling legislation is expected to increase the collection of

lower-quality fibre, while fee-based collection of municipal garbage could also

encourage business to leave more waste office papers for recycling (Oye 1999).

However, if the amounts recovered are great and there is no compensating demand,

then, as in the past, prices may go down to the detriment of the collectors. The

103 In the mid-1990s, about 35% of local governments in Japan charged a fee for general waste collection and disposal. It was estimated that if such a system operated broadly in Japan, the then collection fate for waste paper/board could increase by about 10% to over 56% (Yamada 1994a).

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PRPC supports the collection of higher quality office waste and promotes a

restructuring of fibre supply to ensure appropriate sorting and matching of fibre

grades and products (PRPC 1999a, Takayanagi 1999). This might help ease some

pressures for price reductions, but will also need to be cost effective. The possible

inclusion of more waste office paper in printing papers by Oji is apparently

conditional on the development of an efficient collection system (Ausnewz 2001).

Greater domestic demand for ‘recycled’ paper products would help counter

pressures on costs. Governments are encouraging their departments to use ‘recycled’

paper products as part of campaigns to help reduce environmental problems such as

garbage disposal (Japan 1995, Tokyo 1997, 1999, Japan 2001).104 Surveys indicate

an interest and sympathy among Japanese citizens for environmental protection,

waste paper collection and ‘recycled’ paper products. However, they also show that

prices for ‘recycled’ paper were important to consumers, and may need to be reduced

relative to the prices of products made from new fibre if the use of some ‘recycled

paper’ is to be promoted (Appendix 7.2).

Some paper manufacturers are responding to these various pressures by

expanding their recycling capacity and potential to increase the recovered fibre

content of some products (AEN 1997, Fujiwara 1999b). Some industry members

also see expanded use of ‘recycled paper’ assisting paper/board manufacturers

reduce CO2 production (Takeyama and Otsuka 1994, Oye 1999). However, some

recent successful tenders to supply ‘recycled paper’ to government departments were

at very low prices (JapanA 1999).105 Continuation of such practices could intensify

pressure on prices for recovered fibre. Some commentators argue that manufacturers

may use government policies to purchase ‘recycled’ products as barriers for

competitive imports (Ausnewz 1998b). Indonesian papermakers apparently regard

such policies as a non-tariff barrier (Maplesden et al 1999).

There are several other forces that could potentially counteract pressures from

the higher cost of recovered fibre. These include: higher prices for imported fibre,

such as from changed exchange rates or increased transport or wood costs; changes

to paper products that reduce the need for difficult and expensive recycling

104 The Japan Government’s ‘Action Plan for Greening Government Operations’ (Japan 1995) wants government departments to increase their use of ‘recycled paper’ with a recovered fibre content of 20% or more and to make efforts to reduce paper use. 105 One commentator considers that some of these suppliers who also provide photocopying equipment are prepared to suffer losses on paper sales if it helps their hardware sales (JapanA 1999).

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technologies; and less expensive recycling technologies that do not require low fibre

prices. Perspectives within the industry on how environmental and other factors

could influence the use of recovered fibre are discussed in Chapter Ten.

Thus, while there will be opposing forces, pressures to maintain low recovered

fibre costs should be strong. These pressures will have consequences for the

collection sector and environmental performance. The reuse of waste paper/board

has long been considered important within Japan for assisting urban waste disposal

and efficient fibre resource use (JP&P 1974f, 1974h). A justification for the

establishment of the PRPC was its potential to help create a cleaner environment

(Haas 1979b, Oye 1998a). The following discussions consider how Japan’s use of

recovered fibre contributes to these objectives.

7.8 Recovered fibre - reducing garbage and conserving forests?

7.8.1 Recycling for garbage reduction Recently, Japan has been producing more than 50 million tonnes of general wastes

and between 300-350 million tonnes of industrial wastes annually (GEF 1994). The

volume of municipal garbage produced annually in Japan increased with the nation’s

economic growth (Figure 7.8).

Japan disposes of its general wastes in several ways. In 1990, 74% was burnt,

20% was buried and 6% became fertiliser or feed (GEF 1994). It was estimated in

1994 that Japan’s garbage disposal sites would be full by 2002, although new sites

continue to be found (DY 1994a, 1995a). Nevertheless, the financial cost to local

governments of organising waste disposal and recycling is high, and limited

administrative budgets restrict expenditure (Kalhorn 1993, DY 1995f). Used

paper/board contributes to Japan’s garbage disposal problem, even though the

national average cost of collection and sorting waste fibre - ¥22,656 per tonne in

1992 - has been less than its disposal cost - ¥29,519 per tonne (Oye 1994a).106

Using the estimates for the ultimate destinations of paper/board at the beginning

of this chapter, Figure 7.9 presents an indicative trend for the volume of waste

106 In 1991, the cost of collecting and disposing of waste paper/board to the Tokyo Metropolitan Government was ¥42,733 per tonne. The cost of collection by a small collector was just over a quarter of this - ¥11,430 per tonne (Konno 1994b).

206

Figure 7.8: Recent production of municipal garbage in Japan.

Source: Ueda (1993).

207

products that become garbage. The amount of paper/board waste reached about 10

million tonnes in the late-1980s when papermakers restricted their use of recovered

fibre (JEJ 1986). It was limited to this level through much of the 1990s by increased

collection. In 1998, the amount of paper/board garbage probably declined to around

9 million tonnes. Waste paper/board formed about 20% of Japan’s garbage in the

1990s.

Thus, greater collection and use of recovered fibre helped the paper/board

industry overcome high production costs and expand production. Also, recently it

stopped the growth of paper/board garbage. Within the industry, increased recycling

is reported to produce energy conservation and pollution control benefits (Takeyama

and Otsuka 1994, Oye 2001, PRPC 2001a). However, the need to treat and dispose

of wastes from the recycling process is an important consideration, but beyond the

scope of this dissertation.

7.8.2 Recycling for fibre resource conservation The increased use of recovered fibre and low growth in Japan’s use of paper/board

meant that manufacturers slightly reduced their use of new fibre from the early-

1990s (Figure 7.9). Superficially, it might appear that the greater use of recovered

fibre limited the use of fibre from native forests. However, several aspects need to

be considered before a definitive conclusion can be drawn on the actual extent of any

such impacts. They are discussed briefly here as detailed examinations are beyond

the scope of this dissertation.

First, if recovered fibre replaces new fibre simply to assist a company’s or mill’s

economic viability, then it may be that the replacement merely permits the continued

use of new fibre but at a lower level. This kind of situation seems to have developed

in the 1970s with newsprint manufacturers, when the high cost of energy, fibre and

pollution control made the profitable production of mechanical pulp for newsprint

extremely difficult (Oye 1993). At the time, newsprint manufacturers were locked

into long-term contracts, but in 1973 asked newspaper publishers for a price increase

of ¥100 per ream. Newspaper publishers offered ¥75, which was only a 3% increase

on the contract price of three years before.107 Imports were not available and

manufacturers did not want to increase newsprint production, so rationing was

107 Oji Paper was reported to have asked for a price increase of ¥700 per ream (a 35% rise) from June 1974 (JP&P 1974d).

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Figure 7.9: Indicative trends for the end-use of waste paper/board to 2010, assuming the production of paper/board garbage from 1999 is constant.

Sources: PRPC (1992, 2002), MITI (1998).

Note: Used and stored paper/board is assumed as 14.3% (PRPC 1994, Oe 1995).

209

introduced (JP&P 1973d). This resource and cost problem was overcome by using

more recovered fibre instead of softwood fibre (Oye 1993). Oji also began using

recovered fibre in its Hokkaido newsprint mill because of limited pulpwood supplies

(JP&P 1974d, 1974e). Softwood pulpwood imports began to fall from this time (JPA

2001c), and the use of recovered fibre has been used as a bargaining tool in

negotiation of prices for softwood chips (JapanD 1997).108 Thus, it seems the initial

inclusion of recovered fibre in newsprint was a reaction to higher costs. While it was

unlikely that newspaper production would stop, the use of recovered fibre helped

manufacturers reduce costs and maintain their ability to profitably sell more

newsprint.

Secondly, to reduce exploitative pressures from commercial wood production on

forests and non-wood values, the use of recovered fibre must influence forest

exploitation patterns. Replacing pulp made from plantation wood would not assist

forest conservation unless it reduced pressure for clearing forests for plantation

establishment. Japan’s imports of native forest hardwood pulpwood grew through

the 1990s (Chapter 8), but it was not possible to determine the extent to which the

industry’s use of recovered fibre directly influenced the use of imported hardwood

fibre taken from native forests.

Thirdly, the use of recovered fibre should not assist consumption of new fibre

through a company’s production and financial strategies. The potential for this is

seen in the theorised relationships between the fibre content, production and use of

Japan’s newsprint and printing papers based on known relationships and product use

(Figure 7.10). As discussed in Chapter Five, newspapers usually contain advertising

leaflets, often made of coated printing papers, inserted by the delivery service to help

their viability. Newspaper publishers support this because it helps limit newspaper

subscription charges and their payments to delivery services (Dunnett 1988, Asahi

1997). In 1998, newsprint contained about 50% recovered fibre while printing and

information papers contained about 18% (PRPC 1998a). Coated printing papers

have been one market for imported hardwood pulpwood (Ausnewz 2000), much of

which has come from native forests in Australia, seUSA and Chile (JPA 2001a).

Thus, the new fibres in the leaflets support the consumption of recovered fibre in the

newsprint. However, there is another aspect to this interaction.

108 Recovered fibre also increasingly replaced new pulp in paperboard (JPA 2001c).

210

Figure 7.10: Fibre flows for newspapers and advertising inserts and theoretical financial relationships between the manufacture of newsprint and printing papers for

some companies, and newspaper publishers, distributors and subscribers.

211

The seven companies that made almost all Japan’s newsprint in the 1990s

(95.6% in 1998) also made most of its printing and information papers (70.9% in

1998).109 In particular, the four that made about 60% of Japan’s newsprint also made

about two-thirds of its coated papers (JPA 1999). In contrast to the situation in the

early-1970s described above, industry analysts argue that these companies can use

profits from long-term newsprint supply contracts with newspaper publishers to

support the manufacture of printing papers (Ausnewz 1998b, Shield 1998).110 The

existence of such relationships was confirmed by an industry member (JapanK

1999). The extent to which they operate in the current industry structure means that

while the fibres in advertising inserts assist newspaper consumption, the recovered

fibres in newsprint assist the use of new and recovered fibres in printing papers.111

Thus, although the industry’s use of recovered fibre has increased and its use of

new pulpwood has plateaued, the extent to which this has helped conserve native

forests is not clear and needs further investigation. It would be wrong to assume that

the total volume of recovered fibre used by the industry represents the difference in

demand for new fibre had not recycling occurred and increased.

7.9 Future environmental benefits The benefits and costs from increasing the use of recovered fibre in new paper/board

products is simply the difference between those that exist now and those in such a

future. Identification of these benefits and costs requires a detailed examination

beyond that possible here of the whole fibre collection, processing, distribution and

waste disposal chain, including inputs and outputs of energy, chemicals, fibre, capital

and labour. Also, it would need to cover the various social and financial

relationships between all commercial interests. Benefits and costs will not

necessarily be distributed equally amongst the interests involved in collecting and

using different fibre types and disposing of wastes from manufacturing processes and

final products. Because the kinds of impacts vary, they cannot necessarily be

weighted and compared to determine simple environmentally-benign choices.

Nevertheless, the possible impact of increased waste fibre recovery and utilisation

109 These companies are: Oji Paper, Nippon Paper, Daio Paper, Daishowa Paper, Marusumi Paper, Chuetsu Pulp, Houkujou Paper (JPA 1999). 110 The sale of newsprint is an important source of income for papermakers because of fixed prices, stable demand and high operating rates (JP&P 1987a). Ausnewz (1998a) cites an official of Oji Paper saying that the company was dependent on newsprint for 70% of its profits. 111 The inclusion of recovered fibre in newsprint and printing and writing papers has since increased to 67% and 22.6% respectively (PRPC 2002).

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rates on the production of paper garbage and the use of new wood within the context

of increasing domestic paper/board production can be assessed.

If Japan’s use of paper/board reaches 40.8 million tonnes at 2010 as expected by

some forestry planners in the mid- to late-1990s (Chapter 5), then the collection rate

would need to be about 63% for paper/board garbage production to remain at the

level estimated for 1999 (Figure 7.9). If the amount of paper/board garbage were to

be less than this, the collection rate would need to increase. If such rates of

collection and use in paper/board production were not achieved, then waste fibre

would need to be directed to other uses to reach this objective. One such use is

energy production (Ohkuni 1995), which some consider provides benefits for carbon

dioxide emissions and the industry’s energy use (Oye 1998b, PRPC 2001a). Another

use is sale to export markets, and such sales rapidly increased the collection rate in

2001, even though the amount used domestically fell slightly (PRPC 2002).

For the use of new fibre to remain constant, at say the 1999 level of 13.33

million tonnes, then the utilisation rate for recovered fibre would depend on Japan’s

use of paper/board. A national paper/board consumption of 40.8 million tonnes at

2010, would require an input of recovered fibre of 27.47 million tonnes, an increase

of 10 million tonnes (or 58%) on 1999 and equivalent to a utilisation rate of 63.4%

(JPA 2001c). A lower future use of paper/board may reduce the utilisation rate, but

would depend on the balance of fibres used in production. Higher utilisation rates

would reduce the industry’s consumption of new fibre.

Planners of the industry’s requirements for future wood supplies from foreign

plantations assumed a recovered fibre utilisation rate of 57.2% for a total paper/board

consumption of 40.8 million tonnes at 2010 (Hisada 1997b). Such a future would

mean a substantial increase in the use of new fibre and the production of paper/board

garbage. However, the utilisation rate has already exceeded this and the industry

aims at 60% for 2005 (Takayanagi 2001). A high rate of plantation establishment by

Japanese companies would likely lead to strong price competition between recovered

fibre, plantation wood and wood from native forests. This could produce smaller

markets for native forest wood (Ausnewz 2001).

Because of the already high levels of recovered fibre in paperboard, future

environmental consequences will primarily be related to the inclusion of more

recovered fibre in printing and information papers. These products are currently the

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main destination of native forest hardwood fibres, although some forest fibre may be

replaced by plantation fibre, as discussed in Chapter Eight.

7.10 Conclusions In the absence of strong recycling legislation, the primary force driving the growth in

Japan’s collection and recycling of waste paper/board has been the economic benefit

to paper/board manufacturers from savings in production costs and, more recently,

market opportunities. Greater use of recovered fibre reversed the growth in Japan’s

production of paper/board garbage and the paper/board industry’s use of new fibre in

the 1990s.

Several factors interacted to create this situation. The industry could access

large amounts of new wood fibre from domestic and foreign sources for conversion

into high quality products, which, as seen in Chapters Six and Eight, required

environmental and social restructuring. Advances in recycling and papermaking

technologies created the technical potential for greater use of fibre recovered from

these products and helped lower manufacturing costs. The use of recovered fibre

increased because availability grew with the expansion of paper/board consumption

and fibre prices declined. Prices declined because of pressures from manufacturers

and the inability of the waste paper/board collection sector to improve its weak

economic position in the fibre supply chain. This has been assisted by increased

involvement of voluntary community labour in collection activities, subsidisation of

collection by local governments and declining prices for pulpwood. Thus, the

process of increasing the recovery and use of waste fibre has not simply been one of

cooperation between consumers, collectors and manufacturers. It features

considerable and continuing tensions and contests between these interests, and the

relative strengths of papermakers in the production chains will continue to direct the

use of recovered relative to new fibres.

Future environmental benefits and costs from recycling will depend on how

manufacturers exploit different fibre resources within their commercial situations. If

Japan’s paper/board consumption increases, then waste paper/board collection and

use must increase to maintain Japan’s production of paper garbage and the paper

industry’s use of new fibre at recent levels. There is technical potential to increase

the collection and utilisation of used fibre, especially in fine papers. Recycling laws

will expand the availability of low quality fibres and export markets may help

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consume them. In the absence of domestic recycling legislation that targets high

quality waste paper, economics will drive collection and use.

Higher prices for recovered fibre would help exploit unused higher quality fibre

resources and improve the economic health of the collection sector. However,

paper/board manufacturers want low prices that counter the price and quality of

imported woodchips and pulp. Greater consumer interest would assist production of

higher quality recycled paper, but price remains an important inhibiting factor.

These cost-price pressures could intensify with the expected greater availability of

foreign pulpwood. The next chapter explains the importance of foreign fibre to

Japan’s papermakers since WW2 and the restructuring of these resources that

facilitated their exploitation.

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Chapter 8: Restructuring the supply of foreign fibre

8.1 Introduction Although domestic fibre formed the foundation for the growth of Japanese paper

manufacture from its inception and after WW2, the industry has been shaped by

changing markets for foreign fibres. Pressure from cheap imported papers helped

push Japan’s first papermakers into using wood. The isolation created by WW1

meant higher profits for domestic manufacturers. Pressures on wood resources in

Japan’s pre-WW2 empire prompted the industry to examine south-east Asia for new

supplies (Suzuki 1967, Ooshima 1991). Paper manufacture in Japan now relies on

foreign wood for most new fibre supplies. These imports also help maintain the

quality of domestic recovered fibre.

This chapter explains how the supply of foreign fibre was restructured to support

the industry’s growth since 1950. In doing so, it examines the restructuring of

foreign wood resources and related environmental implications. The chapter first

discusses the growth in imports of pulpwood, pulp and paper from the end of WW2

and the influential role of Japan’s GTCs. This provides the context for the core of

the chapter - three case studies of foreign fibre supplies that illuminate the

restructuring processes. The first examines the changing supply hardwood chips

from temperate native forests. The second investigates the development of foreign

Japanese-owned hardwood plantations. The third compares foreign softwood pulp

supply from Japanese-owned pulpmills in different times and locations.

Conclusions are presented in the final section.

8.2 The supply of foreign fibre since 1950

8.2.1 Factors influencing fibre imports The expanding use of foreign fibre, as implied by the industry’s pre-war growth, was

generated after WW2 by a mix of local and foreign factors, including the growth of

paper use and industry production in Japan, limited exploitable domestic fibre

resources, and supportive foreign political and economic circumstances.

The following discussion explains how the internationalisation of fibre supply

began with small imports of pulpwood and the establishment of a Japanese-owned

pulpmill overseas, and grew to be dominated by woodchips, with smaller imports of

pulp and paper. Paper manufacturers competed and cooperated using available

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technologies and organisational abilities to advance the use of preferred foreign

resources. GTCs were very important as they often found new fibre resources,

organised supplies and in some cases invested in fibre supply ventures.

Foreign governments, wood-based companies, landowners and forestry services,

all keen for more economic activity and income, contributed to shaping the

expansion, as shown in the case studies. Pressures for environmental protection,

competitive pressures on Japanese manufacturers from foreign companies and the

responses of Japanese manufacturers to changing international markets continue to

be important. The industry is entering a new phase in its use of foreign fibre that will

further restructure social, economic and environmental consequences for the industry

and suppliers of domestic and foreign fibre. Chapter Ten discusses attitudes within

the industry to forests and plantations that influence the industry’s future

development.

8.2.2 Imported pulpwood

Pulpwood imports begin The pressure on Japan’s limited pulpwood supplies in the early-1950s shocked the

JPA sufficiently for it to establish the Pulpwood Importers Association in 1953. This

association organised supplies of conifer pulplogs from Russia in the mid-1950s

(Ooshima 1991), and soon after hardwood pulplogs were imported (JPA undated 1).

Foreign wood was regarded as a supplement to domestic supplies, but major changes

in pulpwood imports began during the early-1960s. Because domestic pulpwood

supplies were restricted, MITI decided it would not permit the expansion of paper

production capacity unless manufacturers had gained access to sufficient foreign

pulpwood (Murashima 1988, Shinomiya 1995), so companies expanded their

knowledge of wood resources in the Asia-Pacific region (JP&P 1966c).

In the mid-1960s, the first foreign chips were imported from softwood sawmills

on the west coast of the USA. By the late-1960s securing access to foreign

pulpwood became important to companies’ strategies for lowering costs and

increasing production (JP&P 1965c, 1969f, 1969g). Woodchips from the USA’s

west coast grew rapidly to provide the bulk of imported pulpwood until 1973 (JPA

2001c). Imports from Russia remained small because they were not considered

reliable (Maruyama 1966, JP&P 1967h, 1968j). Malaysia exported hardwood

pulpwood to Japan from the mid-1960s (JPA undated 1).

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Even so, chip prices began to rise, in part because of competition between

Japanese buyers (JP&P 1967b, Murai 1967, JP&P 1973q). There were concerns that

this competition could escalate and influence prices for domestic chips, so

papermakers cooperated to reduce competition, stabilise supplies, limit price

increases and investigate the potential for establishing new pulpwood supply sources.

To give themselves greater control over the organisation, timing and cost of chip

supply, manufacturers invested in a fleet of specialised chip ships, which has grown

with chip imports (JP&P 1967b, 1975h, Narita 1980, JPA 2001a).

Diversification of chip sources In the late-1960s, domestic pulpwood comprised 80-90% of the industry’s pulpwood

intake, but supplies were limited and prices increased (Chapter 6). Concern over the

potential for pulpwood costs to restrict papermakers’ growth and profitability (JP&P

1968i, 1969d) generated two different responses.

First, paper companies and government bureaucracies increasingly cooperated to

assist woodchip imports. Committees were formed containing representatives of

paper companies and sometimes MITI to coordinate pulpwood imports and pricing,

reduce competition between manufacturers and investigate potential pulpwood

resources (JP&P 1967b, 1967g, 1968e). The Japan Overseas Afforestation

Association (JOAA) was established in 1970 to support the establishment of

pulpwood plantations (JP&P 1974c).

Secondly, companies diversified the type and source of woodchip imports. By

the early 1970s, hardwood chip imports were beginning or increasing from the native

forests of New Zealand, Indonesia, Papua New Guinea and Australia. In the mid-

1970s, hardwood chip imports from South African plantations began, while the USA

and Australia dominated softwood and hardwood supplies respectively (JTA 1998).

Diversification was strongly encouraged from 1979 when the price of softwood chips

from the USA was dramatically increased (Schreuder and Anderson 1987), the yen

weakened and energy and freight costs increased (JP&P 1974a, 1980b). The

industry’s use of recovered fibre and domestic chips increased, but attention shifted

south where companies had conducted pulpwood resource surveys (JP&P 1976) and

Australia was exporting large volumes of hardwood chips (JTA 1998).

Imports of softwood and hardwood chips increased and diversified after the

signing of the 1985 Plaza Accord (Figures 8.1 and 8.2). As discussed below several

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factors contributed to this: greater paper use in Japan’s ‘bubble economy’; a stronger

yen that lowered the relative cost of foreign resources; changes in source countries

that assisted economic accessibility; and perceived instability by Japanese

manufacturers in the supply of pulpwood.

However by the early 1990s, new trends emerged. Imports of softwood chips

slumped, while the use of softwood chips sourced from within Japan was maintained

and the use of recovered fibre increased. The use of foreign hardwood chips grew by

329% between 1985 and 2000 with Japan’s increasing use of fine paper and the

declining use of domestic hardwoods. Consequently, total pulpwood supply through

the 1990s was fairly constant, but imported chips increased as a proportion of

pulpwood supply by 32%. The volume of imported hardwoods increased by 72%

but softwood imports fell by 20%.

Several trends are apparent within these general supply conditions (JTA 1998,

JPA 2001a). From the 1980s, the industry diversified away from conifer forests and

sawmill wastes to plantations (Figure 8.3). Concerns over limited supplies in north-

west USA contributed to the diversification, particularly to Australian softwood

plantations (JPA 2001c). However, there is concern that Australian softwood chip

supplies are unsustainable (Auspine 2001). The high dependency on broadleaf

forests continued to the late-1990s as the industry increased and diversified its chip

supply from temperate forests to include Chile and seUSA from the late-1980s. It

declined in the late-1990s as the use of plantation chips, especially from South Africa

and later Chile, expanded (Figures 8.2 and 8.3). Suppliers in Australia, seUSA,

South Africa and Chile now dominate foreign hardwood chip supply. The use of

wood from all other countries, including plantations in South America and the Asia-

Pacific region, increased sharply from the late-1980s. However, some forest-based

hardwood chips schemes in Chile and Indonesia closed in the late-1990s, in part

because of fibre supply problems (JapanI 1998).

In the late-1980s, several paper companies began establishing and/or buying

fast-growing hardwood and softwood plantations around the Pacific Rim and

elsewhere as sources of pulpwood (JOPP 1998, 1999a). Some are already supplying

woodchips. The relationships linking the use of native forests and plantations are

discussed further in this chapter’s case studies, while attitudes within the industry to

the use of plantations are examined in Chapter Ten.

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Figure 8.1: Imports of softwood chips into Japan.

Sources: JTA (1998), JPA (2001a).

Note: ‘Other’ includes Russia, Chile, Brazil, Fiji, Indonesia, Taiwan and other small suppliers of

chips that may not be for paper production.

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Figure 8.2: Imports of hardwood chips into Japan.

Sources: JTA (1998), JPA (2001a).

Note: 'Other' includes China, Vietnam, Thailand, Russia, Canada, Ecuador, Brazil, Argentina and

other small suppliers that may not supply chips for paper production.

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Figure 8.3: Sources of woodchips imported into Japan by fibre type.

Sources: JPA (2001a, undated 1).

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Sourcing and pricing of imported woodchips The cost of pulpwood for pulpmills in Japan is the highest in the world on an

international basis (JP 1986, Neilson and Flynn 1997, Ausnewz 2001, Stafford

2001b). As discussed earlier, this is related to the relatively high international price

for paper made in Japan, Japan’s exchange rate, expensive domestic wood and the

ability of manufacturers to influence product distribution channels. Thus, the

industry can penetrate distant sources of fibre, and the reliance on chips gives

manufacturers direct influence over the fibre supply chain.

The price that Japanese companies are prepared to pay for fibre is basically a

residual value, reflecting the impact of that fibre on the total cost of manufacturing

pulp or paper and the price of the product into which it is converted. Each company

has its own preferences for particular combination of fibres based on its history,

culture and mill characteristics (JapanD 1997). Nevertheless, a general hierarchy of

preference exists for imported hardwood chips (Table 8.1) (Bills 2001),112 which

reflects relative positions of the cost to the manufacturer of the wood in paper. The

lignin waste from these chips produced during manufacturing is also an important

source of energy (Ausnewz 2001).

Japanese paper companies dominate the international woodchip trade (FAO

1998, Neilson and Flynn 1998) and, as discussed above, cooperate to keep price

fluctuations low. The nominal and real CIF prices of softwood and hardwood chips

imported into Japan declined from the early-1980s (Figures 6.10 and 6.12) as paper

prices fell and the industry diversified chip supplies. In 2000, the average nominal

CIF prices in Japan for softwood and hardwood chips were their lowest since 1976

(Flynn undated), and this is reflected in chip export prices (discussed below).

Japanese manufacturers can use diverse chip supplies and domestic recovered

fibre as a tool in supply negotiations to limit the ability of chip sellers to influence

prices outside the boundaries imposed by manufacturers (JapanD 1997).

Papermakers generally know and understand the basic activities of other companies

(JapanF 1997), and anecdotal evidence indicates that often the largest purchaser in a

112 This general ordering was confirmed by source within Japan’s paper industry (JapanD 1997). As an example of the impact of fibre types, in the late-1980s, Tohoku Paper replaced softwood chips from the USA with radiata pine chips from New Zealand and Australia. Although these chips were the same price as Douglas Fir, they were reported to have better pulp strength and yield which allowed the inclusion of recovered paper in kraft linerboard to go from 20% to 30% (JP&P 1987c).

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Table 8.1: Preferences of Japanese papermakers for hardwood pulpwood.

Source: Bills (2001). Note: Alder from the USA and Canada was close to the quality of Tasmanian regrowth, but oxidation and poor bulk density produced difficulties in transport and storage.

225

region is the first to negotiate a chip price, which other companies follow (Streeting

and Imber 1991). While the control over prices is limited by the need for exporters

to be profitable if papermakers are to maintain stable supplies over the long-term

(JapanF 1997), the Australian government’s former control over woodchip exports

via licences has been used to gain higher prices than might otherwise have been

achieved (Suich 1970, Bills 2001).

About sixty foreign ports supplied Japanese papermills with chips during the

late-1990s (Neilson and Flynn 1997). However, Japanese papermakers had direct

investments in only nine schemes during 1982 and six during 2000 (JPA 2001c).

Chip export schemes have been predominantly either totally owned by local interests

or local interests in a joint venture with a GTC. Such joint ventures are useful when

Japanese companies do not have direct financial interests in the resource or a

presence in a region as it provides both investors with a measure of security (JapanF

1997, Speck 1997). Also, limited ownership of export schemes provides a flexible

structure for obtaining wood. Marketing contracts and shareholdings give Japanese

companies some control over the trade, but allow them to avoid responsibility for

local issues and problems that might threaten direct investment, such as resource

management controversies and market changes (Marchak 1995). This pattern of

ownership is not repeated with Japanese-owned foreign hardwood plantations,

because papermakers want control of the resource (see below). At 2000, paper

companies, in conjunction with GTCs and other paper or electricity interests, owned

nineteen plantation schemes around the Pacific Rim (JPA 2001c). However despite

the industry’s continuing reliance on chips, its use of imported pulp has grown,

particularly from joint venture operations.

8.2.3 Pulp imports Pulp imports provide a source of fibre for mills that do not produce their own pulp

(JapanA 1997), are alternative sources of fibre to woodchips when international

prices are low, and through joint ventures provided secure access to cheap foreign

fibre and energy (Whitham 1994, 1995).

Dissolving pulp formed the majority of pulp imports from 1945 to 1955, but

shrank from the mid-1980s with the declining use of artificial fibre. Imports of pulp

for paper production grew rapidly from 1960 (Figure 8.4). In the mid-1960s, pulp

imports for paper/board manufacture were equivalent to about 6% of domestic pulp

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production (JPA 2001c). The industry was not keen to be totally dependent on the

international pulp market for foreign pulp supplies (JP&P 1965c), and its search for

new sources of fibre in the late 1950s included establishing foreign pulpmills

(Mikasa 1958). The first was established in south eastern Alaska during the late-

1950s to primarily supply dissolving pulp (Gilbert 1959, Matsumura 1961), and by

the late 1960s, several joint venture pulpmills had been established in North America

(1994, Whitham 1995). The third case study compares the restructuring of wood

resources for such pulpmills.

Imports of pulp increased because they were relatively cheap and helped

stabilise fibre supplies (JP&P 1973k). In 1996, pulp imports reached 21% of the

industry’s use of new fibre, or 9.7% of its total fibre use (JPA 2001c). The fall in

international pulp prices in the mid-1980s and the early-1990s contributed to this

(Morimoto 1993, TNW 1994a). Pulp is imported from a variety of countries, but

mainly Canada, the USA, Brazil and New Zealand (JPA 2001c). However, Inions

(undated) argues that advantages of new foreign pulpmills over expanding domestic

capacity gradually dissipated because: the difference between FOB chip prices and

foreign pulp prices declined; chip transport became cheaper; the Japanese yen

strengthened; domestic pulp manufacture advanced technologically; and

manufacturers used cheaper fuels. Japanese papermakers have not built new foreign

pulpmills recently, but the use of foreign paper/board is even more restricted than

that of imported pulp.

8.2.4 Imports of paper and paperboard Paper/board imports have fluctuated with changing economic conditions and links to

foreign markets, but remain small (Figure 8.5). While paper is imported because it

can be sold, there are several forces influencing the pattern of imports.

Tariffs on paper/board began to be reduced in the 1950s (JP&P 1985c) and will

be abolished by 2004 (PPI 1995b). Yet, the impact of this is not great overall, as

paper imports remain relatively small. Changes in exchange rates currently probably

have more impact (JapanC 1999).

Manufacturers have not invested greatly in foreign papermills to supply imports.

Generally, they wanted the benefits of manufacturing in Japan and to keep control

over prices, which might be lost by foreign production. Foreign investments in

manufacturing are part of long-term strategies by papermakers, and focus mainly

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Figure 8.4: Imports of pulp into Japan for artificial fibre production and paper production.

Sources: Suzuki (1967), JPA (2001c).

228

on commodity grades. Newsprint imports increased dramatically from 1980

following investment in foreign newsprint manufacture based on cheap resources.

Newsprint now forms the majority of paper imports (Simons and MMA 1990,

Whitham 1994, JPA 2001c).

Converters and users import paper/board that manufacturers do not make in

Japan, either at all or in large quantities (Chapter 5)(AP&P 1994c). Also,

manufacturers import paper to overcome short-term shortages (TNW 1996b).

Commercial users import paper as part of longer-term supply strategies. For

example, in response to increases in domestic paper prices in the mid-1990s, some

printers and converters began importing paper. These users now have sufficient skill

to handle lower quality imported papers and deal directly with foreign suppliers

(AP&P 1997a, Maeda 1997, 1998a, 1998c, JapanA 1999).

International trade pressures also play a role. Much of the pressure on Japan to

lower tariffs and remove perceived non-tariff trade barriers has come from North

American interests eager to expand exports (O'Brian 1992, PPI 1991c, 1992a).113

Imports of Indonesian printing papers increased (JPA 2001c) because Indonesian

manufacturers have low fibre and production costs and target Asian markets (Bayliss

1998, Gallagher 1999a). Also, Japanese manufacturers, GTCs and/or large

distributors provided these companies with technical and other assistance, invested in

them, and/or act as importers and/or agents. Consequently, such products by-pass

the traditional distribution system to enter outlets relatively cheaply (AP&P 1998d,

1998h, Ausnewz 1998b). Growth in such imports challenges the markets and cost

structures of domestic papermakers, so increasing pressures on companies to

restructure their manufacturing, distribution and fibre supply sectors. Because GTCs

are an important factor influencing the imports of paper, pulp and chips, their role in

fibre imports is discussed next.

113 These perceived trade barriers included: the paper distribution system; strict requirements on paper quality; ongoing restructuring; and the Japan Paper Importers Association (JP&P 1985a).

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Figure 8.5: Paper and paperboard imports into Japan.

Source: JPA (2001c).

230

8.2.5 General trading companies and fibre imports GTCs have been critical to the restructuring of fibre imports as Japan’s paper/board

industry evolved (Appendix 5.7), and continue to provide services to manufacturers,

but to maintain their usefulness they need to generate new roles for themselves. The

relationships of GTCs with manufacturers became closer from the late-1950s and

early-1960s when they provided loans to manufacturers and received the rights to

supply raw materials and market products (Sugaya 1964b, JapanF 1997). They also

purchased shares in some papermakers, which increased their influence (JP&P

1966b).

By the mid-1960s, GTCs handled nearly all pulp imports, so had strong links

with foreign pulp manufacturers (JP&P 1966b). As Japan’s use of paper grew from

the 1960s, GTCs increased their foreign activities using their global information

networks, foreign language skills and organising ability to expand their business and

support papermakers. They organised pulpwood supplies, and when annual supply

contracts became inadequate, they developed long-term contracts, import financing

and 'the develop-and-import' system, including the construction of woodchip and

pulp mills. They are the intermediaries for most imported woodchips (PBR 2000a),

and were important in establishing foreign joint venture pulpmills (Sugaya 1964b,

JP&P 1978d, 1979b, 1984a).114 From the late-1970s, when the competitiveness of

domestic papers declined, the GTCs became heavily involved in importing paper

(JP&P 1980c). Because of their role as paper distributors, the imported papers

GTCs handled for some time were reported to be those not produced in Japan and

those over which agreement had been reached with competing paper manufacturers

(JP&P 1985a).

The changing structure of the industry has challenged the GTCs. The

profitability of their small commission on woodchips has been squeezed by the high

cost of servicing a large geographic area. However, as woodchips have little added

value, it is important for GTCs to maintain a high volume throughput. Japan’s

leading papermakers have improved their capital to investment ratios and have

developed some of the skills previously supplied by GTCs so do not always need

GTCs. Also because of company mergers, the large papermakers now deal with

114 For example, Mitsui proposed the Jujo-Weyerhaeuser joint venture newsprint mill constructed in Washington, USA (JP&P 1973j) and Mitsubishi was the intermediary in the first import of woodchips from western USA by Daishowa (JP&P 1964a).

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several GTCs, which creates competition amongst them to generate more business

for fewer manufacturers (JapanF 1997). Consequently, when papermakers needed

higher quality fibre supplies to increase their competitiveness and counter possible

forest reservation, the GTCs generated another role for themselves with involvement

in the establishment of hardwood plantations (JPA 2001c)(Chapter 10). Because of

their long historical relationships it is unlikely that papermakers will stop cooperating

with GTCs (Whitham 1992), and the need for GTCs to create transnational business

can be expected to influence the industry’s pattern of fibre use.

8.2.6 Fibre imports - Overview The role of foreign wood fibre in Japanese papermaking changed from being a

supplement for domestic supplies to the prime source of new fibre as production

grew from the 1960s. The use of woodchips and pulp from joint ventures helped the

major companies maintain control over prices for products and fibre, supporting their

operations as domestic manufacturers rather than participants in international paper

markets.

The high volume trade in chips and pulp was supported by expanding domestic

production, domestic paper prices, GTCs and their need for high volume throughput,

diversification of fibre suppliers, declining real chip prices, specialised chip transport

ships and the restructuring of foreign fibre resources. The restructuring of foreign

fibre supplies continues as the industry increases its use of plantation pulpwood and

faces more potential competition from paper imports. The following case studies

illustrate the importance of restructuring fibre resources in conjunction with supply

systems as part of the industry’s increasing dependence on foreign fibre. The issue

of price is seen to be critical to organising fibre supplies.

8.3 Case studies

8.3.1 Introduction Three case studies investigate the factors influencing two main categories of foreign

fibre supply to Japanese pulp and paper makers – pulp and hardwood chips. They

are concerned with explaining the interactions between the desires of Japanese

interests and local political, economic, environmental and resource factors

influencing resource exploitation that allow supply to occur.

Hardwood chips form the most notable category of foreign pulpwood supply to

Japanese papermakers. As shown above, they come primarily from native forests -

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mainly temperate native forests in Australia, seUSA and Chile. The first case study

examines the supply from these countries. As this use is declining with increasing

plantation supplies, the second case study examines the role of hardwood plantations.

The third case study compares the wood supply and operations of Japanese-owned

pulpmills at different times and locations in North America.

8.3.2 Temperate forest hardwood chip supply

Introduction The Australian forest-based export woodchip industry was established in the late-

1960s after competition intensified in Japan over domestic hardwood supplies (Iida

1995). This was almost twenty years before the establishment of export hardwood

chip suppliers in Chile and seUSA during Japan’s ‘bubble economy’. This case

study uses three interrelated themes to illuminate the factors supporting the

respective industries and their changing balance of production: resource

characteristics and export trends; industrial structure and economics; wood supply

and forest exploitation. The industries in each country are based on widely dispersed

forests and ports, so the study draws on general trends supported by relevant

examples. The case study of an Australian woodchip scheme in Chapter Nine

explains the potential impacts of forest restructuring in more detail.

Forest resources and the beginnings of chip exports This section illustrates how the establishment and growth of woodchip exports were

encouraged by local political and commercial interests and shaped by previous

patterns of exploitation typical of unsustainable forest management. In particular,

the industries were promoted as using waste wood to improve forest quality.

Most Australian forests are dominated by eucalypt species and publicly-owned.

Many have been depleted of high quality sawlogs, and the Japanese pulpwood

demand was seen within the Australian wood-based industries as taking forestry into

a new era (Forwood 1974b). Sawmillers wanted to improve their own economic

viability by cheapening access to remaining sawlogs and selling sawmill wastes

(Head 1968, Golding 1972). Some wanted to counter the power of domestic

papermakers (Graeme-Evans 1995). Also, forest services and industrialists wanted

trees of low commercial value removed to restructure forest exploitation towards

high volume regimes based on more complete utilisation of each tree, clearfelling

and short rotation times. Integration of sawlog removals with pulpwood logging was

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considered to meet these objectives (Lawrence 1964, Gilbert 1972, Forwood 1974b,

Quick undated). Australian hardwood chips exported to Japan (Figure 8.6) were

from public and private forests until plantations matured in the late-1990s. However,

the export woodchip schemes in seUSA and Chile provided wood regarded by

Japanese papermakers as higher quality for papermaking than some Australian

sources (Table 8.1).

Chile’s native forests are primarily temperate rainforests of mixed broadleaf

species or pure beech (Nothofagus) species (Lara and Donoso 2001). All forests

outside reserves are privately owned (Lara 1992). Many were exploited heavily for

timber, so depleting the high quality commercial species (Jelvez et al 1988). When

the export woodchip industry began, the main commercial use of Chile’s forests was

the production of fuelwood and charcoal (Lara 1992). Export schemes were

promoted for their potential to use low quality wood and improve the wood

production qualities of native forests (ChileB 2002). The large export demand

consumed plantation wood and wood from forests of low commercial value. The first

beech forests used for woodchips were owned by large wealthy landowners,

including foreign non-resident owners. The increasing demand drew smaller

landholders into the wood market (JATAN 1993, Youlton 1995, JapanF 1997,

Neilson and Flynn 1997) and stimulated local entrepreneurs to exploit Chile’s most

southern forests (Figure 8.7) (ChileB 2002).

The forests of seUSA include mixed conifer forests, conifer-broadleaf forests

and mixed broadleaf forests. Broadleaf oak-hickory forests are some of the most

abundant (SFBEDC undated). The region’s forests are mainly privately-owned,

primarily by many non-industrial landowners (Neilson and Flynn 1997), so the rate

of logging is unregulated by government. Many forests have regrown from heavy

logging and clearing earlier this century (Larson 1992a, 1992b). A confluence of

local pressures encouraged the development of chip export schemes in seUSA

(Figure 8.8). American papermakers were increasing production capacity in

southern USA. Also, forest owners, wood-based companies and public utilities

wanted to expand the commercial use of unused wood in the region’s forests

(Appendix 8.1). Japanese companies were able to integrate their demands into this

restructuring of forest exploitation.

234

Figure 8.6: The location of export woodchip schemes in Australia during the late-1990s.

Source: Neilson and Flynn (1997).

235

Thus, the physical, social, political and environmental characteristics of the

pulpwood resources in each country influenced the establishment of export chip

industries. The pattern of chip supply from Australia, Chile and seUSA (Figure 8.9)

and the resultant forest restructuring can be understood through the interaction of

Japanese requirements with the structure and economics of local chip production.

Political and economic structures in each country supported chip sales to Japanese

customers and access by exporters to forests.

Chip industry structure and economics The Australian hardwood chip industry grew under the control of national export

licences and agreements with state governments for the supply of pulpwood from

public forests. Until the late-1990s, the Australian government could regulate the

maximum volume and minimum price for exported chips, and require studies on the

feasibility of pulpmills and, from 1974, environmental impacts (Cromer 1975). It

could also regulate economic activities in forests of ‘world heritage’ status and

‘national estate’ forests of high national cultural or environmental significance

(Kirkpatrick 1998).

Japanese papermakers “liked Australia for stability of supply - the world's best

loading facilities and specialist chip mills and solid commercial infrastructure.

Additionally, shipping distances were short and sea conditions relatively benign”

(Bills 2001). Although some disliked the regulatory powers of Australia’s national

government, the Australian domination of hardwood chip imports continued until

supply stability was threatened in the late-1980s by the proposal for a pulpmill in

Tasmania that would consume export chips. The growing demand for chips relative

to potential supply from Australia and New Zealand, and opportunities for importing

relatively cheap, higher quality wood from Chile and seUSA where there were no

national export controls led the Japanese to diversify. Japanese concern over the

potential impact of conservation campaigns on pulpwood supplies in Australia

through the 1990s seems to have supported increased Japanese use of forests in Chile

and seUSA. However, it does not appear to be any more important than other

factors. Similarly, national differences between forest management and the

protection given to non-wood forest values may have affected relative wood prices.

The extent to which such factors influenced Japanese companies to choose

236

Figure 8.7: The location of export woodchip schemes in Chile during the late-1990s.

Source: Neilson and Flynn (1997).

237

Figure 8.8: The location of export woodchip schemes in south eastern USA during the late-1990s.

Source: Neilson and Flynn (1997).

238

between fibre sources is unknown, but this diversity of exporters gave papermakers

a flexible chip supply network (Appendix 8.1 and Chapter 10).

While the Japanese demand for hardwood chips increased, the nominal CIF

prices declined from the early-1980s. However, prices for chips from seUSA and

Chile increased relative to that for Australian chips (Figure 8.10). The low relative

price of Australian chips, especially when considered in the manufacturing cost of

paper (McCormack 2001), reflects the papermaking qualities of Australian wood

(Table 8.1) (ACiL 1997) and the pricing of Australian chips in Australian dollars. In

seUSA, Japanese companies compete for private forest wood with domestic

papermakers who could sometimes pay more to independent suppliers (AustraliaB

2001, Brown 2001), so do not consider the area as a secure, large, long-term supply

(Bills 2001). Nevertheless, US supply surpassed that from Australia in the mid-

1990s, after Australia’s government reduced licensed export volumes because of

conservation pressures, then fell when chip prices and the value of the US dollar

increased. In reaction, Australian exports grew, supported by their low price and the

removal of export licences, which increased perceptions of resource security (Coffey

2001, McCormack 2001).

Higher prices for Chilean chips were initially absorbed by strong Japanese

demand. However, several factors acted to reduce imports of Chile’s forest chips

from the mid-1990s (JapanF 1997): higher delivered chip prices as forests near

chipmills were cut out and competition between chipmills increased; problems

regenerating some forests; the higher quality of US chips; the failure of some supply

contracts; seasonal shortages of beech chips; and a concern over conservation

pressure if Japanese buyers paid higher prices to increase native chip supply. One

scheme closed because of storm damage and low chip prices caused in part because

its Japanese customer altered the operation of paper machines, so reducing the value

of its forest chips (JapanI 1998, Youlton 1998, ChileA 2002, ChileB 2002). Also,

the export of eucalypt chips grew as plantations matured, supported by declining

nominal prices in US dollars (INFOR 2001b, 2001c).

239

Figure 8.9: Imports into Japan of hardwood chips from the leading suppliers by nation.

Sources: JTA (1998), JPA (2001a).

240

Figure 8.10: CIF prices in Japan of hardwood chips from the leading supplier nations compared to that for hardwood chips from Australia.

Sources: JTA (1998), JPA (2001a).

241

While nominal export prices (in local currencies) for Australian and Chilean

chips fluctuated and grew, in real terms prices for Australian, US and Chilean chips

fluctuated and declined (Figures 8.11, 8.12 and 8.13). Sellers could extract higher

prices when Japan’s economy permitted, but there are few economic analyses of

export woodchipping, and those that exist are limited by lack of data. The main issue

of concern for exporters, forest owners and others in the supply chain is whether

export prices provide a suitable return for their products.

The export prices for hardwood chips from Australian export schemes have been

based on the price for Tasmanian chips. According to one Japanese source, the price

for Tasmanian chips first used a formula that was meant to cover production costs as

adjusted by the Consumer Price Index. However as the market expanded, the

formula broke down and prices became negotiated (Cshosha 1997). Australian

studies argued that export prices to the early-1990s were probably below what buyers

could afford to pay while exporters received public subsidies (Byron and Douglas

1981, Parker 1986, 1988, Streeting and Hamilton 1991). Attention over subsidies

focussed on the price of pulpwood, which comes primarily from public forests. The

price of such wood was often seen as being too low to either cover all costs or reflect

its potential market value (FCT 1977, Byron and Douglas 1981, Parker 1986, 1988,

IC 1993). Pulplogs from private forests have been cheaper than wood from public

forests (Jones 1975, Dargavel 1982, HDA 1990), reflecting their low value to

landowners.115

Increased expenditure on infrastructure and regeneration to supply pulpwood

contributed to the growing losses of Australia’s forest services through the 1970s and

1980s (Bruce 1986, Saddler et al 1991). Wood prices increased in the late-1980s

(RAC 1992a, 1992b, Graham 2001), but as annual losses increased, forest services

were restructured to operate on a more commercial basis. Although many now seem

to be making a profit, their profitability varies (CCNCO 2001), while criticisms of

low wood prices and poor economic performance continue (Dragun 1995, MJA

2001). Such conclusions are also criticised (CIE 1995), and Cameron (1997)(p.5)

argues that on the basis of “international benchmark pricing, Australian pulpwood is

now overpriced on a milldoor basis as a result of stumpage increases in real terms

over recent years”.

115 Recent published economic analyses of Australia’s export chip industry were not found.

242

Figure 8.11: Amounts and prices of exports of hardwood chips from Australia.

Sources: RAC (1992a), ABARE (1999), Ausnewz (2000).

Notes: Nominal chip prices were converted to 1995 values using the Consumer Price Index for

Australia (ABS 2001a).

243

Figure 8.12: Amounts and prices of exports of hardwood chips from Chile.

Sources: INFOR (2001a, 2001b, 2001c).

Note: Nominal chip prices in US dollars were converted to Chilean pesos using observed exchange

rates (CBC 2001a). These prices were converted to 1995 values using Chile’s Consumer Price Index for December in each year (CBC 2001b).

244

Figure 8.13: Amounts and prices of hardwood chip exports to Japan from south eastern USA.

Source: USDC (2001).

Note: Nominal prices were converted to 1995 values using the Consumer Price Index for the USA

(Global 2001).

245

The economics of pulpwood production from Australian public forests is linked

with forest management strategies, plus the methods and assumptions used to value

forests and decide how management costs are determined, apportioned and

recovered. Detailed information on these processes and their interrelationships is not

public. However, the forest restructuring required for one Australian export scheme

has been far more profitable for the chip exporter than the forest manager (Chapter

10).

The supply of forest pulpwood from Chile and seUSA is very different to

Australia, being purchased from private landowners. In Chile, forest owners sell

logging rights to independent contractors who supply the chipmills, and the

government heavily supported the wood products industry. The 1974 forestry law

‘Decreto Ley 701’ encouraged the private sector to expand plantations often at the

expense of native forests, while national regulations were amended to allow exports

of unprocessed wood products. Chip companies obtained supplies from forests being

converted to plantations and agriculture. However, as the demand for agricultural

land declined, chip demand drove logging through much of the 1990s. Logging for

wood production requires a government-approved management plan, but illegal

logging occurs because of lack of inspection and enforcement of regulations (Lara

1992, CODEFF 1994, Clapp 1995, Marchak 1995, Clapp 1998c). Only one

economic study of Chile’s native forest woodchip industry was found for this

dissertation. It concluded that: alternative uses of the natural resources consumed by

the industry would give Chile greater social and economic benefits; the industry

contributes little to Chile’s social and economic development; while its profits

depend on environmental subsidies through a loss of natural capital (Claude

undated). However, the worth of Chile’s forests to Japan’s papermakers declined

from the mid-1990s as Chile’s hardwood plantations matured (Figure 8.12). Thus,

Chile’s forest chip supply was unsustainable; forest owners exploited the Japanese

market while economic to do so. The situation in seUSA is similar.

In seUSA, the number of ‘satellite’ chipmills grew from the late-1980s to reduce

wood collection costs and extend the area of forests economically exploitable for

expanding domestic paper production (Smith and Haldeman 1997, Colberg 1998,

Schaberg et al 2000). Japanese chip demand became integrated into this

restructuring.

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About half the chips exported from seUSA leave from ports in the Gulf of

Mexico, especially Mobile, because exporters can cheaply access interior chipmills

by barge using the river and canal system that flows into the Gulf. The Tennessee-

Tombigbee Waterway is part of this system and is critical to the export of woodchips

from Mobile. It was constructed at public expense to link the Tennessee and

Tombigbee Rivers so products from interior states could be transported cheaply to

southern ports. It operates at a loss, which supports chip exports (Smith and

Haldeman 1997, Grabensteder 1998, Tenn-Tom 1999) and prices paid for

pulpwood.116

Several factors encouraged private forest owners across seUSA to sell broadleaf

trees for pulpwood:

• prices grew through the 1990s as the proportion of the delivered price for

pulplogs captured by landowners increased (TMS 2001);

• landowners use their forests as a “biological bank account” (Raper 1997) to pay

for family expenses, especially estate taxes (Larson 1992a);

• pulpwood markets allow the sale of low quality logs (AmericaB 1997); and

• prices for land and pine sawlogs increased substantially from the 1970s (Larson

undated) encouraging the conversion of native forests to plantations (Curry et al

1995).

Stumpage prices declined throughout seUSA from the late-1990s (TMS 2001)

with lower domestic and export demand. Local and international wood markets will

dominate the longer-term pattern of forest exploitation and pulpwood exploitation

(Ezell and Bullard 1997, Schaberg et al 2000).

Thus, the structure and economics of the woodchip industry in each country

assists forest exploitation. The chip supply chains are under constant pressure from

116 The ‘Tenn-Tom’ Waterway cost about $2 billion to construct and opened in the mid-1980s. Its annual operating, maintenance and dredging costs increased from about $14 million to $25 million between 1985 and 1997. The commercial users of America’s waterways pay a levy on their diesel fuel of 20 cents per gallon in place of a direct charge for using waterways, but the income from this levy is insufficient to cover all operating, maintenance and dredging costs. This income cannot be allocated accurately to each waterway, but it is recognised that the ‘Ten-Tom’ waterway is operating at an overall financial loss. In 1995, more than half the tonnage of commodities transported on the ‘Tenn-Tom’ was wood, nearly all in the form of woodchips (Smith and Haldeman 1997, Grabensteder 1998, Tenn-Tom 1999).

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Japanese papermakers to minimise costs while paying enough to generate desired

chip supplies at preferred prices. However as discussed next, the high volume

logging restructures the forests at the expense of non-wood values, and wood prices

are not necessarily sufficient to ensure the long-term protection of those values.

Wood supply and forest exploitation Japanese pulpwood markets gave previously unused trees an economic value and

shifted the exploitative pressures on forests. The impacts of the woodchip schemes

vary with location and styles and rates of logging, but common characteristics are:

the rapid restructuring of forests for high volume supply; lack of initial studies of

environmental impacts; and anti-woodchipping conservation campaigns. Export

woodchip schemes contain an inherent conflict between commercial pressures and

environmental values which generates such features. This is illustrated by comments

on the Australian industry (Wells 1983)(p.103):

The relatively low value of wood from pulpwood logging cannot stand the same level of costs associated with applying environmental constraints as sawlogs. For export woodchips, as with a low level of domestic processing, the exported cost is particularly sensitive to logging costs. If pulpwood or export chipwood logging operation are to continue, some lowering of environmental standards must be accepted.

Japanese papermakers became the largest consumer of Australian forest wood

(ABARE 2001). The majority of Australia’s woodchips come from state public

forests, and pulpwood supply commitments imposed or strengthened logging rates

based on rotations of around 40 to 100 years. Clearfelling became the dominant

form of logging, and regeneration uses seed trees, aerial seeding and hand planting.

Thinning was expected to supply pulplogs (Australia 1977). Woodchip schemes

assist logging of previously economically inaccessible forests so supply sawlogs

(Florence 1993). However, their wood supply commitments interacted with those for

domestic users to restrict potential sawlog supplies from some forests (Everertt and

Gentle 1977). Old forests have been the main source of wood, and as logging

expanded, it approached and/or penetrated forests of national and international

conservation significance (SWFDF 1986)(Chapter 9). Many private forests logged

for export woodchips were cleared completely or replaced with plantations (Jones

1975, Dargavel 1982). Regrowth forests are increasingly logged as the area of old

forest declines. Reliable estimates of the area of forest needed to supply recent

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woodchip exports do not appear to exist, but a conservative estimate is 50,000 ha

annually (Appendix 8.2).

Australia’s first four woodchip schemes supplying Japan were established prior

to 1974, so avoiding national requirements for an EIS until their export licences were

renewed (Cromer 1975). Government inquiries, their submissions and other research

illustrate the long-term deleterious impact of forestry regimes supplying export

woodchips on forest values such as forest-dependent wildlife and wilderness

(Australia 1977, RAC 1992b). Although there was concern over the best way to

manage forests supplying woodchips (Dargavel 1985), the political issue was the

extent to which non-wood forest values should influence chip supply.

Managing industrial development, resource use and environmental conflicts

resulting from export woodchipping (IC 1993, Dargavel 1995) was an important

factor stimulating Australia’s Regional Forest Agreement (RFA) process in the late-

1990s (Lane 1999).117 The national government, amongst other things, agreed to

abandon its controls over woodchip exports when state governments delineated

forests for wood production and conservation. However, the reliability of resource

estimates and the extent to which they allow for conservative management is a

politically sensitive issue (Turner 1998, 1999, Anderson 1999, 2000, Pugh and Flint

1999, Vanclay and Turner 2001) as governments will be liable for financial

compensation if wood supply commitments are reduced to meet conservation

objectives (Australia 2001). The consequences of any problems with the size of

pulpwood resources or assumptions for estimates will be felt after many years.

Public campaigns to reduce forest exploitation for woodchips are unlikely to stop

(Brown 1999, Woodley and Barlett 1999). Also, the pattern of pulplog demand upon

which assumptions about future wood supplies, growth rates and forest service

income are based are likely to be affected by the replacement of forest chips with

plantation chips by Japanese papermakers. This could particularly impact forests in

Western Australia, seNSW and Tasmania where the papermaking qualities of

pulpwood quality are low (Table 8.1). It is also relevant to the export of chips from

Chile and seUSA.

117 Discussion of issues surrounding the RFA process are contained in a special issue of the Australian Journal of Environmental Management (Coakes 1998, Dargavel 1998, Kirkpatrick 1998, Lennon 1998).

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Japanese interests considered that environmental regulations were not severe in

Chile when chip exports began (JapanF 1997). As Chile’s woodchip exports grew,

its southern rainforests became “subjected to the most intensive logging in its

history” (Clapp 1998c)(p.16). Pulpwood was supplied from regrowth and old forests

by clearfelling and selective logging (Lara 1992). Woodchip exports in 1990 were

estimated to have required wood from 21,000 ha of forests, and bird species are

threatened by the removal of nesting trees (Claro and Wilson 1996).

Community pressure grew for greater forest protection. A new law was

proposed to replace ‘Decreto Levy 701’ in 1994 which would: restrict plantation

establishment on forested land; subsidise planting species other than pines and

eucalypts, but also extend subsidies for the intensification of native forest

management, including the logging of old forests. Community opposition to the law

faced “a formidable obstacle in the well-organized forest industry, particularly from

exporters of hardwood chips" (Clapp 1995)(p.294). The proposed law became

divided into two parts. One part was enacted and subsidises plantation establishment

by small landowners on severely degraded land. Progress on the other part tackling

native forest management stalled, so “the cutting of native forest for chips continues,

more or less unregulated…..” (Clapp 2001). Industry and conservation groups agreed

on the principles for this law in mid-2001 (Langman 2001). It is possibly more than

coincidence that this agreement was reached after the chip demand for Chile’s native

forests shrank substantially.

Clearfelling dominates logging in seUSA, and the area of regrowth and

plantations expanded rapidly from the 1980s (Smith and Haldeman 1997). The chip

demand of Japanese and other Asian buyers is less than 10% of the region’s annual

hardwood pulpwood production (Neilson and Flynn 1997). However, it is an

important component of industrial wood demands that have been depleting regional

wood inventories and restructuring native forests through rapid logging,118

particularly forests accessible from the Gulf of Mexico. Competition became high

for pulpwood in forests of the southern upper coastal plains (West 1992), because

their denser hardwoods allow the export of more fibre per ship (Patrick 1994).

118 A variety of references illustrate how industrial wood demands are overcutting the region’s forests and plantations at rates faster than growth and at the expense of non-wood values (Cubbage et al 1995, Pacheco et al 1996, Cubbage 1997, Cubbage and Abt 1997, Smith and Haldeman 1997, Colberg 1998, Neilson and Flynn 1998, Heartwood 1999, Nilsson et al 1999, Teeter and Zhou undated).

250

Regional chip sales to Japan over the 12 years to 2000 would have required

pulpwood from more than half a million hectares of forests (Appendix 8.2).

However, as forests are primarily privately-owned, and coordinated and enforced

government regulations over chipmill establishment and forest exploitation are

absent, chip production expanded with little investigation and control (Smith and

Haldeman 1997).

‘Best Management Practices’ (BMPs) that guide logging are voluntary (Smith

and Haldeman 1997). They may help protect local forest values, but do not address

larger landscape issues, such as protecting biodiversity (Bliss 1997). BMPs can

substantially increase logging costs (Nilsson et al 1999). It was reported that few

forest owners either understood the need for BMPs or implemented them (Henry and

Bliss 1994), although this may have changed (Smith and Haldeman 1997).

Weyerhaeuser, who sells chips for export, does not log a forest unless the owner

agrees to the implementation of BMPs, but staff do not want such prescriptions made

mandatory (Speck 1997).

In north-eastern Mississippi where the export market impacts, log removals

exceeded the total hardwood growth, particularly by depleting pole-sized and small-

sawlog sized stands of oaks and denser hardwoods favoured as pulpwood. The most

rapid depletions occurred during the late-1980s and early-1990s when the demand

for chips was strongest (Faulkner 1994, Bullard et al 1995, Curry et al 1995, Finch

1996). The high general demand for pulpwood is credited with hastening the

replacement of forests with plantations (Hodges 1996). More than half the forests

logged to supply the export-oriented Kimberly-Clark chipmill at Aliceville on the

Tenn-Tom waterway were replaced with pine plantations (Luke 1997).

Two export-oriented chipmills built on the Arkansas River in 1995 stimulated an

increase in logging of local forests, but one closed in 1998 (Thompson 1997a, Ford

1998, Neilson and Flynn 1998, Williams et al 2001). A study of the mills concluded

that they did not encourage good forestry because logging tended to take the best

trees and leave the worst. If all mills proposed for the area had proceeded, wood

supplies may not have been adequate (Gray and Guldin 1997).

The long-term management of the forests will be directed by the interaction of

wood markets and landowner preferences. One chipmill manager (Speck 1997)

considers that landowners in the central south area (Mississippi, Alabama and

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Tennessee), from where much of the export woodchip supply is derived, will be

directed by markets dominated by an industry with a low technology base. As such,

"I think that you are looking at 50 years or less” for rotation times. Any future

Japanese woodchip demand would focus on this area because of the ports and wood

characteristics, so could help maintain pressures for such intensive exploitation.

One Japanese papermaker said its pulpwood suppliers are trying to develop methods

for stabilising the supply of wood with a 30-40 year rotation (Dseishi 1997).

However, conservation groups criticise the logging supplying domestic and export

chipmills and are trying to encourage landowners to adopt more conservative forest

management (Smith and Haldeman 1997, Dogwood various).119

Thus, expansion of hardwood chip exports from each country required radical

restructuring of accessible native forests through: rapid logging, primarily

clearfelling, and regeneration; conversion to plantations; or complete clearing. A

range of environmental impacts resulted that stimulated public opposition to forest

chip exports in each country.

Overview The interactions between resource characteristics, Japanese demands and local

interests produced export hardwood chip industries in Australia, Chile and seUSA

with important similarities. The demands of Japanese papermakers for large

volumes of suitably priced chips with specific pulping qualities was supported by

rapid restructuring of large areas of forests producing a range of environmental

impacts. Forests became economically accessible because the structure of the local

industries and supply chains generated a residual price for pulpwood acceptable to

the resource owner, but not necessarily sufficient to pay for reproduction of the

forests, their long-term management or the values associated with them. The

industries also stimulated greater pressure for forest conservation. With the removal

of Australian export controls, wood suppliers in all three countries now compete

without independent mechanisms for protecting prices or other interests in

119 Bliss et al (1997) concluded that NIPF owners think in much the same way as the general public that environmental protection should temper forest exploitation. However, NIPF owners are also seen to “generally have relatively high rates of time preference for money” (Curry et al 1995)(p.408) which would encourage short rotation management. Bliss (1997) considers that the different perceptions of the attitudes of NIPF landowners over forest protection may be explained to some extent if much of the concern of landowners centres on the conversion of forests into other uses rather than forest management practices.

252

international markets. Pressures on prices for wood and other components of the

chip supply chain will be exacerbated by the expanding supply of plantation wood.

As seen with the Chilean situation, the expanding supply of pulpwood from

hardwood plantations can be expected to reduce the Japanese demand for lower

quality or relatively expensive forest wood (Aseishi 1997, Ausnewz 2001).

Surviving exporters of forest chips will face stronger competitive pressures, and may

have to find alternative markets. Alternatively, they may be able to alter the

characteristics of regrowth trees so they are closer to those preferred by papermakers,

or promote perceived environmental advantages of forests to compete with those

promoted for plantations. Such promotion of some forests (also now called ‘seed

plantations’) has already begun (Jamieson 2001c), and export chip companies that

exploit forests with wood of high quality for papermaking see the possible closure of

schemes using lower quality wood as a marketing opportunity (McCormack 2001).

The consequences of lower forest chip demand will depend on the location and

the ability and desire of owners to actively manage those forests. It may mean that

forests grow relatively undisturbed, but the extent of any environmental benefits will

depend on their condition. In forests where woodchip logging continues, there may

be strong downward pressure on prices, management expenditures and/or

environmental standards. Expected management regimes may need to be altered,

and this could be problematic for the economics of managing some Australian public

forests. Logging of some remaining old forests for export woodchips is thus a short-

term exercise to suit local political and economic objectives while markets exist.

The next case study examines the establishment and use of foreign hardwood

plantations by Japanese companies.

8.3.3 Foreign hardwood plantations The industry’s interest in company-controlled foreign plantations as a source of

pulpwood has a fluctuating history. This case study examines the factors influencing

the development and implementation of this idea and the possible future for such

plantations.

The early years The 1930s idea of establishing foreign plantations was resurrected in the 1960s when

Japan’s paper use and manufacturers’ use of foreign wood were growing. MITI

proposed that the industry move away from logging whatever resources seemed to be

253

the most profitable at the time and begin establishing secure wood supply/plantation

schemes in the southern hemisphere (JP&P 1969c). With MITI’s support, some

Japanese paper companies and a GTC investigated plantation establishment in Brazil

during the late-1960s. The result was a joint venture pulpmill and plantation project

that supplies Japan with chips and pulp (JP&P 1970c, 1970d, 1973c).

In 1970, paper companies formed the JOAA with support from MITI to facilitate

plantation establishment in tropical regions. Japan’s government also promoted the

JOAA as a vehicle for the economic development of participating countries (JP&P

1974c). The Pulp and Paper Subcommittee of the ISC considered the establishment

of foreign joint-venture plantations was necessary to secure the industry’s long-term

resource base, while it continued to exploit available wood resources (JP&P 1972b,

1973h, 1973l).

This thrust for plantation expansion weakened when the first oil crisis and the

recession in the mid-1970s increased the price of foreign wood and dampened paper

demand (Hisada 1997a). Consequently, companies had only established 1,384 ha of

trial softwood and hardwood plantations in the Asia-Pacific region by the late 1970s

(JOPP 1999b). GTCs still considered the possibility for foreign plantation schemes

(JP&P 1974b), and in the early 1980s, the industry developed a proposal for 100,000

ha of plantations in the tropics over 10 years (JP&P 1981d).

However, Japan’s paper industry was classified as ‘structurally depressed’ in

1981 (Julian 1988), and with the second oil crisis, the ISC revised down estimates of

future paper/board use. Also, the industry considered that there would be no

pulpwood shortages up to the 1990s because Australian supplies were stable and

there seemed potential for increasing supplies from South Africa, New Zealand and

Malaysia. Thus, many plans for plantations were abandoned (JP&P 1983a, Hisada

1997a). Hardwood plantation establishment on rainforest land cleared by the JANT

woodchip scheme in Papua New Guinea was slow because these reasons combined

with a reluctance by local landowners to participate. The scheme’s target plantation

area fell from 20,000 ha to 10,000 ha (De'Arth 1980, Seddon 1984, Lamb 1988,

1990, JapanG 1997).120

Imports of plantation hardwood chips increased from the mid-1970s with the

beginning of chip supply from South Africa. Sources diversified from the mid-1980s

254

(JTA 1998; JPA 2001a) to support Japan’s growing paper use. Other than the JANT

scheme, paper and trading companies did not seriously attempt large-scale plantation

establishment until this time.

Recent plantation establishment Several factors contributed to manufacturers deciding to begin large-scale plantation

establishment from the late-1980s. They included (Aseishi 1997, Ashosha 1997):

the ‘bubble economy’ which changed the perceived economics of foreign

plantations; the perception that Asia would become a large market; plantation

establishment by potential competitors; and perceived limits on forest resources.

Pressures for the protection and reservation of native forests increased this concern,

but the main interests were economic (Chapter 10).121

Companies again began to consider Asia and South America for plantation

establishment (Paper 1990b, PPI 1991b). In the late-1980s and early 1990s, paper

and trading companies began joint venture projects, establishing and/or purchasing

softwood and hardwood plantations in Chile, then in the Asia-Pacific region (JP&P

1989a, Paper 1990a, PPI 1991a, Marchak 1995, Whitham 1995). Around this time,

the attitudes of Japan’s leading paper and trading companies towards foreign

plantations began to mesh. Australian chip exporters (Bills 1992)(p.5) found:

a common belief amongst the Japanese pulp and paper industry that they should head towards plantations, but that those plantations should not be at the expense of native forests.... They simply didn’t want the public acrimony of reducing native or natural forest cover.122

According to one industry member, this underlying movement towards

plantations developed into a consensus by the mid-1990s because of the expected

increase in paper use and the assumed limits on the ability to recycle used paper.

However, implementation of this consensus was inhibited by the ready availability of

cheap and secure alternative fibre resources (JapanD 1997).

120 This scheme is now controlled by Oji Paper Co (JPA 2001c). 121 Staff from a large GTC (Ashosha 1997) did not consider conservation pressure was a big factor as the “industry’s consciousness” had moved towards plantations because they give companies greater independence and control over fibre supply than native forests. Staff of a paper company freely stated that its decision to establish plantations was basically business-related. They provide an alternative source of chips to those from seUSA where competition from domestic papermakers for wood is a concern. It expected that lower quality pulpwood from Australia would be replaced with plantation wood and it had already replaced native forest chips from Chile with wood from plantations in Chile (Eseishi 1997). 122 Bills (1992)(p.6) found that Oji was not interested in a joint-venture plantation project because APPM Forests was “talking in terms of clearing forests to establish plantations”.

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The increased intra-industry communication over foreign plantations led to two

major decisions. First, companies developed a plan that one-third of the industry’s

foreign wood intake would come from 600,000 ha of, predominantly hardwood,

company-owned or controlled plantations by 2010 (Hisada 1997b). Secondly, the

Japan Overseas Plantation Center for Pulpwood was established in 1998, supported

by pulp and paper manufacturers, paper distributors, GTCs, shipping companies, a

variety of other companies and individuals. This organisation is based on the old

JOAA and aims to secure raw materials for making pulp and paper. It supports and

coordinates related industry activities, such as surveys, communication, information

collection and lobbying (JOPP 1998).

The industry’s use of pulpwood from foreign hardwood plantations increased

from around 0.55 million m3 in 1988 to 6.64 million m3 in 1999 (36.8% of imported

hardwood pulpwood) (JPA 2001a). From the early-1990s, Japan’s leading paper

companies expanded their area of foreign hardwood plantations (Figure 8.14), and

several noticeable trends developed.

While some plantations were established in Asia through the 1990s, companies

gravitated to temperate and more politically and commercially attractive countries,

such as Australia, Chile and New Zealand. Australia is now seen as the primary

location for new hardwood plantations (Aseishi 1997, Ashosha 1997), and

government support has been important for this.123 China could become a major

supplier (Ausnewz 2001). Also, plantations have been dispersed to reduce risks

(JapanE 1999). This limits their size to 10,000 to 20,000 ha (Watanabe 1995, Anon

1996, AP&P 1999d, Oji 1999d). In some regions, Japanese plantations stimulate

plantation establishment by other companies and landowners.

123 The Western Australian Department for Conservation and Land Management committed to establishing plantations in south-west Western Australia before Japanese companies decided to invest there (Shea 1998). The Australian government developed its ‘Plantations for Australia - The 2020 Vision’ which aims to create a commercial, regulatory and cultural environment conducive to plantation expansion (Stanton 1998).

256

Figure 8.14: The location of Japanese-owned foreign hardwood and softwood plantation projects.

Source: JPA (2001a).

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The industry recognised the potential for plantations to improve its

environmental image by advertising its use of plantations instead of native forests

and the sequestration of carbon to offset carbon-dioxide production from energy use

(JOPP 1998). Most of the larger paper and trading companies included plantation

establishment in their fibre supply strategies and environmental policies (Chapter

10). However, companies do not have obvious conservation-based policies directing

the replacement of native forest wood with plantation wood. For example, the use of

plantation wood by one company is directed by a variety of economic and other

factors. Its mills justify using wood from native forests because of price (JapanE

1999). Another expects that it will replace native forest wood of low quality for

papermaking with plantation wood (Aseishi 1997).

The Japanese partners in joint-venture plantations expanded during the 1990s to

include commercial paper users, distributors, electricity producers and automobile

manufacturers (JPA 2001c). The companies gain an environmentally-sympathetic

image in Japan, while the investment by users and distributors provides a market for

the plantation-based paper (Bshosha 1997, JapanB 1999). Consumer interest in

papers made from plantation wood may increase in Japan, but local opposition to

some forms of plantation establishment exists because of perceived social and

environmental impacts (Chapter 10).124 While social factors may be seen as

important in directing plantation establishment (JapanE 1999), Bills (1992)(p.5)

discovered that senior staff of Oji Paper considered “whatever the arguments were

for plantations they had to have an economic rationale”.

Plantation economics and use Paper and trading companies analyse plantation economics, but do not release their

results. Staff recognise that it is difficult to make forestry profitable (JapanE 1999),

which helps explain the companies’ interest in tax concessions (Bills 1992). There is

also a conflict of priorities in joint venture plantations between paper companies and

GTCs. The desire of one GTC for a 15-20% internal rate of return on investments

contrasts with paper companies that accept a lower return (Ashosha 1997).

124 For example, some joint-venture plantations in Chile and Australia were criticised for being at the expense of native forests (Marchak 1995, Carr and Verscheure 1996, Boycott 1999). Plans by Oji Paper and Marubeni for plantations on agricultural land in Hawaii were stopped by citizens concerned over the longer-term impacts from: chemical sprays; large-scale burning; increased traffic flows; and the inability to use public and private land for other purposes (FoH 1997, Parker 1997, Neilson and Flynn 1998). The change in rural communities and landscapes brought on by plantation establishment on farms also generates opposition in Australia (Mitchell 1999a).

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The long-term economic viability of these plantations will depend on the balance

between the discounted costs of their management and prices for their wood. These

costs and prices fluctuate, influenced by such factors as (Neilson and Flynn 1998,

JapanE 1999, Clark 2001): declining international wood prices; the competitiveness

of paper companies; the availability and price of alternative fibres; paper use; the

application of certification systems to forests and plantations; and the capacity to

gain financial benefits for the sequestration of carbon.

Two factors are particularly important - the availability of alternative fibre

sources and the competitiveness of Japanese manufacturing. The area of foreign

hardwood pulpwood plantations owned by Japanese interests in 2000 was 114,800

ha. These were part of plantation projects expected to total 306,900 ha (Ausnewz

2001). Thus, reaching the much larger target area of 600,000 ha is some years away.

However, assumptions on which this target was based are unrealistic. The assumed

recycling rate of 57% at 2010 (Hisada 1997b) was reached in 2000 (JPA 2001c), and

continues to increase slowly. Even if Japan’s use of paper/board reaches the

comparatively high assumption of 41 million tonnes, the industry may not need the

calculated volume of new fibre. Also, the large area of ‘third-party’ plantations, not

owned by Japanese companies but established in the vicinity of their plantations,

provides extra supplies.

Industry observers (ConsultantA 1998, Ausnewz 2001, AustraliaB 2001) report

that: Japanese companies have found plantation management costs are higher than

assumed; some growth rates are lower; and land prices in Australia increased through

competition from ‘third-party’ companies. As a result, plantation establishment by

some investors has slowed. These factors might be countered by using cloned and

genetically modified trees (Nippon 1998, 2000d, 2000e). However, it is clear that

large volumes of pulpwood will be available in 2010 from Japanese-owned and other

hardwood plantations around the Pacific. If the owners of some ‘third party’

plantations cannot sell their pulpwood, it is possible Japanese companies may

purchase some plantations, strengthening their control over the resource base

(Ausnewz 2001).

The 600,000 ha of Japanese-owned plantations were planned to supply 30% of

imported pulpwood supplies at 2010 (Hisada 1997b), but some companies also plan

to use ‘third-party’ plantations (Nippon 1999a). By extrapolating such plans over all

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Japanese manufacturers, one analysis concludes that their use of plantation pulpwood

could be 66% of their hardwood requirements, and the hardwood plantation

pulpwood available in just Australia at 2010 would be sufficient to supply their

requirements for wood from ‘third-party’ plantations (Ausnewz 2001). This analysis

(2001)(p.110) expects Japanese buyers will “drive the price of third party hardwood

plantation pulpwood down to the point where just the amount of wood that they

require is forthcoming”.

As discussed in Chapter Five, some analysts consider that Japanese papermakers

will need to shift papermaking capacity overseas to be more internationally

competitive. This perspective criticises the pattern of dispersed plantation

establishment by Japanese papermakers as ignoring these pressures (Ausnewz

1998b). However, the supply of plantation pulpwood with preferred papermaking

qualities may assist the competitiveness of domestic mills, lessening the pressure for

such dramatic restructuring.

Thus, when considered in relation to trends in the use and recycling of paper in

Japan, the large amount of higher quality pulpwood soon to come from hardwood

plantations around the Pacific Rim can be expected to lower the papermaking value

of much native forest and threaten the viability of related export woodchip schemes.

Plantation pulpwood will continue to replace wood with poorer papermaking

qualities at a rate directed by the economic benefit to Japanese papermakers.

Environmental considerations will influence the use of plantations and native forests

by Japanese papermakers to the extent they impact on the economics of

papermaking. This is discussed further in Chapter Ten.

8.3.4 Foreign pulpmill development As discussed above, the establishment of foreign pulpmills became an important

strategy for some Japanese companies. This case study compares the first Japanese

foreign pulpmill, established during the 1950s in south eastern Alaska, with two

Japanese pulpmills constructed during the late-1980s in Alberta (Figures 8.15 and

8.16). Although the first was primarily established to make pulp for artificial fibre,

paper companies were involved, and the two situations provide an important

temporal and spatial comparison of the many factors influencing the establishment of

such pulpmills.

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Pulp mill establishment The processes that established the first and the most recent Japanese-owned foreign

pulpmills were 30 years apart, but share important characteristics.

Alaska After WW2, Japanese pulp companies exploited the desire of the US government to

prevent Japan building links with the USSR to access to foreign forests. They argued

that they needed access to Soviet forests to meet future pulp demands (Matsumura

1961, Hagino 1996). In response, the US encouraged Japanese interests to invest in

Alaska (Steiner 1998, Durbin 1999). This suited American ambitions to expand

Alaska’s economy and population by exploiting local forests (Cone and Ridlington

1985). Japanese interests were enticed to the area by the lack of competition and the

size, quality and price of the wood - mainly spruce and hemlock at about ¥140/m3

compared to ¥2,470-4,940/m3 in Japan (Matsumura 1961, Hagino 1996). The US

government apparently had already passed a law guaranteeing all timber sales from

the Tongass forests in Alaska would not be hindered by aboriginal land claims (Cone

and Ridlington 1985).

Alaska Pulp Co. was formed in 1953 by a consortium of pulp and artificial fibre

makers, GTCs, timber companies, banks and shipping companies (JP&P 1971b,

Durbin 1999). In the mid-1950s, its subsidiary, Alaska Lumber and Pulp Co.

(ALPC), received a 50 year contract for 22.5 million m3 of wood from the Tongass

public forests. ALPC built a pulpmill in south eastern Alaska primarily to produce

dissolving pulp for Japan. However, altogether four companies were guaranteed 107

million m3 of wood from the Tongass for 50 years. Ketchikan Pulp Co. (an

American company) was guaranteed 35% and ALPC 21% of this without any

detailed studies of potential impacts on the forests (Cone and Ridlington 1985,

Durbin 1999).

Alberta In the mid-1980s, Japan’s ‘bubble economy’ stimulated paper companies to invest

heavily in new capacity. However, Japan could not supply the wood, and the high

value of the yen lowered the cost of foreign pulp manufacture. Coincidentally, the

government of Alberta wanted to diversify and expand the province’s economic

activity. It promoted the use of public forests for pulpwood as one ‘prong’ of this

strategy (Higginbotham 1995), and offered attractive wood prices, substantial loans

or loan guarantees, and provision of infrastructure. It sought Japanese and other

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investment, and the number of pulpmills in Alberta increased from two to seven

while established mills expanded (Seifried 1992, Pratt and Urquhart 1994, Simpson

et al 1997).

The two Japanese kraft mills now comprise about 45% of Alberta’s pulp and

paper capacity (Simpson et al 1997). The first mill was initially owned by Daishowa

Canada but later by Daishowa and Marubeni through Daishowa-Marubeni

International (DMI); the second by Alberta-Pacific Forest Industries (Alpac), initially

a joint-venture between Japanese and Canadian companies, but now totally Japanese.

Both mills required large wood intakes, so were granted long-term logging rights

over substantial areas of forests. Yet their potential impacts on those forests were not

thoroughly examined prior to government approval. The establishment processes of

both mills had implications for aboriginal peoples (Seifried 1992, McInnis 1994,

Pratt and Urquhart 1994).

In particular, the wood supply area of the Daishowa pulpmill covered the

traditional lands of the Lubicon Cree indian nation, but negotiations for the mill were

conducted without its involvement. This is discussed in Chapter Nine.

Industry structure, mill economics and resource control After the mills began, companies began to exploit political, economic and corporate

relationships that would help them achieve their strategies for product sale and

resource supply.

Alaska

According to Durbin (1997) the pulpwood supply contracts “turned southeastern

Alaska into a vast pulping colony”. The ALPC and Ketchikan contracts became

‘“the starting point’ for the companies’ conspiracy ‘to control the Alaska timber

market’” (Cone and Ridlington 1985)(p.10).125 By the mid-1970s, ALPC and

Ketchikan controlled 90% of Tongass wood allocations via several interacting

mechanisms. The forest service changed methods of selling logs, which

disadvantaged small loggers. The companies took direct, and often illegal, actions

by buying or controlling loggers and sawmillers through debt, using double invoicing

to depress log prices and colluding over timber sales (Cone and Ridlington 1985).

125 Cone and Ridlington (1985) use the words of Judge Barbara Rothstein (1981b) from her judgement on the legal action that found the companies guilty of antitrust violations. Also see Rothstein (1981a)

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Figure 8.15: Pulpwood supply zones in south eastern Alaska for Alaska Pulp Co and Louisiana Pacific Ketchikan.

Source: Sisk and Koehler (1985).

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Figure 8.16: Forest Management Areas for wood-using companies in Alberta.

Map provided by Alberta Sustainable Resource Development.

264

They also manipulated their contracts and patterns of logging to minimise wood

costs. ALPC clearcut its most profitable high volume forests first (Cone and

Ridlington 1985, Sisk and Koehler 1985, Steiner 1998), building up a ‘backlog’ of

uncut forests of lesser value (Sisk and Koehler 1985). The companies also strongly

influenced the use and price of private wood because sales of private logs were in

part dependent on the supply of cheaper wood from public forests. ALPC purchased

logs from native indian corporations that overcut their forests to make a profit.

When pulp demand was low, felled pulpwood remained in private forest clearcuts,

and other wood was wasted because it was underpriced. Had all this wood been

used, a smaller area could have been logged. The demand and supply of pulplogs

and sawlogs also interacted; when pulp production was high, some sawmills suffered

log shortages (Cone and Ridlington 1985, Durbin 1999).

ALPC’s price for wood from public forests was calculated by the US Forest

Service using the residual pricing method which set the value of the trees as that

remaining after subtracting the company’s production and other costs from its sales

revenue. However, prices paid for ALPC logs, sawntimber and pulp were

determined by APC in Tokyo (Durbin 1999), and the company’s real costs could not

be identified. Thus, actual prices for public forest wood were a fraction of other

valuations (Whitney 1989). The ALPC-Ketchikan monopoly was estimated to have

cost the U.S. Treasury between $63.9-81.8 million to the early 1980s (Cone and

Ridlington 1985). Over the next decade, the Forest Service extended logging roads,

organised timber sales and fulfilled what it saw as its responsibilities, but its losses

increased (Miller 1994).

Despite efforts to minimise costs, ALPC’s profitability was not good. By 1971,

it had accumulated a total debt of ¥11,700 million. Oji Paper recommended

reorganisation including the establishment of a bleached kraft pulpmill because the

outlook for dissolving pulp was poor (JP&P 1971b). This did not occur. Rather,

ALPC’s pulp and timber operations alternated as the company’s main sources of

income, but as the dissolving pulp market worsened, the reliance on timber

increased. The Forest Service reportedly calculated that ALPC lost $220 for every

cubic metre of wood it converted to pulp (Bernton 1993). Ultimately, any financial

benefits of ALPC accrued to its shareholder-customers.

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The voluminous pollution output of ALPC’s mill was important in supporting

ALPC’s operation and fibre flow. The mill closed in 1993 because of poor markets,

higher wood costs and pressure to improve its environmental protection facilities

(Durbin 1997, Steiner 1998).

Alberta In the mid-1990s, Alberta’s seven pulp and paper manufacturers were its prime wood

users with rights to cut about 14.3 million m3 of softwood and hardwood logs

annually from an AAC for public forests of 22.1 million m3. Together, the

companies promoted their contribution to Alberta’s economy and advanced common

interests (Alberta 1997, Simpson et al 1997).

International pulp prices in the 1990s fluctuated greatly (Higham 1995, PIX

1999) and the Japanese mills were generally not profitable (Chapter Nine). While

Alberta’s pulp companies had direct control of most of their own manufacturing

costs, fibre was more problematic. In particular, the companies disliked inflexible

prices for public forest pulpwood, and wanted them determined by a more generic

system that would “allow for capital recovery prior to paying significant royalties”

(Morrison 1997). Even though wood prices comprised only 1% of the pulp

companies’ average production costs (Mak and Simpson 1997), in 1999 the

provincial government responded by introducing a new system in which royalties

fluctuate with the market price of pulp (Pratt and Urquhart 2000).

The Alberta government also supported pulp companies by writing-off major

debts. At the end of 1997, Alpac owed the government about $380 million in

principal and interest on $250 million of loans, but because of its poor financial

position had not made a repayment. The Canadian partner, Crestbrook Forest

Industries, sold its shares to Mitsubishi and Oji. The new owners are only required

to repay $250 million as the government wrote-off about $130 million (Johnsrude

1997a, 1997b, Chambers 1998, Pratt and Urquhart 2000).

Wood use and forest impacts The resource and ecological impacts that the operation of these mills imposed on the

forests became clearer as the logging expanded. However, lack of scientific research

hinders the ability to comment on the impacts of the Japanese pulpmills on Alberta’s

forests.

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Alaska The wood supply contracts for the pulpmills and sawmills required rapid

clearcutting, which at its peak in the early 1970s reached between 5,000 ha and 8,000

ha a year (Cone and Ridlington 1985). In the late 1970s, the Forest Service planned

that almost all remaining commercial and commercially-marginal forests would be

cut over the following 50 years. At this time only about 200,000 ha of forest had

been reserved from timber production (Sisk and Koehler 1985, Steiner 1998).

The 1980 Alaska National Interest Lands Conservation Act placed 1.6 million ha

of forest in reserves, but was heavily skewed against the most profitable forests

(Cone and Ridlington 1985). Also, the Forest Service’s resource estimates were too

high to consider many environmental values (Durbin 1999). The pulp companies’

strategy of logging the most commercially productive public forests maximised the

detrimental impact on wildlife as these forests were also those of highest value for

terrestrial and aquatic fauna, and continued clearcutting was expected to extend the

damage (Cone and Ridlington 1985, Sisk and Koehler 1985, Durbin 1997, Steiner

1998).126 Cone and Ridlington (1985)(p.41) quote the Alaska Joint Board of

Fisheries and Game (Resolution #JB-83-1, April 6, 1983):

It has been demonstrated conclusively that clear-cut logging as presently practiced on the Tongass National Forest will permanently decrease the carrying capacity of the Forest for Sitka black-tailed deer…. Research on other wildlife species such as bald eagles, mountain goats, marten, and Vancouver Canada geese indicates that these species as well may be adversely impacted by present logging practices on the Tongass forest...Although the long-term effects of logging on fisheries are not fully understood, fishery scientists believe that cumulative impacts of logging activities can be expected to severely reduce fish stocks.

Alberta Wide-scale logging as well as clearing for agriculture, seismic exploration and oil

and gas wells left only 9% of Alberta’s boreal forests in a pristine natural condition

by the mid-1990s (Johnsrude and Hyrciuk 1998a, 1998b). About 50,000 ha of public

forests was being logged annually in the mid-1990s; each year Alpac’s mill requires

clearfelling of about 13,000 ha (CanadaC 1997).

Although Alberta’s AAC is promoted by the government as ‘sustainable’

(Alberta 1996b), problems exist with Alberta’s forest resource estimates. Resources

for Alberta Newsprint Co. were overestimated (McInnis 1994) and as discussed in

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the next chapter those for Daishowa were probably underestimated. Problems with

the reliability of resource data seem to be common knowledge among forest

researchers in Alberta (CanadaB 1997). There is a fundamental issue of concern.

According to one source (CanadaA 1997), Alberta’s public wood allocations and

cutting levels are based on inadequately simple volume and growth calculations, in

which the dominating influence is timber production. They do not adequately

incorporate landscape management goals in terms of forest age class structure or the

need for protected areas.

The report of the expert panel that reviewed Alberta’s forest management

(Dancik et al 1990) was also critical of the condition of inventories for many

resources. It concluded that the ability of Alberta’s Department of Forestry, Lands

and Wildlife’s to be an “effective steward” of Alberta’s forests was “seriously

limited in the areas of staffing, funding, inventory resource knowledge and

integration of department activities from the policy to the operational level” (p.2). It

recommended more and better integrated supervision, management and research to

meet public obligations and expectations. It made clear that this required more staff

in major agencies and more public involvement in forestry issues.

However, the provincial government moved in the opposite direction by:

reducing staff numbers in Alberta's Ministry of Environment Protection;127

outsourcing responsibilities to private companies; and delegating management and

other responsibilities to the wood-using companies. According to the then Manager

of DMI’s Edmonton office, the ability of Alberta’s forest service to supervise forest

exploitation declined as the industry expanded and accumulated a strong information

base (Morrison 1997)(Appendix 8.3). This has had several consequences. Giving

the companies greater powers of self-regulation increases the potential for conflicts

of interest over resource management. Also, Alberta’s firefighting capabilities have

been reduced (Johnsrude 1999) which challenges the ability to protect all forest

values.

126 Steiner (1998) provides a concise but detailed description of the forests of south eastern Alaska, their conservation and cultural values, and the forces behind their exploitation. 127 The impact of the government’s plan to reduce staffing of Alberta's Ministry of Environmental Protection’ can be seen in its recent annual reports (Alberta 1996a, 1997, 1998, 1999a). Hannah (1997) considers the provincial government “gutted” the Alberta Environment Program as part of its deficit reduction policy.

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Comprehensive research to determine detailed ecological impacts of the

increased pulpwood logging began after the supply agreements for the mills were

signed, and much is still in its early stages. Nevertheless, sufficient information

has been accumulated for forest researchers to conclude that “(c)urrent forestry

management practices ... are inadequate to ensure the ecological integrity of

Alberta’s boreal mixedwood forests” (Stelfox 1995a)(p.viii). However, there is little

scope to vary the supply agreements and log production to meet more comprehensive

environmental protection objectives (Stelfox 1995b).

128

Pulp companies, including DMI and Alpac, advocate the introduction of

‘ecosystem management’ that attempts to give greater priority to non-wood forest

values in the exploitation process (CanadaA 1997, CanadaC 1997). It would: cost

money to implement; produce less wood per unit area; and mean higher delivered

wood costs. Some economies of scale would be gained if conducted over a large

area (CanadaA 1997). However, the ability to introduce such changes is restricted

by: government behaviour in reallocating forfeited wood supplies; the province’s

forest management legislation and wood supply agreements (Stelfox et al 1995,

CanadaA 1997); and the economic condition and priorities of wood-using

companies. The Japanese-owned pulpmills in Alberta are part of a system of

forest exploitation that will impact deleteriously on many forest values.

129

Overview The passage of 30 years has done little to change the major priorities and behaviour

of Japanese pulp capital and foreign governments towards exploiting forests for pulp

production. In Alaska and Alberta, the large guarantees of wood to the Japanese

mills formed part of forest management regimes in which wood production

dominated. Meshing the interests of the pulp companies, governments and public

land managers required significant restructuring of public forests, considerable

economic incentives, and giving the interests of native peoples and non-wood forest

values a low priority.

128 Studies on the impact of logging on birds found modifications to logging practices could assist some bird species, but because the number of such studies and the extent of the replacement of old boreal forests by logging sites and young regeneration is still small, a detailed understanding is limited (Machtans et al 1996, Norton and Hannon 1997, Schmielgelow et al 1997). 129 In the late-1990s, companies wanted compensatory forests for those reserved, but significant land swaps are impossible because all forests are committed to wood production (Struzik 1999). A high rate of logging was maintained by the government when it reallocated wood relinquished by companies that abandoned expansion plans (Hryciuk 1998a, Edmonton 1999a, 1999b, 1999d, Marck 1999).

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Once established, the companies worked with other pulp and paper

manufacturers to strengthen their control over resources, reduce wood prices and

maximise benefits to their owners. Governments acted to financially assist

companies in ways that would help their long-term operation. In the case of the

Alaskan mill, its environmental impacts and the extravagant government expenditure

eventually became politically unacceptable. The Alberta mills continue to

restructure forests, while their greater management responsibilities could generate

conflicts of interest, and public controversy can be expected to continue.

8.4 Conclusions For Japan’s use of paper to grow during the last half of the 20th century, Japanese

papermakers had to integrate themselves into international pulp markets and the

exploitation of other nations’ forests. Imported fibre now forms the majority of new

fibre used by Japanese papermakers, and is likely to continue to do so.

This growth was greatly assisted by GTCs that organised and supported the

supply of foreign chips, pulp and paper/board. It was also opportunistic as Japan’s

papermakers provided the fibre markets sought by foreign governments and wood

producers to generate local economic activity. Several factors continue to support

the purchase of imported fibre. The internationally high price for paper made in

Japan is important, but such prices still require the organisation of supply chains to

shift costs away from manufacturers. This process includes government assistance

and restructuring forests to provide the large volumes of fibre needed for economies-

of-scale. Also, fibre prices may be acceptable to wood sellers, but they are not

necessarily sufficient to cover all costs involved in wood extraction and the

reproduction and protection of non-wood forest values. However, understanding the

detailed economics of fibre supply continues to be hindered by a lack of published

data.

A technically sustainable fibre supply does not guarantee the future of any fibre

export scheme supplying Japanese papermakers. Companies exploit wood resources

to the limits of economic and political accessibility directed primarily by their own

interests. This is seen in the process of establishing and using foreign plantations.

Papermakers and GTCs procrastinated in beginning this process because of short-

term economic changes, the continuing availability of cheap fibre and concerns over

land tenure. However, now that economic circumstances have changed, their

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increasing reliance on plantations and recovered fibre means that the use of native

forests will decline, threatening the viability of some export woodchip schemes.

Foreign Japanese-owned pulpmills will come under pressure from fluctuating

pulp prices and low-cost pulp producers. Also, if domestic papers are subject to

intense competition in Japan, then CIF prices that manufacturers are willing to pay

for foreign fibre may decline. Competition between fibre suppliers could involve

greater pressures to reduce the cost of forest management and environmental

protection. Governments, forest services and local timber interests have been

organising wood supply chains to assist integration of their wood resources into

international markets. This has included restructuring forest services to reduce costs

(TMSL 1997), which could impact on management to protect non-wood forest

values. The production of pulpwood for Japanese purchasers benefits from such

restructuring.

Opposition to the exploitation of forests supplying Japan’s papermakers

developed at many locations because of environmental and social impacts.

Governments have generally supported fibre utilisation, but also sought to reduce

conflicts with some modification of logging. This conflict contributes to forces

influencing fibre supply, including plantation establishment. The attitudes within

Japan’s paper industry to fibre supply-related conservation issues are discussed

further in Chapter Ten. The next chapter illustrates how issues discussed in the last

four chapters are expressed through one paper manufacturer.

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272

Chapter 9: Daishowa Paper Manufacturing Co. – A Case Study

9.1 Introduction Daishowa Paper Manufacturing Co. holds a special position in Japan’s paper

industry. It began as a small family business and grew into Japan’s leading

manufacturer of paper/board not associated with descendants of the original Oji

Paper Co. However, it lost this status when it was taken over by Nippon Paper

Industries in 2001. Daishowa’s controversial rise and demise were closely linked to

the aggressive policies of its leadership to access fibre resources and expand in

highly competitive markets. The company provides an excellent case study of the

influence of resource characteristics and company management on investment and

fibre use within the general industry trends discussed in Chapters Five to Eight.

This chapter explains the importance of fibre supply in Daishowa’s history by

examining the links between restructuring of the company’s organisation,

manufacturing operations and fibre supply in response to its changing commercial

situation, corporate objectives and resource availability. It first examines

Daishowa’s development and financial condition.130 This provides the context for

the description of Daishowa’s products and analysis of its fibre supply that explain

the restructuring of fibre resources necessary to meet Daishowa’s fibre demands.

The conclusion integrates the main points about Daishowa’s history and fibre supply.

9.2 Company History

9.2.1 Daishowa’s origin and growth Daishowa was formed in 1938 when the Saito family paper company, Showa Paper

Co., based in Fuji city, merged with four other paper companies. Its growth was

interrupted by WW2, but the company recovered and established new mills during

the 1950s and 1960s (Daishowa 1991, 1998a). Control by the Saito family was a

company characteristic until the mid-1990s. Daishowa was listed on the Tokyo

Stock Exchange in 1961 (TKI 1994), so entered a new developmental phase as

Japan’s economy began to grow strongly. Mass production of consumer goods

stimulated increased paper/board use. By 1965, Daishowa was Japan’s second

largest paper manufacturer (Belsito 1991).

130 Much of the content of these sections were first presented by the author in an unpublished paper on Daishowa that was researched during 1994 and 1995, but completed in early 1996 (Penna 1996).

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Daishowa led the import of woodchips from the USA in 1965 (Anon 1980), and

as the company grew, it increased woodchip imports from other areas. In 1967, it

established Daishowa America, Daishowa (Malaysia) Wood Products Sdn. Bhd. to

export rubber tree chips, and Harris-Daishowa (Australia) Pty. Ltd., Australia’s first

native forest hardwood chip export scheme (Daishowa 1998a). Daishowa also

created its own paper distributor (JP&P 1968f, 1970i).

Around this time, Daishowa began using joint ventures and take-overs to

establish manufacturing bases in North America, which provided relatively cheap

fibre supplies and the foundations for later investments and entry into international

markets. In 1969, together with its then major client and shareholder, Marubeni

Corporation, it established DMI in Canada. DMI and Weldwood of Canada

established Cariboo Pulp and Paper Co. (Cariboo) in the same year. Cariboo’s

bleached kraft pulpmill in Quesnel, British Columbia (BC), began operation in 1972

(Daishowa 1998a).

However, Daishowa’s expansionist policies ignored the impacts of pulpmill

pollution in Fuji city, and the company fought hard against public anti-pollution

campaigns during the 1960s and early-1970s (Kouda 1979). When legislation forced

changes, Daishowa invested in pollution control and energy conservation (JP&P

1971f, Daishowa 1991, 1995, 1997). It reorganised its fibre supply and production to

rely more on other domestic and Canadian mills, and cooperated with Honshu so the

price of their paperboards covered increasing costs (JP&P 1972f, 1973b).

During 1973, with 18 other companies, Daishowa invested in establishing a joint

venture eucalypt plantation pulp scheme in Brazil (Whitham 1995, JPA 2001c). It

also helped establish the Canadian Fibreco chip export scheme (Hamaoka 1997).

Daishowa International was formed in 1974 to handle the company’s foreign

investments. Daishowa Canada Co. Ltd. was established in 1977 and with West

Fraser Timber Co. formed Quesnel River Pulp Co. (Quesnel), which produced

thermo-mechanical pulp at its Quesnel mill from 1981 (Daishowa 1998a).

The ‘bubble economy’ years made foreign investment more attractive. In 1988,

Daishowa America purchased a papermill in Port Angeles, USA; Daishowa Inc.

purchased Canadian papermaking operations; and Daishowa Canada announced

plans for a pulpmill in Alberta (CPPJ 1989, Daishowa 1998a).

274

Thus, over 50 years Daishowa grew from modest beginnings to one of Japan’s

largest paper and paperboard companies with major international operations (Figures

9.1, 9.2 and 9.3).

Through the 1990s, Daishowa expanded and modernised its mills (Miller 1997,

Daishowa 1998a). During the late-1990s, decision-making in its international

operations began to be devolved to local managers in response to evolving global

fibre markets (Takeda 1998, Nakano 1999). However, many of Daishowa’s

announced expansions did not eventuate.131 Some of these appear to be ambitious

plans developed during the optimistic years of the ‘bubble economy’, and as

described below, Daishowa’s financial position worsened because of its rapid

expansion through the 1980s.

Nippon Paper Industries merged with Daishowa in 2001 because of Daishowa’s

financial condition (Daishowa 2000, Paperloop 2001b). Daishowa’s facilities in

eastern Canada were sold (Daishowa 2001), and other sales may follow. Before

examining the relationship between Daishowa’s expansion, financial problems and

consequent take-over, it is necessary to complete the history of Daishowa’s growth

by discussing Daishowa as a family-run company and as a threat to Oji. These

factors were important in directing the company’s strategies for resource use, on

which its growth and demise were based.

9.2.2 The Oji challenge and Saito Ryoei Daishowa was born when Oji Paper Co had a virtual monopoly over Japan’s paper

production and fibre resources. Small paper companies without links to Oji had

difficulties obtaining fibre. After Showa Paper began its Suzukawa mill in 1933, it

announced: “Being bullied by Oji over pulp was important to this company’s

development. Oji is our benefactor” (Daishowa 1991)(p.63).132 Oji’s purchase of

Nippon Pulp in the late 1930s preempted Daishowa, which wanted Nippon for a

source of pulp (Daishowa 1991).

131 Plans to expand its Canadian operations with high quality paper production and more joint ventures (CPPJ 1989) did not materialise. Daishowa America withdrew a plan for a pulpmill in Oregon (Anon 1990a) and a plan to purchase a mill from Louisiana-Pacific (JP&P 1987b). The 1989 investigation by Daishowa Forest Products and ReedPack into producing newsprint in England for the European market (JP&P 1989b) did not lead to investment. None of its proposals for pulpmills in Australia (Anon 1989, CPPJ 1989, JEJ 1989) eventuated. 132 I translated this statement. It was unclear whether Daishowa considered the pressure from Oji to be ‘the cause of’ its development or just ‘a factor’ in its development.

275

Figure 9.1: The corporate structure of Daishowa during the mid- to late-1990s.

Sources: Daishowa (1991), Takeda (1995), HDA (2000).

276

Figure 9.2: The location of pulp and paper mills and offices of Daishowa in Japan during much of the 1990s.

Sources: Daishowa (1991), Takeda (1995).

Note: Although these sources are from the early- to mid-1990s, the main locations persisted through much of the 1990s.

277

Figure 9.3: The location of the foreign operations of Daishowa during much of the 1990s.

Source: Daishowa (1991).

Note: Although this source is from the early-1990s, the main locations persisted through much of the

1990s.

278

This strong competition continued after WW2 when wood supply was restricted.

In 1961, Saito Ryoei, a son of Daishowa’s founder, assumed the company’s

presidency, continuing the family reign (Daishowa 1991). He led Daishowa for most

of the following 32 years as what has been described as a ‘one-man’ operation, and

their long-term futures became intricately entwined (Appendix 9.1). According to

Nakano Shogo (1999), Saito’s experience working with his father heavily influenced

his vision for Daishowa and his actions after becoming president.133

Saito directly challenged the Oji group and had Daishowa operating under the

banner “Overtake and outrun the companies of the Oji group” (JP&P 1972f)(p.16); it

was his price-cutting tactics that helped make Daishowa Japan’s second largest

papermaker by 1965 (Belsito 1991). After Daishowa began importing woodchips, its

fibre procurement strategies and other behaviour were praised by observers as

stimulating the industry (JP&P 1967a,1967i, 1968b).

While the whole industry was limited by the size of domestic wood resources,

Daishowa was strongly affected by Oji’s commercial and political strengths. In the

early to mid-1960s, Oji increased coordination between group activities, including

pulpwood supply (JP&P 1966b). Then, following the establishment of Daishowa’s

own distributor, Oji, Jujo, Honshu and Kanzaki established the Oji Group Paper

Trading Co. to import and export pulp and paper (JP&P 1968f). These acts and the

attempted merger of Oji, Jujo and Honshu in the late-1960s were seen (at least in

part) by some as attempts to counter Daishowa (JP&P 1969g). Oji’s tactics appeared

to have had some impact, as Daishowa had difficulties obtaining wood for its Shiraoi

pulpmill in Oji’s traditional area of Hokkaido, but faced less trouble in Tohoku

where Oji group companies were not strongly established. Oji’s monopolistic

strength was a primary factor in Daishowa using foreign wood resources (Appendix

9.2) (Hamaoka 1997, Nakano 1999).

After a round-the-world tour in 1968, Saito became even more committed to a

mass production strategy, which he considered as the only way to counter foreign

competition. Daishowa developed a plan to double production over the following

five years. This necessitated securing access to large volumes of foreign fibre, and

133 Nakano Shogo was a senior executive in Daishowa for many years while Saito Ryoei led the company, and was the first person outside the Saito family to lead the company. He is now ‘Advisor-Senior Counsellor’ with Daishowa (Nakano-Daishowa 2002).

279

Daishowa advocated removal of MITI’s controls on capacity expansion (JP&P

1968f, 1969g).

A proposed new mill at Nagoya that would only use imported fibre did not

eventuate, and pollution problems slowed Daishowa’s growth in the early-1970s

(JP&P 1968f, 1969g, 1971e, 1973o). Daishowa turned to North America for its next

developmental phase - pulp production and import. Saito wanted to gain an early

foothold there because of its cheap wood and energy (Appendix 9.2). The plan for

the Peace River pulpmill to expand into fine paper production was also “his

particular vision” (Hamaoka 1997), while other purchases allowed Daishowa to learn

about international paper markets (Nakano 1999).

Saito considered that the foundation for Daishowa’s successful growth was

control over fibre. Joint ventures with local companies were important because they

could help access fibre (Appendix 9.2). This greatly influenced the company’s

investment patterns, particularly in Canada. Saito did not favour the USA because of

the need to purchase private timberlands, but most of Canada’s forests are publicly

owned and administered by governments keen for economic development. The

generous financial and other conditions offered by provincial governments were

extremely important in capturing Daishowa’s investments. Saito “thought it was

utopia as compared to Japan and other places” (Hamaoka 1997). The Australian

export woodchip scheme also has such features (see below).

Thus, much of Daishowa’s rapid expansion and patterns of fibre acquisition

from the 1960s, particularly its foreign investments and lack of plantation

establishment, was due to the vision, initiative and priorities of Saito Ryoei.

However, as shown next, they left Daishowa in a perilous financial position that led

to its demise as an independent company.

9.2.3 Financial management and take-over Daishowa’s profitability deteriorated from 1950 (Figure 9.4), although the nominal

value of its profits increased (Figure 9.5). When Daishowa was listed on the Tokyo

Stock Exchange in 1961, the era of high profits had ended. Competition for paper

sales and fibre resources was intense. During the 1960s, Daishowa expanded its

sales volume, income and foreign investment, but after-tax profits were not high and

its debt-to-equity ratio deteriorated, as did its share value (Appendix 5.4)(Daishowa

1991).

280

Profits improved in 1973 and 1974 with high national paper demand, but

Daishowa’s financial performance then worsened, even though sales income grew.

Saito Ryoei was forced to resign in 1982 to take responsibility for this and, what its

main bank, Sumitomo Bank, regarded as his inappropriate use of company funds

(Appendix 9.1). Under Sumitomo’s guidance Daishowa’s profits improved, but in

1983 the company split with Sumitomo and profits slumped.

Saito Ryoei returned as ‘Honorary Chairman’ in 1986 and with high profits and

share value from Japan’s ‘bubble economy’, embarked on the wave of domestic and

foreign spending described above. Expansions were permitted by easy access to

bank funds (Hartcher 1998), and encouraged by the then expectations of high

economic growth (KPGYK 1989). However, Daishowa’s sales increases were slow

compared to those of the 1970s (Shima 1995). At the end of the 1990 financial year,

Daishowa announced its first operating loss since 1981 with bank debts totalling

¥450 billion. At least part of this debt resulted from Saito funding Daishowa’s

expansion from borrowings rather than new shares that could have weakened the

family’s control (Belsito 1991, TKI 1991).

Daishowa’s banks wanted this debt reduced to ¥400 billion within two years

(P&P 1991, Yano 1993), so in 1991, Daishowa adopted an ambitious 5-year salvage

plan. However, with the end of the ‘bubble economy’, paper/board prices and share

prices fell. Daishowa was particularly affected because of its price-cutting practices

(Shima 1994b), and sales income fell from 1993. In 1993, Daishowa adopted

another 5-year plan because of worsening bank debts (Yano 1994).

The reign of the Saito family came to an end in late 1993/early 1994 when Saito

Ryoei resigned as Honorary Chairman and his son, Saito Kiminori, resigned as

President. Nakano Shogo was appointed President (DY 1993f, 1994b, AP&P

1994b), while Marubeni Corporation and Daishowa’s creditor banks bought

Daishowa shares and bank representatives became directors (TNW 1994d, 1995).

Management and policies began to reflect a new set of priorities. Restructuring and

cost-cutting intensified as company directors began to reduce the influence of the

Saito family (AP&P 1994b, P&PW 1994a). A new 5-year plan was introduced in

1994 (NSS 1994, P&PW 1994a, PBR 1994b, TNW 1994b, 1994d, 1995), and

although Daishowa’s financial situation improved, its condition remained serious.

281

Figure 9.4: The profitability of Daishowa through the last half of the 20th century.

Sources: Daishowa (1991, 1998b), WE (1999).

282

Figure 9.5: The nominal value of the profits of Daishowa through the last half of the 20th century.

Sources: Daishowa (1991), Penna (1996), AP&P (1999e).

283

Daishowa developed a restructuring plan to restore profitability from 2000, and

in 1999 Nakano was replaced (Yano 1993, Daishowa 1998a, AP&P 1999e).

However, Daishowa was unable to increase prices because of the strong competition

in poor markets (Figure 9.6)(Nakano 1999). In 2000, Nippon Paper Industries (NPI)

and Daishowa announced they would merge to form a new holding company,

Nippon Unipac Holdings (Unipac), controlling over 30% of Japan’s printing and

writing paper production (WorldFinanceNet 2000).

It appears the process by which the take-over occurred began in the mid-1990s

after Saito Ryoei left the company. Daishowa’s then President and Chairman met

with the Presidents of NPI and Daio Paper. Nakano had a long-term relationship

with staff of NPI’s predecessor, Jujo Paper, as it purchased pulp from one of

Daishowa’s foreign mills. He admired the thinking of its executives and felt stronger

business links and rationalisation of their operations would be mutually beneficial

(PBR 1994a). Daio opposed the events it saw emerging and began purchasing shares

in Daishowa. By August 1998, it owned 9.99%, displacing Marubeni as Daishowa’s

largest shareholder. In early 2000, it owned 13.87% of Daishowa. However, the

merger proceeded giving NPI access to Daishowa’s excess production capacity (PBR

2000b).

Daishowa is expected to gradually disappear as an independent entity as

Unipac’s board of directors reflects the dominance of NPI (JapanA 2001). Thus,

Daishowa’s rapid expansion from the 1980s took it into a financial quagmire with

limited escape routes. Finally, it lost its independence to a major competitor.

9.3 Products

9.3.1 Domestic products Daishowa’s paper/board production grew from 1950 (Figure 9.7). Of its main

product groupings - newsprint, printing papers and paperboard - printing and related

papers comprise the largest share. In 1998, Daishowa was Japan’s third largest

maker of paper and sixth largest maker of paperboard. It supplied 11% of Japan’s

paper products and 4.8% of its paperboard, making a total market share of 8.5% (JPA

2000a).

Daishowa’s products are dispersed throughout the Japanese economy into nearly

all facets of a citizen’s life (Tables 9.1 and 9.2). Only about 2% of

284

Figure 9.6: The nominal and real prices for Daishowa’s major products during the 1990s.

Sources: Yano (1993, 1994), Takeda (1995), Yano (2000).

Note: Nominal values were converted to 1995 values using the Consumer Price Index for Japan

(MPMHAPT 2002).

285

Daishowa’s production is directly exported (TKI 1994).

9.3.2 Foreign products In the late-1990s, Daishowa’s foreign manufacturing operations were strategically

located in North America on its east and west coasts and in the northern interior.

They were close to fibre resources and transport networks that serve domestic and

international markets, and produced mainly pulp and newsprint (Miller 1997). In

1999, sales by its foreign operations provided 11.8% of Daishowa’s total revenue

(Worldscope 2000), so they made a small but not insignificant contribution to the

company’s finances.

Cariboo produces bleached softwood kraft pulp used in printing and writing

papers, tissues and speciality grade papers. Weldwood and DMI each sell 50% of

annual production. Weldwood sells into North America and Europe; DMI sells into

Asia, usually supplying at least half to Daishowa (Ellefson 1997, Hamaoka 1997,

Weldwood 1997).

Quesnel River produces thermo-mechanical pulp (TMP) and chemi-

thermomechanical pulp (CTMP). A large proportion of the TMP is sold in Japan,

primarily to Daishowa. West Fraser Timber sells much of the CTMP to the

American papermaker Proctor & Gamble (Miller 1997).

Daishowa’s old Quebec pulp and paper mill could produce newsprint, uncoated

groundwood directory paper, market pulp and paperboard. Its major product was

newsprint and in the early 1990s supplied about 2.8% of the North American market

(JP&P 1990b, Miller 1997). About half its newsprint went to the USA (Belsito

1991). It also had a packaging division in Manitoba making paper bags (DMI 1998).

These facilities and associated forest holdings were sold in 2001 (Daishowa 2001).

The Peace River pulpmill produces bleached kraft pulp of which about two-

thirds is hardwood (used for high quality papers, such as printing and photographic

papers) and one-third softwood (used for tissues and towels) (Miller 1997).

Production is sold to Japan (50%), south-east Asia (15%), North America (25%) and

Europe (10%) (DMI 1999b). The USA market is attractive because of low

transportation costs and large, close markets (Hamaoka 1997). Plans for expanded

pulp production and a papermill were cancelled in 1998 (Edmonton 1998b, Marck

1998).

286

Figure 9.7: Paper and paperboard production by Daishowa within Japan.

Sources: Daishowa (1991), JPA (2001b).

Notes: 1. The values for 1950, 1951 and 1952 are approximate because data periods do not

correspond to financial years. 2. The JPA provides data for Miscellaneous papers, included here within the Wrapping paper category for convenience. 3. Newsprint production for 1970 to 1983 excludes production from a mill, the ownership of which Daishowa temporally transferred to a related company (Nakano-Daishowa 2002).

287

Table 9.1: The main products of Daishowa in Japan.

Source: Daishowa (1998a).

288

Table 9.2: The main commercial users in Japan of the products of Daishowa during the 1990s.

Source: Yano (1994).

289

Daishowa’s Port Angeles mill produces uncoated groundwood telephone

directory paper (Miller 1997), which is sold in North America. The production from

this and the Quebec mill made Daishowa the largest directory paper producer in

North America with about 30% of the market and so could influence the market

price. The mill has also sometimes supplied paper to Daishowa in Japan for

telephone books or newsprint (Tamaki 1997).

Daishowa’s financial situation during the 1990s placed extra pressure on its

products to be profitable and its resource supply strategies to provide cheap, high

quality fibre.

9.4. Raw material supply

9.4.1 Overview Daishowa’s use of fibre diversified as the company grew, particularly from domestic

to foreign sources. Controlling fibre cost and supply strongly influenced fibre supply

strategies. The raw material costs of Daishowa’s Japanese mills as a proportion of

the company’s total costs were considerably larger than the average of the nine

leading paper makers (55.3% compared to 42.3%) (Shima 1994b).

Pulpwood and waste paper In the late 1930s, when Oji’s oligopolistic strength was at its peak, competition for

wood was intense. Annual supply contracts were regarded as unreliable and the

supply of wood from public forests was not secure. In 1937, Daishowa purchased

unlogged forests in central Japan. However, these forests were in a water supply

catchment, so because of local opposition to logging, Daishowa exchanged them for

forests in the southern Alps during 1946. The company began to rely heavily on

them from 1952. The use of recovered fibre and pulpwood by Daishowa’s mills in

Japan from 1950 is shown in Figure 9.8 (Daishowa 1991, Yano 2000).

Pulpwood use grew rapidly until 1970, assisted by the incorporation of domestic

sawmills and chipmills into Daishowa’s ‘keiretsu’ (Narita 1980, Koide 1989) and the

beginning of woodchip imports. The first woodchip imports from the USA in 1965

helped Daishowa reduce raw material costs (JP&P 1964a, 1965c).

Daishowa began using waste paper as a fibre source after installing its first

deinking plant in 1959 (Belsito 1991). However, while its recovered fibre intake

290

Figure 9.8: The consumption of pulpwood and recovered fibre by Daishowa within Japan.

Sources: Daishowa (1991), PRPC (2000c), PBR (2001) and earlier issues of Paper

Business Review.

Notes: 1. The data for 1950, 1951 and 1952 are approximate because data periods do not correspond to calendar years. 2. Amounts of woodchips are in Bone Dry Tonnes.

291

remained small through the 1960s, its pulpwood intake grew by more than 200%. It

was not until the oil shock and stricter pollution regulations in the early-1970s that

use of recovered fibre grew - almost 200% through the 1970s - and pulpwood intake

stagnated. Both pulpwood and recovered fibre intakes increased through the 1980s,

but were limited by stagnant production in the 1990s.

Daishowa’s domestic mills increased their reliance on foreign fibre from the

mid-1960s, and in 1996, 62% of pulpwood came from overseas (Yano 2000).

Through the 1990s, the small use of both domestic and imported softwood chip

imports declined, which is understandable given Daishowa’s foreign softwood

pulping operations and use of recovered fibre. Hardwood chip imports increased at

the expense of domestic supplies (P&P 1991, PBR 1992, 1993, 1994a, 1995, 1996,

1997).

Like other Japanese papermakers, Daishowa has relied heavily on the USA,

Australia and Chile for most of its imported hardwood chips (Figure 9.9). It came to

view the US Pacific North West area as unstable and looked to the southern

hemisphere and southern USA for replacement supplies (Takeda 1995). While

imports from western USA declined, so did imports from Australia; imports from

southern USA stopped. In contrast, imports from Chile, Canada and ‘Others’

(mainly China) increased (PBR 2001). China and Chile contain large areas of

eucalypt plantations, but the detailed factors influencing this pattern could not be

ascertained (Nakano-Daishowa 2002).

Imported pulp By the early-1990s, imported pulp comprised about 20% of pulp used by Daishowa’s

domestic mills (P&PW 1994c). Daishowa imports pulp from America, Canada,

Sweden, Brazil, Chile, Portugal and Finland (Yano 1991). The company’s imports

of pulp vary with the quality and cost of pulps and paper products (Yano 2000,

Nakano-Daishowa 2002), and it can manipulate pulp supply to minimise fibre costs.

When international pulp prices declined in 1993, Daishowa closed pulp facilities

at its Shiraoi and Fuji mills (PPI 1993d, NKS 1994). The lost production was to be

replaced by pulp from Canada (Penna 1996), which was selling below the cost of

production (McInnis 1994). However, in response to substantial price rises in 1994

(P&PW 1994b) and internal production changes, Daishowa reopened the closed

Shiraoi facilities (P&PW 1994c).

292

Figure 9.9: Sources of hardwood chips imported by Daishowa into Japan during the 1990s.

Sources: PBR (2001) and earlier editions of Paper Business Review.

Note: Values are for the 12 months from April for the stated year.

293

Plantation and forest ownership Saito’s philosophy of accessing fibre sources that do not require a large initial outlay

appears to have heavily influenced Daishowa’s fibre supply strategies. The Cariboo,

Quesnel and Peace River pulpmills and the Harris-Daishowa export woodchip

scheme rely on wood from public land. The purchase of Reed International’s North

American operations in 1988 provided access to about 3,000 square miles of public

land in Quebec province (Belsito 1991). However, although Daishowa purchased

82,000 hectares of forest in the US state of Maine within economic radius of its

Quebec mill (Kukka 1990, MT 1990), unlike other major Japanese paper companies

it has not established large plantation areas overseas.

Fibre resources summary Thus, while Daishowa recycles substantial amounts of recovered fibre, its domestic

and international operations depend on foreign fibre resources, particularly publicly-

owned forests. Restructuring these resources has been essential to supply the

Cariboo Pulp and Paper mill, the Peace River pulpmill, the Port Angeles papermill

and the Harris-Daishowa export woodchip scheme. Each of these operations has

interacted with local conditions to produce different consequences for local resource

management.

9.4.2 Cariboo Pulp and Paper Co The Cariboo mill was stimulated by Daishowa’s search for new fibre resources and

Weldwood’s desire for new chip markets (Hamaoka 1997). Daishowa’s Japanese

staff consider that Cariboo has not felt strong conservation pressures because it

operates in harmony with the local people (Kobara 1999). However, Cariboo’s fibre

use raises important resource management issues.

Cariboo’s fibre supplies The Cariboo mill has only used one source of fibre – woodchips from sawmills.134

About half comes from two Weldwood mills, while half is purchased from eight

other mills. The economic radius for chip supply is about 150 kilometres, so while

Cariboo has the capacity to consume the chips from all Weldwood’s mills, it trades

chips from distant sawmills with other pulpmills (Ellefson 1997).

134 Based on a conversion factor of 5m3 of chips to 1 tonne of kraft pulp (Ellefson 1997), Cariboo’s 1996 production of 321,000 tonnes (Weldwood 1997) required 1.6 million m3 of chips.

294

Cariboo can be characterised as a consumer of ‘waste’ wood, but a more

illuminating understanding is obtained by examining its place in the structure of

industrial wood production in interior BC, where it is only one of several pulpmills.

However, the issues facing local wood industries are indicated by the fact that

Cariboo expects that regional chip supplies will decline as sawlog supply falls and

new sawing technologies increase timber recovery (Ellefson 1997). In fact, BC’s

public native forests continue to be logged so heavily that their AAC cannot be

sustained.135 Log output must decline and log quality is deteriorating. Some

sawmills and pulpmills must close (Reed 1997a, May 1998, Marchak et al 1999).

Wood supply, the interior pulp industry and Cariboo The forests of interior BC have not escaped overcommitment. In 1998, the AACs for

most Timber Supply Areas (TSA) in BC’s interior were above their estimated long

term harvesting level (LTHL). Log quality is also declining, but changing

technologies assist exploitation (Marchak 1991, Ellefson 1997). If greater emphasis

were given to protection of non-wood forest values, as desired by some community

conservation organisations and others (BCSierra 1996, Cooperman 1996, BCWild

1997, undated, May 1998, Marchak et al 1999), then AACs and LTHLs would be

even lower. The government’s large wood supply commitments produced three

related consequences for the management of the interior’s public forests and the

structure of dependent wood-based industries – declining log supplies, the double

commitment of wood resources and the integration of wood processing mills.

The three most important TSAs for Cariboo and Weldwood are the Williams

Lake TSA, the Quesnel TSA and the 100 Mile House TSA as they supply logs to

Weldwood’s mills that sell chips to Cariboo, while Cariboo’s pulpwood supply area

covers forests in the Quesnel and Williams Lake TSAs (Figure 9.10) (BCMOF

1994a, 1994b, 1994c, 1995a, 1995b, 1995c, 1995d, 1996, Pederson 1996a, 1996b,

1997, Weldwood 1997, 2000). These areas provide excellent examples of the

problem of declining log supplies.

In the mid-1990s, the AACs for the Quesnel TSA and the 100 Mile House TSA

were about 19% and 10% higher than their LTHLs. That for Williams Lake was

135 The overcutting of British Columbia’s forests has been recognised for many years (Reed 1987, 1997a, May 1998, Marchak et al 1999). In a phone interview, Reed (1997b) stated that British Columbia’s forests are now like a “sucked orange”.

295

Figure 9.10: The area of the pulpwood supply agreement of Cariboo Pulp and Paper in British Columbia.

Source: BCMOF (1997).

296

around 80% higher than its LTHL. This great difference for Williams Lake is due to

the long-term removal of large volumes of wood taken from beetle-damaged stands.

However, local mills, supported by the Ministry for Forests, became dependent on

these high logging rates and mill capacity exceeded even this unsustainable supply.

Log removals will have to decline from 3.8 million m3 to 1.79 million m3 over the

following 40 years, resulting in much lower sawmill waste chip supplies. These

volumes can only be maintained by using poorer quality wood (Pederson 1996b), and

herein lies the origin of the second consequence of the large supply commitments.

The Cariboo mill was built when the provincial government was trying to attract

pulp-based industries into BC’s interior to process large volumes of low quality

wood. The government facilitated this in two ways. It provided some companies,

including Cariboo, with ‘pulpwood harvesting agreements’ that gave them security

for raising capital. Companies gained the right to remove a maximum volume of

wood from specific public forest areas - if needed.136 The government assumed that

pulpwood would come from logs unsuitable for sawlog production (BCMOF

undated, BCWild 1998, Nelson 1999, Trigg 2000).

However, the government also granted existing sawmillers increased allocations

for lower quality wood if they had equipment to process smaller logs and supply

chips to pulpmills. Until that time, millers were taking logs down to ‘intermediate

utilisation standards’. Now, they could take logs down to ‘close utilisation

standards’, which had a smaller minimum diameter, and they did so as technological

changes and market demands permitted. These utilisation standards became fixed in

the 1970s and the lowest quality logs, termed ‘third band wood’ (below ‘close

utilisation standards’) were allocated to those sawmills whose log use was moving

towards ‘close utilisation standards’ (BCWild 1998, Nelson 1999).

The introduction of pulp companies and log utilisation changes increased log

removals from public forests by sawmills. By creating a market for smaller, lower

quality wood, logging could expand into forests previously considered uneconomic

(BCMOF undated). However, some of the lower quality wood - in particular ‘third

band wood’ - was assumed to be the potential source of pulpwood under the

136 The ‘pulpwood harvesting agreements’ were replaced by ‘pulpwood agreements’ that last for 25 years, but can be renewed every 10 years. However, before activating them, pulp companies are required to purchase all available pulpwood and sawmill wastes cut by existing operators using those and other forests (Nelson 1999).

297

pulpwood harvesting agreements. While the pulp companies obtained some of this

wood as pulpwood after sawn timber was removed from it, the government had also

committed at least some of it to local sawmillers. The availability of pulp quality

timber stands is now quite small - being committed to sawlog production, wildlife

habitat, watershed management or recreation (McPhail 1997). Thus, the second

consequence was that wood was committed twice (BCWild 1998, Nelson 1999).

The third major consequence was to make the pulp and sawmilling sectors more

interdependent. Concentration of sawmill ownership was encouraged by the

increased capital investment required to use lower quality logs, and sawmills became

increasingly dependent on the income from the sale of chips to pulp companies.

Some pulp companies purchased sawmills (Nelson 1999).

The increased removal of small diameter wood by sawmills exposed ambiguities

in the definition of pulpwood. The BC government replaced ‘pulpwood harvesting

agreements’ with ‘pulpwood agreements’ that were meant to remove these (Nelson

1999). However, in the mid-1990s, competition between pulp companies for chips

increased. Fears of chip shortages led Cariboo and other pulp companies to inquire

about activating their agreements (Ellefson 1997, Hamaoka 1997, Trigg 2000), and

industry and public concerns over the sourcing of the pulpwood showed that the

issue of overcommitment was still relevant (BCWild 1998). However, market

conditions changed and the interest by pulp companies in forest logs waned

(Hamaoka 1997).

Cariboo’s current agreement guarantees it up to 1.51 million m3 of forest logs

annually from the Quesnel and Williams Lake Timber Supply Areas, but only after it

has used all other available and suitable pulp logs and chip supplies. The agreement

has been renewed several times, the most recent being in December 1996. It gives

Cariboo the right to this wood until 2021, but does not appear to remove ambiguities

over what constitutes a pulplog or sawlog. Rather, it increases the discretionary

powers of public forest managers to resolve such issues (BCMOF 1986, 1996). If

the agreement had to be activated, the pulpwood would come from lower quality

stands, and may also use lower quality sawlogs. However, the BC Forestry Service

does not expect that the agreement will ever be needed (Trigg 2000).

For Cariboo, this issue will only arise if it can show that its economically

available supply of chips has fallen below 1.51 million m3 before its agreement

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expires (Trigg 2000). Public forest sawlog supplies must decline, but using pulplogs

is not as economically attractive or secure as purchasing a sawmill with a log quota

that could be used for trading chip supplies (Ellefson 1997). Thus, the value of

independent sawmills and their log allocations should increase, while industry

ownership and control over regional wood supplies should concentrate. If Cariboo is

to survive and grow over the long term, it and/or Weldwood will probably need to be

involved in such acquisitions. The same might apply to the Quesnel mill.

Declining AACs and more mergers will impact on the interior’s trade in chips,

which appears to operate as an oligopsony. Nelson et al (1994) found that sawmill

waste chip supply contracts are usually short term, initiated by pulp companies and

are FOB the sawmill with transport paid by the pulpmill. Pulp companies dictate the

price, while sawmillers have little choice about purchasers. Total chip production

costs were estimated to be above the pulpmills’ chip prices,137 but some sawmillers

indicated that they would consider using logs below ‘close utilization standards’ if

the price was sufficient. These conditions do not appear to have changed

appreciably, although the chip price increased somewhat (Ellefson 1997).

Nelson et al (1994) used the economic model of monopsony to explain the

‘interior’ chip market. They concluded that because the pulp companies set the price

for each supplier and pay transport, mills are able to discriminate on the basis of

price to capture the economic surplus that would go to the chip supplier in a

competitive market. To increase chip supply, they can simply expand the radius of

supply rather than increasing the price to all suppliers. This pricing system means

that: pulpmills can access fibre more cheaply than in a competitive market; chip

production costs may not be covered; wood resources, such as commercial forests,

may be undervalued; and sawmills integrated with pulpmills have a competitive

advantage.

Weldwood staff confirmed that Cariboo uses a price range for chip purchase

common to all the region’s pulpmills and pays transport costs. It uses contract

137 This recognises that “(t)here is no theoretically ‘correct’ way to allocate joint (sawntimber/chip production) costs”. While sawmillers estimated their 1991 chip production costs (including royalty and other costs) from $75/BDU to $150/BDU, the average chip price was under $70/BDU (Nelson et al 1994)(p.10). According to Ellefson (1997), the chip price in late 1997 was around the mid-$70s/BDU plus freight and quality incentives. Chip price is based on the price of pulp, while chip supply contracts are all written with windows of quality and price, and provide incentives for good chip quality. "Everybody has a pretty good idea of what everybody else is paying". According to McPhail (1997), when the pulp price was high, sawmills “were running hot” processing logs for chips.

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haulage giving it further control over supply costs (Ellefson 1997). Thus, Cariboo

continues to operate within an oligopsonic price discrimination structure used by

regional pulpmills to maximise profits.

Overview The apparent role of the Cariboo pulpmill as a user of ‘waste’ wood is too

superficial. It is part of the process of restructuring BC’s public forests for industrial

wood production through unsustainable logging. If the Cariboo and Quesnel

pulpmills are to survive expected declines in log supplies, they will need secure

supplies of chips. Cariboo faces possible resource conflicts if it tries to activate its

pulpwood supply agreement, but it cannot rely on the agreement beyond 2021.

Improving both chip and pulp recovery or using other fibre types, such as waste

paper or agricultural fibre, may provide some potential. Their owners may compete

with other pulp interests to acquire sawmills. Such competition may raise the value

of public forest log allocations, further concentrate control over wood resources and

strengthen the existing regional chip oligopsony.

9.4.3 The Peace River pulpmill By the late-1980s, BC’s commercial forests were mostly allocated. Daishowa

wanted another pulpmill in western Canada, so looked east. As discussed in Chapter

Eight, the Alberta provincial government wanted industrial exploitation of

unallocated public forests to increase local economic activity. It saw Daishowa’s

desires as helping to validate its forestry strategy (Pratt and Urquhart 1994), so

provided Daishowa Canada with financial assistance for infrastructure (Appendix

9.2), and a fibre supply commitment that impacted on politically sensitive social and

environmental issues.

Mill establishment and expansion The proposal for a pulpmill at Peace River was first announced in March 1987 and

received government environmental and licence approvals in February 1988 (DMI

1999a). Daishowa’s EIS concentrated on the mill’s direct impacts, in particular

waste emissions. The government did not require detailed examination of the social

or environmental impacts of the mill’s forestry operations.138 Approvals were

granted despite substantial public criticism of the mill (Pratt and Urquhart 1994), and

construction began in 1988 (DMI 1999a).

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In 1989 and 1990, Daishowa Canada bought two local sawmills (Brewster

Construction and High Level Forest Products (Nash and Mah 1997)) giving it the

potential to control integrated sawlog/pulpwood logging. The pulpmill began

production in 1990 (DMI 1999a), and in 1992 these facilities were sold to DMI to

help relieve Daishowa’s financial problems (Yano 1993).

The mill manufactures about 390,000 tonnes of pulp annually (Nash and Mah

1997). However, for most of the 1990s, pulp production was unprofitable (Hamaoka

1997, Morrison 1997). DMI planned to install a chemi-thermomechanical pulpmill

and a fine paper machine by late-2001 and double the pulp production capacity by

2010 (Alberta 1989), but the paper machine was cancelled in 1998 because of poor

market conditions. Nevertheless, DMI wanted the first right to build a papermill in

the area (Edmonton 1998b, Marck 1998). It maintained the option of a second pulp

line, but sold High Level in 1999 (Marck 1999, 2000).

Thus, Daishowa’s ambitious growth plans of the late 1980s have not

materialised, and its position within the Alberta forest products industry is

substantially less than expected. Nevertheless, the Peace River pulpmill still requires

large inputs of wood.

Pulpmill fibre sources The pulpmill uses both softwood and hardwood fibre. The softwood comes as chips

via regional sawmills. The hardwood comes directly from the forests covered by

DMI’s twenty-year Forest Management Agreement (FMA) signed in 1989 with the

Alberta government and revised in 1996 (Figure 9.11). The agreement used to

guarantee wood for the papermill, but still guarantees wood for a second pulp line. It

can be extended for another twenty years from 2009 (Alberta 1989, DMI 1997c,

1997d, Hamaoka 1997, Nash and Mah 1997, 1999b). Also in 1996, High Level

received its own FMA for 3.6 million ha of forest land, which meant DMI had

control of wood production from 6.5 million ha of forests or about 18.5% of

Alberta’s commercial forest area (DMI 1997a).

DMI’s FMA and quota allocations guaranteed the pulpmill 1.57 million m3 of

hardwood logs and 31,000 m3 of softwood logs, which DMI trades with sawmills for

woodchips. DMI also had rights to 841,200m3 of hardwood logs as a reserve, while

138 A more detailed analysis of the process of the mill’s establishment and its Environment Impact Assessment can be found in Pratt and Urquhart (1994).

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Figure 9.11: The Forest Management Area of Daishowa-Marubeni International in Alberta.

Source: DMI (2002).

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through Brewster and High Level, it had the quotas for 962,948m3 of softwood logs

(Nash and Mah 1997). Private forests are also an important resource. The mill’s

pulpwood supply in 1996-97 is shown in Table 9.3 (DMI 1997d).

By cancelling the proposed papermill, DMI lost some of its supply area and

guaranteed pulpwood supply. The province sold some of this wood to other

companies. When DMI sold High Level, it lost control of this company’s wood

supply (Edmonton 1998b, Marck 1998, Edmonton 1999a, 1999b, Marck 1999,

2000). Thus, while the mill’s expansion has not progressed as planned and DMI lost

wood resources, its wood use is still large and has the potential to double within ten

years.

Forest management The FMA provided DMI with timber rights over 2.9 million ha of public forests of

which at least 1.24 million ha is available for logging (DMI 1999a).139 The FMA

requires that DMI conduct its forestry operations so as to maintain “a perpetual

sustained timber yield from the productive forest land, while not diminishing the

productivity of the land” (Alberta 1989)(para 9(a)). DMI also acquired responsibility

to regenerate the forests and the ability to conduct intensive silvicultural practices,

such as “fertilization, genetics and drainage” to increase its AAC (Alberta 1989)(para

28(1)). The provincial government wanted to include private forests in the FMA, but

DMI’s then Executive Vice President, Tom Hamaoka (1997) rejected this as he

wanted them available for contingencies and incremental production increases.

The original FMA required DMI pays stumpage for pulpwood of $2.00 per m3

for softwood logs and $0.28 per m3 for hardwood logs, to be indexed annually using

international pulp prices (Alberta 1989), so stumpage rates would fluctuate. DMI

must also pay annual holding and forest protection charges, but basic fire protection

responsibilities remain with the province. DMI may take wood from management-

generated increases in its AAC without charge (Alberta 1989).

The Operating Ground Rules direct logging for the pulpmill (Higginbotham and

Thorp 1990).140 They basically require the use of all merchantable wood from

139 Other higher estimates also exist – 1.33 million ha (DMI 1994) and 1.39 million ha (DMI 1996b). 140 These rules lasted for 5 years to 1995, but the conditions in the later ground rules are understood to have the same effect in requiring clearcutting and removal of all merchantable wood (CanadaA 1997).

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Table 9.3: The pulpwood intake of the DMI Peace River pulpmill in 1996-97 (1 May-30 April).

Source: DMI (1997d).

Note: 1. The conversion factor of 2.7374 was used to convert BDT to cubic metres (DMI 1994)(p.23).

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alternately logged areas. Clearcutting, with remnant dispersed, dead or

unmerchantable trees, is the result. However, according to a recent DMI Woodlands

Annual Report (DMI 1997d): “In addition to dead snag trees, live residual trees

(conifer and deciduous) were distributed in clumps through the (clearcut) blocks at a

rate of 1 per 100 trees harvested, for wildlife habitat. In addition to dead snag trees,

1:1 live stems were left in clumps of 10-25”.141 Slope limits can be exceeded with

approval. The provincial government is able to withdraw commercially productive

forests from DMI’s supply area, but is limited to a maximum of 3% of the total area

of productive forests, and must pay compensation (Alberta 1989).

According to Hamaoka (1997), the FMA wood supply is based on a 70 year

rotation with no thinnings; this rotation length is needed because of the short growing

season. However, the compounding interest of regeneration costs over such a long

period generates pressure to reduce the rotation length - “that’s why we've got to get

involved in intensive forestry management" (Hamaoka 1997). DMI is breeding fast-

growing aspen for short rotation wood production, and states they will be used on

private land (DMI 1997b). The company wants to promote private forest

management to help secure its long-term fibre supply (Hamaoka 1997).

Thus, the forestry operations supplying the Peace River pulpmill are based on

clearcut logging of accessible productive public forests over a 70 year cycle - the

kind of silvicultural system that is criticised as being inadequate to protect the

ecological integrity of Alberta’s boreal forests (Chapter 8). DMI has the potential to

introduce more intensive forestry practices on public and private land to counter the

compounding financial cost of long rotation pulpwood production. However, such

strategies are at odds with ‘ecosystem management’ being promoted for forestry in

Alberta.

DMI and ‘ecosystem management’ In the mid-1990s, DMI said it would introduce the concept of ‘ecosystem

management’ into its forests management planning, and expanded its funding of

forestry research (DMI 1996a). According to one observer, pulpmill staff convinced

DMI executives to adopt the concept because it helps manage risk, provides security

of fibre supply and satisfies social objectives better than conventional forest

141 The potential exists for using other logging systems where circumstances dictate (Higginbotham and Thorp 1990). DMI has been testing experimental logging systems that leave 20%-70% of trees

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management strategies even though there would be short-term penalties. The

executives also apparently saw it as enhancing DMI’s image domestically and in

international markets that they felt could develop a demand for ‘environmentally-

friendly’ pulp (CanadaA 1997). However, as DMI is concerned about the cost of 70

year rotations and Alberta’s forests appear fully committed, an important issue is

whether sufficient uncommitted wood exists in DMI’s FMA to support ‘ecosystem

management’ and whether DMI can afford to introduce it.

One interviewee indicated that DMI has some management flexibility because

the forest interpreters could not distinguish between shrubs and young aspen stands

in aerial photographs so inventory surveys underestimated the area of potentially

exploitable forests (CanadaA 1997). However, the extent of this flexibility is

unknown.142 DMI has not been profitable (Morrison 1997), and its ability to pay for

‘ecosystem management’ is unknown. It would depend on pulp prices, the mill’s

profitability and DMI’s ability to organise costs to allow more expensive logging and

forest management. In 1997, the then General Manager of DMI’s Edmonton office

indicated that DMI had not determined the extra cost of implementing ‘ecosystem

management’ nor how much it would add to the price of pulp, mainly because he

considered the term still did not have a clear definition to guide its application

(Morrison 1997).

The degree of flexibility available in DMI’s pulpwood supply strategies and the

financial potential to introduce more conservative forest management are also of

great importance to the Lubicon Indian nation whose unceded traditional territory

(MacPherson 1998) is substantially covered by DMI’s FMA. The Lubicon have a

long-standing dispute with the Alberta and Canadian governments over land rights

(Ominayak 1997, FoL 1999a, 1999b), and Daishowa became embroiled in this

controversy.143

The Lubicon Indian nation and pulpwood supply The Alberta government’s decision to provide timber rights over its traditional lands

to Daishowa contributed to the Lubicon’s anger over their situation (Figure 9.12). In

late-1988 the Lubicon decided to restrict access to these lands. The subsequent

standing in a block (Hryciuk 1998b). 142 At the time of writing, the author had not received a reply to a letter sent to Tom Hamaoka of DMI requesting information on this and other issues. 143 Goddard (1991) describes the history of the Lubicon Cree since white settlement.

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Figure 9.12: Lubicon Indian Nation Traditional Lands

Map provided by Friends of the Lubicon.

Notes: 1. The area enclosed by the serrated-edged line is the traditional area of the Lubicon Indian

Nation. 2. The dark rectangular-shaped area inside, and at the bottom of, the traditional area is the

reservation land established for the Lubicon. This is also seen in Figure 9.11.

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confrontations with police stimulated negotiation of the Grimshaw Agreement with

the Alberta government that transferred 95 square miles within the Lubicon’s

traditional territory to the Canadian government for a reservation (Lennarson 1997,

FoL 1999a, 1999b). This area was excised from DMI’s FMA (Alberta 1989).

The main mill negotiations were conducted without Lubicon involvement. The

Lubicon leadership opposed logging in their traditional lands, at least until their land

rights claim was resolved, and wanted to negotiate with Daishowa over the method

of any logging (Ominayak 1995, Lennarson 1997, 1997). Daishowa expected that

the Lubicon land rights issue would be resolved by the time it was ready to log in

that area in the early-1990s, and was told by the province to not get involved in

negotiations with the Lubicon (Hamaoka 1997). Daishowa considered logging

methods would be decided with the province though its FMA; consultations with the

Lubicon would be secondary to this (Kitagawa 1988).144

Daishowa Canada’s FMA was signed in September 1989 (DMI 1999a), and in

1990, a subcontractor logged the disputed forests. The subcontractor’s equipment

was burnt and damaged (Pratt and Urquhart 1994), so Daishowa organised logging to

stay out of these forests on a year-to-year basis. For many years, Daishowa/DMI

was not prepared to give a commitment to stay out until the Lubicon land rights

claim had been finally resolved, arguing that it “cannot indefinitely postpone the

timber harvest to which it is entitled in the Forest Management Area” (Morrison

1991a). It did apparently lobby the Alberta and Canadian governments to settle the

dispute (Morrison 1991b), but its failure to make this commitment had expensive

consequences for the company.

In 1991, a group of Canadian citizens, ‘Friends of the Lubicon’ (The Friends),

began a public boycott of the paper products made by Daishowa Inc. The Friends

intended to continue the boycott until Daishowa/DMI committed to not cut or

purchase wood from the Lubicon’s traditional territory until after a settlement of

144 Daishowa Canada (Kitagawa 1988) stated: “The wildlife management and environmental protection responsibilities will be spelled out in our Forest Management Agreement, however, we will endeavor to cooperate and consult with the Lubicon people prior to the planning and harvesting of the timber resources.” Some resolutions of the Grimshaw agreement, including the right of the Lubicon to be involved in the long-term environmental and wildlife management of the traditional territory outside the reserve once the land rights issue was resolved (Alberta 1988, Lennarson 1997, Ominayak 1997, FoL 1999a, 1999b), were not given any recognition in the FMA (Alberta 1989).

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Lubicon land rights and negotiation of a logging agreement with the Lubicon that

takes into account Lubicon wildlife and environmental concerns (MacPherson 1998).

The Friends targeted customers of Daishowa Inc. in Ontario, all of whom joined

the boycott (MacPherson 1998), resulting in losses of up to $20 million for Daishowa

Inc. (Edmonton 1999c, Hryciuk 2000). Daishowa Inc. sought a court order to stop

the boycott and what it considered to be defamatory statements by the Friends and

others about Daishowa/DMI. These statements included claims that Daishowa had

agreed to not log in Lubicon traditional territory until the land rights issue had been

resolved and that it was contributing to the genocide of the Lubicon people

(MacPherson 1998). Injunctions stopped the boycott for over two years (FoL

1999a). However, a court case found that it was legal, but the Friends had defamed

Daishowa (MacPherson 1998). Fearing further boycotts, Daishowa Inc. appealed

this decision (Thorne 1998). The Friends resumed the boycott, and called on

Daishowa to drop its appeal and DMI to make the commitment it wanted (Edmonton

1998a). The poor international pulp and paper market then intervened to assist the

Lubicon.

DMI cancelled the proposed lightweight coated papermill and chemi-

thermomechanical pulpmill at Peace River in 1998 because of the poor market and

made the commitment wanted by the Lubicon (Hryciuk 1998c). Daishowa dropped

the court appeal and the Friends ended the boycott in May 2000 (FoL 2000, Hryciuk

2000). Nevertheless, pressures on the Lubicon remain as the Alberta government

invited proposals to log forests in Lubicon traditional lands given up by DMI

(Edmonton 1999d), but DMI gained access to other more distant forest (Alberta

1999b).

While DMI currently has some resource flexibility, any mill expansion may

restrict potential logging methods. The mill’s future and DMI’s control over logging

could be important to negotiations between the Lubicon and the province over land

rights and the Lubicon’s ability to influence forest exploitation in traditional lands.

Central to the choice of logging options will be the flexibility of wood resource

estimates to meet DMI’s wood demands, Lubicon demands and ‘ecosystem

management’ criteria. DMI has wood resource data for its supply zone (Hamaoka

1997), and until this is made public, interests other than DMI will be in a weak

position to influence forest planning.

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Overview Daishowa’s ambitious plans for the Peace River pulpmill were supported by the

Alberta government, but the commitment to supply pulpwood from public forests

was negotiated without detailed public analyses of its impacts. These impacts soon

appeared through the marginalised position of the Lubicon Cree and a silvicultural

system criticised for its destructive ecological implications.

DMI’s recent provision for Lubicon demands has reduced some conflict, but

resulted from poor market conditions. Conflicts may reappear if the Lubicon seek

substantial influence over logging on its traditional lands. ‘Ecosystem management’

also has such economic and political dimensions. Whether it could meet Lubicon

concerns and reduce impacts from forest exploitation would depend on its

application.

DMI is under financial pressures to reduce fibre costs. Its potential to

incorporate more conservative management will depend on the flexibility of

corporate priorities, pulpwood resources and production expenditure, plus its ability

to be profitable in international markets. Its response will develop within the context

of a provincial forest resource regime where, as discussed in Chapter Eight, public

sector expenditure is stressed and forest management responsibilities are shifting to

wood-using companies.

9.4.4 The Port Angeles papermill When Daishowa purchased this papermill, the mill was old and not well maintained

by its previous owners, so Daishowa modernised and expanded it. The mill attracted

Daishowa because it had long-term contracts to supply telephone book paper to

American companies, could supply products to Japan and the then US$-yen

exchange rate was favourable (Tamaki 1997).

At the time of purchase, about 90% of the mill’s fibre intake was hemlock

woodchips, most of which came from the local area, and about 10% was market

pulp. Daishowa produced the chips from purchased logs. However, the

modernisation allowed it to diversify its fibre supplies to cheaper sources.

With the installation of ‘state of the art’ deinking and recycling facilities in

1992, Daishowa began to exploit regional waste paper resources. It established

supply contracts with the telephone companies US West and Pacific Bell, which

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collect old telephone books. The process relies heavily on consumer awareness, and

while more phone books might be collected by directly paying citizens, Daishowa

America considers it would probably be cost prohibitive. This ability to use

recovered fibre was important in the mid-1990s when there was a chip shortage

(Tamaki 1997).

Daishowa had been competing for wood with a nearby sawmill and another

(now closed) pulpmill. However, by shifting from chipping whole logs to using

chips from the sawmill it reduced its wood costs. The pulpmill now uses 45%

woodchips, 45% recovered fibre and 10% market pulp. Low fibre costs allowed the

mill to set competitive prices for its directory paper, “and so we’ve done pretty well”

(Tamaki 1997).145

9.4.5 Harris-Daishowa export woodchip scheme This export woodchip scheme in south eastern Australia has been controversial since

it began because of the impacts of its logging on local forests. The scheme illustrates

particularly well the consequences for wood resources, forest values and

management regimes caused by the imposition of a large pulpwood demand and the

continuing interaction of that demand with the changing political, economic and

ecological characteristics of the resource as it is restructured through exploitation.

Understanding these interactions and consequences requires discussion of the

scheme’s growth and forest management issues arising from pulpwood supply.

Chip scheme establishment The old, mixed eucalypt forests of south eastern Australia (seNSW and eastern

Victoria) were recognised as a potential source of pulpwood from the 1930s (Leslie

1963, FCNSW 1976b, Sinclair 1990).146 They have a history of timber ‘mining’

(ACF 1986, Lunney and Moon 1988, Streeting and Hamilton 1991) characteristic of

non-renewable resource management.

The forests of seNSW were commercially “relatively unproductive ... with a

high proportion of defective trees (and were) not an economic resource until a market

for low quality wood became available” (Jurskis 1999). The sawmill industry could

145 The company also appears to have increased its capacity to meet the conditions of government liquid effluent disposal licences (PPS 1996). 146 Here, the words ‘old’ and ‘mixed’ are used to cover forest types containing a variety of eucalypt species, including unlogged ‘old growth’ forests (Scotts 1991), old forests that have been logged to varying degrees but still retain characteristics seen in ‘old growth’ forests, or forests that were logged but regrew into forms that resemble the previous two general classifications.

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access limited areas (Bridges and Dobbyns 1991), so did not have a long-term future

(FCNSW 1976a). Foreign interest in exploiting the region’s public forests for

pulpwood developed during the 1960s (FCNSW 1976b), and the then Forestry

Commission of NSW (FCNSW) advertised for potential users.147

Daishowa (49%) and a small Australian company, Harris Holdings, (51%)

formed Harris-Daishowa (Australia) Pty. Ltd. (HDA) to establish an export

woodchip mill at Eden (Scott 1975, HDA 1986a). There were also private forests,

sawmills in NSW and eastern Victoria (East Gippsland), and a large pulpwood

resource in East Gippsland’s public forests. The region held promise for Daishowa

who hoped to increase chip imports from HDA to over 1 million tonnes by the mid-

1970s (JP&P 1968d).

However, proposals for large parks and reserves covering public forests in

seNSW also existed, but there was a dearth of knowledge on the region’s wood

resources and wildlife. The government considered woodchip exports would bring

increased prosperity “by making possible virtually complete utilisation of the vast

forest resources of the region” (ATJ 1971)(p.67), so it created small reserves leaving

the bulk of the forests open for logging (Scott 1975).

In late 1967, the FCNSW contracted to sell HDA 450,000 tons net (excluding

defect), later specified as 530,000 tonnes gross, of eucalypt pulpwood annually from

public forests in its South East Forestry District, later the Eden Native Forest

Management Area – EMA (Figure 9.13) for 20 years from January 1970 (FCNSW

1976a, 1982). The Commonwealth government issued export licences (HDA 1977),

but there was no formal public analysis of the potential social and environmental

impacts. Logging commenced in 1969, and chips were first exported in late-1970

(HDA 1986a). HDA began taking wood from private forests in 1971 and chips from

sawmills in 1972 (HDA 1990). A condition of HDA’s NSW pulpwood supply

licence and Commonwealth export licence was that HDA construct a pulpmill by

January 1997 if feasible (Scott 1975). However, economics and wood and water

availability worked against this (Betty 1976, JP 1991, Streeting and Hamilton 1991).

147 The FCNSW is now known as State Forests of New South Wales (SFNSW).

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Figure 9.13: The location of the public forests in south eastern NSW supplying pulpwood to Harris-Daishowa.

Source: Drielsma (1994).

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In 1971, Harris sold out to Daishowa who then sold 37.5% of HDA to the

general trading company, C. Itoh (later Itochu) (HDA 1990). HDA agreed to

introduce Australian equity, if and when possible. In 1990, the Saito family

company, Daishowa Ashitaka, purchased Daishowa’s majority shareholding in HDA

(HDA 2000). It was responsible for organising Daishowa’s supply of foreign fibre

(Nakano-Daishowa 2002). However, in the late-1990s, when Daishowa’s

management was reducing the Saitos’ influence, it could not repurchase all the

family’s shares in HDA, so Itochu raised its shareholding to 80%, while Daishowa

purchased the remaining 20% (Takeda 1995). Daishowa regained control over HDA

when shareholdings reverted to their earlier balance in 2000 (HDA 2000).

Export growth HDA responded to the growing demand of Daishowa’s papermills through the early-

1970s by quickly expanding chip production (Figure 9.14). In 1977, it received a

new export licence for 850,000 tonnes per year until 1989, but its 1980 application to

export wood taken from Victoria lapsed (Morgan 1997) because of poor market

conditions. HDA was permitted larger exports during Japan’s ‘bubble economy’, but

reduced both its export licence and sales from the early-1990s when the Japanese

economy slumped (Singarayar 1994) and Daishowa imported more chips from other

areas (Figure 9.9). After 1996, when the Australian government reduced HDA’s

export licence by 18% as part of overall licence reductions in response to

conservation pressure (RSR 1997), Daishowa imported more chips from Chile and

Tasmania (Phillips 2000a).

In 1997, the new Australian government increased HDA’s export licence to

930,000 tonnes annually to the end of 1999 (DPIE undated). However, regional

RFAs changed this. HDA has not required export licences for chips from East

Gippsland and south eastern NSW since their respective RFAs were signed (HDA

2000). However, it requires a licence for wood from southern NSW (inland from

seNSW) until that region’s RFA is finalised. Despite this potential for expansion,

HDA’s exports remained low. HDA’s Japanese owners allowed it to sell to any

buyer from the late-1990s, and HDA considers that Indonesia may be a potential

customer in 10 years (Phillips 2000a). However, this will depend on HDA’s ability

to efficiently supply suitable fibre.

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Figure 9.14: Annual woodchip exports of Harris-Daishowa.

Sources: HDA (1977, 1990), DPIE (undated), Phillips (1999, 2000b).

315

HDA’s wood intake HDA consumes wood from public and private forests and sawmills in NSW and

Victoria. The pattern of supply over the last 30 years (Figure 9.15) has been

influenced by changes in local resources, access to alternative fibre and the Japanese

market.

HDA’s main resource continues to be public forests in seNSW. HDA’s intake

of pulpwood from these forests reached the guaranteed supply level in 1977. Its use

of cheaper wood from private forests increased through the 1970s, but jumped in

1980 when public pulpwood stumpage began growing rapidly. HDA’s intake of

sawmill chips grew through the 1970s. Through the 1980s, the use of private forests

declined, but supplies from public forests outside its licence area increased. The use

of sawmill wastes levelled off during the 1980s as the price began to increase, but

jumped in the late 1980s as HDA’s exports increased (HDA 1990).

Exports slumped from the early-1990s, and HDA’s reliance on public forests in

the EMA declined, particularly when the RFA process began (DPIE 1998). The

NSW government advised HDA that it would not honour its supply agreement, so

HDA took more wood from southern NSW and Victoria where it gained access to

younger forests with wood of a higher papermaking quality (HDA 1990, Ford 2000,

Phillips 2000a). Also, its intake of sawmill chips fell as sawlog availability declined,

and its use of private forests almost stopped.

HDA’s chip production has relied on the radical restructuring and/or

unsustainable exploitation of local wood resources. HDA’s use of each of these

pulpwood sources is examined separately to illustrate the historical interaction of the

company’s wood demands and resource management. Because economic factors

influence patterns of wood use, HDA’s profitability is discussed, but a detailed

economic analysis is beyond the scope of this dissertation.

NSW public forest pulpwood supply HDA takes pulpwood primarily from public forests in seNSW abutting the Pacific

Ocean, and smaller amounts from southern NSW inland from this area. Some

pulpwood came from public forests cleared for pine plantations (Bell 1981). The

following discussion concentrates on the supply of pulpwood from its original

licence area in seNSW.

316

Figure 9.15: Sources of pulpwood for Harris-Daishowa.

Sources: HDA (1990), Phillips (2000a).

Note: The value for ‘NSW licence area’ at 2000 is for NSW public forests generally.

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While forest management policies in seNSW changed in response to public

pressure, research results and management experience (Bridges and Dobbyns 1991),

the main objectives of logging have not. Logging aims to meet HDA’s pulpwood

supply agreement and sawlog licences of local sawmills (FCNSW 1982, Drielsma

1994). The characteristics of the logging regime that best illustrate the impact of the

woodchip scheme on these public forests are: the area available for logging; the size

of wood resources; the rate of logging; the silvicultural system; log specifications;

and fire management practices. These features are examined and one aspect of the

scheme’s impact – the impact on fauna - is discussed.148

Available forest area and resources The first regional pulpwood assessment in 1967 used photo-interpretation, field

measurements and volume tables from another region to conclude that forests in

seNSW could support an export industry. Assessments of the EMA at 1971-72

refined the loggable area to about 80% of 297,248 ha of state forests and timber

reserves. The total useable pulpwood resource was estimated at 23.037 million

tonnes after making allowances for rocky, steep or uneconomic areas, small reserves

and special management areas (22%), plus trees with future sawlog potential and

streamside reserves (2%). This was later put at about 20 million tonnes (FCNSW

1976a, 1982).

The pulpwood supply commitment imposed an initial cut of about 40 years for

all available forests. However, sawlog output still had to decline substantially before

the end of the first cutting cycle. The second cutting cycle was expected to produce

pulpwood and sawlogs from regrowth (FCNSW 1982).

During the 1970s, community pressure for reservation of more public forests

increased. The FCNSW opposed this, telling the NSW government that the lack of a

safety margin in the resource estimates meant that significant reservation of more

forest or retention of more trees would make it impossible to meet the pulpwood

supply agreement over the long term (FCNSW 1977).

The history of streamside reserves in the EMA illustrates this problem

(Appendix 9.3). Gullies tend to have more trees and higher volumes of wood than

ridges (Lunney 1987). When the woodchip scheme began, streamside reserves were

148 Some of the information and arguments contained in the following discussion on pulpwood supply from public forests was presented by the author in 1986 (Penna, 1986).

318

not prescribed, but were established in 1971. Specifications for the reserves first

prohibited logging. They were weakened so that reserves could be logged, and

modified since. Also, the Preferred Management Priority classification, introduced

in 1981, modified or restricted logging in 54,000 ha by 1990 (Bridges and Dobbyns

1991), but did not affect the commitment to supply pulpwood.

When conservation pressure became overwhelming from the early-1990s,

stronger prescriptions reduced wood yields and the logging cycle was extended to

2020. Also, new parks and reserves reduced the net area of public forests in the

EMA available for logging by about one-third. HDA’s pulpwood intake and

guaranteed supply dropped by a similar amount, so the proportional rate of logging

remained unaltered. Estimated wood availability to 2020 has declined by about a

quarter. This assumes streamside and other reserves, about 23% of accessible

forests, are not logged, but does not allow for serious bushfires. Availability is

calculated to increase from 2020, implying more productive silvicultural systems

(DPIE 1998, SFNSW and BRS 1998).

Thus, meeting HDA’s original pulpwood supply agreement required logging of

all accessible public forests in the Eden region over 40 years. Establishing parks and

reserves that include substantial areas of commercial forests took community

conservation campaigns almost 30 years. Supplying pulpwood in the future at

calculated levels requires continuation of intensive silvicultural systems in accessible

forests.

The silvicultural system When HDA began, forests were clearcut over generally continuous areas of about

800 ha. These were reduced to 200 ha, and in 1976 the FCNSW introduced alternate

small coupes (15 ha), so that after 20 years half the accessible forests would be cut in

chequerboard fashion. In 1983, logging units were increased in size to around 60 ha

comprising a group of small alternate coupes (FCNSW 1982, Bridges and Dobbyns

1991). In 1994, the average coupe size was 50 ha (Drielsma 1994) while logging of

the second stage of alternate coupes had begun.

Changes also occurred within logging coupes. Initially, clearcutting felled

almost all trees, leaving unmerchantable mature trees and advance regrowth. The

amount of retained unmerchantable trees declined through the 1970s, but the number

of trees left for other purposes - potential sawlogs, wildlife ‘habitat’ trees and seed

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trees - increased (Bridges and Dobbyns 1991). Now, up to 30-40% of trees may be

retained in a coupe, while soil disturbance has declined (Jurskis 1999). For the first

10-12 years, coupes regenerated without being burnt, but considerable amounts of

wood and other dead organic matter remained as a fire hazard. After large fires in

1980, coupes were burnt before and after logging (Bridges 1983).

It was expected that in the second logging cycle pulpwood would be primarily

supplied from regrowth by thinning and later clearcutting at between 80 to 150 years

(HDA 1986a). This changed with the implementation of the RFA. As the end of the

first logging cycle approaches, an increasing volume of wood will be taken as

thinnings from regrowth. Wood yields in the second cycle are based on exploiting a

smaller area of forests using thinning and a rotation of 70 years (SFNSW and BRS

1998). However, according to SFNSW staff, the density and uniformity of

regeneration declined because of the increased retention of vegetation and reduced

soil disturbance in coupes (Jurskis 1999).

Thus after almost 30 years, coupe size has declined, more trees are retained in

coupes and burning occurs after logging. The smaller area of accessible forests will

need fairly intensive management to achieve calculated wood yields. However, the

yield calculations do not allow for serious losses from bushfires, while greater tree

retention and less soil disturbance may affect the quality of regeneration upon which

these yields depend. The difference between calculated yields and the guaranteed

pulpwood supply provides some flexibility, but the important issue is whether it is

sufficient to supply the guaranteed volume and protect other values.

Fire protection The Eden region is fire prone (Bridges and Dobbyns 1991), and destructive forest

fires threaten the long-term viability of the woodchip scheme. Regrowth forests in

particular need to be carefully protected because they are fire sensitive.

In the early-1970s, the FCNSW calculated that forest fires could burn about one-

third of logging regeneration each year without affecting the capacity of the forests to

supply the pulpwood commitment after the end of the first cutting cycle (FCNSW

1976a). From 1969, fuel reduction burning was conducted in broad areas of old

forest. However, because post-logging burns were not conducted over the first 10

years, regrowth contained high fuel loads. Alternate logging coupes made fuel

reduction burning difficult or impractical, so from 1976 debris was burnt on log

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dumps, but caused some ‘escape’ fires (CSIRO et al 1997). One such fire started a

large forest fire in 1980 that destroyed 12,886 ha of regeneration equivalent to the

first 10 year safety margin (Bridges 1983), so challenging the FCNSW’s fire

management policies.

At the time, the FCNSW intended that prescribed burning for fire protection

would not be used in the licence area once the first stage of alternate coupe logging

was complete because of the risk to regeneration (Sneeuwjagt 1981, Bridges 1983).

One fire analyst considered that “(b)y that time it will be too late to bring in burning

buffers, and slash removal burns alongside established regeneration will be too risky.

As a result, the forest fuels will continue to build up to such an extent that even

wildfires burning under mild conditions will present difficult suppression problems,

and the possibility of the entire licence area being consumed by a series of massive

conflagrations will increase with time” (Sneeuwjagt 1981)(p.11).

Although the logging regime was creating conditions that threatened the

resource, unlike plantations, forest regrowth is not considered to be sufficiently

commercially productive to justify “intensive and effective fire suppression over vast

areas” (Sneeuwjagt 1981)(p.1). The FCNSW then introduced a new Fire

Management Policy incorporating burning before and after logging, plus more

controlled burning, combined with detection and suppression using the extensive

road network (Drielsma 1994). The policy aimed at restricting the maximum loss of

wood from fires to the equivalent of the productive capacity of 40,000 ha of mature

regrowth. Losses greater than this would allow the pulpwood commitment to be met,

but reduce the capacity for supplying other products (FCNSW 1982, Bridges and

Dobbyns 1991).

The new policy was progressively introduced through the 1980s and to assist its

implementation, logging coupes were enlarged and seed trees retained for

regeneration (Bridges 1983, 1991). Burning after logging reduces fuel loads, but

stimulates the growth of grasses and shrubs (Bridges 1983), so regular fuel reduction

burning became important for protecting regrowth (Drielsma 1994). Annual fuel

reduction burns were planned to cover around 10,000 ha as a mosaic within a gross

area of 20-25,000 ha (CSIRO et al 1997). Complying with the Fire Management

Policy needed a 50% increase in the FCNSW workforce, which was to be “pursued

when appropriate” (FCNSW 1982)(p.81), so was expected to be more expensive.

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Thus, supplying the original pulpwood commitment rapidly created large areas

of fire sensitive regrowth with high fuel loads that threatened the future of the

resource itself. Policies aimed at reducing the risk of destructive fires required the

frequent use of controlled burning and more forestry staff for their implementation.

Fire remains a serious threat to the woodchip scheme, and with the land use changes

introduced by the RFA, an important issue is how fire management in the region with

its smaller area of production forests will be implemented and financed.

Pulpwood and sawlog interactions Pulpwood logging has influenced the use of commercial logs. It increased sawlog

supplies by cutting forests and trees of low economic value (FCNSW 1982), but

some potential sawlogs were chipped because of the way sawlog and pulpwood

criteria interacted (Appendix 9.4).

For the first decade or so, the difference between sawlogs and pulplogs in the

region depended on quality criteria and the stumpage received by the FCNSW. The

stumpage of a pulplog was higher closer to the chipmill than further away because of

HDA’s distance allowance. As such, some logs classified as sawlogs far from the

chipmill could be classified as pulplogs if cut close to the chipmill because their

value to the FCNSW was higher as pulplogs. Also, some lower quality ‘non-quota’

sawlogs could go to the chipmill for the same reason (FCNSW 1976a, 1982).

Redirecting such logs to sawmills so some forests could be reserved was

unsuccessfully promoted by conservation interests (Thompson and Miller 1977).

By 1982, criteria changed to raise the proportion of higher quality logs

sawmillers were likely to receive and widen the definition of pulplogs. Lower

quality sawlogs with minimum stumpage value could be rejected by the sawmiller

and chipped. Short, low quality logs could become pulplogs (FCNSW 1982). By the

mid-1990s, sawlog specifications had become more intricate and stumpage value was

not listed as a relevant factor. The minimum criteria for pulplogs were lowered to

include shorter logs, but while quota sawlog criteria were also changed, some lower

quality non-quota sawlogs became pulpwood (Drielsma 1994). The system for

pricing sawlogs began to consider the value of recovered products (DPIE 1998).

Support for the argument that non-quota sawlogs were regularly chipped comes

from the Eden RFA, which allows a supply of up to 23,000m3 of non-quota sawlogs

from the annual pulpwood supply (Australia and NSW 1999). Yet, in 1995-96,

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public and private forests in the region produced only 1,695m3 of non-quota sawlogs

(DPIE 1998).

Thus, the pulpwood supply commitment created a new economic framework for

log production by both exposing hidden sawlogs and consuming potential sawlogs.

Changes in log criteria reflect the efforts of the FCNSW to maintain high quality

supplies to sawmillers from an unsustainable sawlog resource while meeting its

obligations to HDA. New forest reserves prevent access to some sawlogs and

hastened the inevitable drop in supply. Sawmilling will depend on integrated

logging for smaller logs from younger forests primarily producing pulpwood (Figure

9.16) (DPIE 1998).

Impact on non-wood forest values Conservation interests have long considered public forest reserves in seNSW to be

inadequate for the long-term protection of the region’s landforms, old forests,

wildlife, wilderness and sites of cultural significance (SEFA 1992). They have

sought substantial expansions of parks and reserves to protect these values. Some

forests were listed on the Register of the National Estate for their importance to

Australia’s natural heritage (AHC 2002). Clearfelling was seen as damaging these

values (SEFA 1989, 1992, 1993, AHC 1994), and its impact on fauna became one

focus of research.149

The remaining forests in seNSW are important habitat for native wildlife

(Lunney and Leary 1988). Prior to the woodchip scheme, there was little knowledge

on the region’s wildlife and the likely effects of integrated logging. Early analyses

were based on short-term observation and inferences from other areas (Scott 1975).

The impact on wildlife of the forest management regime imposed to supply

pulpwood is influenced by a number of factors including: the rate and style of

logging; regeneration quality; the area and configuration of unlogged forests; the use

of controlled burning; and the ecology of the species.

The first formal study of the impact of woodchipping on terrestrial vertebrates

(Recher et al 1980) decided that then national parks and nature reserves in the region

149 The Australian Heritage Commission identifies National Estate areas and advisers the Australian Government on their protection. In 1994, it reported that it “commented, over many years, on the significant adverse impact of the Harris-Daishowa operation on the national estate significance of the forests of south-east New South Wales” (AHC 1994)(p.1).

323

Figure 9.16: Sawlog and pulpwood availability from the Eden region.

Sources: DPIE (1998), SFNSW (1998).

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were inadequate by themselves to ensure the survival of local wildlife. It concluded

that then logging patterns could be expected to:

• reduce the abundance of animals dependent on mature forest, possibly causing

regional extinctions;

• reduce the abundance of nectar feeding birds because of changes in the patterns

of flowering and abundance of nectar; and

• favour birds and mammals suited to open and low vegetation.

Later research stressed the vulnerability of forest dependent fauna because

integrated logging and planned rotation lengths would remove critical forest features

upon which they depend. These species include the koala, and a variety of possums,

gliders and birds that require large trees and/or tree hollows for nesting. Assuming

the woodchip industry would continue, researchers recommended an enlarged system

of parks and reserves, and substantial changes to the management of production

forests (Pyke and O'Connor 1991). These included: wide unlogged streamside

reserves; retention of ‘habitat’ trees and sometimes adjacent vegetation in logging

coupes; selective logging of coupes important for wildlife; and, extension of the

logging cycle in wildlife-rich forest patches (Appendix 9.5).

In 1979, the FCNSW introduced a wildlife management policy for the Eden

region based on this work and in 1981 established the Preferred Management Priority

classification system that excluded or modified logging in some areas (FCNSW

1982, Bridges and Dobbyns 1991, Drielsma 1994). Wildlife corridors were

established and more ‘habitat’ trees left in coupes. However, as discussed earlier,

streamside reserves could be logged until the late 1990s. While some of these

changes may have provided some benefits, there were doubts over their long-term

effectiveness (Recher et al 1987, Pyke and O'Connor 1991, SEFA 1992).

Eventually, more substantial parks and management changes in production

forests were introduced by the Eden RFA (Australia and NSW 1999), but their

adequacy is challenged by community conservation organisations (Plumb 1998).

The full impact of the new resource regime on fauna will only be known with time.

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Overview The NSW government’s original pulpwood supply commitment to HDA required

radical restructuring of most of the public forests in the Eden region over 40 years. It

made high volume wood production the dominant management concern, with roads

and logging tracks penetrating unlogged forests, and old forests becoming

fragmented by a patchwork of regrowth and logged coupes.

The pulpwood supply commitment created new, often conflicting, relationships

between forest values. The expanding areas of regrowth created conditions

conducive to bushfires that could destroy the wood resource. Controlled burning was

used to try to counter this. However, wildlife values are impacted by the logging and

controlled burning. The potential to introduce ameliorative changes, such as larger

reserves, was limited by the size, characteristics and interactions of the pulpwood

commitment and sawlog allocations relative to available log supplies.

Conservation interests took 30 years to obtain new national parks and more

conservative management of production forests. However, some still consider them

inadequate. Because of these changes, future pulpwood supplies have declined by

25% and depend on intensive management of remaining accessible stands.

Nevertheless, resource estimates do not allow for destructive wildfires, and

environmental protection changes may reduce the commercial value of regeneration.

How the costs of fire protection will be distributed is important.

The minimum annual supply of pulpwood to HDA from Eden’s public forests

has fallen by a third. HDA considers it still faces various concerns, including a lack

of resource data, resource variability, a governmental failure to appreciate economic

factors impinging on its operations and a lack of harvesting flexibility to minimise

costs (Mitchell 1999b). As the impacts of the changed forest management regime

become understood, the critical issue for the future of regional forests will be the

ability to change the resource regime again. RFA legislation (Australia and NSW

1999, Australia 2001) works against this and guarantees companies compensation for

reduced wood supplies.

Private forests log supply When HDA started, private forests in south eastern Australia were estimated to cover

about 85,000 ha, but the economically exploitable area was unknown (Scott 1975,

HDA 1977, 1990).

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During the early 1970s, 40% of private forests logged by HDA were cleared for

farming, about 40% were left to regenerate and 20% were used for rough grazing.

These forests usually occurred on the steepest and least accessible land. HDA

argued that its demand simply helped landowners offset the cost of clearing (HDA

1977). However, the pulpwood market increased the value of forested land (Scott

1975), so potential income probably was an incentive for farmers to have their

forests logged.

In 1977, HDA (1977) estimated that its annual intake of pulpwood from private

land would be about 130,000 tonnes. However, Scott (1975)(p.76) “considered (this

level) to be overcutting this resource, and the total will reduce in future years”. It felt

that the low price for private pulpwood did not encourage regeneration or long-term

management. The Victorian Land Conservation Council also considered that private

forests were not a sustainable source of pulpwood for HDA (LCC 1977). In the mid-

1980s, about two-thirds of private forests logged for pulpwood were converted to

agriculture or pine plantations. The size of the private forest wood resource was still

not clear, but HDA (1986a) estimated that it would last until about 2025 at the rate of

90,000 tonnes per year.

In the late 1990s, private forests in southern NSW could only supply 20,000 to

25,000 tonnes of pulpwood annually. This was about half HDA’s annual intake from

private forests between 1990 and 1995. Recent legislation influencing private forest

management in NSW substantially reduced HDA’s intake of private pulpwood and

will likely prevent logging in most of the region’s private forests (DPIE 1998,

Phillips 1999). In 1989, private forests in East Gippsland were estimated to be able

to supply about 35,400 tonnes of eucalypt pulpwood per year until 2020 (Streeting

and Hamilton 1991). In 1999, HDA purchased about 25,000 tonnes of pulpwood

from East Gippsland landowners, but expects that its future use of private forests will

be close to nil (Phillips 2000a).

HDA initiated a small plantation establishment program on private land in 1989

(Watanabe 1995). Some plantations failed, but by 2000, 2,000 ha had been

established and the target area was 5-6,000 ha to provide 10-15% of exports (Phillips

2000a). However, HDA has had problems purchasing suitable land and local

governments have not been approving plantation establishment (Phillips 1999).

327

Despite HDA using a formal contract for logging private forests, that used until

at least the early-1980s did not guarantee that the logging contractor would minimise

soil and water disturbance (McClellan 1981, 1986b, HDA undated).150

Environmental impacts come from the logging operations, changes to the forest

cover and the subsequent management of the land or tree cover, but it appears no

thorough study of regional impacts has been performed.

Thus, private forests in south eastern Australia were never a sustainable source

of pulpwood for HDA, and supplies have declined. Restrictions on their exploitation

and HDA’s difficulty in obtaining land for its small plantation program should

increase the value of Victoria’s public forests to HDA.

Sawmill chip supply As with private forests, sawmill chips could not be considered a large, long-term

resource because sawlog allocations in both NSW and eastern Victoria have not been

sustainable (Forwood 1974a, FCNSW 1976a, McKittrick 1976, FCNSW 1982, HDA

1986a).

Sawmill chips formed 17-20% of HDA’s wood supply until the late 1980s when

they jumped to 28% (HDA 1990). Recently, they comprised 20% of HDA’s export

volume. HDA takes all economically available supplies, and most now come from

East Gippsland. The sale of chips is critical for sawmill viability (Phillips 1999,

2000a).

Sawlog allocations from regional public forests were reduced through the 1980s

and 1990s when state governments responded to overcutting and community

pressure of forest reservation (HDA 1986a, Morgan 1997). These lower allocations

for East Gippsland will be reduced further because they are still unsustainable

(Vanclay and Turner 2001, DNRE 2002). This emphasises the importance of East

Gippsland’s public forest pulpwood resource to HDA.

150 In 1981, lawyer P. D. McClellan (1981) advised the Australian Conservation Foundation that the agreement used by HDA at this time (HDA undated) “imposes no obligation upon the company to take the measures (to minimise soil and water disturbance in accordance with relevant state regulations). It follows that unless the company voluntarily chooses to take measures to minimize soil and water disturbance no protective measures need to be taken at all. Certainly the farmer is unable to require the company to take measures to minimize soil and water disturbance and should soil or water disturbance be caused and the farmer suffer damage he could not sue the company for compensation relying upon the clause.”

328

East Gippsland The Victorian government and FCV sought buyers for pulpwood in eastern

Victoria’s public forests from 1969. HDA competed against, and/or cooperated with,

local sawmillers and other forest products companies for short and long-term access

to this wood (Scott 1975, Morgan 1997). However, a large pulpwood industry in

eastern Victoria was prevented by a variety of factors, including a lack of

infrastructure and a long conservation campaign (Appendix 8.1).151

In 1980, HDA applied to export 400,000 tonnes of woodchips per year from East

Gippsland, but this application lapsed with poorer economic conditions in Japan. In

1987, two East Gippsland sawmillers were allocated ‘optional’ sawlogs by the FCV

and used them to produce chips for HDA. HDA’s export licence was increased in

1988 to allow the sale of these chips (Morgan 1997).

HDA’s intake of pulpwood from East Gippsland’s public forests increased

through the 1990s (Ford 2000, Phillips 2000a). With the signing of the RFA in 1997,

HDA obtained a contract for up to 200,000 tonnes of pulpwood annually from East

Gippsland’s public forests until mid 2012 (HDA 1999, DPIE undated). It took more

than half this amount in 1999 (Phillips 2000a). The wood comes from integrated

pulpwood/sawlog logging and thinnings. Some is from forests considered to be

uneconomic for sawlogs alone, and sawlog allocations and yield calculations depend

on pulpwood removals (Ford 2000).

HDA’s future in eastern Victoria may develop if it can expand its woodchip

sales and exploit larger volumes of younger trees with higher quality pulpwood. The

short and long-term impacts of HDA’s pulpwood removals will be influenced by

political, economic and environmental factors similar to those in NSW.

Woodchip economics and HDA’s financial situation The profitability of public forestry supplying HDA has been challenged for many

years (Routley and Routley 1975, Hammond 1981). The SFNSW and HDA argue

that public forestry is profitable and not subsidising HDA (Davies et al 1974, Scott

1975, HDA 1986a, Drielsma 1994). However, the basic data and assumptions of

151 A more detailed description of the forest management controversy in East Gippsland and the influence of log grading systems on sawlog supply is found in Morgan (1997). There is a variety of literature that provide information on different aspects of the conservation campaign, including ACF (1986).

329

these latter claims are not publicly available, and the weighting given to various

forest values is unknown.

The reservation of forests in the region could return net benefits if the Australian

public made a small once-off payment, but the most profitable strategy for forest

managers is maximising pulpwood production (Streeting and Hamilton 1991).

Optimising the timber value of Eden’s remaining old forests over time supports

pulpwood production, but if the forests are valued as a ‘multi-use resource’, then it

may be optimal to never harvest them (Hartley 1995).

The SFNSW argued that public forestry in the EMA provided a real return of

$31.5 million (1992-93 dollars) for the 12 years to 1992-3 and would return $11.6

million in the three years to 1995 (Drielsma 1994). However, HDA made a profit of

$83.5 million (1993 dollars) in the 12 years to the end of 1993 and $32.55 million

(1993 dollars) in the following three years (HDA 2000, ABS 2001b).152 HDA’s

long-term profitability emphasises this imbalance.

HDA has been very profitable. Although HDA’s chip export price declined in

real terms over the 30 years to 2000 (Figure 9.17), HDA’s profits and profitability

fluctuated but increased in real terms (Figures 9.18 and 9.19). By 1998, it had made

a total profit after tax of around $163 million (1998 dollars) of which about 80% had

been paid to shareholders. Almost all the remaining retained earnings were

repatriated in 2000 prior to NPI’s take-over of Daishowa (HDA 2000).

In 2000, HDA exported 712,758 tonnes of chips at a price of around $75/tonne.

Its profit after tax was $7.7 million (HDA 2000). The cost of wood at the chipmill

gate was around $50/tonne (Phillips 2000a). A change of $1/tonne in HDA’s chip

price was equivalent to 9.25% of its after tax profit (HDA 2000). Phillips (2000a)

considers the international expansion of plantation pulpwood availability means

buyers will try to reduce the price of lower quality chips, such as those from HDA.

Thus, HDA’s future profitability will depend heavily on controlling wood quality

and costs.

152 I used the gross national product implicit price deflator (ABS 2001b) to calculate constant dollar values. Using the CPI shows profits of $89.32 million and $35.51 million for the same periods (ABARE 1999).

330

Figure 9.17: The amount and price of woodchip exports by Harris-Daishowa.

Sources: HDA (1990, 2000), Phillips (2000a, 2000b).

Note: Nominal prices were converted to 1995 values using the Consumer Price Index for Australia

(ABARE 1999, ABS 2001a).

331

Figure 9.18: The nominal and real value of the annual net profit of Harris-Daishowa.

Sources: HDA (1990, 2000).

Note: Nominal prices were converted to 1995 values using the Consumer Price Index for Australia

(ABARE 1999, ABS 2001a).

332

Figure 9.19: Different measures of the profitability of Harris-Daishowa.

Sources: HDA (1990, 2000).

Notes: 1. Measures of profitability (Woelfel 1994):

Profit margin on sales: Operating income/total net sales revenue. This indicates the ability of the company to control costs and expenses in relation to sales. Return on stockholder's equity: Net income/Stockholder's equity. This indicates management's success or failure at maximising the return to stockholders based on their investment in the company. Return on total assets: Net income/ Total assets. This shows management's performance in using the firm's assets to produce income. 2. HDA’s annual reports do not show ‘operating revenue’ until 1985. The operating revenue for years prior to 1985 was estimated using HDA (1990).

333

Overview Harris-Daishowa has been a highly profitable supplier of woodchips to Daishowa.

The scheme was based on restructuring accessible public native forests in seNSW for

high volume wood production, and unsustainable supplies of sawmill chips and

private forest pulpwood. HDA’s pulpwood demand assisted the clearing of private

forests. The NSW government’s pulpwood supply commitment to HDA dominated

the management of the region’s public forests. It required the rapid conversion of

large areas of old forests into regrowth, created fire management problems and

detrimentally impacted on wildlife, particularly forest-dependent fauna. The

commitment’s interaction with wood resource estimates and sawlog criteria and

allocations limited the potential for more conservative forest management.

These impacts extended with the logging, but the introduction of new

environmental protection measures reduced the area of accessible forests. Some of

these measures may conflict with management necessary to produce expected wood

yields in remaining production forests. Fire suppression and paying for forest

management costs remain important issues. Sawmills in the region depend on HDA

for access to many forests and as a market for sawmill chips, but forest logs will

become smaller as accessible forests become younger. Because of reduced

pulpwood supplies in seNSW, HDA is taking more logs from more distant forests.

These forests could supply more pulpwood, but conflicts between wood and non-

wood values are likely. RFA legislation makes HDA’s resource base secure by

limiting the potential to reduce wood supplies without financial compensation.

However, HDA’s future depends very much on the objectives of its new owner and

its ability to be profitable in an international market that is becoming more

competitive. This intensifies pressure to keep wood costs low.

9.5 Conclusions This case study contributes to answering the dissertation’s research questions by

illustrating the importance of the role of fibre in the history of one Japanese

papermaker. It shows how the political, economic, ecological and papermaking

characteristics of specific fibre resources interacted with Daishowa’s unique situation

to produce a particular developmental pattern. It links Daishowa’s history and

products to domestic and foreign environments and economies through the

company’s structure.

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Gaining control over fibre supplies to support Daishowa’s plans to become a

large domestic and international papermaker was a critical component of the

historical process that brought its eventual demise. From the 1950s to early 1970s,

Daishowa used its ‘keiretsu’ strengths to gain control of domestic wood supplies

against strong competition, especially from Oji. It also initiated woodchip imports

and foreign joint venture pulpmills to gain wood supplies. In the early 1970s, its

polluting domestic mills combined with high energy costs to challenge its fibre

supply and manufacturing strategies to stimulate a greater use of domestic recovered

fibre and foreign pulp.

Daishowa manipulated its diverse domestic and foreign fibre sources to help

control manufacturing costs. However, the euphoria of high economic growth in the

late-1980s encouraged Daishowa to overextend itself with large foreign expansions

to obtain fibre and further penetrate international markets. The strong control over

Daishowa by the Saito family, particularly Saito Ryoei was responsible for this. His

ambitious vision was a product of, and only suitable for, a high-growth environment

which could not last. Daishowa was left financially stricken when Japan’s ‘bubble

economy’ burst. It was this that led to Daishowa’s eventual take-over by Nippon

Paper Industries, and Daishowa can be expected to disappear as an independent

company.

Daishowa’s overseas ventures contributed to the integration of foreign

environments into Japan’s and international fibre markets. Fibre supply regimes

were restructured to provide Daishowa’s interests with significant control over

resource use. The Australian and Canadian examples show how pulpwood supply

became a driving force for restructuring forests into forms more suited to industrial

exploitation - even when the fibre first passed through sawmills. Economic, social

and environmental values were subjugated to those regimes in ways specific to each

region. These processes were assisted by governments that used public forests to

capture Daishowa’s investment to assist local political and economic objectives.

Daishowa was particularly attracted to such areas to minimise fibre costs, and this

has limited the development of its own plantation resource base. The HDA export

woodchip scheme clearly shows the interrelated and complex consequences and

problems created for forest management when high volume pulpwood supply is

imposed on a region’s forests without detailed consideration for the forest’s many

values.

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In contrast to these uses of new fibre, Daishowa exploited its experience with

recycling, pulping and capturing fibre to expand its Port Angeles papermill in a

different way. Through new capacity investment it restructured production to use

cheaper waste paper resources, in what appears to be a more environmentally-benign

fibre supply regime. More study is needed to illuminate the various relationships

that contributed to this process, including those surrounding product markets and

fibre collection.

Daishowa sold its eastern Canadian facilities prior to the take-over by NPI. The

future of its remaining operations will be directed by a new balance of interests

created by the take-over. They can be expected to include: the need to reduce

Daishowa’s debt; domestic and international competitive pressures to reduce costs;

and the development of ‘green’ fibre markets. Daishowa and Japan’s other

papermakers have been forced to consider increasing community concerns over the

environmental consequences of supplying papermaking fibre. The next chapter

discusses the policies and attitudes within the Japanese paper industry to fibre-related

environmental issues.

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Chapter 10: Environmental issues and paper industry policies

10.1 Introduction Restructuring fibre supply and resources for the growth and development of the

Japanese paper/board industry continues to produce a range of changing social and

environmental impacts, as shown in earlier chapters. In response to community

concerns over such impacts, Japanese papermakers and GTCs prepared

environmental charters to guide their actions on fibre supply and manufacturing

processes, and created public images of themselves on environmental issues.153

These visual and written images in annual reports, company guides and published

articles present companies as socially and environmentally responsible, by working

to provide their products and services in ways that minimise harm to, and protect, the

natural environment (Figures 10.1 and 10.2).154 However, such images represent

those that companies want to present (Nasi and Nasi 1994). For a more detailed

understanding of their philosophy and actions over environmental issues, one needs

to consider the content and implementation of their environmental charters in relation

to company behaviour.

This chapter specifically addresses the second subsidiary question of this

dissertation: ‘How do decision-makers within the Japanese paper industry perceive

fibre supply strategies, forest management issues and waste paper recycling, and then

incorporate those perceptions into their decision-making processes to meet corporate

objectives?’. It analyses the charters and attitudes of Japan’s major paper and trading

companies towards fibre resource management and related environmental issues and

factors influencing their implementation to understand how they affect the industry’s

fibre supply.

The chapter first describes the history of environmental charters released by

Japanese paper and trading companies, then following the structure of strategy

implementation, institutional change and corporate ‘greening’ discussed in Section

2.7, examines the companies’ environmental charters, internal attitudes and

153 The word ‘charter’ is used here to cover the range of company environmental policy documents variously called charter, policy or guidelines. 154 A variety of company documents support this argument (Mitsubishi 1991, Mitsubishi 1993a, Marubeni 1994, Itochu 1995, Kobayashi 1996, Makihara 1996, MC 1996, NI 1996, Oji 1996, Rengo undated).

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Figure 10.1: Advertisement by Oji Paper Co promoting its care for the natural environment.

Source: Oji (1999a).

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Figure 10.2: Advertisement by Nippon Paper Industries promoting its care for the natural environment.

Source: Nippon (1999b).

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processes, policy outcomes and implications in relation to fibre supply. The fibre-

related content of the charters is discussed using available documents and

information gained from questionnaires and interviews. The discussion of internal

company processes, attitudes and perspectives relies primarily on information gained

from questionnaires and interviews. Finally, the implications for fibre use of these

company images, policies, attitudes and methods of implementation are assessed.

The depth of the information and analysis is restricted by commercial

confidentialities, difficulties in negotiating corporate structures and time constraints.

Also, as discussed in Chapter Four, while the number of participating manufacturers

and GTCs is small, they are among the largest in the industry.

Much of the information is presented in tables within the chapter and Appendix

10.1 that provides background for the numbered points in the tables. Because

companies and staff generally desired anonymity for information provided in

response to the questionnaires and interviews, each participating company was given

a letter by which it is referred in tables and text. Companies A to G are GTCs, and

companies H to M are paper/board manufacturers. Confidentiality restrictions are

generally not applied to published documents, except where the use of a company’s

name might help identify the company elsewhere in the chapter. Appendix 10.2

contains unformatted English versions of the questionnaires. As the information was

mostly gathered in 1997 and 1998, the analysis reflects issues within the industry

through much of the 1990s. Some information has been up-dated as necessary and

available.

10.2 The history of company environmental charters Some GTCs released environmental charters during the early-1990s in response to

community conservation campaigns wanting to reduce the environmental impacts of

Japan’s tropical timber trade in which GTCs participate. The GTCs who seem to

have made the most effort in presenting their positions publicly are those who were

heavily targeted in such campaigns (eg Itochu (1995), Mitsubishi (MC 1996) and

Marubeni (1994)) (JATAN 1990, Iioka 1996, Yamane 1999).

Japan’s paper/board industry was a target of environmental protection campaigns in

Japan from the 1960s over pulpmill pollution (Danjyou 1977) and forest exploitation

(Narita 1980). Similarly, export woodchip schemes supplying Japanese manufacturers

in foreign countries became controversial from the 1970s because of their use of

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native forests (Routley and Routley 1975, Searle 1975, Webb 1977). The industry

began its “Recycle 55” campaign in 1989 (Hoshino 1995), but manufacturers did not

release charters on environmental protection until 1992. This followed an

administrative guidance from MITI and the Environment Agency of Japan. Also, it

was encouraged by the release of environment charters from the Japan Federation of

Economic Organizations of Japan (Keidanren) and the Japan Committee for Economic

Development (Keizai-Doyukai) in 1991 (AP&P 1993d).

In 1994, proposed actions on environmental issues for the industry were

published in an “Industrial Environmental Vision” released by the Global

Environment Working Group of the Industrial Structure Council. These included

expanding the use of recovered fibre and recycled paper products, promoting

afforestation and using unexploited resources (Inoue 1994).

The JPA released its ‘Self-imposed Activity Plan in relation to the Environment’

in early 1997 (JPA 1997c). This plan directs the industry’s general response to

environmental problems, and supports three basic policy areas: solving global

warming; constructing a ‘recycling society’ that protects the environment and uses

resources sustainably and efficiently; and implementing environmental management

systems. For each of these areas, it promotes a variety of activities, some of which

relate directly to management and use of fibre supplies. To counter global warming,

the association wants to expand foreign pulpwood plantations. To build a ‘recycling

society’ and promote carbon sequestration, it wants to promote the use of human-

grown fibre resources and efficient use of fibre from sustainably-managed forests.

To protect forest resources, conserve energy and reduce garbage, it supports the

recycling of used paper/board. It also advocates implementation of environmental

management systems to reduce the impact of the papermaking process and meet

environmental regulations, but does not present a position on paper/paperboard

consumption as a driver of fibre resource use.

Some manufacturers have since amended their charters. Generally, their main

points are similar to the JPA’s ‘Self-imposed Activity Plan in relation to the

Environment’. Tables 10.1 to 10.4 contain the main points of the charters of GTCs

and papermakers.

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10.3 Company environmental charters

10.3.1 General trading companies Not all GTCs cooperating with the research had an environment charter at the time.

Of the two that did not, one had a draft charter, while the other had a general position

statement on handling environmental issues (Table 10.1).155 Since then, these two

companies have released charters. Published environmental charters of selected

GTCs show that while they vary in style, structure and wording, their main points

share similar concerns (Table 10.2):

• observance of relevant laws and international treaties;

• consideration and minimisation of the environmental impact of company

activities;

• pursuance of sustainable development;

• promotion of efficient resource use and recycling; and

• conducting community relations and educational activities.

Some charters and related documents state that GTCs conduct environmental

audits prior to and/or during business activities, are planning, or examining, the

introduction of the environmental standard ISO 14001, and support the

environmental charter of Keidanren. No detailed discussions or positions could be

found on product use or the relationship between consumption, resource use and

environmental impact.

Some charters state that company departments prepare plans for the management

of environmental issues relevant to their business activities. For example,

departmental managers within Company B decide whether to make such plans. If

the manager decides not to have a plan, any actions over environmental issues rely

on the manager’s discretion. Thus, rather than being highly proactive, the

environment charters of the large GTCs contain principles and policy actions that

seem appropriate if their main concern is to meet existing laws and regulations. This

is reinforced by their failure to explain their interpretation of ‘sustainable

development’ - for which there are many definitions (Morita et al 1993).

155 One company provided only part of its charter and I had to make notes of the titles of other sections in the company’s office.

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Table 10.1: Basic information on environmental protection interests of general trading companies.

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Table 10.2: Main points from the environmental charters of selected Japanese general trading companies.

Sources: Kanematsu (1992), Marubeni (1994), Itochu (1995), MC (1996), NI

(1998), Mitsui (2001), Sumitomo (2001).

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The one forestry policy provided by a GTC also suffers from problems of

definition and explanation. The statement commits it to follow all applicable

environmental laws and regulations, and prepare management plans. It also

guaranteed that the company would follow higher standards if those laws and

regulations were below the company’s own standards or where there might be

irreparable harm done to the environment, but these standards and situations were not

defined. Some trading company documents and staff stated their support for

sustainable forestry, but it was not possible to determine how they interpret and

implement the term. Definitional failures could lead to ambiguity in the

implementation process and ultimately actions that conflict with staff or community

expectations based on policy statements.

10.3.2 Paper companies Of the six paper/board manufacturers who responded to the questionnaire, four had

environmental charters (Table 10.3). The paperboard company that responded did

not have such a policy. This company felt that because its main source of fibre was

used paper/board, it was being environmentally responsible. The other papermaker

was relatively small and provided a list of its activities during 1997 that it considered

contributed to environmental protection.

The public availability of the environmental charters of papermakers in 1997-98

allowed comparison of their main points outside of guarantees of confidentiality

relevant to the questionnaire and interviews (Table 10.4). The issues addressed and

the language used in the charters are quite similar, although some language is also

ambiguous.

The level of detail varied, with that of Daishowa containing three main points

but others comprising several pages. In summary, the companies say they are

directed by a basic philosophy of conducting sustainable operations in harmony with

nature to improve human lifestyles. This is translated into several basic principles,

the main ones being:

• reduce environmental impacts;

• protect and develop resource bases;

• use resources efficiently; and

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Table 10.3: Basic information on environmental protection interests of paper/board manufacturers.

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Table 10.4: Main points from the environmental charters of selected Japanese paper/board manufacturers.

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• develop an environmental consciousness.

These principles are then expressed through a variety of guidelines for company

activities, such as protecting and developing forest resources, reducing the

company’s environmental load, promoting recycling, introducing new technologies,

protecting local environments, conserving energy and educating citizens.

At a superficial level, the philosophy underlying these charters - sustainable

operations in harmony with nature to improve human lifestyles - could be regarded

as worthy. However, like the GTCs, papermakers do not define terms or relate them

to other philosophical positions on the environment. Similar definitional problems

exist for their ‘Basic Principles’ and ‘Action Guidelines’. Protecting, developing and

efficiently using forest resources may help reproduce fibre supplies, but they do not

necessarily protect values unrelated to the commercial worth of the fibre.

‘Environmentally-compatible’ or ‘sustainable forestry’ may seem appropriate

methods of forest management. However, the terms are not defined, so could be

interpreted in ways that reproduce wood quantities, but do not necessarily guarantee

protection of wood qualities and non-wood forest values. Thus, even audits by paper

companies of the sustainability of forest management may avoid important issues.

Similarly, obeying environmental protection standards is of little value if they are

weak or are not relevant to the protection of important vales. Protection would then

be up to the good conscience of the fibre supplier and/or forest owner. Oji’s

environmental charter explains its use of forests with the quaint and obfuscatory

euphemism of ‘forest recycling’ (Oji 1997). This term appears to coopt the idea of

cycles within ecosystems (such as discussed by Bormann and Likens (1981) and

Harris (1984)) into a shallow paradigm that can be used to justify forest exploitation

and plantation expansion (Oji 2000). However, with no definition, the term is simply

a public relations slogan.

Notable omissions from these charters, specifically from their ‘Action

Guidelines’, are commitments to use or supply fibre only in ways that protect

biodiversity or rare and endangered species, conduct and publish environmental

audits of fibre supply schemes, or liaise with community interests over fibre supply.

Staff of one company with an environment charter excused the omission of specific

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concerns by saying environmental issues were complex and the company was still

developing its position and responses to such issues.

Plantations, efficient fibre use and recycling provide opportunities for reducing

waste and the exploitation of native forests, so could be viewed positively. However,

the social and environmental consequences would depend on how they are integrated

into the company’s operations. As seen in Chapter Seven, the increased use of

recovered fibre is directly related to the declining price paid by manufacturers, but

this has stressed the waste paper collection sector. Explanations of the principles or

priorities that direct plantation establishment and the use of plantation wood or

recovered fibre are limited. However, the charters of Japan’s two largest

papermakers, NPI and Oji, both set numerical targets for plantation areas and the use

of plantation wood and recovered fibre.

NPI increased its target plantation area from 30,000 ha to 100,000 ha, and

shifted the target date from 2000 to 2008. It plans to supply 70% or more of its

imported hardwood chips from plantations by this time (Nippon 1993, 1996b,

2000a). Oji has a target plantation area of 200,000 ha to be achieved by 2010, and a

target for utilising plantation chips of 33% of the company’s 1997 woodchip intake

(Oji 1999b). NPI increased its target for the content of recovered fibre in its

newsprint to 60% (Nippon 1996b) and then 70% (Nippon 2000a), but did not specify

a target date, and wants to increase the recycling of used ‘wood-free’ paper. Oji now

aims to raise its group’s share of the industry’s use of recovered fibre to 25% by

2010 (Oji 1999b).

Only the charter of Daio Paper stated that satisfying paper demands is part of its

basic philosophy. However, no manufacturer’s charter presents a position on the

relationships between product consumption, resource exploitation and environmental

impact.

10.3.3 Charter overview Despite their dependency on natural resource exploitation, the GTCs and

papermakers prepared environmental charters only after strong external stimuli. The

quality and usefulness of their charters are mixed. If they contained appropriate

definitions to direct implementation, they might make significant contributions to

environmental protection.

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However, the charters of GTCs seem to be primarily directed at supporting

company activities so they meet government laws and regulations. The papermakers’

charters are rightly concerned with perpetuation of their fibre resources. Expanding

the use of recovered fibre and plantation pulpwood should give them more resource

security and may affect the use of native forests. However, the charters tend to

define the environmental issues in terms of sustaining resources for exploitation

rather than ecological values upon which supply impacts. This acts to exclude

important issues from their discourse. As such, their charters are characterised by a

lack of definitions and a failure to address important policy issues in their

philosophies, directions and guidelines. They do not commit papermakers to use

fibre from resource regimes that protect non-wood forest values. Nor do they

attempt to describe acceptable regimes. The reliance on laws and regulations will be

inadequate where they do not address specific behaviours or values associated with

fibre production. The failure of the charters to address factors influencing

paper/board use and their links to environmental and social impacts indicates that an

important underlying assumption within the industry is to find solutions to fibre

supply and resource management problems within the context of relatively

unrestricted markets.

These charters would most easily fit a philosophy of the environment based on

an economic ethos of prudence and efficiency of resource use (Rawlinson and Penna

1982). They reflect positions low on the scale of greening presented in Chapter Two

(Welford 1995). The depth of any environmental consciousness created, supported or

spread by the companies would be expected to reflect such positions. The vagueness

within charters provides flexibility for companies in responding to changing political

and economic circumstances, but could lead to outcomes that do not meet

expectations held outside the industry or particular companies. Greater

understanding of the charters and their implementation is gained by examining

attitudes and activities within the industry.

10.4 Policy implementation and internal company and staff attitudes

10.4.1 Implementing environmental charters

General trading companies The processes used within GTCs to implement environmental charters share

common features. All GTCs that responded to the questionnaire had established an

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environment department within the company and/or an environment committee

comprising staff from different departments (Table 10.1).156 Both environment

departments and environment committees implemented various components of their

environmental charters and activities, such as finding environment-related business,

checking the company’s compliance with relevant laws, publishing information on

environmental matters and managing the environmental risks caused by the

company's activities. Some environment departments were responsible to the

company’s environment committee.

All companies stated that they confirm that their business activities meet

relevant laws and have all necessary regulatory permits. They may also be required

to participate in inquiries or hearings on proposed projects. Some companies said

that if the project is for fibre supply, they also assess the availability of wood and

whether supply is sustainable.

Some GTCs state in published literature or company charters that they have

systems for auditing company activities to ensure environmental values are not

damaged. The characteristics of these systems differ between companies, but

according to company documents, the checks could occur prior to investment, during

the investment process and/or after operations begin. Environment departments or

committees may be involved in this auditing process.

If a trading company conducts an environmental audit on a potential project, it

would likely occur as part of the ‘ringi’ system of decision-making. The ‘ringi’

system provides an opportunity for departments with a potential interest in a project

to have input into the project, comment on issues of concern and to make

recommendations on whether and how it should be adopted.157 It is applied

differently between companies and the auditing methods do not appear to be

uniform. It was not possible to obtain detailed information on the method of their

implementation in relation to environmental policies, but interviews provided

insights.

156 The generic terms ‘environment department’ and ‘environment committee’ are used to cover these entities even though both GTCs and papermakers gave them specific names unique to each company. 157 J. van Wolferen (1990)(p.442) argues that the ringi system creates an illusion of consensus. He sees it as a "superb mechanism for diffusing and finally obfuscating all responsibility”. However, the legitimacy of this comment was not investigated for this dissertation.

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Company A uses a checklist to determine whether a project might have

environmental and social impacts and the need for countermeasures. The check is

conducted by staff early in the ringi procedure of assessing potential investments. It

is not conducted on trade in products, for which the company checks whether the

seller has obtained all the necessary government permits. Monitoring of some

impacts may be conducted. The reports from this monitoring are checked by the

environment committee.

According to Company B’s environment officer, the environment department

had not examined any of the woodchip or pulp operations in which the company is

involved. At the time of the interviews, only 50 of the company's 170 business

divisions had adopted voluntary management plans to handle relevant environmental

issues and the departments responsible for woodchips and pulp were not among

them.158

Company C said in its literature that it has a policy of conducting audits before

and during business operations. However according to the company's environmental

officer, it did not conduct environmental audits of the forestry impacts of its

woodchip export operations in the USA or of a chip mill in South America before

deciding to invest, although an EIS was conducted on a mill itself. This officer said

that the environment department conducted a review of the company's global

operations, including affiliated pulp operations, but could not find any problems with

environmental performance so the company decided to carry on all operations

without any changes. The study was not publicly available.

Staff of Company D said that the company had a statement of its general stance

on environmental issues and a draft Environment Charter. This statement says that

the company will give careful consideration to environmental matters in its business

activities and will strictly check whether or not they cause environmental damage.

However, the stated ‘ringi’ route does not include the environment department, while

the general manager of the Business Department is responsible for environmental

matters.

158 Information that might have helped explain this situation was provided during an interview with a manager of one of these departments. However, because of the conditions imposed on the interview by the manager, this information cannot be used, even anonymously.

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Staff of Company E stated that there is not a formal policy directing its

involvement in the woodchip/pulp/paper trade area, nor a company requirement for

consultation with the general public other than that required by local authorities.

Also, staff reported that there is no policy for checking the environmental impact of

products in which the company trades or the activities in which it is involved other

than that required by local authorities.159

Company F's charter said that it must comply with all relevant laws and

regulations, while environmental audits are conducted at the local office level and

checked by its environment committee. The criteria used in the audits are developed

by each office, but staff said the internal policy document for company managers that

is meant to assist them in meeting the two objectives of economic growth and

environmental protection is not public. Thus, it was impossible to determine what

values are considered important and how staff are required to balance them.

According to material from Company G, it has a system for annual

environmental audits. However, according to a member of its environment

department, it does not have a “real” assessment system or set of procedures for

checking the impacts of its activities or those of product sellers. The company's

Business Department must determine whether the seller is complying with all

relevant laws. If the environment department is asked, it can assess whether the

seller is obeying relevant environmental regulations using information from the

Business Department. It can submit a report to relevant decision-makers based on

the reputation of the supplier and legal aspects. Staff said that the company can have

some influence over affiliated companies and that it did investigate a controversial

foreign wood chip supply operation. A member of the company’s environment

department was sent several times to investigate the logging operations. Although

this employee believed that the forests were logged sustainably, he recommended

that the scheme be stopped if market conditions allow and that it not be expanded. It

is understood that the scheme was operating at the time of writing.

Thus, the environmental audits or checks conducted by some GTCs may identify

potential problems in relation to the use of native forest pulpwood that need to be

remedied. However, the structure of some implementation mechanisms, the size of

159 Information taken from published company documents in early 1999 indicate that this company too uses an environmental check list similar to that of Company A, but the detailed method of implementation is not known.

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environment departments and company business priorities can and do create the

potential to limit consideration of, and action on, environmental matters. Some

environment departments may be prevented from having input on environmental

aspects of investment decisions. In some companies, environmental audits may not

always be performed. This general situation appears to be related to the role of

GTCs as trade intermediaries in which sellers have responsibility for compliance

with relevant laws and the status of environment department, environment charters or

environmental activities. The relative effectiveness of environment committees

versus environment departments on paper-related issues was not addressed.

Paper/board manufacturers Of the manufacturers who responded to the questionnaire, three had an environment

department or committee with company-specific responsibilities (Table 10.3). In

some companies, other departments or individuals had some responsibility for

environmental matters, including environmental audits (AP&P 1993d). However,

environmental audits conducted by interviewed papermakers appeared to be directed

primarily at domestic pulp and paper mills and not foreign manufacturing or wood

fibre supply operations that are outside the company’s direct responsibilities. It was

difficult to gain a detailed insight through interviews into the processes within

manufacturers that implement environmental policies related to fibre use because of

the many factors influencing such decisions and time constraints.

The wood supply departments of the large manufacturers contribute information

on forest management issues to their company’s resource use decisions. Interviews

and other personal communications indicate that manufacturers also rely on foreign

fibre suppliers for information and perspectives on local forestry and conservation

issues. Employees of manufacturers are also posted to foreign joint venture

operations, which gives them direct experience of the fibre supply issues.

Some companies said that they check the long-term availability of wood and

whether the quantities they desire are sustainable. Smaller manufacturers may rely

on advice from larger manufacturers with whom they are affiliated. The leading

companies generally consider Australian forests to be managed sustainably, and the

RFA process was expected to resolve forest conservation issues and stabilise

supplies. One manufacturer stated that it began using pulpwood from seUSA after

checking that supplies were available on a sustained yield basis.

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Staff of one manufacturer said its forestry adviser told them that the tropical

forests that supplied some of its wood were replanted after cutting so there was no

environmental damage. They also understood that the volume of pulpwood available

in the relevant South American native forests was sustainable, and because the

forests were logged selectively, the company did not feel that there were

conservation problems. However, one of its suppliers closed the following year, in

part because of supply problems.

The economics of the relevant manufacturing process is a critical factor in

decisions on fibre use. An employee of one papermaker (JapanE 1999) said his

company is trying to raise the proportion of plantation wood but had no specific

policy directing the pattern of substitution - such actions being directed by economic,

quality, and environmental (social expectation) pressures. He said that if there is a

sufficient price difference then its mills can justify using wood from native forests.

Another company said it had instructed a mill to attempt to increase its use of

recovered fibre, but this was restricted by its economic situation.

Thus, manufacturers justify using forest wood with economic criteria specific to

the firm or its mills, and because it is legally available. Manufacturers research the

sustainability of fibre supplies, but advice on sustainability appears to come

primarily from perspectives supportive of wood use from existing resource regimes.

Although specific decision-making processes were not clarified, the attitudes of

manufacturers, discussed below, help illustrate the dominant values and perspectives

on environmental and resource management issues used in such decisions.

Manufacturers and GTCs have introduced, or are considering introducing,

management systems aimed at regulating the environmental impacts of their

activities, which may impact on decisions over fibre use. The ISO 14001

certification standard for such systems is popular, but it will not necessarily lead to

major improvements in the environmental impacts of fibre supply strategies.

ISO 14000 certification The ISO 14000 series of voluntary environment-related standards for business and

other organisations are developed by the International Organization of

Standardisation. “The ISO 14001 standard is designed to assist organisations in

implementing and maintaining an environmental management system, verifying

conformance with their environmental policies and objectives and demonstrating

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such conformance to other organisations via certification by a third party or via self-

declaration” (Ricca 1997).

Interviewed companies considered adoption of this standard as a major step in

the process of identifying and/or reducing their environmental impacts. Their

attitudes towards the standard should influence its implementation. For example, the

environment officer of Company B said that once the company adopted the ISO

14001 standard it would be in a better position to consider how to handle

environmental audits of its woodchip and pulp operations. However, staff of some

trading companies expressed concern that this standard was not appropriate for their

firm in which impacts were indirect and not related to manufacturing.

Some pulp and paper mills in Japan operate under the standard, and recently,

NPI gained ISO 14001 certification for its plantations in South Africa (Nippon

2002). However, companies that introduce ISO 14001 do not have to thoroughly

address all environmental concerns because the standard only requires compliance

with applicable laws and regulations (BEC 1995). Also, ISO 14001 is not really a

forest management standard (Elliot 1996).

A company may use the standard’s principles of compliance, improvement and

pollution prevention to increase its performance (Ricca 1997). However, as a

company's environmental charter is the primary driver of any EMS, following the

standard will simply mean adopting an EMS that monitors improvements in the

compliance with the company's own policy (Sutton undated). If a company's policy

is superficial or just restricted to meeting relevant laws, it is possible that company

will not substantially reduce its environmental impact (BEC 1995). Sutton (undated)

argues that if a company’s implementation of the standard is driven primarily by

private interest, it will concentrate on changing its own product and organisational

performance rather than helping society achieve ‘ecological sustainability’ which

could require different behaviours. If a company is to use the IS0 14001 to meet

broader ‘ecological sustainability’ objectives, it would need to make its

environmental policy sufficiently comprehensive (Sutton undated). Thus, the

effectiveness of such standards need to be considered in relation to the content of

environmental charters, the ability to apply the standards to fibre supply and attitudes

within the industry towards fibre resources that influence policy development.

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10.4.2 Attitudes to fibre use and conservation issues This discussion draws on responses to the questionnaires and interviews, and some

published documents to examine attitudes within companies to using forests,

plantations and recovered fibre.

Pulpwood supply and forest conservation Almost all the GTCs were aware of some kind of controversy over the management

of forests from which they obtain fibre, but of the papermakers, only one admitted

knowledge of controversy in its response to the questionnaire (Tables 10.5 and 10.6).

However in interviews, staff of two manufacturers stated that they were aware of

objections to logging in some areas of supply, and while these might once have been

considered problems, they were no longer.160

Some staff said that they consider forestry is acceptable if it is sustainable and

that appropriate laws are being obeyed. Some said that they assume that the wood is

produced legally and ‘sustainably’ or in an ‘environmentally-sound’ manner simply

if it is available for purchase. Some staff considered that the management of

Australian native forests is sustainable, and expected that once the RFA process was

finalised, conservation controversies there should subside and supply would stabilise.

GTCs and papermakers basically consider that the responsibility for solving

forest management conflicts rests with either the governments of the countries or

state that contain the forests, or the forest owners/managers. One papermaker gave

itself responsibility for solving any conflicts, but staff explained that this position

was an ideal as it had never experienced wood supply problems. Staff from other

companies said that even if there is opposition from NGOs, if the government has

approved logging, then the company considers it permissible to purchase the wood.

Thus, companies generally consider they do not have responsibility for impacts in the

forest and do not need to play a role in solving forest management disputes.

Comments made by staff in some interviews illustrated that companies view

forest pulpwood as a low quality waste product whose use does not have a serious

impact, as discussed in Chapter Three. This general perspective has also been

160 The difference between these companies’ questionnaire response and answers provided by staff in interviews indicate that some responses to the questionnaires could be misleading. Some staff were reluctant to talk about some schemes for what they said were commercial reasons, and staff from the environment department of one company denied any knowledge of a then current controversy over a foreign wood supply scheme that company was trying to establish.

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Table 10.5: Awareness within general trading companies of forest conservation issues in areas of foreign wood supply.

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Table 10.6: Awareness within paper/board manufacturers of forest conservation issues in areas of foreign wood supply.

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presented publicly by, for example, staff of Oji Paper (Kato 1997). It is found in

documents published by the industry to explain its position on wood use and

environmental impact (Amari 1997, JPA undated 2), and expressed within the

industry’s technical research association (Iida 1996)(p.2)(sic): “If harvesting is

managed and controlled so that the deforested land should be again converted to

plantation forest or return to natural forest, it is regarded as ecological. ... (Thus,) ...

most of chips coming to Japan are produced with little damage to the forest and

environment”. The extent to which this perspective is held throughout the industry

will influence attitudes to the resource regimes supplying fibre, the impact of those

regimes, the legitimacy of complaints about those regimes and the need for change.

Conservation controversies have affected company attitudes and activities. The

overall short-term impacts on fibre supplies, at least as stated by company staff, do

not appear to be great. For example, the wood supply problems expected by

Company A from reservation and reduced logging of public forests of America’s

Pacific North West were subsumed by much broader industrial and wood supply

changes, and did not develop as expected. Company E said that it lost an opportunity

to expand its business in Australia during the early-1990s because of limits on

woodchip export licences (but the size is unknown), and Company I was affected,

although apparently in minor way.

Impacts on longer-term strategies seem larger. Some questionnaire responses

and interviewees stated that controversies contributed to diversification of fibre

supplies, especially plantation establishment. Other activities were said to include:

using sustainably managed forests; using less wood from forests; following local

regulations; and consulting the public. However, as discussed in Chapter Eight,

company staff also stated that plantation establishment was driven primarily by a

perception within the industry that plantations were needed for long-term

competitiveness. Staff of one manufacturer considered alternative supplies were

necessary if increased competition from American papermakers reduces the supply

of pulpwood from seUSA. A GTC employee argued that GTC involvement in joint

venture plantations provides them with opportunities for investment in fibre demand

and supply. Also, staff of one papermaker said that the company does not see any

problem with logging native forests, so does not consider replacing native forest

wood with plantation wood is necessary, although it might consider doing so if there

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were fibre quality and economic benefits. This is similar to attitudes mentioned

above.

The main market for wood from these plantations is Japan (Tables 10.7 and

10.8). However, staff of some GTCs indicated that they would like to use plantations

to expand their business in the woodchip trade rather than replace native forest

supplies. Thus, conservation pressures have helped shape company attitudes in

favour of plantation establishment and use, but do not dominate.

Recycling used fibre and environmental issues That Japan’s recycling laws had little impact on the industry is indicated by the fact

that the majority of companies considered that market forces primarily direct the use

of recovered fibre in Japan. Four companies considered that laws and regulations

make a contribution (Tables 10.9 and 10.10), and follow-up interviews indicated that

some staff considered that local government regulations encouraged collection.

The vast majority of companies said that the utilisation rate of recovered fibre

should increase and the reasons given were primarily environmental - garbage

reduction, forest protection and resource use efficiency. However, three companies

felt that the market should direct the use of recovered fibre. One considered the rate

should stay the same.

Almost all companies expected to increase their use of recovered fibre.

Company L said it has the technical expertise and a plan to increase its intake, but

this would only occur if demand increases. Company M said it would increase

recycling if it was economic. The impact of this attitude in another company was

mentioned above – the target for using recovered fibre in a mill was not reached.

One trading company expected that its trade in recovered fibre would not increase

because of the limitations of its suppliers.

The factor considered within the companies to be most important for increasing

the use of recovered fibre is an increase in consumer demand for recycled paper

products. The next important factors include: advances in recycling technologies,

cheaper wastepaper for papermakers and more efficient collection systems.

Stabilisation of prices and supply was also important. Three GTCs felt that the

determination, or will, of papermakers to increase their utilisation rates was

important, but no manufacturer stated this. Two GTCs considered that government

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Table 10.7: Attitudes of general trading companies to the establishment of plantations and the use of plantation wood.

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Table 10.8: Attitudes within paper/board manufacturers to the establishment of plantations and the use of plantation wood.

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Table 10.9: Attitudes within general trading companies to the utilisation of recovered fibre.

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Table 10.10: Attitudes within paper/board manufacturers to the utilisation of recovered fibre.

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restrictions on the supply of other fibres in the form of chips and pulp was fairly

important, but again no paper company shared this view.

However, companies opposed actions that would restrict their potential access to

cheap fibre. Such actions included guaranteeing minimum and maximum prices,

restricting the supply of new fibres and purchasing used paper/board from

consumers. Companies opposed these measures primarily because they were

considered unnecessary interference that could damage markets for recovered fibre.

Preferred positions generally required government actions that would assist demand

(government purchase of paper products with recycled content, tax breaks for paper

with a high content of recovered fibre) and the introduction of a tax or charge on

consumers to cover the cost of product disposal. These actions have little direct

affect on company costs, but could be expected to encourage demand for recycled

paper products and inhibit the use of products requiring disposal.

On the whole, papermakers required more conditions than GTCs if they were to

voluntarily increase their rate of using recovered fibre. An increase in demand for

recycled products was the most important. Improvements in recycling technology,

cheaper collection and cheaper wastepaper were also important, but two

manufacturers considered that a reduction in the availability of alternative fibre

resources was necessary. One of these manufacturers stated that a policy was needed

to expand the demand and stable supply of recycled paper products. Two GTCs said

their trade in recovered fibre would operate like that for other commodities and

increase if it were profitable and met company objectives.

Overall, companies generally realised the importance of actions that restricted or

encouraged company activities for increasing their utilisation of recovered fibre.

However, when given further choices, they preferred those that did not restrict their

current level of freedom to do business. Government actions that encourage

increases in the demand for recovered fibre are favoured, while actions that might

limit company access to, or increase the price of, fibres to companies are not desired.

Thus, a voluntary increase in a company’s rate of trade in, or use of, recovered fibre

depends on changes in the economics of recycling without increasing the price to

manufacturers. A similar conclusion was drawn recently by one industry observer

(Ausnewz 2001).

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10.5 Environmental charters and environmental outcomes Japan’s paper industry has made a number of advances in environmental protection

and resource use efficiency over the last 30 to 40 years that have helped reduce some

aspects of its environmental load (Ikuta 1992, JPA 2001c). For example, after being

highly polluting, pulpmill wastes are now said to clear “one of the toughest

regulations in the world” (Iida 1996)(p.5). This was essential to maintain production

under stronger environmental codes and regulations (Davis 1995). As Iida

(1996)(p.6)(sic) points out “most of these results are outcome of the intention to

reduce production cost”.

Observed patterns of fibre supply reflect the attitudes expressed through

responses to the questionnaires and interviews and within environmental charters.

The increasing use of native forests allowed companies to expand production and

support growing paper markets. Their consumption of new fibre became

opportunistic as governments and wood sellers sought industrial markets. By taking

moral responsibility for the fibre from the point of direct legal involvement in the

consumption-production chain, companies avoided much involvement in

controversial discourse over the impacts of resource regimes. While GTCs and

manufacturers purchased woodchips from Australia where government export

approval required local companies to conduct EISs, those same manufacturers, or

their associates, operated pulpmills in Alberta for which governments did not require

analysis of the impacts of their forestry operations (Pratt and Urquhart 1994).

The concern of manufacturers and GTCs for ‘sustainable forestry’ does not

challenge the restructuring of forests that continues at the expense of non-wood

values, and yields are not being sustained in some places (Chapter 8). Published

expressions of concern by Japanese companies over the environmental impact of

logging in foreign native forests that provided the majority of the industry’s

pulpwood could not be found for this research; in fact the industry defends this use

(JPA undated 2), and companies continue to consume large volumes of wood from

native forests. This could be explained by the perception of pulpwood as waste

(Amari 1997) and forest management as ‘ecological’ (Iida 1996) or ‘sustainable’

(Amari 1997). Criticism or questioning from within the industry would challenge the

environmental credentials and legitimacy of fibre suppliers and the fibre supply

strategies of Japanese companies. Companies also draw on fibre suppliers and

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representatives of relevant foreign governments for advice on conservation issues

(Appendix 8.1).

The industry’s use of foreign plantation wood increased during the 1990s,

compensating for a declining use of forest wood. However, this does not necessarily

reflect conservation-inspired initiatives. As discussed in Chapter Eight, the changes

are primarily responses to economic concerns; external conservation pressures are

secondary. According to one GTC employee, Japanese buyers of Chilean chips

preferred plantation wood, while sellers wanted to supply forest chips because of

limited plantation supplies. This desire for higher quality wood helps explains the

increasing supply of plantation chips from Chile through the 1990s as use of forest

chips declined. Increasing the intake of pulpwood from hardwood plantations

around the Pacific over the next ten years can be expected to reduce the industry’s

need for forest wood. The industry planned to use wood from company-owned

plantations equivalent to one-third of the intake of wood from native forests in 1994

(Kanda 1996). The impact of this on opportunities for more conservative forest

management will depend on how it influences the economics of management and

whether forest owners find new, high volume markets. The pattern of using more

plantation wood will also be directed primarily by the economic interests of Japanese

companies, so areas containing wood resources with unpreferred physical, economic

and political characteristics should be affected the most. However, if, for example,

GTCs use forest wood to expand company business after substituting plantation

wood in the supply chain for Japanese manufacturers, this would subvert the stated

conservation objectives of plantation establishment.

Plantation establishment by Japanese companies has been heavily influenced by

local political, economic and environmental circumstances. Companies expect to use

their plantations to counter restrictions on wood supply caused by forest reservation

(JP&P 1989a). Also, countering salinity in agricultural areas was a stated benefit in

Western Australia (Kanda 1996). The land on which Japanese-owned plantations are

established is now generally former agricultural land. However, when political

conditions were favourable, clearing of native forests occurred, such as in Papua

New Guinea (Lamb 1990), Chile (Marchak 1995) and Australia (NFN 1996a,

Jamieson 1999). Plantations on agricultural land influence local environments and

communities in a variety of ways (Petheram et al 2000), and some promoted by

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Japanese companies have been opposed and stopped by local interests, such as in

Hawaii (FoH 1997, Parker 1997, Thompson 1997b).

Also, companies incorporated concern over global warming into their positions

on environmental protection, and promote plantation expansion as a major

contribution to environmental protection through carbon sequestration (JOPP 1998).

Oji Paper established a “Global Warming Investigation Office” to promote reduced

fossil fuel use and plantation establishment (AP&P 1998i). It is possible that some

Japanese papermakers might become sub-contractors for companies in developed

nations that want to offset their carbon emissions by establishing plantations in

developing countries; this could also be promoted as helping the ‘sustainable

development’ of local people (JapanE 1999). Evaluation is needed of the extent to

which such global justifications might conflict with, or support, environmental and

social effects of the fibre supply strategies of Japanese companies at local and

regional levels, and the methods by which land supply is created.

The collection and use of recovered fibre by manufacturers in Japan surpassed

target levels recently, and this stabilised the production of paper garbage and the

intake of new fibre by manufacturers. Some of the economic factors described as

encouraging recycling in the responses to the questionnaires and interviews

contributed to achieving this outcome, in particular, technological advances and

lower prices for recovered fibre. Governments are also supporting the purchase of

‘recycled’ papers (Japan 1995, 2001), and the ‘Eco Mark’ labelling scheme gives

emphasis to the recovered fibre content, although it does not include criteria for

acceptable sources of new fibre (AP&P 1997d). Foreign analysts consider the

interest by papermakers in using recovered fibre to produce ‘environmentally-sound’

papers is mainly directed by their interest in protecting domestic markets from

imports (Ausnewz 2001).

Further advances in the collection and utilisation rates for used paper/board to

reduce paper garbage or the use of new fibre will need an extension of the previous

economic benefits to companies that assisted recent growth. As discussed in Chapter

Seven, given the low price for recovered fibre maintained by paper/board

manufacturers, the importance of technological innovations, legislation, product

prices and demand could grow. The price of alternative fibres will also be crucial.

Several interviewees considered deregulation might stimulate rationalisation of the

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collection sector to reduce costs. However, with economic benefits to companies

currently being the driving force of fibre supply strategies, environmental outcomes

have to compete with corporate and social outcomes within and between different

fibre flows. Also, the potential interaction of government policies in Japan that could

favour ‘recycled’ products for environmental protection objectives needs

examination in relation to requirements of international trade agreements.

10.6 Conclusions The images Japanese paper and trading companies present publicly of themselves as

actively protecting fibre-related environmental values are simplistic. Individuals

within companies and organisations, such as the Paper Recycling Promotion Center,

may be genuinely concerned and act to reduce environmental impacts. However,

because companies are directed by economic priorities, environmental benefits have

generally been outcomes of companies pursuing economic objectives within

changing market conditions.

Much of the industry’s growth has depended on restructuring domestic and

foreign forests with various environmental costs. Through much of this time,

companies had no environmental charters, and still regard themselves as primarily

buyers of resources to satisfy market imperatives. Because of technological

developments, companies can now primarily use plantation wood and recovered fibre

that can be promoted as environmentally-sound. Implementing environmental

charters may help sustain or expand fibre supplies and meet environmental protection

regulations. However, this is not sufficient to ensure fibre supply strategies protect

and perpetuate environmental or social values related to fibre resources.

Environmental charters do not show an awareness of the range of fibre-related

environmental issues (as described in earlier chapters) sufficient to direct relevant

company behaviour. Also, some attitudes and processes within the industry and

some companies reinforce this situation. Competition between suppliers of fibre

from forests, plantations and used paper/board for sales on the basis of the overall

cost to papermakers, means social and environmental values and outcomes will

compete on the same basis. Competition on the basis of environmental preference

requires a greater depth of analysis and appreciation of environmental values and

issues than appear in these companies’ charters, public statements and behaviours.

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Achieving strong outcomes from environmental standards and management

systems would be assisted by GTCs and papermakers adopting stronger

environmental charters and transparent, well-funded implementation mechanisms

that aim at protecting values outside those that suit direct corporate economic

interests. Iida (1996)(p.6) argued that “(it is) necessary for the industry to develop

technology with a definite intention for an ecological goal, not as unintentional

results” (sic). This can equally be applied to fibre supply strategies. However,

achieving these outcomes would require restructuring the economic pressures and

priorities affecting the industry to give environmental values more status.

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Chapter 11: Conclusions

11.1 Introduction This dissertation seeks to explain the roles of papermaking fibres in the development

of the Japanese paper/board industry by exposing major interactions within and

between the processes of fibre supply, paper/board manufacture, distribution and

product use that support the industry’s development. It is particularly concerned with

the contribution made by the restructuring of natural environments, so that fibre can

be processed and consumed as manufactured products

This chapter integrates the results of the dissertation within the contexts of the

political ecology paradigm and the industrial structure/consumption-production chain

approach to answer the research questions posed in Chapter One and achieve the

dissertation’s objectives. First, the chapter briefly reviews the dissertation. Then, it

addresses the three subsidiary questions, the answers to which contribute to the final

section that answers the main questions.

11.2 Overview of the dissertation

The dissertation first drew attention to the Japanese paper/board industry using the

controversies surrounding the supply of fibre from several dispersed locations. It

then explained the social significance of the economy-environment relationships

underlying the exploitation and supply of fibre to the industry, and adopted a

political ecology framework to examine those relationships.

The political ecology framework directed research to the political, social and

economic relationships underlying patterns of resource use and the way those

relationships interact with ecological relationships in organic nature. The

dissertation used an industrial structure/consumption-production chain approach to

link the processes of resource exploitation, fibre supply, manufacturing, product

distribution and product use. This approach emphasised issues of control over these

processes and the influence of resource characteristics on these processes.

The application of this paradigm and approach to the modern paper industry

illustrated the importance to papermakers of controlling fibre supply, prices and

qualities. The basic strategy of increasing economies-of-scale in manufacturing and

fibre supply adopted by the industry to support greater paper use in industrial nations

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has been depleting its financial base, while homogenising its resource base at the

expense of environmental and social values.

The Japanese paper/board industry was shown to reflect these international

trends. The dissertation examined the links between product use and the

manufacturing and distribution sectors. It explained how these sectors and product

qualities were restructured to support increasing sales of pulp, paper and paperboard

by Japanese companies. Reducing costs and concentrating control over fibre flows

were important objectives in these processes.

The dissertation also explained how the industry’s development depended on

cooperative and competitive restructuring of supplies of new and recovered fibre by

manufacturers and GTCs under changing political, economic and technological

conditions. The industry exploited available domestic wood, while increasing its

dependence on recovered fibre, and later foreign wood. Restructuring social and

natural environments was shown to be essential for increasing fibre supplies, and

involved governments and resource owners. The case study of Daishowa illustrated

the importance of control over resources to papermakers and the specific

characteristics of individual companies when explaining patterns of resource use.

The examination of attitudes within the industry towards fibre-related environmental

issues helped explain why the industry has given such issues relatively low priority

in the exploitation process.

Several specific topics could not be addressed in the dissertation because of time

and other restrictions. They could be subjects of further useful research on the

industry because the global demand for industrial wood fibre continues to have

important environmental, social and trade implications (Maplesden et al 1999,

Dauvergne 2001). For example, now that the JANT woodchip scheme in Papua New

Guinea uses only wood from local plantations, it is important for landowners to

understand potential impacts of the changing Japanese market and how previously

logged forests are recovering.161 Also, there is little published information on the

political ecology of the export woodchip scheme at Tarakan in Indonesia, which

closed in early 1998 (JapanM 1998), and the methods by which Chilean native

forests were incorporated into, and then excluded from, the fibre supply of Japanese

161 There are many references on the history and impacts of this scheme (Webb 1977, De'Arth 1980, Saulei 1984, Seddon 1984, Lamb 1988, 1990, Shimizu 1996, Montagu 1997).

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paper companies. An examination of the contribution of the industry’s use of

domestic softwood sawmill chips to the economics of importing softwood sawlogs

into Japan could form part of a study on possible changes in the paper/board

production chain to increase the use of Japan’s softwood plantations.

11.3 The subsidiary research questions The subsidiary questions are addressed in order of presentation, but there is some

unavoidable overlap in the content of the responses. Each answer integrates

information on domestic and foreign fibre – pulpwood/woodchips, pulp, recovered

fibre and paper/board – and the factors influencing their use in relation to each

question. These factors include: fibre and product markets; the objectives and

policies of papermakers, GTCs and domestic and foreign governments; changing

technologies in manufacturing, fibre extraction and transport; currency exchange

rates; laws and regulations; policies of resource owners, managers or regulators;

conservation pressure; energy, labour and capital; security of resource supply; and

the characteristics of fibre resources, especially price, quality and availability.

How do patterns of fibre supply to the Japanese paper industry affect fibre-related

environmental values?

This question seeks to understand the industry’s impacts on environmental values

directly related to the supply of different categories of fibre, rather than impacts

generated primarily by manufacturing processes.

The impact of Japan’s modern paper/board industry on forest values began when

its main fibre sources shifted from rags and rice straw to wood, and then expanded as

the industry extended its range through the pre-WW2 Japanese empire. The industry

was involved in resource depletion, forest clearing, forest regeneration and plantation

establishment. In particular, the industry, alone or with other economic activities,

removed and/or restructured forests on Hokkaido. It was also the major beneficiary

of destructive logging on Sakhalin Island.

After WW2, Japan’s papermakers became the prime users of hardwood from the

nation’s native forests and former fuelwood forests. Pulpwood demand supported

the clearing of forests for the softwood plantation program, and drove the logging of

many forests, as in Nagano Prefecture and on Amami Island. The detrimental impact

of logging on the forest fauna of Amami Island carries implications for the logging

of forests throughout Japan.

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The wood in Japan’s softwood plantations is currently not highly favoured for

pulpwood. Much of the paper industry’s softwood chip supply comes from sawmills

processing imported sawlogs. Manufacturers that use these chips benefit from the

resource regimes and environmental impacts that provide those sawlogs. This

benefit will shrink as softwood sawlog imports decline, but papermakers could

replace these chips with pulpwood from foreign softwood plantations.

The industry’s increasing use of foreign wood, especially imported chips, began

with log imports from Russia and imports of pulp for artificial fibre from the

Japanese pulpmill in Alaska. Logging for this pulpmill impacted detrimentally on

forest values, such as fauna, and helped limit the expansion of reservations. Such

consequences became typical of later forest-based pulpwood production for Japanese

papermakers.

Tropical forests in south east Asia were exploited, but temperate and boreal

forests in more politically-secure industrialised nations, including Australia, the

USA, Canada and Chile, became the main sources of pulpwood. Pulpwood demands

became integrated with those for other wood products and converted those forests

into forms more suited to industrial wood production or agriculture, often making

previously uneconomic forests exploitable. These forests have often been unlogged

old forests or logged forests that still express many non-wood values. Rapid

intensive logging, often clearfelling, occurs at rates that provide pulpwood in

volumes desired by papermakers. This is followed by regeneration, plantation

establishment or complete clearing. As seen with Harris-Daishowa in Australia and

DMI in Alberta, where pulpwood production continues over the long-term, it will

influence subsequent resource regimes and environmental impacts.

The Cariboo pulpmill in British Columbia showed that Japanese pulpmills using

sawmill chips can generate pressure for intensive forest exploitation. The wood

demands of DMI and Alpac contribute to restructuring Alberta’s forests at the

expense of inherent ecological values. Where wood demands are large, the potential

to introduce more environmentally-benign forest management systems, such as

proposed by DMI, depends on the flexibility of fibre supply. However, such

conservative management systems conflict with the commodity nature of pulpwood

production, and there are often legal, political and economic impediments. The

examination of the Harris-Daishowa woodchip scheme showed how high-volume

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pulpwood supply regimes can generate new, more complex relationships between

commercial and other forest values that favour pulpwood production at the expense

of values with lower commercial, political or legal standing, such as wildlife.

Significant changes to such forest management can take many years to achieve.

During the 1990s, papermakers increased their use of hardwood chips from

foreign plantations while imports of forest chips declined. These plantation chips

may have directly substituted for forest chips, or simply replaced supplies from

forests that were economically depleted. Manufacturers’ plans for their own foreign

hardwood plantations have implications for forest exploitation. The delay in

beginning these plantations postponed the time their wood could replace that from

forests. Some plantations have been at the expense of forests, while other social and

environmental consequences come from how they are imposed on rural landscapes.

Manufacturers will continue to replace pulpwood from forests of lower quality for

papermaking with wood from their own and others’ plantations. The extent will

depend on availability and price, but is likely to be substantial.

The consequences of the industry’s past use of recovered fibre on environmental

values depended on the price of, and profitability of using, such fibre. There are

benefits and costs from the use of energy in fibre collection and repulping, and the

disposal of related wastes. Nevertheless, the increasing use of recovered fibre,

especially in paperboard and newsprint, stabilised the production of paper/board

garbage in Japan and the industry’s use of new fibre, mainly at the expense of new

softwood fibre. As yet, increased recycling does not appear to have impacted greatly

on the use of new hardwood fibres. However, all the implications of recycling for

the industry’s use of wood are difficult to identify clearly without understanding: the

relationships influencing the use of ‘recycled’ products; whether recovered fibre

replaces fibres from forests; and whether such replacement affects forest

management.

Continuing substitution of new fibre with recovered fibre will depend on

technological developments, capital investment, relative fibre prices and potential

profits for papermakers. If paper/board use continues to grow in Japan, then the rate

of collecting used fibre will need to increase to maintain or reduce the nation’s

production of paper/board garbage. Export sales may help do this, if the domestic

rate of recycling does not increase sufficiently.

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The consequences of the use of plantations and recovered fibre for forests will

vary, depending on local conditions, company objectives and future markets.

Pulpwood supply from some forests may cease entirely, but the extent to which

exploitation is affected will depend on the way pulpwood sales influence patterns of

logging. Where supply to Japanese papermakers continues, it will compete against

plantation wood, other suppliers of forest pulpwood and recovered fibre. This could

generate pressure for: cheaper pulpwood; financial subsidies; and/or a concentration

of management expenditure on wood production at the expense of non-wood values.

Longer-term impacts on non-wood values will depend on the extent to which

subsequent management can produce a forest that allows their expression.

Ultimately, the pattern of the industry’s fibre supply reflects the ways the price,

quality and quantity of fibre from different sources influence the price and qualities

of manufacturers’ products and meet the various objectives of the papermakers. The

consequences for fibre-related environmental values stem from the extent to which

social relationships and natural environments are restructured to meet these

objectives within the consumption-production chains. Thus, the ways in which

papermakers view environmental values and act on those perceptions in relation to

other priorities are important for environmental outcomes.

How do decision-makers within the Japanese paper industry perceive fibre supply

strategies, forest management issues and waste paper recycling, and then

incorporate those perceptions into their decision-making processes to meet

corporate objectives?

The difficulty in answering this question stems from the inability to penetrate all

decision-making processes. Historically, manufacturers and GTCs have been

involved in exploiting a variety of forests, plantations and sources of recovered fibre.

The dominant attitude towards those resources among company decision-makers is,

to some extent, reflected in the way their companies exploited those resources, or

supported exploitation on their behalf. The loss or restructuring of domestic and

foreign forests for pulpwood production at the expense of social and environmental

values reflects the relatively low position of those values in the hierarchy of factors

considered by company decision-makers. Such attitudes may reflect some standards

or thinking in parts of the wider community, such as governments and resource

suppliers. However, public concerns and criticisms before and after WW2 indicate

that these attitudes were not shared throughout relevant societies, and became

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sufficiently strong in some areas to influence the way some decisions on fibre supply

were made and implemented.

The impacts of logging for pulpwood prior to WW2 were mixed, but

manufacturers appeared happy to benefit from destructive logging, such as on

Sakhalin. After WW2, papermakers were involved in successfully lobbying Japan’s

government to replace a conservative forest management regime with a more

exploitative one. They continued as the main industrial beneficiaries of the logging

and plantation establishment until public controversy forced change. Their use of

foreign forests grew from the late-1960s. Yet, it was not until the early-1990s that

the larger manufacturers and GTCs developed policies addressing fibre resource

management and environmental issues. This appears to stem from the way they see

themselves as primarily purchasers of resources with little or no responsibility for the

impacts of fibre supply.

The contents of environmental charters within the industry also reflect a very

narrow concern for the impacts of fibre use – a concern that is aimed primarily at

perpetuating fibre resources for exploitation rather than protecting organic nature and

non-commercial environmental values. The increased use of forest pulpwood to

meet market demands illustrates the dominance of the economic priorities within

these companies. This use has been supported by the perception of forest pulpwood

as ‘waste’, reassurances by fibre suppliers and government officials, and, as seen in

some companies, inadequate mechanisms for reviewing, appreciating and reacting to

the environmental impacts of their trade in, or use of, forest fibre.

These charters also promote the companies’ increasing use of plantation wood as

environmentally-responsible. However, economic pressures have driven plantation

development. Plans for establishing foreign plantations were promoted prior to

WW2 and resurrected in the 1960s. They were postponed when their economics

looked doubtful. It was not until plantation economics changed in the late-1980s that

companies seriously began establishing plantations, sometimes at the expense of

forests. Economic factors will also primarily drive the way companies use

plantations.

Similarly, the industry’s greater use of recovered fibre was stimulated by

pressures from outside the industry for environmentally cleaner production, and

required substantial restructuring of the waste paper collection sector to reduce the

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price for manufacturers. An objective of the establishment of the Paper Recycling

Promotion Center, which the industry supported, was to control Japan’s paper/board

garbage, and this has occurred. However, increases in Japan’s rates for collecting

and reusing used paper/board depended on the economic benefits to manufacturers,

which the industry did not want affected by strong legislatively-prescribed targets.

This concern over the influence of legislation was reflected in answers to the

questionnaire and interviews. Companies recognise the range of incentives and

pressures that could be used to restructure patterns of fibre supply to improve

environmental performance, but do not want their freedoms in fibre markets

restricted.

Overall, industrial decision-makers see fibre resources primarily in terms of their

economic contribution to the production process, and fibre supply strategies seek to

optimise such benefits within the industry’s changing domestic and international

political-economic environment. As a result, manufacturers and GTCs are generally

reactive, or mildly pro-active on fibre-related environmental issues. They seem to

frame their actions in terms of what they perceive as most favourable for their

economic performance. Environmental consequences stem from this.

How do Japanese paper/board companies contribute to international economic and

environmental restructuring through their fibre sourcing strategies?

This question seeks to understand how the fibre supply strategies of Japanese

paper/board manufacturers influence transnational restructuring of economies and

environments. If domestic and foreign fibre suppliers wish to maintain sales and

profitability, they need to restructure the different dimensions of the fibre supply

chain – inputs/output, territoriality and/or governance – to suit the changing demands

of papermakers. Because suppliers and the labour, resources and environments they

exploit are all linked through the manufacturers and GTCs, such restructuring can

affect other economies and environments. Advocates of negotiated solutions to

social conflicts over local forest logging to supply Japanese papermakers with

pulpwood (Thompson and Tracy 1995) sometimes avoid addressing the international

fibre supply strategies of Japanese paper companies and the interests of other

economies and environments that these strategies link.

Control over cheap domestic fibre supplies was important for Japan’s first

papermakers when competing with imports and other domestic manufacturers.

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However, WW2 prevented any large-scale extension of the industry’s fibre demands

outside the then Japanese empire. Post-war expansion of fibre imports was directed

by the focus of papermakers on domestic markets supplying domestically-made

products. Intense competition for domestic fibre and the fear of market penetration

by foreign competitors contributed to industrial restructuring and created a large

demand for foreign pulpwood, and to lesser extents, foreign pulp, paper and

recovered fibre. Control over distribution channels by manufacturers helps limit

competition from foreign products, and contributes to the ability of manufacturers to

pay internationally high prices for imported chips. However, when economics

permitted, manufacturers forged alliances with foreign companies in domestic and

foreign joint-ventures to restructure markets, production and associated fibre flows.

Also, more recently some commercial users and GTCs have established supply

chains for foreign products that challenge established distribution systems.

From the 1960s, papermakers used expanding supplies of foreign wood to

restructure the domestic woodchip sector, reduce chip prices, avoid establishing

costly domestic plantations and escape the public controversy over domestic forestry.

Domestic plantations became unattractive as a source of pulpwood. Manufacturers

shifted between using imported and domestic pulps as currency exchange rates and

fibre prices fluctuated. Greater domestic economic activity, changing markets and

exchange rates, the threat of the Tasmanian pulpmill and the international

environmental challenge to forestry contributed to the industry’s diversification of

pulpwood supplies from the late-1980s and the decision of manufacturers to shift

much foreign wood supply from forests to their own plantations. These plantations

will help manufacturers improve their bargaining position with other fibre suppliers.

As manufacturers move away from forests with low papermaking qualities,

economies based on those forests will need to restructure. The continuation of wood

supply from some areas may depend on the ability of governments and/or suppliers

to provide papermakers with some other benefit, such as lower prices, alternative

resources or an image of environmental responsibility. The major industrial

beneficiaries of the restructuring of forest management responsibilities under the

Regional Forest Agreements in Australia are forest-based export woodchip

companies. The consequent removal of export licences for woodchip schemes helps

counter the lack of such government regulations in other nations, such as Chile and

the USA.

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The use of Japan’s recovered fibre continues to be influenced by the price and

quality of foreign fibre. The supply of new fibre at volumes that dramatically

restructure forests and prices that do not reflect related environmental costs means

recovered fibre must compete with subsidised fibre. In turn, as manufacturers

reduced the price of recovered fibre from the early-1980s and forced Japan’s waste

paper collection sector to restructure, competing suppliers of domestic and foreign

fibre needed to respond to retain sales. Low prices for recovered fibre and imported

new fibres will influence if and how the collection sector penetrates untapped

sources of urban fibre. Japan’s imports and exports of recovered fibre are also

influenced by foreign demand and supply; this affects domestic collection and use.

Overseas joint venture pulpmills use foreign partners to secure fibre and sell into

foreign and Japanese markets to gain economies of scale. However, fluctuating

markets and prices can challenge their viability. Japanese investment in new foreign

pulp and paper mills will depend on their size in relation to available resources,

markets and production economics. The failure of DMI to establish a papermill in

Alberta illustrates the financial risks for foreign production of high quality papers.

However, expanded paper/board use in China provides opportunities for Japanese

companies with plantations there and/or expertise in recycling to restructure their

manufacturing strategies.

Thus, the desire of manufacturers to capture fibre primarily for processing and

sale within Japan has been driving the industry’s transnational interactions with

economies and environments. Crucial to this has been the ability of manufacturers to

control consumption-production chains so they can regulate competition and

implement preferred fibre supply strategies. Compliant governments will continue to

be important as the industry integrates further into foreign markets and companies

seek to restructure economies and environments to meet their objectives for growth

and development.

11.4 The main research questions

How are the development, structure and operation of the Japanese paper industry

related to the use, management and control of its fibre resources? How do these

relationships influence both the industry's development and its use of fibre

resources?

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Answering this question involves incorporating material from the responses to the

subsidiary questions with other information in the dissertation on fibre use and the

industry’s structure to illustrate the relationships between fibre supply,

manufacturing and distribution, and product use that influence the roles of fibre in

the industry’s consumption-production chains.

Since the industry began, the characteristics of its fibre resources - in all their

dimensions – have been important to its development. As resource characteristics

changed, by political and technological developments or by exploitation, and were

expressed through evolving resource regimes, so pulp and paper interests had to alter

their use of fibre and other aspects of their consumption-production chains. Also,

changes elsewhere in consumption-production chains pressured manufacturers to

manipulate fibre supply and resource characteristics. Thus, maintaining a measure of

control over these chains has been important to manufacturers for their survival.

The Japanese industry’s pattern of expanding resource use resembles that of the

modern global paper industry in pursuing larger supplies of fibre of a suitable quality

and price. Manufacturers exploited fibre resources made economic with available

technologies to allow the potential paper/board demand to be expressed. As the

limits to these resources were approached, the industry sought new resources and

applied new exploitative and manufacturing technologies to support further growth.

This produced a new cycle of demand - increasing the use of some resources, while

others were depleted or abandoned.

Such cycles, and the interaction between fibre characteristics and control over

fibre flows, began when the industry shifted from using old cloth and rice straw to

wood so that the cost of paper could be reduced to compete with imports and

domestic production could grow. Accessible wood supplies close to pulpmills were

depleted and mills became based on the forests of Hokkaido and Sakhalin Island.

Oji, and, when they existed, the other leading manufacturers, controlled the supply of

most fibre, particularly that of the cheap fibre from the destructive logging of

Sakhalin’s forests, to dominate the industry. Oji’s influence over domestic fibre

affected the emergence of new competitors, such as Daishowa, and continued after

WW2 through the ‘Oji group’.

The industry’s development and growth after WW2 was directed by the

underlying strategy of papermakers to supply domestic markets primarily with

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domestically manufactured products. Investment in foreign manufacture of

paper/board has been comparatively minor, and related to specific products favoured

by markets and production economics, such as newsprint, thermal papers and

paperboard. In particular, large-scale foreign production of printing and information

papers has not advanced because manufacturers with low profitability would have

had to invest in expensive papermills and lose the integration of domestic production

with local markets. It would have also required access to large supplies of fibre and

other resources in appropriate locations.

Instead, manufacturers supported greater domestic paper/board use by expanding

domestic manufacturing capacity. However, as they sought to capture market share,

they usually expanded in unison, and often maintained older machines, using staff

expertise to obtain production efficiencies. Total manufacturing capacity sometimes

substantially exceeded market growth, creating cycles of overcapacity, price

competition and lower profitability. Companies attempted to improve profitability

by regulating this competition to control fibre supply and product prices. This

particularly was seen with the evolution of Oji Paper and Nippon Unipac Holdings.

It involved restructuring production, concentrating the ownership or control of

production and distribution, and securing distribution links. MITI often provided

administrative guidance, while GTCs assisted by providing finance, and securing

sales and supplies of recovered and foreign fibre. However, it was only recently that

the leading manufacturers could substantially increase prices for some products.

Pricing of paper/board products in Japan has been important to product demand

and fibre use. Since the early-1980s, the use of major paper/board products in Japan

has depended on declining nominal and real prices, generating pressure to reduce

prices for papermaking fibres. Daishowa’s fate illustrated the consequences of

intense price competition within expansionary company behaviour. The higher value

of the Japanese yen from the mid-1980s made domestic paper/board prices

internationally high, but allowed papermakers to extend their economic range of

supply for foreign fibres. The control by manufacturers over the distribution system

contributes to protecting their products from foreign competition and supports prices

paid for domestic and foreign fibre.

Restructuring the qualities of paper/board products has also been important for

expanding fibre flows. It has required manipulating the fibre content of products,

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restructuring production and fibre supply, and sometimes changes in ownership. For

example, the progressive development of new types of high quality printing papers

generated new and increased uses for such paper. This helped stimulate investment

in new and restructured mills and paper machines and increase the demand for new

fibres, much of which is still supplied by native forests. The greater use of recovered

fibre in progressively lighter newsprint helped control the weight of newspapers,

create space for advertising inserts, regulate delivery costs and support newspaper

use. Demand grew for recovered fibre in newsprint and new fibre in inserts.

Stimulating the use of tissues required domestic joint ventures with foreign

companies and a restructuring of fibre supply. Similarly, expanding the use of

paperboard drink cartons required the entry of foreign companies, technologies and

paperboard, plus the support of relevant government bureaucracies.

The post-WW2 cycles of developing then abandoning resources, embedded in

such restructuring of fibre supply, were seen in Japan with the behaviour of

papermakers towards company-owned plantations and larger public and private

forests. Control over fibre flows by manufacturers was relevant not just to their

ability to exploit resources, but also to they way they did so. Manufacturers gained

influence over their main supplies of domestic wood by incorporating chipmillers

into their keiretsu groups and obtaining negotiated wood supply contracts from

Japan’s Forestry Agency. Later, they used imported chips to help rationalise the

woodchip sector and reduce the price of domestic chips. Manufacturers also used

their market strength to force down the price of recovered fibre from the early-1980s

and support increased recycling. The waste paper collection sector was restructured

and, as with domestic chipmillers, surviving collectors occupy a relatively weak

position in fibre supply chains.

The opportunistic and transitory nature of the fibre supply strategies of Japan’s

papermakers became transnational with the beginning of pulpwood/woodchip

imports and the establishment of foreign pulpmills. The desire of foreign

governments and forest/plantation owners for fibre sales allowed Japanese

papermakers to expand domestic manufacturing. Manufacturers and GTCs

diversified chip suppliers to help control the price, quality and security of the overall

supply of raw fibre, as resource characteristics, manufacturing technologies, product

markets and currency exchange rates changed. The supply of hardwood chips is now

in an important transitionary phase as manufacturers reduce supplies from forests in

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favour of plantations and make Australia the main source of hardwood and softwood

chips. Despite the large capital investment needed for a pulpmill, the closure of

Alaskan pulpmill, the unsustainable forestry supplying Cariboo Pulp and Paper and

the poor economics of the pulpmills in Alberta illustrate the potential long-term

insecurity of foreign Japanese pulpmills.

Overall demands for wood and recovered fibre have been generated by the

strategies of the manufacturers. However, the success of these strategies and the

ways their fibre demands are satisfied at local levels are determined by their

interaction with the preferences of local resource controllers (governments,

landowners, producers and collectors of waste paper/board) and the characteristics of

fibre resources. For manufacturers to obtain the quantity and quality of fibre

supplies at acceptable prices has required the compliance of resource controllers to

allow restructuring of resources and methods of supply at the expense of

environmental values in favour of political and economic values. Generally, such

compliance has been obtained through negotiation, and/or some application of

economic power by manufacturers and GTCs. The changing characteristics of these

resources have been important in these interactions.

Physically, the range of fibre types economically acceptable for papermaking

grew with research and technological advances in papermaking. This also expanded

the potential geographic range of exploitable new and used fibres within Japan, and

later around the Pacific Rim, to South Africa and seUSA. Extension of the economic

range was assisted by: technological changes in logging equipment, waste

paper/board collection and fibre transport; and during the late-20th century, the

increased value of the Japanese yen.

Suppliers of wood fibre that are distant from Japan now depend on a relatively

high yen and the sale of products via distribution channels that are regulated by

manufacturers. A cheaper yen, or penetration of Japanese markets by cheaper

foreign products, would increase pressures for cheaper fibre. This could threaten the

economics of distant woodchip or pulp suppliers and impact on the management of

relevant forests for environmental values.

The concentration and quality of the resource base (as opposed to the qualities of

useable fibre within the resource) continues to be important in the industry’s

development. Relatively concentrated areas of forests and plantations or urban areas

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with high paper use have been the industry’s main fibre sources, but more dispersed

resources were used where transport and logging economics permitted, such as in

parts of southern USA. The concentration of waste paper/board in commercial

establishments assists its collection, as does the concentration of old newspapers and

other used paper in the suburbs of large metropolitan areas. However, large volumes

of higher quality office papers remain unused in Japan because they are not

concentrated in ways that are economically accessible to current collection systems.

The location, size and content of company-owned foreign plantations also help

structure the industry, manufacturing methods and product features. Plantations are

dispersed and the target sizes may be sufficiently large to generate economies-of-

scale and encourage the establishment of plantations by others. The industry’s

patterns of fibre supply will change because of them, but whether they will support

pulpmills, either by themselves or in conjunction with other fibre supplies, remains

to be seen.

The extent to which the environmental or ecological features of a fibre resource

influence the industry’s development continues to depend on how their worth is

expressed by relevant societies of the nations in which they are located, and how they

are regarded by decision-makers in the industry. Governments or government

agencies have rated the worth of non-wood values sufficiently low to allow rapid

restructuring of public forests to achieve economies-of-scale and supply large

volumes of pulpwood. Government support for wood-based economic activity

meant that many fibre supply schemes were established without prior examination of

the social and environmental characteristics of the resources and the implications of

proposed resource regimes.

Also, manufacturers were prepared to accept such supply regimes because they

viewed the characteristics of forest resources narrowly and, as resource buyers, felt

little responsibility for the environmental consequences of those regimes. The rapid

conversion of private forests in Australia, Chile and seUSA for export as chips to

Japan also shows that protection of vulnerable non-wood values has not been as

important to their owners as their monetary worth within the fibre supply chain.

Some chip suppliers, such as in Australia or the USA, or manufacturers with

management control over forests, such as in Alberta, may modify tree qualities to

improve the economic value of that fibre within the consumption-production chain.

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The socio-political worth of the environmental features of different fibre

resources became an important characteristic for consideration by Japanese

paper/board manufacturers and GTCs during the latter part of the 20th century. This

perceived worth has generated community opposition to, or support for, the use or

style of use of forests, plantations and waste paper/board by, or for, the industry

across its geographic range of fibre supply. This kind of value has only been able to

influence exploitation and/or the industry’s patterns of fibre use when opponents or

supporters have been able to find suitably strong political or economic levers, but it

has grown significantly. As a result, manufacturers and GTCs have to at least

consider the strength of such characteristics when making investment decisions.

Companies usually present their fibre sourcing as being environmentally responsible,

especially the increasing use of fibre from plantations and waste paper/board, to help

justify their use of these resources and extend their perception of environmental

features into the community of product users. The replacement of forest fibre with

recovered fibre or plantation fibre in communication and information papers may

help the sales and profitability of manufacturers seeking ‘green’ markets.

If resource suppliers try to manipulate the characteristics of their resources for

their own objectives, they need to recognise their position of power across the fibre

supply chains. Price increases by chip exporters on the west cost of the USA in

1979-80 contributed to restructuring of fibre supplies by Japanese papermakers.

Later, the Tasmanian chip supplier, North Ltd, substantially weakened its position

with plans to build a pulpmill and link chip supply to pulp purchases, as Japanese

papermakers responded by diversifying their short- and long-term chip supply.

However, North assisted its position in price negotiations by giving other chip

suppliers the model it developed for Japanese paper manufacturing costs. Japanese

pulp manufacturers in Alberta strengthened their ability to change the pricing

characteristics of fibre resources by joining with other similar companies to pressure

Alberta’s provincial government.

The implications of these characteristics for exploitation illustrate the

importance of resource ownership and regulations governing exploitation.

Ownership characteristics influence the way Japanese papermakers gain access to the

resource and organise fibre supply chains to gain access to suitably-priced fibre.

Governments and relevant government agencies assisted through their general role of

supporting economic activity, and specifically in changing the characteristics of

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publicly-owned resources to suit exploitation through such things as supply

agreements, wood pricing, provision of infrastructure and regulation of interests

influencing exploitation. This was seen in: Japan, when the government altered the

rate at which forests could be logged after WW2; Australia and Canada with the

provision of high volume, pulpwood supply agreements, and the regulation of

conservation and management disputes; and Australia with the removal of export

licences. Japanese papermakers could also benefit from the policies of public forest

managers to alter management responsibilities in ways that reduce public

expenditure, as seen in Alberta.

The diversity of ownership and lack of coordinated regulation of private forests

in and outside Japan also helped exploitation without consideration necessarily being

given to the protection of biodiversity or the future of wood resources across broader

landscapes. Manufacturers and GTCs who own foreign plantations can use them as

levers when negotiating other fibre supplies.

The unique status of recovered fibre as garbage with basically no use value to

consumers or local governments meant that its exchange value to collectors, dealers

and manufacturers regulated its use. Manufacturers used their capital strength to

reduce the ability of collectors and dealers to influence this value. Recent changes in

Japan for the legal responsibility for disposal and reuse of waste paperboard and

some waste paper altered the pressures for their collection. However, the lack of

government direction on responsibility for most waste paper means that its economic

value to manufacturers continues to dominate its fate.

Thus, the development, structure and organisation of the Japanese paper industry

reflect that of modern wood-based paper industries, but with unique situational

characteristics. In pursuit of market growth, it has depleted its capital base, while

competitive and cooperative control over the flow of fibre by manufacturers and

GTCs has been critical to restructuring those flows to support the use of capital and

production expansion. The roles played by fibre in the industry’s history vary along

its consumption-production chains. They include: products and services for

consumers; employment for workers; economic activity and political kudos for

governments; income for landowners; and a home for forest fauna. However, the

outcomes of these roles continue to be directly influenced by the economic role fibre

plays in satisfying the interests of Japanese pulp and paper capital.

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Simplification of natural environments to supply new fibre and reorganisation of

social relationships involved in supplying new and recovered fibre to suit Japanese

pulp and paper interests continue to be integral to organising the paper/board

industry’s fibre supply and generating the political, social, economic and ecological

roles for fibre along consumption-production chains. As the Japanese paper/board

industry moves into a new phase based more on plantation resources, this seems an

appropriate time to recognise the legacy of restructured environments and

relationships, and assess the continuing and potential consequences arising from the

links between the industry’s structure and its use of fibre.

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JP&P (1966d) Tariff Rate Comes to the Front. Japan Pulp & Paper, 4 (3): 11-13. JP&P (1966e) World's Top in Collection Rate. Japan Pulp & Paper, 4 (1): 24-27. JP&P (1967a) How To Challenge To The International Competition. Japan Pulp & Paper, 5 (4): 6-11. JP&P (1967b) Imports of Overseas Pulp Materials. Japan Pulp & Paper, 5 (2): 12-14. JP&P (1967c) Liberalization of Capital: Its Effect on Paper Industry. Japan Pulp & Paper, 5 (1): 8-13. JP&P (1967d) Major Paper Companies Transfer to Waterfront Areas. Japan Pulp & Paper, 5 (2): 6-8. JP&P (1967e) Newsprint Demand Exceeds Production. Japan Pulp & Paper, 5 (3): 6-8. JP&P (1967f) Popee Raises Dispute. Japan Pulp & Paper, 5 (1): 34-35. JP&P (1967g) Regular Import System for Foreign Pulp Materials. Japan Pulp & Paper, 5 (2): 28-29. JP&P (1967h) Second Meet to Promote Russo-Japanese Trade. Japan Pulp & Paper, 5 (4): 15-18. JP&P (1967i) What Will Become of Tangled Problem? Japan Pulp & Paper, 5 (1): 32-33. JP&P (1968a) Board Industry Shows Big Growth. Japan Pulp & Paper, 6 (1): 26-32. JP&P (1968b) Daishowa Pulp 400 tpd BKP Mill Has November Star-up. Japan Pulp & Paper, 6 (4): 12-13. JP&P (1968c) Merger of Three Top Paper Firms Decided to Withdraw Sept. 19. Japan Pulp & Paper, 6 (3): 90-93. JP&P (1968d) New Plans for Wood Imports Are Underway. Japan Pulp & Paper, 6 (1): 8-11. JP&P (1968e) New System for Orderly Import of Foreign Pulpwood Established. Japan Pulp & Paper, 6 (1): 19. JP&P (1968f) Oji and Daishowa Erect Subsidiaries for Paper Trade. Japan Pulp & Paper, 6 (1): 13-15. JP&P (1968g) Oji Group Still Entertains Next Chance to Merge: Withdrawal of Merger Plan. Japan Pulp & Paper, 6 (4): 9-11. JP&P (1968h) Publishing Industry in Japan. Japan Pulp & Paper, 6 (3): 106-112. JP&P (1968i) Restriction on Expansion to be lifted: Paper industry moves towards free competition. Japan Pulp & Paper, 6 (4): 26-29. JP&P (1968j) Russo-Japanese Lumber Trade Starts Anew. Japan Pulp & Paper, 6 (3): 94-95. JP&P (1968k) Wet-Strength Board Is Replacing Iron Pan. Japan Pulp & Paper, 6 (2): 41-42. JP&P (1969a) Corrugated Cases Seeks New Demand. Japan Pulp & Paper, 7 (2): 25-27. JP&P (1969b) Four Companies Make Business Tie-up. Japan Pulp & Paper, 7 (1): 5. JP&P (1969c) Japan Is Establishing Permanent Supply Sources of Wood and Pulp. Japan Pulp & Paper, 7 (4): 18-22. JP&P (1969d) Japan Taking New Turn With Long-Range Plan. Japan Pulp & Paper, 7 (2): 17-21.

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JP&P (1969e) Oji Paper and Mitsubishi Petrochemical Jointly Researches Synthetic Paper. Japan Pulp & Paper, 7 (1): 5. JP&P (1969f) Third Cambodia Forest Survey Team Dispatched. Japan Pulp & Paper, 7 (3): 53. JP&P (1969g) Where Are Major Paper Companies Heading? Japan Pulp & Paper, 7 (1): 12-21. JP&P (1970a) 10 Big news in 1969. Japan Pulp & Paper, 8 (1): 67-70. JP&P (1970b) Big Growth of Tissue and Milk Carton. Japan Pulp & Paper, 8 (1): 65-66. JP&P (1970c) Eucalyptus Chip Import from Brazil Is Underway. Japan Pulp & Paper, 8 (2): 10-11. JP&P (1970d) Japanese Team Surveys Brazil Forest. Japan Pulp & Paper, 8 (1): 56. JP&P (1970e) Joint Pulpwood Purchase Company Established. Japan Pulp & Paper, 8 (4): 8. JP&P (1970f) Kokusaku and Oji Jointly Construct Pulp Mill. Japan Pulp & Paper, 8 (1): 58. JP&P (1970g) Nakai and Fuji Yoshiten Merged into Japan Pulp & Paper Co., Ltd. Japan Pulp & Paper, 8 (1): 59-60. JP&P (1970h) Oji Paper and Kitanippon Paper Merged. Japan Pulp & Paper, 8 (1): 55. JP&P (1970i) Third Biggest Paper Trader by Merger. Japan Pulp & Paper, 8 (4): 6. JP&P (1971a) 2 Major Companies; Sanyo and Kokusaku to merge Next April. Japan Pulp & Paper, 9 (3): 5-6. JP&P (1971b) Alaska Pulp Emberks on the Rebuilding of Aggravated Management. Japan Pulp & Paper, 9 (3): 24-26. JP&P (1971c) Chuetsu Pulp Set up New Policy Helped by Oji Paper. Japan Pulp & Paper, 9 (3): 7 and 16. JP&P (1971d) Household Paper Has Undergone Drastic Changes for a Decade. Japan Pulp & Paper, 9 (4): 18-23. JP&P (1971e) Most Companies Suffer Loss of Profit in Second Half Term. Japan Pulp & Paper, 9 (2): 12-14. JP&P (1971f) Paper Firms Grapple with Environmental Problem. Japan Pulp & Paper, 9 (1): 10-13. JP&P (1971g) Rapid Progress of Japan's Corrugated Case Industry and Its Future Trend. Japan Pulp & Paper, 9 (1): 69-71. JP&P (1971h) Waste Paper under Plan of Stable Market Condition. Japan Pulp & Paper, 9 (2): 22-23. JP&P (1972a) Bearish Business Accelerates Regrouping. Japan Pulp & Paper, 10 (1): 19-22 and 43. JP&P (1972b) A Future Course of This Ind. Indicated by Pulp and Paper Subcommittee of ISC. Japan Pulp & Paper, 10 (4): 27-33. JP&P (1972c) Jujo Decided to Render a Help to NKS. Japan Pulp & Paper, 10 (2): 8. JP&P (1972d) Paper Industry Urged to Do Stable Operation. Japan Pulp & Paper, 10 (2): 15-22. JP&P (1972e) Recycled Fiber: Cheap Non-pollution Material. Japan Pulp & Paper, 10 (2): 39-42. JP&P (1972f) Top Two Board Makers Decided to Cooperate in the Board Market. Japan Pulp & Paper, 10 (3): 15-17.

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JP&P (1972g) The Year of Transformation - 1971. Japan Pulp & Paper, 10 (1): 29-32. JP&P (1973a) Big Three Kraft Paper Makers Cooperate. Japan Pulp & Paper, 11 (1): 7-8. JP&P (1973b) BKP 500 Tons Mill Planned by Daishowa. Japan Pulp & Paper, 11 (2): 13. JP&P (1973c) Celulose Nipo-Brasileira to Start up Pulp Plant of 255,000 Tons/y in 1976. Japan Pulp & Paper, 11 (3): 15-16. JP&P (1973d) Chronic Paper Shortage Foreseen. Japan Pulp & Paper, 11 (4): 15-17. JP&P (1973e) Financial Help for Waste Paper Collection. Japan Pulp and Paper, 11 (1): 5. JP&P (1973f) Giant Wastepaper Warehouses to be Set Up. Japan Pulp & Paper, 11 (4): 9. JP&P (1973g) Honshu Paper and Fukuoka Paper Join on the Container Board Market. Japan Pulp & Paper, 11 (1): 8. JP&P (1973h) How to Ensure Stable Supplies of Pulp and Paper. Japan Pulp & Paper, 11 (2): 31-40. JP&P (1973i) Japan Launches into Nationwide Drive to Save Papers. Japan Pulp & Paper, 11 (4): 19-20. JP&P (1973j) Japan Puts Emphasis on Paper Manufacture b International Joint Ventures Abroad. Japan Pulp & Paper, 11 (2): 23-25. JP&P (1973k) JPA Hopes to Remove Customs on Pulps. Japan Pulp & Paper, 11 (2): 13. JP&P (1973l) The Measurers to Carry out Most Effective Equipment Investment. Japan Pulp & Paper, 11 (3): 34-39. JP&P (1973m) New Recovery System Moves Ahead. Japan Pulp & Paper, 11 (4): 22-25. JP&P (1973n) Paper Shortage Hits Printing Circles. Japan Pulp & Paper, 11 (3): 12-14. JP&P (1973o) Resource and Pollution Issues Forcing Japan to Reform Industrial Policies. Japan Pulp & Paper, 11 (3): 23-28. JP&P (1973p) The Second 5-Year Program Mapped out by Smaller Household Paper Makers. Japan Pulp & Paper, 11 (3): 21. JP&P (1973q) Some measures to Secure Pulpwoods. Japan Pulp & Paper, 11 (4): 33-38. JP&P (1973r) Waste Paper Recycled 37.9% in 1972. Japan Pulp and Paper, 11 (3): 7. JP&P (1973s) Waste Paper Shortage Threatening Board Manufacturers. Japan Pulp & Paper, 11 (4): 9. JP&P (1974a) Board Demand Becomes Sluggish. Japan Pulp & Paper, 12 (1): 12-15. JP&P (1974b) Japanese firms Cooperate in Afforestation Plans Abroad. Japan Pulp & Paper, 12 (2): 21-22. JP&P (1974c) JOAA Promotes Overseas Forestation Plans. Japan Pulp & Paper, 12 (3): 21-23. JP&P (1974d) Oji Paper Asks a 35% Rise of Newsprint Price. Japan Pulp & Paper, 12 (2): 11. JP&P (1974e) Oji Paper Firstly Uses Wastepaper for Newsprint. Japan Pulp & Paper, 12 (2): 5. JP&P (1974f) Two-year Program for Recycling. Japan Pulp & Paper, 12 (3): 23-24. JP&P (1974g) Waste Paper Collectors Marched Streets Asking for Relief. Japan Pulp & Paper, 12 (4): 5.

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JP&P (1974h) Wastepaper Problems...Effective Use. Japan Pulp & Paper, 12 (1): 27-30. JP&P (1975a) Antirecession Measures Urged by Paper Ind. Japan Pulp & Paper, 13 (4): 14 and 29. JP&P (1975b) Carton for Fruit Juice Grew 7 Times. Japan Pulp & Paper, 13 (3): 7. JP&P (1975c) First Use of Waste Paper by Honshu Paper. Japan Pulp & Paper, 13 (3): 9. JP&P (1975d) Jujo Paper Started New Milk Carton Mill. Japan Pulp & Paper, 13 (2): 11. JP&P (1975e) Oji Uses Recycling Fibers for Newsprint. Japan Pulp & Paper, 13 (2): 11. JP&P (1975f) Paper Recycling Problems Taken up at the Diet. Japan Pulp & Paper, 13 (3): 25-27. JP&P (1975g) Pulpwood of Nation-owned Forests to Be Sold by Tender. Japan Pulp & Paper, 13 (2): 7. JP&P (1975h) Surplus Chip Carriers Pose New Problems. Japan Pulp & Paper, 13 (4): 31-33. JP&P (1976) Decision soon made on the development of West Irian forests. Japan Pulp & Paper, 14 (3): 8. JP&P (1977a) High Growth of Facsimile Recording Paper. Japan Pulp & Paper, 15 (4): 20-23. JP&P (1977b) Imported woodchips held 43.5% of total demand. Japan Pulp & Paper, 15 (4): 7. JP&P (1977c) JPA Sees the Changing Paper Industry. Japan Pulp & Paper, 15 (4): 24-26. JP&P (1977d) Liquid Carton; Most Promising Market. Japan Pulp & Paper, 14 (4): 10-11. JP&P (1977e) Wastepaper content rate records new high. Japan Pulp & Paper, 15 (1): 27. JP&P (1978a) 10 Chief Events of 1978. Japan Pulp & Paper, 17 (1): 35-37. JP&P (1978b) Fourth Revised Prospect of Pulp and Paper Made by ISC. Japan Pulp & Paper, 16 (4): 35-37. JP&P (1978c) Oji/Nippon Pulp Merger Creates Japan's Biggest Paper Company. Japan Pulp & Paper, 16 (4): 17-19. JP&P (1978d) Sogo-Shosha Plays an Important Role in This Industry. Japan Pulp & Paper, 16 (3): 25-27. JP&P (1979a) Demand for Wastepapers Climbing with the Increase of Deinking Plants. Japan Pulp & Paper, 17 (4): 39-44. JP&P (1979b) The Role of Sogo Shosha Is Vital to Japanese Pulp and Paper Industry. Japan Pulp & Paper, 17 (2): 15-20. JP&P (1980a) The growing market for coated paper stimulates expansion projects. Japan Pulp & Paper, 18 (3): 47-51. JP&P (1980b) Ongoing Structural Change Induced By Difficult Material Problems. Japan Pulp & Paper, 18 (2): 27-34 and 41. JP&P (1980c) Sogo Shosha - Key participants in the international trade of pulp and paper. Japan Pulp & Paper, 18 (3): 55-61. JP&P (1980d) Staffs of Pulp and Paper Committee, ISC, selected. Japan Pulp & Paper, 18 (1): 5. JP&P (1981a) Demand for paper is expected to glow 3.5% annually in the 1980s by ISC. Japan Pulp & Paper, 18 (4): 15-20.

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JP&P (1981b) ISC unveiled the final report on the "1980s Vision of This Industry". Japan Pulp & Paper, 19 (2): 27-36. JP&P (1981c) The post-cartel measures are focussed on the cut of capacity and business cooperation. Japan Pulp & Paper, 19 (3): 11-15 and 92. JP&P (1981d) Pulpwood plantation projects in the tropics. Japan Pulp & Paper, 19 (1): 5. JP&P (1981e) Reform of industrial structure is urged for emerging from the recession. Japan Pulp & Paper, 19 (2): 19-24. JP&P (1982a) The Sogo Shosha strive to find a way out of the lagging growth. Japan Pulp & Paper, 20 (2): 82-86. JP&P (1982b) Waste paper dealer established by paper dealer. Japan Pulp & Paper, 20 (1): 9. JP&P (1983a) Bright prospect for pulpwoods supplies due to a negligible gain in demand. Japan Pulp & Paper, 21 (3): 21-24. JP&P (1983b) Resque plan for Nagoya Pulp. Japan Pulp & Paper, 21 (2): 5. JP&P (1983c) Japanese Paper Industry '83 Outlook Japan Pulp & Paper, 21 (1): 21-26. JP&P (1984a) Highly diversified functions of the Sogo Shosha in pulp and paper trade. Japan Pulp & Paper, 22 (2): 33-36. JP&P (1984b) Market structure of printing papers and its changing trend in Japan. Japan Pulp & Paper, 22 (3): 49-54. JP&P (1985a) Bold steps urged to mitigate the trade tention with U.S. Japan Pulp & Paper, 23 (2): 25-27 and 33. JP&P (1985b) Business Paper - Dynamic growth, but profits are squeezed down by keen competition. Japan Pulp & Paper, 22 (4): 27-45. JP&P (1985c) Exports hit a new high in 1984. Japan Pulp & Paper, 23 (1): 32 and 38. JP&P (1985d) The hike of yen brings a temporary profit to the paper industry. Japan Pulp & Paper, 23 (3): 24-25. JP&P (1985e) Japan's self-sufficiency in paper materials reaches around 74%. Japan Pulp & Paper, 22 (4): 41-45. JP&P (1985f) Paperboard demand rises, but business performance stagnating. Japan Pulp & Paper, 23 (1): 33-38. JP&P (1985g) Rengo's capital participation in two paper companies. Japan Pulp & Paper, 23 (2): 21. JP&P (1985h) Sogo Shosha enter new phase for revival. Japan Pulp & Paper, 23 (2): 67-71. JP&P (1985i) Wastepapers - Market is stabilized by the orderly purchase plan by paper makers. Japan Pulp & Paper, 22 (4): 45-47 and 57. JP&P (1986a) Emphasis on mechanical and LWC grades in expansion plans. Japan Pulp & Paper, 23 (4): 23-26. JP&P (1986b) Honshu Paper to become the second largest company through merger. Japan Pulp & Paper, 23 (4): 19. JP&P (1986c) In growth rate, B grade leads the way among uncoated printing papers. Japan Pulp & Paper, 23 (4): 27.

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JP&P (1986d) Market rally is the vital point of the management policy under over-capacity. Japan Pulp & Paper, 23 (4): 33-41. JP&P (1986e) Printing paper undergoes great changes in demand pattern. Japan Pulp & Paper, 24 (3): 37-42. JP&P (1986f) Robust demand, but producers are involved in keen competition. Japan Pulp & Paper, 23 (4): 47-54. JP&P (1986g) Slightly coated paper emerges as the most promising grade. Japan Pulp & Paper, 24 (2): 21-24. JP&P (1986h) Sogo Shosha strive to rebound with new management strategies. Japan Pulp & Paper, 24 (1): 33-38. JP&P (1986i) Wastepaper market faces a new phase of permanent over-supply. Japan Pulp & Paper, 24 (3): 43-46. JP&P (1986j) Yen appreciation serves as a strong booster to increase paper imports. Japan Pulp & Paper, 24 (1): 25-29. JP&P (1987a) The Changing Pulp and Paper Situation in Japan. Japan Pulp & Paper, 25 (1): 16-37. JP&P (1987b) Heavy emphasis on the market balance for container board and printing paper. Japan Pulp & Paper, 24 (4): 47-58. JP&P (1987c) Tohoku Paper prefers radiata pine chips. Japan Pulp & Paper, 24 (4): 9. JP&P (1988a) Business paper takes the lead in the growth race. Japan Pulp & Paper, 26 (3): 29-36. JP&P (1988b) Domestic demand-led economy fuels paper demand, profitability rising. Japan Pulp & Paper, 25 (4): 49-55. JP&P (1988c) The external factors contribute much to big profit improvement. Japan Pulp & Paper, 26 (1): 21-24. JP&P (1988d) Giant program by Toyo Pulp to increase its woodfree share. Japan Pulp & Paper, 26 (1): 9. JP&P (1988e) Marketing expertise boosts the sales in the pulp and paper sector. Japan Pulp & Paper, 26 (2): 29-32. JP&P (1988f) Oji and Toyo Pulp to merge in April. Japan Pulp & Paper, 26 (3): 7. JP&P (1988g) The strong yen expedites Japanese companies to step up paper production abroad. Japan Pulp & Paper, 25 (4): 26-27. JP&P (1988h) US chip price rises in the first half. Japan Pulp & Paper, 25 (4): 9. JP&P (1989a) Forestry plantation in Chile Daio Paper founding new company. Japan Pulp & Paper, 27 (2): 11. JP&P (1989b) Japanese industries pursuing active policy in EC penetration. Japan Pulp & Paper, 27 (1): 28. JP&P (1989c) KG joint-ventured corrugated board mill construction in Thailand. Japan Pulp & Paper, 27 (3): 7-8. JP&P (1989d) Marubeni Take Over U.S. Firm For Sales of Information Paper. Japan Pulp & Paper, 27 (3): 21-22. JP&P (1989e) Mitsui & Co foot step into West Coast to handle thermal paper roll. Japan Pulp & Paper, 27 (3): 22.

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462

Appendix 1.1: Pulp and paper mill location, ownership and production in Japan during the year 2000

Numbers in this map correspond to those in the table on the following page. Source: JPA (2001c).

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464

Appendix 4.1: Interviewees and people who assisted with information

Interviewees

Japan

Hashiguchi Masamichi - MITI, Paper, Pulp and Printing Industry Division

Morimoto Taiji - Daio Paper

Shima Chiharu - BZW Securities Ltd

Hisada Mutsuaki – Japan Overseas Plantation Center for Pulpwood

Shimizu Yasuko – Mercedarian Missionaries of Berriz

During the research process, people in Japan, North America, Australia and other

areas provided information through one or more interviews and/or supplied

documents and advice. I also received assistance from many people that I did not

meet. I extend my thanks to all of them. Some of those people, particularly those

working for companies in Japan, did not wish to be named. Also, companies and

their employees who participated in the questionnaire wanted to remain anonymous.

Individuals who placed no such conditions on their assistance are listed below with

the name of their then or current organisation or affiliation. As throughout this

dissertation, Japanese names are presented with the family name first.

Kondo Tadahiro, Watanabe, Koichi, Oi Masahiko, Wakano Tadao - Japan Paper Association

Takayanagi Haruo, Suzuki Tsugio, Ono Mikio - Paper Recycling Promotion Center

Iida Kiyoaki – Japan TAPPI

Haga Hiroshi, Watanabe Akihiko – Japan Pulp and Paper Co.

Konno Takero - Tokyo Resource Recyclers Association

Nakano Shogo, Kobara Teruo, Kondo Teruo – Daishowa Paper Manufacturing Co. Sugimura Ken, Ryukoh Hiroto, Kato Takashi, Miura Shingo, Suzuki Wajiro, Horino

Shin-Ichi – Forestry and Forest Products Research Institute Yoshimura Yuzuru, Yamkoshi Eiichi, Ueda Kunihiko - Asahi Newspaper Co Nakamura Masako - Waste Paper Network Narita Masami – University of Tsukuba Oe Reizaburo – Tokyo University of Agriculture and Technology

Ohata Akihiro – Democratic Party of Japan

Others who assisted with information and/or advice include: Morita Tsuneyuki – National Institute for Environmental Studies Kuroda Yoichi Ken Rogers – Kyoto Journal Rick Davis – Japan Environment Monitor Taniguchi Masao – Japan Paper Association Kume Taeko - Library, Ministry for Agriculture, Fisheries and Forestry Minai Susumu - Paper Business Review Furusawa Koyu, Aoki Masako, Shirai Kazumi - Economics Department, Kokugakuin University Ogura Tadashi - Japan Tropical Forest Action Network Bill Gallagher – Schroeders Japan Ltd

465

Oyadomari Motoko – Edogawa University Ueno Masashi – Yano Economic Research Institute Naito Fuyumi, Okazaki Yuta – Environment Agency of Japan Takagi Keizou, Nakamura Shinya -Bank of Japan Yoshida Takuya - Nippon Consumer News Kanazawa Mutsumi – Independent International Distributor Bob and Reiko Gavey – Gavey Associates Canada Harry Nelson - University of British Columbia Jim Coutts - Fibreco Ltd Daryl Price – Alberta Environmental Protection Ian Urquhart, Susan Hannon– University of Alberta

Chris Tollefson, Fred Gale – University of Victoria

John McInnis

David Orton – Green Web

Harold Draper – Tennessee Valley Authority

Mark Luke – Kimberly-Clark (Aliceville facility)

John Bliss, Charles Raper, Lawrence Teeter, Mark Dubois, Conner Bailey, Harry

Martin Ellefson - Weldwood of Canada Jeff Hirata – Simons Consulting Group Les Reed – Forestry consultant Dennis McPhail – British Columbia Ministry of Forests Tom Hamaoka, Jim Morrison – Daishowa Marubeni International

Glenda Hanna – Alberta Wilderness Society

Fred Lennarson

Others who assisted with information and/or advice include: Takeda Yoshihiro – Daishowa North America Alex Clapp – Simon Fraser University Lois McNabb, Michael Whybrow, Dirk Trigg - British Columbia Ministry of

Forests Kevin Thomas, Stephen Kenda - Friends of the Lubicon Patricia Marchak, Michael Feller – University of British Columbia

USA Jack Speck, Ricky Mobley – Weyerhaeuser (Amory facility)

Joseph Castleman – US Army Corps of Engineers

Agnes Zaiontz – Tennessee-Tombigbee Waterway Development Authority

Cullinan – Auburn University Steven Bullard, Bob Daniels – Mississippi State University Bob Flynn – Robert Flynn & Associates Mark Lawler – Cascade Chapter, Sierra Club Tamaki Teruo – Daishowa America Håkan Ekström – Wood Resources International Cielo Sand, Denny Haldeman, Danna Smith – Dogwood Alliance Ruth Seawell - Larson & McGowan George Draffan – Public Information Network Robert Lawton – University of Alabama Other people who helped with information include: Ralph Colberg – Decisions Support, Inc

466

Katsuhisa Hikojiro – Japan Wood Products Information & Research Center Bill Flournoy – Dept of Environment and Natural Resources, North Carolina Fred Cubbage – North Carolina State University Sara Baldwin – Timber Mart-South Cynthia West, David Emanuel, Debra Warren, David Brooks, James Guldin - US

Forest Service John Gray - Forestry Policy and Program Consulting

Maureen Smith - LightHawk

Economics

Jill Redwood – Concerned Residents of East Gippsland

Keville Larson - Larson & McGowan David Brown – Division of Forest Resources, North Carolina Benjamin Cashore – Yale University Ada Pulin-Lamme, Jim Anthony – Friends of Hamakua Stephen Bunker - University of Madison-Wisconsin

David Howell – Princeton University Lisa Vidic – Southeast Alaska Conservation Council

Australia Brian Stafford – Ausnewz Pulp and Paper Dennis Neilson – Dana Ltd Vince Phillips – Harris-Daishowa (Australia) Pty. Ltd. Greg McCormack – Midway Pty Ltd Harriett Swift, Keith Hughes – Chipstop Robin Coffey – Gunns Ltd Mark Blecher, Robert Bertram - South East Forests Conservation Council Tim Anderson – Wombat Forest Society Sugimoto Yoshio – Latrobe University Dan Lunney – National Parks and Wildlife Service of New South Wales Craig Browne – State Forests of New South Wales Judy Clark – Australian National University Peter Ford – Department of Natural Resources and Environment, Victoria Others who assisted with information and/or advice include: Robert Johnston – Australian Pulp & Paper Institute Allan Jamieson – AOK Innovations Pty. Ltd. John Trewick – AMCOR Research & Technology Library Jo Sasse – Centre for Forest Tree Technology Beth Schultz – Conservation Council of Western Australia Noel Clark, Mike Connell – CSIRO Evan Shield – Economic Forestry Associates Peter Morgan Clive Hamilton – The Australia Institute Peter Dauvergne – University of Sydney Harry Recher – Edith Cowan University David Lamb – University of Queensland Ross Scott Jeremy Whitham Lesley Potter – University of Adelaide Adrian Kemp, Alasebu Yainshet – Australian Bureau of Agricultural and Resource

Brian Turner – Australian National University Francis Grey – Economists at Large & Associates

467

Mike Wood – Forestry Tasmania Justin Wejak - University of Melbourne Several people in other countries provided information and/or assistance. They include: Chile

Indonesia

Andrew Youlton Andrew Lara – Instituto de Silvicultura Alejandra Ruiz – Forestry Institute of Chile United Kingdom David Bills – Forestry Commission of Great Britain Christine Ganzleben – Cambridge University Larry Lohmann – Corner House Andrew Leslie

Chris Barr – Center for International Forestry Research New Zealand Frances Maplesden – New Zealand Forest Research Institute

468

Appendix 5.1: Japan’s early use of paper Japan had a thriving hand-made paper industry for well over a thousand years before

the entry of western mechanical papermaking technology in the late 1800s. The

techniques for making 'true paper' as developed in China were introduced into Japan

in the 6th or 7th century AD. This new knowledge was soon put to major political

and religious ends. Increasing volumes of paper were used to support changing

government structures that needed physical records of official activities. Also

Buddhism was rapidly spreading through Japan and paper provided a medium for the

transmission of religious sutra. The government established papermaking workshops

and paper manufacture became centred in rural areas where plants with suitable fibre

characteristics could be efficiently grown and processed (Thompson 1992, Hori

1993).

The fibres used in traditional hand-made papers came primarily from the bark of

a bush known as 'kozo', or the paper mulberry, which provides fibres suitable for

making thin but strong paper. Fibres from other similar plants, including 'mitsumata'

and 'gampi', were used as well as old rags. These plants were grown using deliberate

farming practices, and the unique characteristics of each fibre type were exploited

either by utilising their fibres in a mixed or pure form to produce a paper with

desired characteristics. Papers using recycled fibres were also recorded as far back

as 881 AD. They were probably mainly used to overcome supply problems by

supplementing new fibres and counteracting shortages caused by transport

infrastructure problems. The soft, dull and long-lasting recycled papers were popular

for the writing of sutras, while the first toilet papers made in Tokyo around the

beginning of the 19th century used recycled fibres (Hori 1993).

News sheets that might be called ‘newspapers’ were first released in Japan

during 1615 and reported natural disasters, murders and suicides using wood-block

printing and illustrations (JP&P 1968h). The earliest known Japanese language

newspaper was published in 1862 by the Tokugawa shogunate, but an English

language newspaper was first published in 1861. The first daily newspaper was the

Yokohama Mainichi Shimbun released in 1871. The language used in the first

newspapers was classical Chinese, which was read by the upper classes, so this

restricted circulation. More popular-style newspapers began soon after and

469

circulations were in the thousands (Haruhara and Amenomori 1997). Newspaper

advertising in its modern form first appeared in 1873 (Matsumura 1961).

Japan's slowly growing literacy rate encouraged an interest in reading, while the

expansion of commercial printing and publishing allowed the market for books to

spread. By the late 19th century, the establishment of lending libraries, information

broadsheets and eventually newspapers had created a society in which printed

publications and the use of paper were an important part of the culture (Bowring and

Kornicki 1993). The Meiji Restoration in 1868 brought to an end the feudal

Tokugawa regime and completed Japan’s shift to capitalism (Howell 1995). This

changed Japan’s political, economic and social circumstances and consequently its

production and consumption of paper.

Japan’s modern publishing industry developed from around the beginning of the

Meiji period when the industry adopted a new form of movable type more suited to

the coming style of publishing. Japan’s first magazine appeared in 1867 and over

180 new magazines were established in the first 10 years of the Meiji period.

Publishing companies released increasing numbers of new magazines and

periodicals, which gave them the ability to plan regular production runs and improve

their commercial operations (Ueda 1997). In just the 10 years between 1878 and

1887, almost 3,000 new books were published, and by 1920, Japan was the world’s

second largest publishing country after England (JP&P 1968h).

Traditional papermaking techniques and fibres continued to be used in Japan

during the early- and mid-1800s, while the European and American paper industries

were mechanising and shifting across to using wood as their primary fibre source.

The increasing use of paper within Japan's growing economy from the Meiji

Restoration relied primarily on traditional papers (Hori 1993), but paper imports also

increased. Traditional papers continued to be exported in small quantities through

the early 20th century after machine-made paper was first made domestically in 1874

(Suzuki 1967, Ooshima 1991).

Following the opening of the first western-style papermill in 1874, machine-

made paper production grew quickly with an increasing use of the new papers and

the construction of new papermills. In 1886, Japan had 5 paper companies and

production had increased to 2,900 tonnes from the 16 tonnes made in 1874. Imports

of paper and paperboard increased. Pulp imports and paperboard production began

470

near the end of the century and small quantities of machine-made paper and

paperboard were soon exported (Suzuki 1967). However, machine-made papers

competed with traditional papers, and this impacted heavily on traditional

papermaking centres (Nishizawa 1984).

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472

Appendix 5.2: Types of paper used in Japan

Source: JPA (1995). Translated by author.

Paper Type Explanation of paper type NEWSPRINT Used for newspaper printing, and

contains both mechanical pulp and waste paper.

PRINTING AND INFORMATION PAPERS

Uncoated printing papers High quality printing papers Printing paper A Uses 100% bleached chemical pulp.

Usually printing paper products and has quality for many uses. Used in books, textbooks, posters, commercial printing etc.

Other printing paper 100% bleached chemical pulp. Papers made to meet all kinds of objectives: books, dictionaries, maps and cream books.

Note book/Drawing paper Generally 100% bleached kraft pulp. Note books made for memo/notes, stationery, note paper for account books, and drawing paper for sketchbooks and drafting.

Medium quality printing paper Printing paper B Semi high quality paper Includes 90% or more of chemical pulp,

and a whiteness of about 75%. Used for books, commercial printing general printing etc.

Printing paper B (including Semi high quality paper) Includes 70% or more of chemical pulp, and a whiteness of about 70%. Used for books, textbooks, the body of magazines.

Printing paper C Between 40% and 70% chemical pulp and whiteness about 65%. Used for the body of magazines, telephone books etc.

Graviure paper Printing papers that include mechanical pulp and are supercalender finished. Used for the graviure printing for magazines etc.

Low quality printing paper Printing paper D Less than 40% chemical pulp and a

whiteness of about 55%. Used for the

473

body of magazines and mimeography (copying).

'Senka' printing paper 100% waste paper. Primarily used for the body of comics.

Thin-leafed printing paper India paper Uses hemp pulp, wood pulp, chemical

pulp to make extremely fine and highly opaque paper for dictionaries, encyclopaedias and bibles etc.

Typing and copy papers Uses bleached chemical pulp. Superior printing characteristics and note characteristics, and less than 40 gms/m2 but is stiff and so is used for typewriters and copying.

Other Carbon paper base, airmail paper, copy paper, mimeography paper and others that are not the above, but are less than 40 gms/m2 and used for printing.

Slightly-coated printing papers Slightly-coated high quality paper

Coating is applied to both sides at the rate of 12 gms or less, and the paper has high quality printing characteristics. Whiteness of 79% or more. Uses high quality paper (Printing paper A) as the base paper. Used for commercial printing of catalogues and chirashi etc, and colour printing in the body of magazines.

Slightly-coated printing paper 1 & 2 Coating is applied to both sides at the rate of 12 gms or less, and whiteness is: 1 (74%-78%); 2(68%-73%). Uses medium quality printing paper (Printing paper B) as the base paper. Used for the body of magazines, colour pages and chirashi etc.

Slightly-coated printing paper 3 Coating is applied to both sides at the rate of 12 gms or less per m2, and whiteness is 62%-67%. Base paper is medium quality paper (Printing paper C). Used for the body of magazines, colour pages, chirashi etc.

Coated printing paper Art paper Coating is applied to both sides at the

rate of about 40 gms per m2 (20 gms/side). Uses high quality and medium quality paper as a base. Used

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for high quality art books, magazine covers, front pieces, posters, catalogues, calendars, pamphlets, labels, tobacco boxes etc.

Coated paper High quality coated Coating is applied to both sides at the

rate of about 20 gms per m2. Base paper is high quality paper. Used for high quality art books, magazine covers, front pieces, posters, catalogues, calendars pamphlets, labels etc.

Medium quality coated Coating is applied to both sides at the rate of about 20 gms per m2. Base paper is medium quality paper. Used for the body of magazines, colour pages, chirashi etc.

Light weight coated paper High quality light weight coated paper

Coating is applied to both sides at the rate of about 15 gms per m2. Base paper is high quality paper. Used for catalogues, the body of magazines, colour pages, chirashi etc.

Medium quality light weight coated paper Coating is applied to both sides at the rate of about 15 gms per m2. Base paper is medium quality paper. Used for the body of magazines, colour pages, chirashi etc.

Other coated papers Cast coated paper A high quality printing paper with a

superior smoothness and a surface with a stronger lustre than art paper. Used for high quality art books, magazine covers etc.

Embossed paper High quality printing paper that is finished by texturing or making art paper and coated paper silken. Used for catalogues, pamphlets, etc.

Other coated paper Art poster, fancy coated paper, pure white roll-coated paper. Used for picture postcards, product labels, magazine covers, front pieces, greeting cards, commercial printing, high quality packaging, etc.

Special printing paper Coloured high quality paper Coloured paper made from 100%

bleached chemical pulp. Used for

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covers, tables of contents, inside covers, programs, catalogues, health insurance certificates, etc.

Other speciality printing papers Government postcard paper Used for ordinary postcards, new year

cards and return postcards issued by the Ministry for Post and Telecommunications.

Other For speciality uses such as small postage stamps, promissory notes, bonds, greeting cards, maps, drafting paper, fancy papers.

Information paper Copying base paper Carbonless base paper Base paper without carbon. Carbon backed base paper Base paper with a carbon backing. Other Copying paper such as clean carbon paper.

Form paper Used for computer output. Includes NIP.

Diazo photosensitive paper Base paper for diazo photosensitive paper.

Photocopying paper Used for plain paper copiers.

Information recording paper Thermal paper Used for output from facsimiles and

printers etc. Base paper for thermal paper that depends on heat for the appearance of characters and images.

Other recording paper Used for recording outputs on papers other than thermal paper, such as ink jet paper, paper that records using static electricity, heat copying, electrical discharge, measurement.

Other information paper Used for computer input paper, including

mainly data cards paper, perforated tape, OCR paper, OMR paper, MICR paper, magnetic recording paper.

WRAPPING PAPER Unbleached wrapping paper Heavy wrapping double layer kraft paper

Used for large bags to carry cement, feed, grains, and agricultural products.

Other double layer kraft paper General double layer kraft paper

Used for square bags, small bags, general wrapping and processing.

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Special double layer kraft paper Used for semi-bleached shopping bags and general duty envelopes.

Other unbleached wrapping paper Strengthened kraft paper One side glossy thin kraft paper with

ribbed pattern. Used for duplex asphalt paper, envelopes, fruit bags, etc.

One side glossy thin kraft paper Used for base paper for tiles, fruit bags, composite paper and miscellaneous wrappings etc.

Other unbleached wrapping paper Unbleached papers other than the above, and used for general wrapping paper and processing "wanpu" etc.

Bleached wrapping paper Pure white roll paper Made on a Yankee machine with one

side lustred. Used for wrapping paper, small bags and processing stock for such things as aluminium foil composites.

Bleached kraft paper Double layer bleached kraft paper

Made on a Fourdrinier paper machine. Used for shopping bags, envelopes, processing for industrial materials etc.

Single side lustre bleached kraft paper Made on a Yankee machine, and used for processing and small bags for things like medicines, sweets, shopping bags and cosmetics.

Other bleached wrapping paper Thin vellum paper Thin paper with both sides lustred and

made on a Yankee machine and supercalendered. Used for general wrapping and slips of paper.

Other bleached wrapping paper Used for general wrapping and processing uses other than the above. Pure white wrapping paper, coloured kraft paper etc.

SANITARY PAPERS

Tissue paper Moisture absorbent crepe health paper (Standard weight of 13 gms/m2) used as 2 ply paper.

Chirigami (toilet paper) Made from high quality waste paper and primarily used as toilet paper (Standard weight of 23-24 gms/m2).

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Toilet paper Roll paper made using bleached pulp or high quality waste paper (Standard density of 20 gms/m2).

Feminine hygiene paper An alternative product to absorbent cotton. Processed into pads or 'tekkusu'.

Towel paper Used in the toilet and kitchen. Both flat and roll types.

Other health papers Health papers other than the above, including table napkins, diapers and 'kyokashi'.

MISCELLANEOUS PAPERS Miscellaneous industrial papers Base paper for processing Building material stock Stock for cosmetic board Base stock for printed plywood for walls

and furniture. Stock for wall paper Base stock for wallpaper, including

backing. Laminated board stock Base stock for laminated board that has

been treated with phenol resin, and used primarily for printed base board.

Adhesive paper stock Processed paper, base paper for adhesive and peel-off paper.

Food container stock Base paper used for paper cups, plates and small sized liquid containers etc.

Coated printing paper stock Base paper for coated printing paper that is excluded for consistency uses, and sent to sent to retail outlets and the same company's factories.

Paper processed in the same factory Base paper that is processed in the same factory and not included in the production statistics.

Base paper for other processing Paper that is given a coating or soaking and includes parchment paper, grease proof and oil proof paper, rust-proof paper, insect proof paper, hot-bed paper, imitation leather, grinding/polishing paper, waxed paper, vulcanised paper, plate making masters and photographic printing paper.

Electrical insulation paper Condenser paper Extremely thin insulation paper used in

condensers. Pressboard paper Extremely thin insulation paper used in

such things as transformers.

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Other insulation paper Paper used for all kinds of electrical insulation such as coils and cables.

Rice paper Used for tobacco paper. Glassine paper Thin partly opaque paper, used for

sweets and medicine packets and inside linings.

Other miscellaneous industrial paper Other industrial papers not included above, such as tracing paper, filter paper, water soluble paper, shade paper, chips for tobacco, absorbent paper.

Miscellaneous household paper Calligraphy paper Paper for calligraphy, first writing of the

New Year, and drawing paper. Other Includes paper twine, papers for sliding

doors, thick high quality paper, teabags, umbrella paper, oiled paper and bags for seaweed.

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Appendix 5.3: Tissue production, waste paper use and industrial restructuring in Japan

The growth in the use of tissue papers in Japan and the incorporation of more virgin

pulp from the 1960s was stimulated by the penetration of Japan's tissue industry by

American capital through domestic joint ventures.

Japan’s household tissue industry grew out of the ‘machine-made Japanese

paper’ industry, which developed from the traditional hand-made papermaking.

Machine-made Japanese paper came to be divided into 2 main grades – traditional

style papers of high quality for cultural uses, and low quality sheet and roll toilet

papers.

Promoting the growth of their products was considered to be probably beyond

not just the imagination of then Japanese paper manufacturers, but also their

finances. Until the 1960s, tissue and toilet paper makers were small and medium-

sized companies operating old paper machines and producing a generally low quality

product. There was little interest in product presentation and no effort to expand

markets or stimulate demand, which "was left to take its own natural slow course"

(JP&P 1970b)(p.65). Much toilet paper was simply cut into squares, tied with tape

and then placed in shops for sale. At the beginning of the 1970s, toilet paper

comprised about half of all machine-made Japanese paper (JP&P 1970b, 1971d).

In the early-1960s, Scott Paper Co. and Kimberly-Clark of the USA separately

joined with local paper companies to form two new large tissue producers

(Maruyama 1965). They introduced large paper machines and sophisticated

American advertising techniques designed for mass production and consumption.

Their advertising campaigns and colourful packaging were persuasive, and their

products were cheap. Jujo-Kimberly introduced its “Popee” brand of tissues at ¥50

for 150 sheets - a price at which machine-made Japanese paper makers could not

compete. Household tissue consumption increased 300% between 1960 and 1975.

This encouraged the entry of other large paper makers into the market, forcing the

smaller Japanese paper producers to restructure (Maruyama 1965, JP&P 1967f,

1970b, 1971d, JPA 2001c).

The production of household papers (tissues, toilet paper and sanitary paper

products) then gradually became dominated by three large papermaking groups -

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Nippon Paper, Daio Paper and Oji Paper who together control about 45.5% of annual

production, either directly or through keiretsu links. The larger paper companies also

control distribution channels, so narrowing the outlets of smaller manufacturers. The

large manufacturers compete primarily on price and attempt to keep the cost of

recovered fibre low. However, some of the smaller companies have been trying to

differentiate themselves on the basis of product characteristics, particularly by

promoting their products with high recovered fibre content as environmentally-

friendly (Nozaki 2000, JPA 2001c).

For a long time most facial tissue has been made from pure virgin pulp, while

most toilet tissue has been made from waste paper (Fujimori 1987), but 'recycled

paper' toilet tissue faired badly during the late-20th century (AP&P 1993e). Despite

considerable apparent public concern about garbage problems and recycling in Japan

(Kyodo 1992), the ratio of waste paper in household tissues declined from 0.9 in

1977 to 0.62 in 1991 (Oye 1994b). Advertising and price are probably the main

reasons for this. For example, some supermarkets include virgin pulp toilet tissue in

advertising promotions because of potential higher profits (Hagiwara 1994), and

surveys indicate the higher price for recycled paper toilet tissue is an important factor

for some consumers (Fukui 1993, KSSK 1993).

In the mid 1980s, when the annual use of facial tissues in smaller regional cities

was estimated to be 46.4 boxes per home, much less than Tokyo’s 70.8 boxes per

home, these areas became targets for greater marketing efforts. It appears that

Japanese people became relatively great users of tissue paper, as per capita

equivalent use of facial tissue was reported to by 2.76 kgs at this time, in contrast to

1.46 kgs in the USA (JP&P 1986d, 1987a). Also, as seen on Tokyo streets, facial

tissue packages are an important "give-away" advertising medium. The average

price of tissue paper has dropped markedly since the early-1980s, in contrast to the

decline in the average price of toilet paper, which has been much less - in actual yen

and as a proportion of the total price (Nozaki 2000).

The proportion of recovered fibre in tissue products was reported to have fallen

to 49.9% in 1997, but increased to 62% in 1999 (PRPC 1998a, 2000a). This was

reported to be due to modifications in the database for recycled papers (PRPC

2000c), but time did not allow the details of this change to be ascertained.

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Appendix 5.4: Recent trends in share prices of Japanese paper/board companies

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Appendix 5.5: Oji Paper Co. – issues of structure and resource control

Establishment, early growth and resource use

This appendix is used as a source of information and arguments contained in several

chapters of the dissertation. The first section provides an overview of the

relationship between the establishment and growth of Oji Paper Co., its control and

use of wood fibre, and the changing industry structure and history until WW2. The

second section illustrates how Oji’s strengthening influence over the flow of fibre,

either as a resource or manufactured product, has contributed to changes in the

industry’s post-WW2 structure. The appendix relies heavily on translations made by

the author of sections of two books that describe the development of Japan’s early

paper industry (Suzuki 1967, Ooshima 1991).

1. Oji's origins and operations to World War 2

Oji Paper Co was Japan’s first ‘western-style’ machine-base paper making company.

It became established through the close links that developed between the Mitsui

trading company group and the Meiji government, which was installed in 1868 after

overthrowing the Tokugawa shogunate.

The Meiji government was initially short of money so it turned to the long-

established, influential and wealthy trading groups for assistance. Probably the most

important of these was the Mitsui family group of companies, which had aligned

itself with the supporters of the Meiji emperor. Mitsui organised the raising of funds

and in turn was favoured by, and developed close links with, the Meiji government.

The well-organised Mitsui group thus became a powerful conglomerate in the

Japanese economy, and played a vital role in the establishment and expansion of

Japan's modern paper industry (Anon 1988, Roberts 1989).

In the late-1800s, the Ministry for Finance was relying on imported papers for

the production of bank notes, stamps, government bonds and related paper products.

The then assistant to the head of the Ministry for Finance, Shibusawa Eiichi,

proposed establishing a papermaking and printing office. However, failing to

achieve support he approached the Mitsui group, who was the new government's

currency trader, and some other companies close to Mitsui, convincing them to

establish the business. They imported a British paper machine on the advise of an

English construction engineer working at the Ministry, and in 1888 when the

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company was planning to expand further, the company's main shareholders included:

a Mitsui family member; Shibusawa (who eventually left the Ministry of Finance,

joined a Mitsui-backed bank and ran Oji Paper in its early years); Asano Chokun,

Shibusawa's relative by marriage who was an entrepreneur and an imported paper

merchant; and Ougawa Heizaburo, Shibusawa's nephew who became a leading paper

technologist (Suzuki 1967, Hunter 1978, Roberts 1989)

As a result, Shoshi Kaisha (Paper Making Co.) was established in 1873 and

began operating the first western style machine-based papermill in 1874. It later

changed its name to Seishi Kaisha (Paper Manufacturing Co.) and in 1893 became

Oji Seishi (Oji Paper Manufacturing Co.), taking the name of the town near Tokyo

where its mill was located. This creation of this company followed the failed attempt

to establish a papermill by an Osaka-based company (Suzuki 1967).

The growing industry, based on cloth and rice straw, suffered fibre shortages and

competition from imported paper made from wood fibre (Suzuki 1967, Ooshima

1991, Ishii 1992). Oji's Shibusawa sent the company's paper technologist - his

nephew, Ougawa Heizaburo - overseas to study the latest wood-based technologies

(Roberts 1989) and in 1890 the company began producing paper from chemical

(sulphite) pulp at a new mill at Kiida on Japan's main island of Honshu. Other

Japanese commercial interests also saw the potential for using this new technology,

and in 1890, the new Fuji Paper began producing wood-based paper at a mill near

Mt. Fuji on Honshu, using the mechanical groundwood pulping process (Suzuki

1967). The use of wood-based technologies appears to have provided Oji and Fuji

with some important market advantages. They were the only 2 companies to

produce high quality paper and wrapping paper (Suzuki 1967, Roberts 1989).

The ability to use wood as fibre for papermaking also depended on the Meiji

Government's promotion of economic growth and capitalist production. The first

wood fibre supplies of both Oji and Fuji paper companies came from public forests

that were created by the Meiji government in its restructuring of land ownership

(Funakoshi 1988) (Handa 1988b) (Kumazaki 1988, Sugahara and Ouchi 1988, Ninan

1996).

Oji's formative years were not very profitable. When more capital was needed in

the early 1890s to improve production efficiency and expand, Mitsui interests forced

out the previous management and installed more aggressive staff who went on to

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increase both Oji's size and eventually its profitability (Suzuki 1967, Pardy 1982,

Roberts 1989).162 However, Oji was still in a serious financial condition and faced

resource shortages during the late 1890s. A series of operational disasters (including

Japan's first large-scale strike in 1898) and low paper prices, caused by Japan's poor

economic situation after its war with China, put pressure on the company's costs.

Also, its mills were depleting their available wood resources, while the cost of

alternative imported pulp was high (Ooshima 1991). Because of limited funds, the

company apparently was not interested in acquiring forests on Honshu and managing

them for the long-term production of wood fibre. Rather it was just interested in

obtaining wood. However, it was often forced into purchasing forests rather than just

standing timber because private landowners did not want to be left paying tax on the

land remaining after logging. To ensure its survival, Oji too began to ship cheap

wood from Hokkaido (Suzuki 1967, Ooshima 1991).

Oji’s financial problems continued into the 20th century. It had built a new main

mill on Honshu, but this was not successful and the company began to restructure. In

1906, it decided to construct a pulp and paper mill at Tomakomai on Hokkaido and

secured wood resources from national and imperial forests. This large expensive

mill with several paper machines began producing newsprint in 1910. It was backed

by Mitsui, and the new investment strengthened Oji's position by giving it the ability

to counter paper imports that had been damaging the profitability of its domestic

production. Oji and Mitsui dominated wood supply contracts from public forests in

Hokkaido from around 1905, and the exploitation of Hokkaido’s forests for

pulpwood by Oji and Fuji grew substantially. Oji and Fuji followed different

pulpwood supply strategies on Hokkaido. Oji relied on sales from national forests

for most of its wood. Fuji preferred purchasing wood from private forests and

accumulating forest lands, but there was competition between the two when

acquiring forests (Suzuki 1967, Ooshima 1991).

162 Perhaps the most important of these new employees was Fujiwara Ginjiro who became Oji's President and eventually a powerful member of the Japan's government during World War 2 (Roberts 1989). Pardy (1982) presents Fujiwara as an ardent nationalist with strong militaristic leanings, and gives credit to him for turning Oji Paper into “one of Mitsui's most profitable ventures” through “his ability to ally himself in the closest possible way with Japan's military and political aims and at the same time ensure a good financial return to Oji” (p36). He says Fujiwara supported Japan's imperialist expansion as the nation's 'manifest destiny', looked to the military to support and protect Japan's 'foreign trade needs’ and saw the invasion of eastern China as an opportunity to expand Japanese business and exports. Fujiwara’s political influence is reflected in the fact that he later became a member of the Cabinet Advisory Council of Japan's war-time government and was appointed a State Minister without portfolio.

487

WW1 generated an industrial boom within Japan. Paper prices increased

sharply and provided good profits for all companies (Suzuki 1967, Ooshima 1991).

Oji and Fuji used their war-time profits to buy smaller paper producers and invest in

both resource acquisition and production expansion using the latest technologies to

lower production costs (Ooshima 1991). Hokkaido-based pulpmills expanded their

wood intake, the first pulpmill was established on Sakhalin by Mitsui in 1914 and

was promptly bought in 1915 by Oji, who also began producing pulp from Korean

forests. Oji relied on national forests in Korea, but the cancellation of its long-term

supply contract by an antagonistic governor-general (and the subsequent renewal

after Oji decided to shift its pulpmill to Sakhalin) spurred its acquisition of private

land for plantation development in both Korea and other parts of Japan (Suzuki 1967,

Ooshima 1991, Ishii 1992). A new pulp company, Karafuto Kougyou (Sakhalin

Industries) began operation on Sakhalin in 1915and Fuji took over a pulpmill there in

1922 (Ishii 1992).163 By 1921, Oji and Fuji together produced 70% of the nation's

pulp production of 242,000 tonnes (Suzuki 1967).

When the Japanese economy slumped in 1920, pulp and paper prices fell. The

pulp and paper companies formed a cartel to control reduced production for about 3

years, and using the capital acquired from the previous good profits, Oji and Fuji

expanded their facilities on Hokkaido. Oji's Tomakomai mill produced more than

60% of Japan's newsprint by the mid 1920s (Ooshima 1991). Investment also

increased on Sakhalin (Suzuki 1967).

Oji takes over its competitors At the end of the 1920s and in the early 1930s, the 3 main pulp and paper companies

had production overcapacity and were under pressure from imports. Fuji was the

leading producer, with Oji second. Karafuto was producing increasing volumes of

paper even though it had a much shorter history than Oji and Fuji. Profits and

dividend rates were declining, but Oji was the most profitable. The presidents of

Fuji and Karafuto apparently had discussed merging the two companies, but Oji took

over both Fuji and Karafuto in 1933 (Suzuki 1967). As a result, it gained the pulp

and paper mills and forests owned by the other two companies, monopolised the

available forests of Sakhalin (which supplied 76% of Japan's pulpwood in 1935 (Ishii

163 This company was established by Ogawa Heizaburo and Shibusawa Eichi, formerly of Oji (Suzuki 1967, Shinomiya 1997).

488

1992)), and dominated the pulp industries in Korea, Manchuria and Hokkaido

(Shinomiya 1997).

In 1936, Oji supplied 81% of Japan's annual paper production, dominating all

grades of paper, but with a complete monopoly over newsprint. Although new pulp

and paper companies were being established, the merger meant that eleven

companies supplied the other 19% of Japan's paper market. Oji's nearest rival was

Mitsubishi Paper, which supplied a mere 4.6% (Suzuki 1967). Thus, Oji basically

drove Japan's paper industry at this time.

Planning resource use for future growth

This plan was released in early 1938 and looked to the following five years. It

considered that the domestic pulp supply to both the paper industry and the artificial

fibre industry would grow from 870,000 tonnes in 1936 (of which about 56,000

tonnes was for artificial fibre manufacture) to 1.65 million tonnes in 1942 (an 88.5%

Resource Pressures Controlling competition Small paper companies such as Daishowa were established during the pre-WW2

period of high paper consumption growth when Oji Paper Co had a virtual monopoly

over Japan’s paper production and exploitation of domestic fibre resources. As they

had limited or no pulp producing capacity, they were very dependent on Oji. They

cooperated amongst themselves to improve their situation, but Oji’s capital and

technological strengths were a barrier. For example, according to Daishowa’s

company history, small paper makers applied jointly to the governments of both

Sakhalin and Hokkaido for access to wood supplies that could be used to replace

imported pulp and help them grow. However, the idea that they could join up with

the group of small artificial fibre makers was thwarted when the fibre makers

received the support of Oji and formed Kokusaku Pulp (Daishowa 1991).

From the mid-1930s, the paper industry began to feel the problems created by an

expanding fibre demand approaching limits of its economically available resource.

Also, the worsening relationship between China and Japan from the early 1930s

emphasised to people in the industry the need for greater security of supply. Pressure

increased to restructure the industry's resource base with more emphasis on domestic

self-sufficiency. To this end a plan was developed for future fibre supply, and had

the plan been achieved Oji would probably have continued to dominate the industry

through its operations throughout Japan and its colonies (Suzuki 1967).

489

increase of 780,000 tonnes, but no break-up between pulp for paper and artificial

fibre was provided) (Suzuki 1967).

Thus, the intention was to raise the use of Sakhalin forests to a slightly higher

level and rely increasingly on domestic forest pulpwood and imports of pulp from

Manchuria. The planners must thus have expected that Manchuria would not only

remain under the control of Japan, but that sufficient infrastructure would be

developed to allow access to the forests, the expansion of pulping capacity and the

export of pulp. The establishment of large areas of domestic plantations was

apparently also considered important at this time too. There had been a plan for the

expansion of softwood plantations for construction timbers, but creating resources to

supply the paper industry's expansion was also now being considered. Of the

5,952,000 ha (6 million choubu) of plantations planned, it was thought 990,000 ha

could be allocated to pulpwood production (Suzuki 1967).

Oji Paper and the dissolving pulp market for artificial fibre production were

important for developing the use of wood from the hardwood ‘buna’ (beech) and the

softwood ‘akamatsu’ (red pine). Oji executives and others considered that the use of

beech was essential if the paper and artificial fibre industries were to be able to

continue to grow. They promoted its use heavily from 1935 to the end of WW2

(Suzuki 1967).

The plan made very specific assumptions about the level of company expansions

and the sources of fibre from within the then Japanese empire. It allowed for equal

increases in production between the general categories of new and established

companies. In addition, it described from where the fibre to satisfy these increases

would come, and despite industry concern over Japan's deteriorating relations with

China, it relied heavily on Japan's new colonies for imported resources. Manchuria

was to supply 300,000 tonnes of pulp, while the remaining 480,000 tonnes of pulp

was to be produced in Japan (including the Sakhalin Islands). Bagasse and soy bean

waste sufficient to make 150,000 tonnes of pulp was to be imported from the

Japanese colony of Taiwan. Wood fibre was to be supplied to make the other

320,000 tonnes, of which Hokkaido was to provide 47%, Honshu and the other main

islands (particularly private forests and new companies using national forests) were

to provide 41%, and Sakhalin was to provide the remaining 12% (Suzuki 1967).

Technologies for expanding the resource base

490

After conducting successful tests on red pine, Oji established a new company

(Sanyo Pulp Co.) in 1937 to run a new artificial fibre pulpmill. Red pine had

originally been tested by another Oji company for paper production, but because of

problems it was thought it could only be used for rayon manufacture. Sanyo

overcame these problems, so allowing its use for paper manufacture, and small

volumes were used in Oji's mills on Hokkaido. Similarly, in 1935, Oji conducted

successful trials to use beech as a source of short fibred-wood for artificial fibre

production. Successful research on the use of other hardwood species for dissolving

pulp gave Oji the technical ability to greatly expand its potential fibre resources. It

surveyed the distribution of red pine and beech, and in 1937 applied to the

government for an annual contract for beech wood. It also established a new

dissolving pulp company to use beech in the Tohoku (north-east) region of Honshu

where there were large areas of native mixed hardwood forests that had only been

marginally exploited for other wood products. Oji also used small quantities of

hardwoods in its Hokkaido mills (Suzuki 1967, Ooshima 1991). WW2 interrupted

the development of the widespread economic application of these new pulping

technologies for paper manufacture. However they were of vital importance in

making available new resources for the industry's expansion in its next stage that

began from the end of the war.

Oji also realised that it might be able to move south to obtain resources from

tropical forests in the Asian-Pacific region. It sponsored a research expedition by the

Imperial Forestry Association in 1936 to Borneo to investigate the potential for using

tropical forests as a pulpwood resource and suitable tropical plantation species. The

pulping tests failed because the processes used were inappropriate for tropical wood,

being similar to those used for temperate softwoods, and with the advent of war the

idea was abandoned (Suzuki 1967).

Oji Paper’s use of pulpwood supply areas Hokkaido Oji and Fuji followed different general strategies to secure long-term pulpwood

supplies for their mills that reflected their different histories and characteristics. Oji

preferred to rely on sales from national forests for most of its wood. Fuji preferred

purchasing wood from private forests and accumulating forested land, but there was

competition between the two for buying forests (Ooshima 1991).164

164 According to Ooshima (1991), Fuji used its own name and those of employees to lease some

491

The sale of forest wood and the disposal of unused national land on Hokkaido by

the Meiji government were crucial to the establishment and expansion of both Fuji's

and Oji's mills on the island. Pulpwood was purchased under contract from national

and imperial forests as well as from private forest owners. Between 1907 and 1925

for example, approximately 6.9 million m3 of wood was sold from Hokkaido's public

forests of which 70% was bought by the local papermills. Such sales continued until

1946, although volumes declined substantially during World War 2. Forests were

purchased from private landowners and often landowners just sold the standing

timber, disappearing with their profits and leaving behind a "wasteland" (Ooshima

1991)(p.73). Forests were also leased or purchased from the government, and

Mitsui, Oji and Fuji were important buyers. Such disposal continued until the early

1920s. Oji also purchased cleared land for plantation establishment.

Fuji entered Hokkaido before Oji in the late 19th century and so had gained

experience in obtaining wood from private forests that was generally cheaper than

that from national forest. Fuji’s pulpmills were a long way from its main papermill

in Ebetsu. This required long distance transport of pulp, but provided Fuji with

important tactical advantages. Its mills had good access to water and power, while

being in more remote areas, they often had access to cheap wood that could be used

to dominate wood markets over a wider area than just one mill. Where rivers were

used for log transport, the company could also influence the use of forests and land

in their catchments. It was also relatively easy to build and shift a pulpmill close to

new resources if necessary. This general strategy appeared to help Fuji because

throughout much of this period the unit wood costs of its mills were lower than Oji.

The output of Fuji's mills on Hokkaido began to increase greatly from 1915, and

between 1915 and 1922 the company bought large areas of mature forest that it could

use to expand pulp production. The growth in Fuji's consumption of Hokkaido wood

from this time exceeded that of Oji. However, Fuji was finding that its usual sources

of pulpwood were becoming limited. The government stopped the sale of

undeveloped national forests in 1921; the availability of pulpwood from general sales

on undeveloped land had been declining; and wood prices had risen because of

national forests on the pretext that they would be used for grazing. It also purchased large areas of national forest land. Some of this success appears to have been dependent on the employment of a former engineer of the Hokkaido administration who was able to pre-empt changes in the "Law for Disposal of Undeveloped Land in Hokkaido" (which had been criticised as the prime cause of forest destruction in Hokkaido) and hasten the purchase good forests sought by Oji. The rate of Fuji's forest purchase fell after he left the company.

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WW1. As a result, Fuji had to alter its fibre supply strategy by increasing the

purchase of wood from national forests near its mills (Suzuki 1967, Ooshima 1991).

Because of Oji's experience with wood shortages for its Honshu mills, it was

concerned to ensure its new integrated pulp and paper mill at Tomakomai would

have secure and adequate wood supplies. It obtained annual supply contracts and 10

year contracts for wood from national forests near the mill, as well as acquiring

unused national forests. However, it soon had to obtain extra annual supply contracts

to guarantee the expanded demands of the mill, and use those resources carefully.

Oji kept control over unused volumes of its contracts for later use, but the

government began to take greater control of log sales from national forests to which

Oji was opposed. There was a decline in national forest wood output from 1921,

which tightened Oji's wood supply. Total wood costs increased as wood prices rose

along with transport costs because the wood was being removed from more distant

forests. As a result, Oji too had to modify its resource strategy. It increased the

purchase of wood from private forests, used wood from other public forests and its

own forests, plus began shipping in wood from Sakhalin. Oji had already begun

acquiring private forests and also started to purchase and plant cleared land with the

intention of accumulating sources of future wood supply. After Oji took over Fuji

and Karafuto, the quantity and range of resources under its control increased, but the

largest part continued to come from public forests (Ooshima 1991).

Sakhalin

This use and domination of Sakhalin's forests by the three paper companies

seems to have come under threat from two sources. The first was from elements

within the Sakhalin's colonial administration who wanted to diversify the industrial

base exploiting its native forests, while the second came from the companies' own

treatment of the resource (Suzuki 1967).

The Japanese government encouraged the exploitation of the Sakhalin forests (Ishii

1992), and the three largest Japanese paper companies - Oji, Fuji and Karafuto

Kougyou (Sakhalin Industries) - obtained twenty year cutting rights in a patchwork

of logging concessions over the national forests in southern Sakhalin (Suzuki 1967).

Their contract conditions were apparently so good that these forests were “referred to

as ‘the private property of the large paper companies’” (Ishii 1992).

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In 1928, the Sakhalin administration released a new policy for the island's

forests. It contained the intention to reorganise the boundaries of the pulp

companies' concessions and reduce existing contracts by 20%. The reason given was

that the amount of wood already consumed by the mills had caused an imbalance

between resource demand and availability. However, some of this reduced volume

was then secretly sold by the then Head of the Sakhalin Department of Agriculture

and Forestry to an artificial fibre company on the condition that it would also

establish a pulpmill. This kind of concern over resource control and use within some

sections of the administration was also expressed when Oji took over Fuji and

Karafuto in 1933. At this time, the Head of the Sakhalin Department cancelled the

old supply agreements with Fuji and Karafuto because of his opposition to the

resulting monopoly. This was later rescinded by the government who wanted to

maintain the industry's activities on Sakhalin (Suzuki 1967).

The other problem appears to stem from the way the Sakhalin forests were

actually exploited and managed by the pulp and paper companies. While the pulp

companies on Sakhalin consumed the natural wood resource, for some time they

were under no obligation to actively regenerate the forests, because the forests were

owned by the government and the pulpmill establishment agreements stated that the

forests would regenerate naturally (Suzuki 1967). This must have contributed

enormously to the ability of the companies to cheaply exploit the wood.

According to Suzuki (Suzuki 1967), because of the huge demand for wood by

the paper companies in Sakhalin and other colonies there was "colonial

indiscriminate destruction of the forests, and industry people who cared about things

other than acquiring profit were non-existent" (Author's translation - (Suzuki

1967)(p.265)). As a result, he said forest fires and insect attacks were frequent. By

the early to mid 1930s, concern was being expressed about the condition of

Sakhalin's forests and their wood resources because of the heavy impact of industrial

demands already made on the forests and the expected growth in pulpwood demand.

One opinion felt that because of the high rate of cutting, the annual output would

have to drop substantially in the near future. However, another opinion held that a

somewhat increased output could be sustained, but Suzuki points out that the general

expectation was that pulpwood output could not increase greatly over the long term.

After the beginning of WW2, the pulpwood output from the Sakhalin forests

increased rapidly reaching 2.37 million m3 in 1940 before plummeting to 250,000

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m3 in 1945. Much of this supply increase was probably to used in the manufacture

of dissolving pulp for artificial fibre to counter cloth shortages during the war.

Korea and Manchuria Korea became part of Japan in 1910 and from 1919 to 1941 its forests were used to

provide increasing volumes of pulpwood to Japanese pulpmills supplying Japan.

These pulpmills produced pulp for paper, but from 1936 they also supplied pulp for

artificial fibre. Oji was one of the companies in Korea and here too it relied on

national forests. However, the cancellation of its long-term supply contract by an

antagonistic governor-general - and the subsequent renewal after Oji decided to shift

its pulpmill to Sakhalin - spurred on its acquisition of private land for plantation

development in both Korea and other parts of Japan (Suzuki 1967).

Surveys of Manchuria's forests began in 1924 and decided that while the

standing volume of timber in its forests was very large, the amount that could be

removed annually was very small. In addition, it was felt that pulp being produced

here would be too expensive to compete in large volumes on the domestic market

against other cheap imported pulp. The then conclusion was that Manchuria's forests

could not contribute greatly to the industry's pulpwood supply. However, the

industry's attitude towards these forests changed after 1930 when Japan established

its Manchuko state across the region. In addition, a survey in the early-1930s by the

Imperial Forestry Association decided that a much greater volume of wood for

lumber and pulpwood could be economically removed. As a result, by the mid-

1930s, more pulpmills had been established, including the Japan-Manchuria Pulp

Co., owned by Oji Paper (Suzuki 1967).

Overview Oji Paper was Japan’s first paper company. It had strong links to Mitsui Bussan, one

of Japan’s largest trading companies, and Japan’s national government. It relied

heavily on public forests for much of its wood supply from the late-1800s and

through the first part of the 20th century, but also purchased its own forests and

developed a plantation base. It came to dominate Japan’s paper industry and

resource supply by the purchase of its main competitors in the early-1930s and used

this position to its advantage against smaller competitors. Oji was also instrumental

in supporting investigations to extend the reach of the paper industry into south-east

Asia for wood supplies and research that allowed Japan’s paper industry to expand

the range of tree species it could exploit for pulpwood.

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2. Activities after World War 2 Dissolution of the Oji monopoly

Oji's dissolution was one of the most significant post-war events to affect

Japan’s paper/board industry, and had a lasting impact on the industry’s structure and

behaviour (Shinomiya 1995). The American occupation government removed what

would have been the industry’s leader and created what appeared to be a more

competitive industrial structure. However, there were also important cooperative

efforts made throughout the industry’s subsequent development, including the way

fibre resources were exploited.

Oji Paper Co was divided into three new companies in 1949 - Tomakomai Seishi

(Tomakomai Paper Manufacturing Co. - but to be renamed Oji Seishi Kougyou in

1952 and Oji Seishi in 1960 (Shinomiya 1995)), Jujo Seishi (Jujo Paper

Manufacturing Co.) and Honshu Seishi (Honshu Paper Manufacturing Co). The

companies did not have equivalent structures - production capacities and access to

fibre resources varied substantially.

The pre-war paper monopolist Oji Paper Co was prevented from directly dominating

post-WW2 paper markets and fibre supply by its dissolution during 1949 into three

separate companies. This occurred as part of the plan by the American occupation

forces to break the control of the zaibatsu over the Japanese economy (Imai and

Uekusa 1978). Oji became a target because of its control over pre-war paper

production, its strong links to Mitsui Bussan, one of the strongest zaibatsu groupings

in Japan, and the fact that its president, Fujiwara Ginjiro, had been such a powerful

figure in Japan’s war-time government (Pardy 1982, Roberts 1989).

The Oji ‘three’ - production capacities and fibre resources

Tomakomai controlled the old Oji newsprint mill at Tomakomai on Hokkaido

and produced newsprint; Jujo had seven mills spread around Japan and concentrated

on printing paper production; and, Honshu produced high quality papers and

paperboard at seven mills in the central part of Honshu. Other companies (such as

Kanzaki and Kita Nippon) took over various old Oji mills - eg Kanzaki Paper took

over the mill at Kanzaki that had been destroyed in the war and rebuilt - while other

affiliated companies, such as Nippon Pulp, Sanyo Pulp and Tohoku Shinkou Pulp,

became independent. A number of paper companies were operating after the war,

but even after the break up of the former Oji Paper, they were still overshadowed by

the productive capacities of Tomakomai, Jujo and Honshu. As proportions of

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Japan’s total paper and paperboard production in 1949, Tomakomai had 17%; Jujo,

16%; Honshu, 9%; Hokuetsu, 6%; Mitsubishi, 3%; and Daishowa, 3% (Shinomiya

1995).

The 84,000 hectares of forests and plantations owned by the pre-war Oji Paper

Co. were divided between the 3 new companies, based on the levels of wood use of

the three companies and the regions where the wood was located. Tomakomai Paper

acquired about 65,000 ha, all in Hokkaido; Jujo Paper obtained about 13,500 ha in

Hokkaido and about 3,500 ha in the islands of Honshu and Kyushu; while Honshu

Paper was left with a mere 2,000 ha in Honshu. In 1946, the total area of forests and

plantations owned by pulp and paper companies in Japan was 98,000 ha but had risen

to 137,000 ha by 1950 (Ooshima 1991). Thus, at a time of limited wood availability,

Oji Paper (then Tomakomai Paper) was in a relatively strong position, with control

over the larger part of wood resources owned by pulp and paper companies.

Oji and the concentration of control over production and resources The lingering influence of the pre-war Oji The influence of the old Oji Paper continued on after its dissolution, so that the three

new companies were collectively known as the ‘Oji Three’. They and eight other

closely related companies were known as ‘the Oji group’. In the mid-1950s, the ‘Oji

Three’ produced 42.7% of Japan’s total paper production, 60% of its newsprint, 43%

of its printing paper and 40% of light packaging paper. The ‘Oji group’ produced

52.5% of Japan’s total machine-made paper output. The dominance of the three was

not seen as “particularly strange in view of the position of the defunct Oji Paper

konzern before the war ... (and they) have again come to wield power with the exit

of the Occupation regime” (Oriental 1955)(p.416)(sic). Much of the activity that

concentrated control over resource use, production and product distribution from this

time - take-overs and cooperative agreements - was centred on Oji Paper.

In 1964, members of the Oji group of companies began to meet informally to

strengthen their “general business coordination” over issues such as pulpwood

supply, equipment investment, research, production and sales. These meetings

apparently began with just Oji and Kokusaku Pulp and were first held at Oji’s villa in

Tokiwa and became known as ‘Tokiwakai’ (the Tokiwa committee). The Tokiwakai

expanded to include other members of the group - Jujo, Honshu, Kanzaki, Sanyo,

Kitanippon Paper, Nippon Pulp and Tohoku Pulp (JP&P 1966b, 1969d). Around this

time, Oji and Kokusaku were cooperating to rationalise wood purchases and product

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sales in Hokkaido, while Honshu and a non-Oji group company, Hokuetsu, had

cross-shareholdings (JP&P 1967a). One observer considered that an important

committee objective was probably to counter the effect of Daishowa Paper Co.,

which had become a vigorous competitor (JP&P 1966b, 1969d).

The attempt to recreate the pre-war Oji The attempted merger by Oji, Jujo and Honshu paper companies in early 1968

illustrated the importance of control over resource supply and production in the post-

war industry. This was regarded as a reference point for the restructuring of the

paper industry, as it was followed by a string of regroupings, cooperative ventures

and mergers (JP&P 1971a).

The main reason given for the merger was the need to prepare for greater

competition with foreign capital and competition that were expected to enter the

Japanese paper industry and market because of capital liberalisation. Narita (1980)

also views the proposal in the context of these kinds of pressures. It was said the

merger would give the new company competitive strengths through greater

economies of scale, rationalised production and increased market share. It may also

have been part of the group’s response to Daishowa’s growing strength. However,

Daishowa was reported as having supported the merger because it expected greater

market and price stability and better profits (Sugaya 1968, Oriental 1969)

At the time the share of total paper and paperboard production held by the 3

companies was 24.6%. However, the proposed merger would have given the new

company 37.5% of the paper market and 10% of the paperboard market, although it

would control 60% of the newsprint market, 41.4% of the printing paper market and

36.1% of the tissue market. These companies’ distribution networks were well

organised and given much of the credit for providing them with such high market

shares . The nearest rival would have then been Daishowa with a mere 8.2% total

market share (Sugaya 1968, Oriental 1969).

The merger application to the Fair Trade Commission was supported by the

Japan Pulp and Paper Association (Oriental 1969) and MITI (JP&P 1968c).

Although MITI recognised the possibility of problems with the Anti-Monopoly law,

it supported the merger because it argued that products would be supplied at

competitive international prices that would prevent the abuse of market concentration

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and benefit consumers. It also considered that the larger company would better be

able to develop foreign pulpwood resources (JP&P 1968c).

The companies eventually withdrew the application because they learnt of the

FTC’s opposition to the merger, but they also “clarified their intention to work for

the merger again in the future and to conclude business tie-up arrangements in

preparation” (Oriental 1969)(p.18). Thus, not only was the merger argued to be

important to help maintain fibre flows through Japanese companies to the paper-

consuming public, but also it was supposed to be important for generating access to

new resources. The complete legitimacy of all the arguments put to the FTC cannot

be determined.

The FTC did not release a formal decision on the application. However, the

Japan Pulp and Paper journal published what it says it surmised would have been

grounds for rejecting the application. They included: high levels of production in

particular market shares that would be even higher if associate companies were

included; sector control could have been strengthened by strong distribution

networks; the market share of the nearest rival was too small to prevent

monopolisation; import competition was small and likely to remain so; the merger

was not necessary to raise capital for foreign resource development; and, end-users

were too weak to negotiate with such a strong company (JP&P 1968g).

Group cooperation intensifies During the late-1960s and 1970s, the three companies acted on their stated intention

for greater business collaboration. Oji initiated a variety of ‘business tie-ups’

through companies in and outside the ‘Oji group’ and provided assistance to a variety

of companies. This helped stabilise the nation’s paper/board production and also

strengthened and extended Oji's potential influence within the industry. The

objectives of some of these links were reported as providing security of fibre supply

and protection of fibre flows. However, because the Anti-Monopoly Law prevented

Oji group companies from acting as strongly as Oji wished in relation to paper sales,

the companies concentrated on reducing pulpwood supply costs both in Japan and

overseas. Domestically, this included joint purchases of pulpwood and exchange of

pulpwood to reduce transportation costs, as well as strengthening of links to other

closely-related companies. For foreign supplies, it meant trying to jointly purchase

logs and chips, and establish joint resource developments and rationalisation of log

sales as well as chip carriers and port use. It was expected that this would help the

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develop leadership in foreign resource projects without “unreasonably keen

competition” (JP&P 1969d)(p.20).

For example, in 1969, Oji began cooperating with Kitanippon Paper on

pulpwood collection and product sales (JP&P 1969d), while Oji, Kanzaki, Kokusaku

and Kitanippon agreed to cooperate on the production and sales of fine paper because

they controlled 30-40% of the production of fine paper, coated paper and newsprint.

This was seen as a way of providing some market stability and countering expected

greater foreign competition (JP&P 1969b). Oji also acted as a guarantor for Kanzaki

in its purchase of pulp and timber from the USA (JP&P 1969f), supported the

establishment of a new pulpmill on Hokkaido by Kokusaku - which became the first

step in the plan of Sanyo-Kokusaku for a giant coastal integrated pulp and paper mill

(JP&P 1970f). In 1970, Oji took over Kitanippon so increasing its share of the

printing and wrapping paper markets to 12.5% and 20% respectively (JP&P 1970h).

Also, in 1969 Oji and Mitsubishi Petrochemical Co agreed to establish a new

research company to develop a synthetic paper that could compete with the

traditional fibre-based paper (JP&P 1969e).

At the beginning of the 1970s, Chuetsu Paper, which was independent of Oji,

almost became bankrupt because of poor management and depressed paper demand,

so the company's banks asked Oji to intervene (JP&P 1972a). Oji rescued Chuetsu

and coordinated its reorganisation and rationalisation of production in conjunction

with its own policies on raw materials and product sales (JP&P 1971c). This

culminated in a ‘business tie-up’ for the procurement of raw materials, production

and sales (JP&P 1972g), which extended Oji’s influence beyond its ‘group’.

The high cost of domestic fibre resources was also a factor in Oji, Toyo Pulp and

Tokai Pulp agreeing to cooperate over the production and distribution of low value-

added kraft paper, as there was fear about the impact of imported products. Their

agreement was aimed at limiting competition and rationalising distribution systems

through customer exchange (JP&P 1972f). However, because their combined market

share was more than 60%, it was expected the FTC might intervene (JP&P 1973a).

In 1972, Sanyo Pulp and Kokusaku Pulp, which were the fifth and seventh largest

companies respectively, merged because of poor business conditions that had

reduced their profitability. The merger was expected to increase their efficiency of

wood use and strengthen their product range. Oji was the second largest shareholder

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of Kokusaku at the time, but was also assisting Chuetsu and Alaska Pulp, so

Kokusaku chose to merge with Sanyo (JP&P 1971a). Alaska Pulp had accumulated

a massive loss by the early-1970s, and Oji recommended reducing its capital and

establishing a bleached kraft pulpmill (JP&P 1971b).

In 1972, when facing the end of an anti-depression cartel in the containerboard

industry, Honshu - a member of the Oji group - made an agreement with the third

largest paperboard maker, Settsu, to cooperate on the sale paperboard products

(JP&P 1972d). It made a similar agreement with Daishowa, which was apparently

not the first such agreement between the two companies (JP&P 1972f). In 1973,

Honshu and Fukuoka Paper agreed to cooperate in the area of corrugated containers

over raw material purchase and product sales (JP&P 1973g). Jujo and Nippon

Kakoh Seishi (NKS) agreed to cooperate over raw material purchase as well as

product sales and development. Jujo was NKS’s fifth largest shareholder at the time

and was asked by NKS for help due to low demand and overspending (JP&P 1972c).

In 1973, the control over Japan’s paper production by the 5 companies in the old

Oji group was: newsprint - 56.7%; wrapping paper - 27.6%; printing paper - 44%;

and, light note paper - 41.7%. To establish this level of concentration and expand the

group's market share for each of the main products, Oji developed business tie-ups

with middle-sized companies and/or brought companies into the group. Also, it

moved into the paper processing sector, strengthened the keiretsu and promoted the

above production organisation. The five Oji group companies, particularly Oji, Jujo

and Honshu, formed and developed strongly layered relationships through capital

links (i.e. business tie-ups to individual medium-scale companies and business tie-

ups between the five companies that formed the ‘keiretsu’) and in this way company

restructuring advanced (Narita 1980).

One of the most important business agreements occurred in 1981 between the

four main members of the Oji group - Oji, Honshu, Kanzaki and Jujo. They

established a joint venture to purchase raw materials and included pooling the four

companies’ research-and-development activities. Through the formation of a liaison

group and specialist councils to organise cooperation, the companies achieved

benefits of a merger without actually merging - which would have struck legal

obstacles (Grossman 1991). Also in the early-1980s, Oji was also directly involved

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with banks and MITI in rescuing the kraft paper maker Toyo Pulp which had failed

to respond to changing market conditions (JP&P 1981e)

The greater independence of Jujo from the Oji group was shown in 1993 when it

took over Sangyo-Kokusaku to form Nippon Paper Industries, but in the same year

the Fair Trade Commission forced the presidents of Oji, Honshu, Kanzaki and

Nippon Paper to stop their pre-WW2 tradition of meeting monthly because it argued

that the companies must be seen to be acting properly while the industry was in a

period of major restructuring (TNW 1993).

In 1996, New Oji merged with its group member, Honshu Paper, taking the

name Oji Paper (PPI 1996b, TNW 1996a). Reasons given for the merger included a

greater ability to compete in a deregulated global market with lower prices, and to

rapidly develop necessary raw materials. The then president of New Oji, Okuni

Masahiko, said: “We hope to aggressively promote reforestation overseas. To

shoulder the cost, we need to expand the size of our company” (Ikenaga 1996); and,

"I considered it vital to revise (plantation management) capabilities by tying up with

Honshu, a pioneer in that sector" (TNW 1996a).

Recent major mergers

Later in 1993, Oji Paper merged with Kanzaki Paper, a member of its own

group, to form New Oji, which became Japan’s largest paper maker in terms of

production, whereas Nippon Paper led in terms of turnover. The companies’ stated

reasons for this included: poor economic conditions; excess capacity; price drops;

and an expectation of greater international competition (AP&P 1993b, PPI 1993c).

Company pride may also have been important for Oji in this merger (Bayliss 1993),

but it was said to have quickly provided substantial cost savings (Shima 1996a).

Oji lost its status as Japan’s largest papermaker when Nippon Paper Industries

and Daishowa Paper merged in 2001 (Nippon 2000b, 2000c). More information on

this and other mergers is contained in Appendix 5.6.

Overview With the dissolution of the pre-war Oji monopoly, the new Oji Paper Co worked with

Jujo Paper, Honshu Paper and other companies with which it had shared interests to

secure control over wood resources and reduce fibre costs. This probably helped it

compete against major competitors, such as Daishowa, and secure its position against

the threat of greater imports. As its economic, capital and managerial strengths

502

increased, it was called on to assist other companies in financial difficulties. This

helped stabilise fibre flows, maintain companies that might have otherwise closed

and expanded its influence. Recent mergers increased its control over production

and markets while providing potential economies of scale and capital strength for use

at the international level, particularly in development and exploitation of fibre

resources. Many of Oji’s historical cooperative links with Jujo have broken down

under the industry’s changing competitive pressures.

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504

Appendix 5.6: Mergers and acquisitions in Japan’s paper/board industry since the mid-1960s

In 1965, Nippon Kakoh Seishi took over Takahagi Pulp and Daiichi Plastic, and

Mitsubishi Paper took over Shirakawa Pulp in 1966. In 1968, Jujo Paper took over

Tohoku Pulp, and Senju Paper took over Kansai Paper Industries in 1969. In 1970,

Oji Seishi took over Kitanippon Paper (JP&P 1965a), and formed an alliance with

Chuetsu Pulp, while in 1971 Abekawa Kogyo took over Sano Paper to form

Abekawa Paper and became part of the Oji group (Narita 1980, JapanA 2000).

In 1972 Sanyo Pulp, which began as a producer of dissolving pulp but turned to

paper production when the chemical fibre industry stagnated (Maruyama 1965),

merged with Kokusaku Pulp. They were fifth and seventh respectively in the

industry, but the merger was a response to the depressed business conditions that had

impacted on the industry's profits. They produced similar paper products, and the

amalgamation provided a strong network of factories and technological skills

throughout the nation. This was expected to be able to help avoid wastage of wood

resources and allow production of a range of products from paper to chemical

products. Oji Paper was said to be an influence in this amalgamation (JP&P 1971a).

The entry of US companies into the tissue market was the reason that MITI

classified the household paper sector as in need of modernisation. In the early 1970s,

the Shizuoka group of 66 tissue makers who produced 42% of Japan’s sheet and roll

toilet paper released a 5-year plan for rationalisations, mergers, business groupings

and a new waste paper pulpmill to reduce costs (JP&P 1973p).

In 1974, Oji became the largest shareholder of Chuetsu so bringing it into the Oji

group. This increased the group’s share of packaging and newsprint markets and

gave Oji a stronger lever in the packaging paper sector. It then merged Tohoku

Packaging and Higashi Nippon Resin (which were packaging companies with forest

and public wood supply that had been bought into the Oji group in 1970), and in the

same year formed Oji Paper Processing through a merger of Kasugai Packaging and

Kasugai Paper Industries, so moving into the paper processing sector and unifying its

companies (Narita 1980). This association also assisted later expansions by Chuetsu

(Fujiwara 1997a, 1998).

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In 1978, Oji Paper took over Nippon Pulp (JP&P 1978a, 1978c), and two

member of the Honshu group of companies, Teshiogawa Paper and Kitagami Paper,

merged to form Hokuyo Paper (JP&P 1978a).

In 1983, Jujo Paperboard merged with Senju Paperboard - both were members of

the Jujo group - to form Japan's largest paperboard company. Honshu Paper merged

with Fukuoka Paper and Toshin Paper to become the 5th largest company in terms of

sales. Honshu Danboru (Japan’s second largest corrugated case producer) merged

with Saga Paperboard (JP&P 1983c).

In 1983, Taio Paper (now Daio Paper) began a rescue plan for Nagoya Pulp,

which was on the brink of bankruptcy. It had purchased the company from Marubeni

who owned 90% of its shares. Nagoya Pulp provided Taio with a mill in Tokaido

where it had none. Taio planned to install a new paper line to increase it use of its

own pulp, but this was opposed by the presidents of 16 other paper companies, so

that a proposed capacity cut by the industry could be made by cooperatively by all

the companies (JP&P 1983b).

Mitsubishi Paper Mills, Mitsubishi Corporation and Mitsubishi Kasei purchased

50% of Kohjin Co, which ceased trading in 1985 with huge debts (Anon 1990c).

Rengo, Japan’s largest corrugated container company, purchased shares in Tohoku

Paper and Takasaki Paper in 1985, while in 1986, Honshu Paper merged with

Honshu Container Co to create the second largest company after Oji in terms of

sales. The objective of both mergers was to stabilise business operations (JP&P

1985g, 1986b). In 1989, Oji Paper and Toyo Pulp merged (JP&P 1988f, JapanA

2000).

There were a variety of important mergers during the 1990s. Jujo and Mitsui

had been financially supporting Tohoku Paper for many years, and in 1992 Jujo

bought Mitsui’s 35% shareholding in Tohoku to give it 65% (JP&P 1992c).

In early 1993, Jujo Paper Co and Sanyo-Kokusaku Pulp Co (then Japan’s third

and fifth largest paper makers respectively) merged to form Nippon Paper Industries,

Japan’s largest and the world’s sixth largest paper company (Fukida 1992, Chang

1995). The reasons given for this merger included: the economic downturn in the

early 1990s which reduced their respective 1991 profits by 52% and 63%; concern

over loosening of government regulations on prices and output that had guaranteed a

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certain level of profitability; the desire for a larger company with greater

productivity, a higher technological expertise and a broader business base; greater

strength in price negotiations; and creation of an industry guardian that could

influence the industry’s structure and instability. Its then president said that Nippon

sought “further globalisation, especially in the area where higher growth rate of

paper demand is expected in order to become one of the world’s leading enterprise

with a truly global scale” (sic) (Kobayashi 1995b).

A notable feature of the merger was that the two companies were from different

keiretsu, but the new company was said to be non-aligned (Fukida 1992, Kobayashi

1995a). MITI welcomed the amalgamation, which it considered would help reduce

excess competition and boost the international competitiveness of the whole industry

(DY 1992b). Some parts of the industry expected that the new company would

provide industry leadership (Fukida 1992).

Later in 1993, Oji Paper merged with Kanzaki Paper, a member of its own

group, to form New Oji (AP&P 1993b, Bayliss 1993, PPI 1993c), and in 1996, New

Oji merged with its group member, Honshu Paper, to form Oji Paper, and so secured

its status as Japan’s largest paper producer (PPI 1996b) (TNW 1996a).

In 1996, the two tissue-making subsidiaries of Nippon Paper, Sanyo-Scott and

Jujo Kimberly, merged to form Crecia, Japan’s largest manufacturer of sanitary

paper products (PPI 1996a). Following this in 1997, Daio Paper bought the tissue

maker Korei Paper (Fujiwara 1997b).

In 1997, Japan Paper Industry Co and Jujo Paperboard Co, both subsidiaries of

Nippon Paper, merged to form the second largest paperboard manufacturer (TNW

1997a). This was followed by the merger of Sanko Paper and Takasaki Paper in

1999 to form Takasaki-Sanko with major shareholders of Mitsui (13.7%), Oji group

companies (23.8%) and Itochu group companies. (12.3%) (AP&P 1999f).

The location of fibre seems to have been an important influence on the Takasaki-

Sanko merger, as the new company’s mills are close to the main areas of waste

paper/board production (AP&P 1999f). However, Rengo’s 1999 take over of Settsu,

another large paperboard producer, made it Japan’s largest paperboard company and

gave it over 30% of the recycled corrugating medium market. This created a

problem for the Fair Trade Commission as to whether it would enforce legislation

507

that prohibits a market share greater than 25% or accept arguments that the merger is

necessary for international competitiveness (AP&P 1998j).

In 2000, Nippon Paper and Daishowa announced their intention to merge by

creating a new holding company under which they would operate. The companies

expected to financial benefits totalling ¥50 billion per year in a variety of areas,

including the purchase of raw materials (Nippon 2000b, 2000c). The new company

is the largest in Japan and the decision appears to follow several years of preparation

(see Chapter 9). Daio had been quietly purchasing Daishowa shares and in 1998

owned 9.75% making it the company’s largest shareholder. This fuelled speculation

of a take-over by Daio (AP&P 1998k), but in fact was part of a strategy to stop the

merger (PBR 2000b).

Later in 2000 and probably in response to the Nippon-Daishowa merger,

Mitsubishi Paper and Hokuetsu Paper exchanged shares to form a business alliance

giving them 9% of Japan’s paper production (TAPPI 2000). However, integral to

future mergers will be the application of Japan’s anti-monopoly legislation. In 1999,

Oji felt that the Fair Trade Commission would relax the 25% market share limit

(Kenny 1999a).

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Appendix 5.7: Japan’s general trading companies and their involvement in the Japanese paper/board industry

Japan’s general trading companies (GTCs - in Japanese ‘sogo shosha’) work with

Japan’s pulp, paper and paperboard companies in many ways and so are relevant to

several chapters of this thesis. This appendix provides background information on

the GTCs - their roles and methods of operation, their relationship with the nation’s

pulp and paper industry, and the interaction between their activities and impact on

the natural environment and resource use.

1. The roles and early history of GTCs Japan’s general trading companies are a small group of large and powerful trading

companies. They are distinguished from the nation’s trading companies and

domestic wholesalers by: their size; their domestic and foreign operations; their

provision of commercial and indirect financing services; and their position as a key

component of groups of large associated companies known generally as ‘keiretsu’

(affiliates (Flath 1996)) (Nagahide 1978, Herbig 1995).

The GTCs are complex. They have a variety of business goals, provide a variety

of services and sell a variety of products. Yoshino and Lifson (1986) studied the

operations of GTCs in detail and argue that they cannot be defined precisely by these

goals and activities because they change over time. However, "(t)he primary

function of the sogo shosha is trading - that is matching buyers and sellers of diverse

products" (p.37). Yoshino and Lifson (1986) consider that GTCs provide

coordination - “a system of governance” (p.6) - over stages in the production and

distribution of goods and services to reduce risk and ensure the trade occurs. Their

history “is one of continuing adjustment and adaptation to new opportunities” (p.36).

The changing operations of GTCs in Japanese society are intimately bound up

with their history. They originated more than 300 years ago with samurai families

who became wealthy through their trading activities while Japan was virtually closed

to foreign trade. At the time of the Meiji Restoration, foreign trade was forced on

Japan by mercantile policies of colonising Western nations, while the new imperial

government used foreign trade to help fund Japan’s modernisation and

industrialisation, and pay for desired weapons, machinery, technology and advisers.

The new government gave the job of expanding foreign trade and introducing foreign

industry to the family-based trading conglomerates. This avoided relying on foreign

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firms who dominated Japan’s foreign trade but were seen as not being interested in

Japan’s national goals and interests. These conglomerates took over many

government commercial activities, financed private companies, promoted domestic

and foreign markets for the commodities produced by these companies, and so came

to control much industrial capital (Sugaya 1964b, Yoshino and Lifson 1986, Roberts

1989, van Gelder 1992).

During the first part of the 20th century, the conglomerates evolved into

‘zaibatsu’ (financial combines (Masuda 1996)) - groups of large diverse companies,

including banks, insurance companies, trading companies and manufacturing

companies, controlled by family-owned holding companies. The holding companies

were linked to subsidiaries and associates by shareholdings, interlocking directors,

personnel transfers, management assistance and bank credit; they made the main

operating decisions, and the structure allowed the introduction of economies of scale

(Yoshino and Lifson 1986).

General trading companies were central to the zaibatsu as they provided

information and leadership to other subsidiaries. Their activities ranged from

purchasing raw materials, equipment and new technologies to financing purchases,

organising transport and exporting manufactured goods. Their power increased

because of their monopolistic control over foreign trade, and with the backing of

their zaibatsu they were able to start new industrial ventures to support Japan’s

developing industrial economy and expanding domestic markets (Yoshino and

Lifson 1986). Thus, they originated as part of the response to Japan’s need for large-

scale trading organisations and evolved into a “facilitator and even leader of the

industrialization process” (Yoshino and Lifson 1986)(p. 23). They were close to

Japan’s army and profited from the colonisation and integration into Japan’s

economy of Manchuria, Korea and other parts of north-east Asia (Roberts 1989, van

Gelder 1992).

2. Post-WW2 functions of GTCs The dissolution of some ‘zaibatsu’ by the American occupation forces immediately

following World War 2 meant the GTCs’ role in raw material importing declined.

They regained it with the greater economic activity stimulated by the Korean War

and the government’s policy of the 1950s and 1960s to expand domestic heavy and

manufacturing industries. GTCs diversified their activities, and their involvement in

domestic and foreign marketing and distribution helped speed Japan’s post-war

510

economic development. Manufacturers could exploit the GTCs’ economies of scale,

obtain capital, and concentrate on capacity expansion, while being assured of secure

raw material supplies and where necessary organisation of further processing and

export markets. However, these activities led again to the formation of cooperative

business groups (‘keiretsu’) linked by shareholdings and common directors.

Cooperation helped reduce risk, while the banks and GTCs provided central

leadership and coordination. Two kinds of groupings developed - those based on the

old ‘zaibatsu’ and those centred on newer banks. Competition between the groups

became intense (Nagahide 1978, Yoshino and Lifson 1986, van Gelder 1992).

The ‘oil crisis’ of the early-1970s forced changes to the Japanese economy and

the operation of the GTCs. The products and industries with which they had their

traditional strengths had matured and new industries were developing. The GTCs

restructured in part by expanding their role as suppliers of finance to rescue clients

and affiliates, and in part by developing new business opportunities. Restructuring

activities included: rationalisation and organisational adaptation; new investments in

major industries in key countries; developing new products; increasing third country

trade; involvement in construction projects; introducing countertrade; and providing

financial services (Yoshino and Lifson 1986).

The GTCs are now transnational organisations with networks of affiliates and

company groups involved in: developing and supplying raw materials and energy

resources; manufacturing and processing; leasing, sale and management of real

estate; sale and leasing of ships, aircraft, electronic and communication technologies;

import and export of machinery, manufactured goods, food and chemicals; as well as

GTCs were again challenged from the mid-1980s by the increasing value of the

yen, the development of global computer networks and the greater ability of some

customers to gather their own information. They again initiated major restructuring

programs. They reorganised their internal information systems, invested heavily in

the communication industry, offered new services - particularly related to finance -

and began to put more emphasis on new materials, high-technology and bio-

technology industries. They also shifted important core functions overseas in

response to changing international markets. However, at this time at least, they were

still reliant on the trade in commodities for about 60% of their gross income

(Yoshino and Lifson 1986, JP&P 1988e, Ubukata 1990).

511

warehousing and transportation. They: act as intermediaries between buyers and

sellers; provide market information from their global networks (which were

considered by some to be more substantial than those of Japan’s Ministry of Foreign

Affairs (JP&P 1979b)); organise finance for projects, often using low interest funds

from affiliated banks; coordinate transportation; and, act as partners in development

of new business opportunities and trade flows. Yoshino and Lifson (1986)(p.38) see

them particularly as coordinators of product systems - "identifiable flows of goods,

services, and resources among technologically separable units that transform raw

materials into finished products”. They use their expertise and abilities to absorb

financial and other risk and so shape and support the product system. They must

manage these complex systems better than the customer could on its own, and must

alway be looking for new ways of adding value to maintain and expand business

(Yoshino and Lifson 1986). Also, they must ensure that their fees do not raise the

price of the product to the extent that potential demand is adversely influenced. For

this reason, they usually charge low interest rates or small commissions for managing

trade flows and rely on business and product volume to provide sufficient income.

The level of profit of the major GTCs is typically extremely low (Herbig 1995).

According to Yoshino and Lifson (1986)(p.60), "(t)he cornerstone of the

(GTCs’) strategy is the search for volume growth" for which it uses two techniques -

maintaining and expanding its influence within existing product systems, and

creating new product systems. GTCs can create new product systems “through

incremental modification of existing industrial and commercial practices” (p.66), by

simply identifying the opportunity and bringing relevant parties together. "In

practice, this means the (GTCs) must always be searching for new business

opportunities to add to its existing array of services to specific clients. It also means

that the (GTCs) must constantly strive to identify the emerging points of greatest

leverage over a particular product system and then undertake activities, such as

research or investment, that give them influence or control over those points" (p.69).

Thus, business is used to generate more business, and GTCs need to maintain a

substantial degree of control. This, and their dependency on volume, are relevant to

both the GTCs involvement in Japan’s pulp, paper and paperboard industry and the

environmental impact of their activities.

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3. GTCs and the paper/board industry There are 6 leading GTCs, known as the ‘Big Six’ - Itochu (formerly C. Itoh), Mitsui

and Co, Sumitomo Corporation, Marubeni Corporation, Mitsubishi Corporation, and

Nissho Iwai Corporation. Other important companies are Kanematsu-Gosho

Corporation, Toyo Menka Kaisha Ltd. and Nichimen Corporation. They are each

part of a large ‘keiretsu’ and some are linked to more than one. These keiretsu either

have a bank at their centre or are based on the GTC itself (Ubukata 1990, van Gelder

1992). These GTCs are all involved in the pulp and paper trade to different extents

depending on their history, but paper-related income is a relatively small part of their

total income (JP&P 1990g). The development of their involvement in Japan’s pulp,

paper and paperboard industry reflects the process of business expansion via

exploitation of ‘product systems’ within the context of Japan’s changing economy, as

described by Yoshino and Lifson (1986).

The first GTC involved directly with the paper industry was Ataka Corporation,

which began importing pulp in the early 1900s. However, it was not until the high

economic growth in the 1950s when the GTCs penetrated the industry substantially

by funding financially-stretched paperboard companies and gaining rights to sell

their products. This provision of funds was important for increasing manufacturers’

productivity and competitiveness. By the early-1960s, the GTCs were providing

considerable financial assistance to pulp and paper companies for the construction of

new mills, in turn receiving the rights to supply raw materials and market products,

in some cases becoming sole agents. Some GTCs were already handling products

and machinery used in the industry - such as paper machines (JP&P 1964b) - and

the industry’s high growth rate was attractive because they anticipated greater

involvement in resource supply and international trade in finished products. At this

time, nearly all imported pulp was handled by GTCs, so they developed strong links

with foreign pulp manufacturers (JP&P 1966b). As paper use grew through the

1960s, they increased their foreign activities, and used their global information

networks and organising ability to expand their business. Annual resource supply

contracts became inadequate and more sophisticated methods were needed to secure

fibre resource and maintain stable resource flows. This led to long-term contracts,

import financing and 'the develop-and-import' system which included construction of

chip and pulp mills. They played major roles in negotiating the establishment of

joint ventures for foreign pulp production. By the early-1980s, GTCs were handling

9% of Japan’s paper supply and 28% of its paperboard supply. These were mainly

513

the high volume products used by large industrial consumers, such as containerboard,

newsprint and kraft paper (Sugaya 1964b, JP&P 1978d, 1979b, 1984a, JPA 2000a).

GTCs found it difficult to penetrate Japan’s paper distribution system because of

the strong links between the manufacturers and agents, particularly in the Oji group,

so they concentrated on paperboard over which they had developed influence (JP&P

1979b). However, from the late-1970s, when the competitiveness of domestic papers

declined, the GTCs saw paper imports as a new business opportunity. Their imported

paper competed with domestically-produced paper, and GTCs were accused of being

‘reckless’ and causing ‘market disruption’ (JP&P 1982a). Until this time, paper was

basically imported to cover shortages or to supply speciality papers. However, this

situation changed because imports were cheaper. Most importing activities became

conducted by GTCs, and three kinds of paper imports developed at this time - those

by:

• paper producers to supplement their own shortages;

• large converters to ensure a stable supply or obtain cheaper products, for which

GTCs sometimes acted as intermediaries; and

• GTCs to create new markets through their own distribution channels (JP&P

1980c).

GTCs came to be seen as the key for expanding future paper imports. However,

there was some conflict between their roles in the paper industry. As mill agents, it

was reported that they were reluctant to handle foreign papers that competed with

After the oil shock at the beginning of the 1980s, future paper and paperboard

consumption was expected to be less than previously forecast and raw material

shortages were not predicted, so many foreign resource development and import

projects in which GTCs were involved (such as plantations) were cancelled and long-

term pulp supply contracts were reduced. The GTCs then decided to concentrate on

improving profitability through: expanding off-shore trade; increasing paper imports;

strengthening relationships with paper companies; reducing loans to subsidiary paper

and board companies; and promoting domestic paper sales (JP&P 1984a, 1985e).

Around this time, the GTCs began withdrawing from managing papermills because

this activity was too far outside their expertise (JP&P 1980c, 1986h).

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domestically produced papers, although as all-round paper merchants they wanted to

increase imports. As a result, the imported paper grades that they came to handle

were reported to include those not produced in Japan and those for which agreement

had been reached with competing paper manufacturers (JP&P 1985a). Also,

although paper exports are not large, the GTCs came to compete with mill agents

over export paper sales to south-east Asia (JP&P 1985h).

The major GTCs were important to Japan’s paper companies in organising the

supply of imported woodchips from the mid-1960s. The expansion of paper use

from the mid-1980s meant that they were involved in finding and developing new

pulpwood resources for export to Japan, and they are the intermediaries for most

woodchips imported by Japanese paper companies (PBR 2000a). Increasing paper

use at this time combined with forecasts of high levels of paper consumption,

commercial pressures for secure supplies of higher quality pulpwood and

environmental pressures to limit native forest logging. This generated new

opportunities for GTCs and they became partners in many foreign plantation projects

with Japanese paper and other companies (JPA 2000b). While Japanese paper

companies have developed some of the skills previously supplied by GTCs and the

interests of GTCs and paper companies do not always correspond (Bills 1992), they

have long-term relationships that, amongst other things, help reduce risk and provide

stability of fibre supply in changeable commercial environments. Thus, Whitham

(1992)(p.15) considers the paper companies “are unlikely to jettison the security

afforded by trading companies”.

The major economic changes in the mid-1980s impacted on the GTCs’ activities

in the paper trade. Profit margins on paper and paperboard were lower because of:

increased competition with paper merchants; imports and exports by paper and

paperboard wholesalers; and paper imports by some paper manufacturers. The GTCs

responded by placing more emphasis on: downstream sales promotion by

establishing subsidiary paper merchants; involvement in paper and paperboard

conversion; and increased handling of commodities, including packaging and papers

for home-use (JP&P 1986h).

In the mid-1990s, the perspectives of senior staff within the forestry/paper

products divisions of leading GTCs and paper traders on their future activities

reflected the historically-developed positions and activities of those companies. The

515

competitive nature of their operations, their relationship to Asian paper companies

and markets, and developing opportunities for expansion were important

considerations (AP&P 1995c).

Marubeni’s paper division considered Japanese paper companies as just one

source of fibre supply now that Asian papermakers are comparable to Japanese

companies. Indonesian suppliers were seen as particularly important. The division

thought that it would be preferable for Japan to import more paper and paperboard,

and saw a definite trend towards international division of production with trading

companies playing an important role. It considered that Asian customers will cease to

be Japan's export customers.

Mitsubishi Corporation thought its strength lay in the pulp trade, which is seen

as a commodity for global markets, while paper is a commodity for domestic

markets. It saw its main job in Asia as finding sales for paper made in Asia,

especially to find niche markets for Asian producers to help them survive and grow.

Itochu Corporation’s Forest Products and General Merchandise Division, along

with other trading companies, had been trying to compete with and catch up with

Marubeni, but considered that it had not succeeded. The division felt that it needs to

determine how to survive other than as a supplier of chips and pulp, which is too

limited. It thought that its main territory should be the domestic market and if it gets

involved in a joint venture it should be one that creates new business in the domestic

market.

Thus, the GTCs have been involved at most levels of Japan’s pulp, paper and

paperboard industry. This has been important to restructuring the industry within the

nation’s changing economic circumstances so that it could expand to support

increasing levels of paper and paperboard use. In particular, the GTCs linked the

industry to international fibre markets, as intermediaries in woodchip supply and

through foreign joint ventures as well as pulp and paper imports. The competitive

pressure of some paper imports is important to recent industrial restructurings, and

the attitudes of staff within some GTCs and paper distributors illustrate the trend for

greater industry integration into international markets.

4. GTCs and environmental issues The relevance of GTCs to environmental protection issues is found in several of their

main roles - financier, company shareholder and trade intermediary. The impact of

516

GTCs could be neutral, adverse or beneficial, depending on the activities in which it

is involved. A joint venture in which a GTC is a shareholder will have a

responsibility at least to ensure that relevant government environmental protection

regulations are met. Nevertheless, they were linked to ‘pollution export’ in the

1970s, when Japanese corporations shifted industrial facilities overseas in response

to stricter domestic environmental protection legislation. As a financier or trade

intermediary, their roles in the trade flow and ‘product system’ are not always

directly obvious, but again ensuring an export scheme or investment complies with

all relevant regulations can be part of their role (see Chapter 10). However, they

have been criticised by Japanese non-government organisations for providing loans

to purchase machinery for large-scale dam construction (Bshosha 1997) and

receiving low-interest government loans incorrectly used to build logging roads

(Sayer 1990).

However, factors that are important at a more basic level are the GTCs function

as a provider of low interest loans, the small size of their commissions and their

dependency on products that can be traded in high volume. These factors can

directly influence the structure of the product system so that it is dependent on

environmentally damaging activities as Dauvergne (1997b) illustrates with his study

of Japan’s role in the south east Asian tropical timber trade. Dauvergne argues that

GTCs “drive unsustainable resource extraction. This is not a result of some devious

plan to exploit the South. It is, instead, a natural outgrowth of their economic raison

d’etre. To function as trade intermediaries, (GTCs) must work at low profit margins”

(p.34). Their low interest flexible loans helped establish and maintain the trade by

financing activities at major steps in the wood flow from logging operators in

tropical countries to the industrial wood user in Japan. Thus, they obtained control

over the ‘product system’ and work to keep resource prices and other costs low to

encourage both high levels of wood use in Japan and log output in the suppling

country. These low prices are in turn supported by ignoring environmental and

social costs. He concludes that GTCs “need wasteful consumption to survive”

(p.34).

GTCs also became associated with other environmental problems. However, it

was the development of rainforest conservation protection campaigns in Japan that

directly challenged the GTC’s ‘raison d’etre’, tarnished their domestic public image

and forced them to respond with the establishment of internal ‘Environment

517

Departments’ and preparation of ‘Environment Policies’ (Iioka 1996). The

environmental policies, practices and attitudes of GTCs are discussed in more detail

in Chapter 10.

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Appendix 7.1: Statistics and terminology related to recovered fibre in Japan

In Japan, the main source of statistics concerning the collection and use of used,

waste paper and paperboard as a source of fibre for paper and paperboard

manufacture is the “Koshi saisei sokushin sentaa” (the Paper Recycling Promotion

Center - PRPC) located in Tokyo. Amongst its various roles, this organisation

collects data related to such recovered fibre from a variety of sources, including

government instrumentalities, paper and paperboard manufacturers, and collectors.

Many of the statistics and other related information used in this dissertation were

provided by the PRPC or came from PRPC publications.

1. Terminology for types of recovered fibre • ‘Old newspapers’ include some unsold papers, but about 93% of all Japan's

newspapers are sold through the home delivery system.

• ‘Old magazines’ include magazines sold and disposed of by readers plus unsold

items.

• ‘Old corrugated containers’ are used cardboard boxes.

• ‘Old fine printed papers’ include white woodfree paper printed with black or

coloured ink, shavings of white woodfree paper with some printing and shavings

of unprinted uncoated woodfree paper.

• ‘Other’ papers include: ‘boxboard cuttings’ - wrapping papers around paper rolls

and cuttings of various paperboards from carton box makers; ‘kraft browns’ - off-

cuts and sheets from the manufacture of kraft paper sacks from sack factories, old

sacks, off-cuts from new kraft corrugated containers and old, mainly imported,

kraft corrugated containers; various types of ‘shavings’ - off-cuts and sheets from

printing companies, bookbinders, converters and newspaper printing works; and

‘white manila’ from carton makers (NSK 1993, PRPC 1993, PRPC 2000a).

2. Statistical issues and problems 1. Calculations of recovery and utilisation rates are also made of individual paper

and paperboard categories. However, the time it takes for different products to leave

the mill and return for recycling vary depending on storage times at main stages in

the manufacturing, distribution and collection process. Such periods could be up to 9

months for newspapers and magazines and 10 months for OCC (PRPC 1997b).

Similarly, some paper products, such as books, magazines or office files may be

519

stored in a home or office for several years before being thrown out. Thus, an

unknown portion of the volume of recovered fibre used by a manufacture in one year

was produced in previous years.

2. The application of the method for calculating the recovery rates to some products

produces some anomalies. For example, statistics published in 1993 by the PRPC

(1993) stated that 98% of newspapers was recovered in 1991 and 1992, while

statistics for 2000 (PRPC 2002) indicate that the newspaper recovery rate increased

to 126.9%. This is an extremely high recovery rate for newsprint, and has been

commented on by Oye (1993) as being too high because it also includes advertising

and other pamphlets inserted into newspapers and subsequently thrown out by

consumers with old newspapers. He notes that an allowance of 35% should be made

in ‘old newsprint’ volumes. When this is taken into account, the newspaper recovery

rate in 1992 falls to 63%, while the recovery rate for printing and other papers

(which include advertising leaflets) increases to 42% (PRPC 1992, Oye 1993).

Applying the same rate to the 2000 figure would reduce the newspaper recovery rate

to 92%, and increase the recovery rate for printing and other papers to 44.2%.

However, now it seems appropriate to apply a higher allowance for newspaper

inserts of 40% because of the increased amount of advertising leaflets (PRPC 2000c,

Oye 2001, Oye 2002). The application of these allowances is included in Table A

7.1.

A smaller allowance might need to be applied to the utilisation rates of old

newspapers many years ago to reflect the smaller use of advertising inserts.

However, in the 1960s and early-1970s, ‘old newsprint’ also contained magazines

and wrapping paper (JP&P 1972e).

3. The JPA (2000b) (Table 13. Consumption of Pulp, Wastepaper and Other

Materials) and PRPC (2000a) (Table 6 Trends in the utilization rate & consumption

of fibre stocks for paper or paperboard) states that the proportion of ‘wastepaper &

other fibre’ in ‘paper’ and ‘paperboard’ for 1999 was about 30.8% and about 89.5%

respectively. The JPA (2000b) indicates that these figures come from the Ministry of

International Trade and Industry. However, “Table 12 The estimation rate of

recovered paper consumption for paper production. (Apl. - Sep. 1999)”(sic) in PRPC

(2000a) estimated the ‘recovered fibre’ content of ‘paper’ and ‘paperboard’ for this

period was 28.3% and 96.34% respectively. Such estimates are based on surveys by

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the PRPC (1998b). The inclusion of ‘DIP’ (0.8%) and ‘other fibre’ (0.2%) in the

earlier tables are too small to account for the difference, while the latter table

contains estimates of the consumption of various paperboard grades equivalent to

more than 100% of production in that period.

4. Proportions of recovered fibre utilised in paper and paperboard are based on the

volume of waste paper and paperboard received at the manufacturers’ mills. This

does not represent the actual amount of fibre included in the end-products as some

amount of fibre is lost in the process of converting recovered fibre to useable pulp.

The yield would depend on the kind and quality of the fibre as well as the pulping

process. A pulping and manufacturing process that has a 94% fibre yield will need

about 1.06 times the amount of fibre in the final product (PRPC 2000c).

5. There is no accepted definition for ‘recycled paper’, so no regulations govern the

use of the term (Oye 1994b).

521

Product Collected Collection Collected Collection

Table A 7.1: Japan: Waste paper product collection rates and volumes (1992 and 2000).

Volume Rate Volume Volume (millions tonnes) (as a % of (using (millions tonnes)

manufacture) of 35% and 35% and 40% product corrections (Adjusted using

40% for correction) newsprint) Old newspapers 1992 3.529 98% 63% 2.269

Printing and

Magazines,

White manila,

(40% leaflets) 45.6% 6.522

Kraft browns and

Containers

1992 KB 0.338 48%

2000 KB & OCC 8.560 86.6

Boxboard cuttings

2000 (35% leaflets) 4.812 126.9% 91.9% 3.485 (40% leaflets) 86.9% 3.295

Information papers,

Cards,

Shavings 1992 3.889 32% 42% 5.149 2000 (35% leaflets) 5.005 35% 44.2% 6.331

Old corrugated

1992 OCC 6.140 72%

1992 0.574 18% 2000 0.751 26% TOTAL 1992 14.465 51% 2000 19.128 62% Sources: PRPC (1993), Oye (1993, 2001, 2002).

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Appendix 7.2: Public attitudes to ‘recycled paper’ products in Japan

1. Surveys of attitudes to environmental protection, waste disposal

and recycling It was difficult to both find and access the primary sources of surveys on the attitudes

of Japan's general population to aspects of recycling and the use of recycled papers.

Various surveys and questionnaires on the attitudes of Japanese people to

environmental issues and recycling exist, but are usually only briefly reported in the

media. Because there are probably differences in their data collection methods and

there is no accepted definition of ‘recycled paper’, they may not all be completely

comparable. However, I consider the surveys discussed here provide indicative

expressions of public attitudes in Japan to environmental protection, and in particular

wastepaper recycling and the use of recycled papers.

Generally, most respondents in the results from available surveys say they have

a concern for protection of the natural environment.

However, another survey reported in November 1995 found that 88.3% of older

people would rather change their lifestyles to protect the environment than pay more

for 'eco-goods', as opposed to 58.4% of people in their 20s. Only 10% of each group

would be prepared to do both (Jensen 1995). This indicates that consumption is

more important for many young people than older people, and that many may be

unable to envisage a lifestyle in which consumer goods play a lesser role.

A national survey by Prime Minister's Department in Japan published in early

1995 (DY 1995b), found that 62.9% of respondents felt that protection of the

environment is a major issue and 75% would be prepared to alter their consumption

habits to conserve the environment. This seems to show good potential for the

introduction of conservative consumption patterns that might help reduce the demand

for natural resources and impacts on ecosystem.

Based on these two surveys, one might expect that there would be considerable

sympathy for the purchase and use of 'recycled' papers within the community.

However, cost could be important for limiting the extent to which people are

prepared to use such products.

523

There also appears to be a strong and long-term concern about the garbage

disposal problem throughout Japan. A survey with about 2,000 respondents

conducted by the Kyodo News Service in 1991 (Kyodo 1992) found that 90% of

respondents were either somewhat or greatly concerned about the disposal of waste.

More than 60% had a great interest in recycling and excessive packaging and

throwaway products, and regarded excessive packaging and throwaway products as

'the biggest factor behind the garbage crisis'. However, efforts to avoid excess

packaging were made by only 26.1%, and efforts to avoid the purchase of throwaway

products were made by only 18%. In contrast, 80% of respondents stated that one of

their main activities to reduce the volume of waste was to sort their trash for separate

collection (which includes sorting household garbage for recycling, disposal by

burning and disposal as landfill).

Thus, survey respondents recognised Japan’s garbage disposal problem and had

a clear idea of a primary cause - excess packaging. However, they did not seem to be

able to act to solve it beyond sorting their own garbage after it is produced. Nor

were they able to envisage solutions beyond promoting better recycling of waste.

For some unknown reason, they appeared unable to take personal action to reduce

their own consumption of excess packaging, while there was a limited desire for

industry to act on what was regarded as the key source of the problem.

When asked what they would like to see business and government do to alleviate

the garbage crisis, "Should cooperate in setting up recycling system" appeared in

55.6% of answers, but "Firms should reduce throwaway products" appeared in only

36.1%.

The same survey found that about two-thirds of respondents were receptive to

the suggestion of charging a fee for the collection of certain kinds of waste. The

other third felt that local authorities should continue to collect garbage free of charge.

Similar results were obtained in a survey of 32,000 people conducted by the Ministry

of Health and Welfare during mid-1994 (DY 1995e). This survey found that 47% of

respondents agreed that individual households should pay for garbage disposal, while

37% said that the relevant costs should be covered by taxes. As well though, 57%

said that manufacturers and retailers should carry the cost of disposing of their

products.

524

Thus there appeared to be good support for waste disposal systems that shift the

costs away from local governments onto producers and consumers of the products

that become waste. This would force individuals and firms to take greater personal

responsibility for their economic and lifestyle choices.

Activities of local citizens and experiments in office waste collection expose the

fact that there are strong feelings within sections of Japanese society that could be

used as a foundation to advance the penetration and effectiveness of paper recycling

schemes in the community. One of these is the campaign that developed to recycle

milk cartons. This began in the mid-1980s with a group of housewives trying to

reduce the environmental impact of their daily lives. The campaign spread and

eventually grew into a national organization with sufficient public support to cause

the packaging industry to establish their own "Committee for Milk Cartons and

Environmental Issues" aimed at presenting the industrial perspective on the

relationship between milk cartons and environmental destruction. In 1990, only

2,000 tonnes of milk cartons were recycled, but by 1995 it had grown to 40,000

tonnes (15% of all paper cartons) (Takahashi 1995).

Oye (1994b) also reports on a study conducted in 10 major offices on the

feasibility of collecting office paper for recycling. Not only was 130,000 kilograms

of paper collected in one month, but office workers had happily separated the paper

wastes into three grades prior to collection by the recycling company. Participants in

the study considered recycling important, were happy to follow the necessary

instructions and felt paper recycling made a contribution to conservation of

resources, environmental protection and reduction of garbage.

Although the amount of paper recycled in these two examples is small, when

combined with the apparent enthusiasm of participants, there could be good potential

among the general public for substantially increasing the amount of paper collected

for recycling when there is sufficient motivation.

An older survey found that Japanese citizens had recognised what they

considered to be wasteful uses of paper, and would be happy to consume less.

A report of the Industrial Structure Council (JP&P 1981b) found that in the

early-1980s 68.1% of survey respondents were agreeable to a decrease in paper

consumption, while only 2.5% were happy with the idea of consuming more paper.

525

A wasteful use of paper in some products was also recognised. Sixty five percent of

respondents regarded the use of inserts in newspapers as wasteful, while 52%

thought that wrapping in stores was wasteful. These levels were well above the

levels of wastefulness recognised in office documents, weekly magazines and

comics, which were in the range of 21 - 25%. This survey was conducted well

before the "bubble economy" of the late 1980s, so if these views continued to be held

during that period, then Japan’s greater paper use and waste generation was probably

not welcomed by the majority of Japanese.

2. Surveys of Japanese attitudes to recycled papers There is some information on public attitudes to paper products and the acceptability

of 'recycled' products.

Oye (1994b) reported a survey conducted by the publishing company Shigyo

Times in 1992 that examined the attitudes of 253 of Japan's leading companies to

'recycled paper’. Fifty six percent of respondents said that 'recycled' paper was

inferior to regular paper, but 42% found no difference. Despite the high proportion

of people who regarded the 'recycled' product as inferior, 85% of respondents

admitted buying paper with a recycled content even though it was more expensive.

Thus, at least some people are prepared to pay extra to use 'recycled' paper.

However, other information indicates this attitude may not be widespread.

Statistics show a decrease in the use of waste paper toilet tissue, and Oye

(1994b) laments the fact that an increasing number of consumers (many of whom are

supposedly concerned about recycling and protection of the environment) are not

even prepared to use toilet tissues made of recycled paper. He wonders whether they

are swayed by the cheaper price of virgin pulp products and the advertising

campaigns of those manufacturers. His reasoning would appear to have some factual

basis.

The Seiyu chain of department stores sells it own brand of 'recycled' toilet tissue,

and in 1993, one roll of Seiyu toilet paper cost ¥40, while that made from virgin pulp

cost ¥25 a roll. More than 60% of shoppers at Seiyu purchased toilet paper made

from virgin pulp rather than 'recycled' paper (Fukui 1993).

A survey conducted by a community group in 1993 of 835 people (about 93% of

whom were women) from the city of Kishiwada (KSSK 1993) examined attitudes to

526

toilet tissue. It found that the good image of toilet paper and tissue paper made from

recovered fibre - cheap, good quality and was good for the environment - outweighed

its bad image. However, as criteria for purchasing a particular kind of toilet paper or

tissue paper, being made from recovered fibre was only given by 23% and 13.7% of

respondents respectively. Price was the largest criteria given (31.2% and 32.4%).

Thus, in this survey, although most people thought that using toilet paper and

tissues was good for the environment, and a large group thought that they were

cheap, most people's purchases were based on other reasons and almost a third of

respondents were mostly concerned about price.

However, the results of another survey of 806 people over the age of 15 living in

an urban area of Japan (Hiyoko 1994) indicated that many people who do not use

toilet tissue made of recovered fibre are not concerned what kind of fibre is in toilet

tissue. For these people, price was not an important factor in choosing not to use

such products.

This same survey asked questions about the use of recovered fibre in other

products. It found that between 68% and 76% of people thought that it would be

good if the following products were made from recovered fibre: toilet paper, tissue

paper, textbooks, notebooks, photocopy paper and office paper, postcards, calendars

and paper towels. Thus, there appears to be strong support for the use of products

made primarily of recovered fibre, and a majority felt that a label stating the recycled

content should be attached so they can be distinguished.

The three areas considered most important for increasing the use of recovered

fibre were:

• newspapers - even if the quality declines;

• photocopy paper by companies; and

• government office documents

Then followed:

• textbooks; and

• books and magazines - even if the quality declines.

527

Thus, there would appear to be some support for increasing the amount of

recovered fibre in those products (printing and writing papers and newsprint) which

have the greatest technical potential for more recovered fibre.

However, of the conditions necessary to make recycled products more

acceptable, lowering their price to below that of 100% virgin pulp products was

considered to be the most important (62.4%). Improving their quality and

distribution were seen as less important (43.9% and 44.7%), as was improving their

image (27.3%).

When asked to rank what action is necessary to increase the recovered fibre

content of newsprint, "Cooperation of the consumer - separation of paper grades" and

"Action by government - wastepaper content regulations and assistance to waste

paper collectors" were the most important.

While cooperation of the paper consumer is essential, as seen above, even when

they cooperate to provide increased volumes of waste paper for collection, if there is

not the demand for that fibre, the collection system itself can be disrupted. As such,

the second important point "Action by government" must be regarded as important,

as this could be loosely interpreted to indicate potential community support for:

• the introduction of clear regulative measures to require manufacturers to use

more recovered fibre; and

• the use of financial assistance, incentives and taxes to allow waste paper

collection to function effectively.

These latter surveys show that even though there might be good theoretical

community support for recycled paper products, when it comes to the choice of even

parting with a few more yen for something as relatively cheap as toilet paper, many

people were not prepared to buy the 'recycled' product.

The higher cost of recycled products must be regarded as a primary obstacle to

be overcome if the consumer demand for recycled products is to grow in a market

where a choice is provided between 'recycled' paper products and those produced

from ‘new fibre’ pulp. However, in terms of product quality, the provision of choice

between ‘new fibre’ products and recycled products for consumers may not be

important because it has been shown that the industry could use all available waste

528

paper and produce products of current quality (Nakajima 1995). If maintaining this

choice is not politically important, then government options include amending

relevant laws to:

• require the greater use of recovered fibre in paper manufacture;

• alter the economics of the paper production process through subsidies and taxes

to encourage the use of greater volumes of waste paper in place of virgin fibre;

and/or

• increase the costs of waste disposal for individual consumers and corporate users

of paper products to encourage lower paper use and a shift in the flow of fibre

from the waste stream into recycling.

529

530

Appendix 8.1: Diversification of foreign temperate hardwood chip supplies in the late-1980s

Claro and Wilson (1996)(p.190) contend that conservation campaigns against

the expanding export of woodchips from Australia’s native forests “forced the

Australian government to set export limits in 1987, with the result that the Australian

share in the world market has decreased dramatically since the late 1980s (Japan

Pulp and Paper, 1987). This sudden ‘gap’ in Japanese supplies provides one of the

major explanations for Chile’s rapid establishment as one of the major wood chip

exporters in the world (along with political changes within Chile itself which

facilitated the opening of the economy to the world market …). … Thus, the

enforcement of environmental standards in Australia forced Japan to seek alternative

sources in countries with lower environmental standards”.

Industry commentators make similar claims. Brian Stafford, (Ausnewz

1998c)(p.8) contends that “green activity badly damaged the pulpwood trade and led

Japan to massively diversify away from Australia...”. He bases this claim on

personal communications and interviews with Japanese wood buyers. He says that

they saw diversification as the only way of protecting “enormous capital

expenditures” in Japan (Stafford 2001a).

Japan’s leading papermakers diversified their supply of hardwood chips away from

Australia to Chile, seUSA and South Africa from the late-1980s. Several

commentators have argued that community pressure for the conservation of

Australia’s native forests was the major cause of this diversification. This appendix

examines the features influencing this shift to determine its major causes.

Claro and Wilson (1996) rely on only one reference from a Japanese paper

industry journal (JP&P 1989g) to justify the argument that the shift was the result of

conservation campaigns. However, the reference does not explain the detail of the

environmental standards and export limits. Also, Claro and Wilson do not use any

references from Australia to describe: the objectives and impacts of forest

conservation campaigns in Australia; the environmental impacts of logging

Australia’s forests for export woodchips; the limits imposed on woodchip exports;

the environmental protection standards the Australian government was supposed to

have enforced; or the implications of these standards and export limits for the

logging of forests and the activities of export woodchip companies.

531

Stafford was also a co-author of a report (Stafford et al 2000) which states

(p.199-200): “During the mid 1980’s, Australia’s woodchip supply to Japan became

vulnerable to unforeseen major cuts and supply disruptions. These disruptions were

caused by three primary developments:

• the forceful campaign by environmental groups for a total ban on logging native

forests;

• the forest industry proposal to establish a world scale pulpmill in Tasmania

utilising local supplies of pulpwood; and

• the Commonwealth government’s annual renewal process for export licences to

control woodchip exports …..

These actual and/or perceived threats to supply led Japan to reduce its heavy

reliance on Australian supply.

Another key factor is the developing preference of most pulp and paper

producers to procure woodchips sourced from plantations, rather than native forests.

….”

Another industry consultant, Robert Flynn (1995)(p.30) also argued that

"(c)oncern over the long term sustainability of this Australian supply (because of

political opposition, not biological limitations) led Japanese trading companies to

develop a number of other major new supply sources including Chile and the US

South - specifically from Texas, eastward to Florida, and north to North Carolina".

Upon questioning, Flynn (1999) stated that “as I learn more about the Japanese

business practices, I'm not really sure how much credence to put on the conservation

pressure, versus normal ‘diversify the sources’ attitude…. I think the two are mixed.

Trading companies told me that they were concerned with getting too much of their

hardwood from Australia, because of the pressures that seemed to be mounting, and

threatened at one point to eliminate the trade by 2000---- so they spread out to chile

(sic), US South, Brazil, etc. On the other hand, old growth is still being exported in

chip form from Australia, so evidently while the Japanese are ‘concerned’ about

(conservation pressure), as long as the price is right, they will keep buying.”

532

For this dissertation, a variety of information sources were drawn on to examine

the situation of Japan’s paper industry and fibre supply through the late-1980s and

1990s and the legitimacy of this general argument that conservation pressure drove

the diversification. This information makes it clear that political pressure for less

logging of native forests in Australia was only one of many potential factors that

could have influenced the strategies of Japan’s paper manufacturers and trading

companies for sourcing fibre. Several points need to be considered in drawing a

conclusion on this topic:

1. Japanese paper production

2. The origins of Chile’s export woodchip industry

The beginning of chip imports from Chile and seUSA by Japanese companies was

part of a major increase in hardwood chip requirements related to greater paper

production in Japan from the late-1980s. It is extremely unlikely that Australia’s

native forests had the long-term ability to supply substantially larger amounts of

woodchips with the quality (and perhaps price) desired by Japanese papermakers.

The increase in Japan’s imports of hardwood chip from just Chile and the USA

between 1987 and 1990 was 2.12 million BDT (in excess of 4 million green tonnes).

This was 81% of hardwood chip imports from Australia in 1987. By the year 2000,

the total volume of hardwood chips imported from Chile and the USA was 3.948

million BDT, 119% of that from Australia. The volume imported from Chile, the

USA and South Africa totalled 5.528 million BDT, 167% of Australian imports, even

though Australian chip exports to Japan had grown by 27% since 1987 to 3.316

million BDT. For Australia to maintain its share of the Japanese hardwood chip

market at 64% (the level in 1987), hardwood chip exports at 2000 would have

needed to be 7.47 million BDT, 2.23 times actual exports to Japan in that year (JPA

2001a).

David Bills (2001), formerly General Manager of the export woodchip company

North Forest Products, notes that “(t)here is simply no way Australian native forest

supplies could have maintained their share (of Japan’s hardwood chip market), even

with the most optimistic calculations of sustainable yield for eucalypt”.

Strong Japanese interest in Chile as a source of native forest pulpwood arose

following difficulties in obtaining beech woodchips in New Zealand. The

economically exploitable area of native beech forests in New Zealand is not large

and was being restricted by conservation pressure (Wilson 1994). According to one

533

Japanese source (JapanF 1997), beech forests were then regarded highly as a source

of pulpwood, and Itochu and Marubeni were competing for New Zealand’s last

available areas. A New Zealand sawmiller advised Itochu of the potential for chip

exports from Chile’s native beech forests and introduced the company to Chilean

timber interests. Itochu then established Chile’s first joint venture native forest-

based hardwood chip export scheme supplying Japan. Marubeni followed.

3. Wood prices and quality Japan’s paper industry had pursued a general policy of diversification of fibre supply

since the early-1980s; which reflects a national and industry concern with resource

security (Coffey 2001). The characteristics of Chilean beech wood were valued

more highly than some Tasmanian eucalypts for some papers (Youlton 1995). Chile

also had eucalypt plantations that could supply high quality pulpwood (JapanF

1997), while forests in seUSA provided wood similar in quality to that from Japan’s

forests (JapanB 1999). Plantation pulpwood from South Africa is also highly valued.

Fibres from these sources are considered to be of higher quality for papermaking

than some eucalypts from Tasmania as well as eucalypts from New South Wales and

Western Australia (Bennett 1984, Streeting and Imber 1991, ACiL 1997, Bills 2001).

The export price of Australian woodchips also increased in the late-1980s

(ABARE 1999), rising more in 1987 than that for chips from the USA (JP&P

1988h). This could have been related to an increase in the stumpage for pulpwood

from Tasmanian public native forests (ForTas 2000). After chip imports began from

seUSA, the export price of American hardwood chips in America dollars became less

than the price of Australian chips (Streeting and Imber 1991), while the landed price

of American hardwood chips in Japan declined substantially – only to increase later

(JPA 2001a).

Diversification of chip sources was expected to help the Japanese influence

export prices (Inions undated). According to Bills (2001), during Japan’s bubble

economy Japanese companies negotiated low prices for chips with its new suppliers

that did not reflect their full value. This was countered when Australian chip

interests developed a model of the cost of chips in Japanese pulp and distributed it to

other chip suppliers who then “smartened up their negotiations”.

4. Australia’s export woodchip licences Also, the Australian export licence system did not provide an image of stability for

wood supply (JapanB 1999). The system was of concern to some people in Japan’s

534

paper industry because licences regulated export volumes and minimum export

prices, and required investigation of the feasibility of establishing a pulpmill to use

exported chips. The system was also thought to be able to be influenced by

conservation pressure (JapanF 1997).

Bills (2001) states that the need for studies for the feasibility of pulpmills

prevented the signing of long-term chip supply contracts. Although long-term export

approval was provided to woodchip companies, for some time licences had to be

renewed on an annual basis subject to “several important conditions regarding prices,

location of the source material, environmental protection, inspection, and the lack of

an alternative use in Australia involving value-added production” (Streeting and

Imber 1991)(p.33). This “undermined (Japanese) confidence in resource security”

(Bills 2001). Also on at least one occasion, the then responsible government minister

refused to approve the export price of another supplier until North Forest Products

(NFP) had settled its negotiations because NFP felt the price was too low. After NFP

obtained a better price, the other company was required to reopen negotiations (Bills

2001).

A senior American timber company employee involved in negotiations over

export chip sales from seUSA said that Japanese purchasers were worried that

Australia was supplying a large proportion of chip imports and that greater

competition for chips and the conditions of the export licences would limit supply.

The purchasers thus wanted to diversify their chip sources (Speck 1997).

An employee of one Japanese GTC said that his company had wanted to

purchase volumes of woodchips larger than that permitted by Australian export

licences during the early- to mid-1990s. Because it was unable to do so, it sourced

the volumes it wanted from other countries including Chile, South Africa and the

USA (Cshosha 1997). However, as discussed in Chapter Ten, Japanese paper and

trading company sources state that conservation pressure did not have a great impact

on their ability to meet chip demands made on Australia.

Logistical factors also appear to have inhibited large-scale expansion of chip

exports from Australia. For example, the establishment a woodchip industry in far-

eastern Victoria (East Gippsland) was inhibited by the lack of access to a suitable

deep-water port. The only port in the region was controlled by the export woodchip

company Harris-Daishowa in New South Wales. Also, according to one industry

535

source (AustraliaA 2001), it was possible to initiate a new export woodchip scheme

very quickly in the USA. One company took less than 12 months to construct and

begin operation of a new export chip scheme – after the preparation of a feasibility

study of about 18 months. This was “unheard of” in Australia because of several

factors, including licensing procedures and wood supply commitments to established

pulpwood companies.

5. Pulpmill proposal In the late-1980s, North Broken Hill Ltd (North) which owned Australia’s largest

woodchip exporter (North Forest Products – NFP - located in Tasmania) proposed

the construction of a large pulpmill in northern Tasmania. If established, the

pulpmill would have used much of the pulpwood exported as chips to Japan,

substantially reducing export volumes. This proposal scared Japan’s paper

companies (JapanD 1997, Bills 2001). At the time, a senior Japanese paper company

employee reported that the mill proposal stimulated the industry’s diversification of

hardwood chip supply away from Australia to the seUSA and Chile, which were seen

as being more stable suppliers, but he did not mention the impact of conservation

campaigns (Amari 1989). This reason has been repeated by other commentators

(Streeting and Imber 1991, West 1992) and industry members (Speck 1997,

AustraliaA 2001).

The concern over the pulpmill proposal was magnified by the way it prevented

the establishment of a new export woodchip scheme in Tasmania in the late-1980s.

Japanese investors believed they had concluded an agreement with Huon Forest

Products for the supply of woodchips to Japan. However to their surprise, the

Tasmanian government gave control of chips produced by the company to North on

condition that the pulpmill begin operation. This impacted on financing

arrangements for Huon Forest Products and the project was stopped (Ausnewz 1989,

Graeme-Evans 1995, JapanF 1997). North also wanted to link the purchase of pulp

to chip purchases. However in response to North’s proposal and to provide for future

growth, North’s Japanese customers began to invest in plantation pulpwood supply

in Chile and South Africa. Thus, when the pulpmill proposal collapsed, the long-

term relationship between North and Japanese paper companies had been

“fundamentally undermined” (Bills 2001) and Japanese companies were already in

the process of securing chip supplies in other countries.

536

Graeme-Evans (1995) also argues that the Huon project was finally killed by

conservation pressure, but the Japanese investors had already pulled out and this

reason was not presented by industry members as the prime cause (JapanF 1997,

Bills 2001).

Also, in early 1990 the Australian government and some state governments

announced policies of phasing out woodchip exports by the year 2000 or soon after

to replace them with pulp or paper mills - depending on international and domestic

circumstances (RAC 1992b). Pressure from the Australian government for the

construction of pulpmills worried Japanese companies (Bills 2001). Senior members

of the Australian government were reported to have supported the establishment of a

pulpmill in East Gippsland and told Harris-Daishowa (the export woodchip company

in seNSW – see Chapter Nine) of this. If this mill had been established, then the

operations of Harris-Daishowa could have been threatened unless the company or its

owners were involved in the mill (Switzer 1988).

6. The origins of the export woodchip industry in seUSA According to one Japanese source, Japanese companies began investigating the use

of chips from seUSA in the 1980s independently of events in Australia, although

experiences in Australia would have encouraged their growing use (JapanF 1997).

The Japanese concerns over their heavy reliance on Australia were evident during

negotiations for purchasing chips from seUSA (Speck 1997).

American paper companies based in north-western USA had been increasing

production capacity in southern USA during the early-1980s with the expectation of

an imbalance between high domestic paper use and fibre supply from north-western

USA. They also thought they would be unable to meet export chip supply contracts

with their Japanese customers from the north-west because of forest reservation and

reduced wood yields (JapanH 1997). Some Japanese papermakers began negotiating

with American timber companies in 1986-87 (Speck 1997). The Americans

integrated the Japanese demands into this shift to southern USA as some

infrastructure, such as satellite chipmills supplying domestic pulp and paper mills,

was already in place (JapanF 1997). Also, organisations in southern USA were

looking to expand the commercial use of the region’s forests. Timber and paper

companies wanted to lower the cost of establishing softwood plantations by getting a

market for uncommercial native forest trees (Speck 1997). The export market

allowed large integrated pulp and paper companies to use equipment more

537

efficiently, so helping to lower the cost of wood to local mills (West 1993, Patrick

1994). The Tennessee Valley Authority, a major public authority in the region,

began seeking “opportunities to promote demand for the region’s forest products

through both domestic and export markets” in the mid-1980s (Buffington 1984)(p.v).

It was particularly concerned with “low quality and underutilized hardwoods”

(Buffington 1984)(p.16).

7. The international position of the Australian economy This could have had an impact. From the late-1980s to the early-1990s,

Australia’s competitiveness increased relative to major producer nations, such as

Japan and the USA but declined relative to developing nations, including Chile (IC

1993).

8. Conservation campaigns Australia’s export hardwood chip industry became a major target of campaigns by

non-government conservation organisations soon after it began (Routley and Routley

1975, Dargavel 1995). Campaigns organised by these groups sought more

conservative forest management with lower levels of wood production and larger

conservation reserves. These campaigns contributed to preventing the export of

chips from some areas, such as far-eastern Victoria (Morgan 1997). Nevertheless,

forest output and the amount of hardwood chips exported from Australia increased

through the 1970s and 1980s. However, despite the increasing Japanese demand for

chips at the end of the 1980s, exports were only 86% of the total licensed amount

(Streeting and Imber 1991).

The impact of conservation campaigns on export licences assumed by Claro and

Wilson (1996) could relate to the process and outcome for renewing licences for

Tasmanian export woodchip companies in the late-1980s. Yamane (1999) studied

the NGO campaigns against export woodchipping in Tasmania through the 1980s

and 1990s, and discusses the impact of the campaigns in the mid-1980s as the time

approached to renew the export licences for Tasmania’s woodchip schemes. The

companies wanted larger export licences, and the Environmental Impact Statement

prepared for the licence renewal estimated that 4.146 million green tonnes of

pulpwood was available each year of which 0.55 million tonnes was required for

domestic paper makers. This left 3.589 million tonnes available for export. The

Australian government agreed to slightly larger licences totalling 2.889 million

tonnes per year, thus leaving an unused amount of 0.7 million tonnes. Yamane states

538

that this level of chip exports appears to have been developed through negotiation

with the Tasmanian government, and conservation interests opposed it arguing that

the resource estimates were based on excessively short rotation times and the use of

forests of high conservation value.

This ‘ceiling’ on potential exports from Tasmania lasted until the late-1990s, but

the total amount exported from Tasmania did not decline. According to Yamane

(1999), Nippon Paper Industries (NPI) slightly reduced its purchase of chips from

NFP, but Hokuetsu Paper signed a new contract with Forest Resources. Also she

reports (p.50) that “(a)ccording to a representative of NPI, the only time Japanese

paper companies considered reducing their woodchip intake from NFP was when

there was an economic decline in Japan and when Japanese companies became

concerned that Australia might shift from being an exporter of chips to a pulp

producer, such as with NFP’s plan to build the Wesley Vale mill in the late 1980s”.

She concludes that “there is no indication that the environment movement has had

any significant impact upon woodchip export” (sic).

Thus, conservation campaigns did not reduce the amount of chips exported from

Tasmania at that time, and the licensed volume was above what conservation NGOs

wanted. However, while the ‘ceiling’ on potential exports was lower than

Tasmanian exporters may have liked, it is when the licence limit is considered in

conjunction with North’s pulpmill proposal, the possible consequences for Japanese

papermakers become severe. Robin Coffey (2001), formerly Marketing Manager of

North Forest Products and now Marketing Manager of Gunns Ltd, Tasmania’s sole

exporter of woodchips, considers that it was the combination of the two that “made

(Japanese papermakers) nervous about future supply” as the pulpmill would have

consumed about 50% of the hardwood chips exported from Tasmania, potentially

creating severe resource shortages for Japanese papermills.

Coffey (2001) also feels that a “compounding factor was the risk in Japanese

eyes of environmental pressure causing the government to further restrict supply

volumes, - something the ALP government had shown a tendency towards ...”. This

risk appears to have grown during the 1990s. NGO campaigns against woodchipping

intensified in 1988 and 1989 as the time approached to renew export woodchip

licences and state wood supply agreements in the late-1980s and early-1990s. At the

time, analysts thought that “(s)trong and continuing environmental opposition to

539

woodchipping has probably also increased Japanese concerns regarding the future

supply of Australian woodchips” (Streeting and Imber 1991)(p.90). Bills (2001)

considers that the effect of community conservation campaigns was possibly at its

peak just prior to the end of 1993 when groups sought judicial review of the export

licensing system. He felt that this threat of legal reviews reduced the predictability

of annual licence renewals, which Yamane (1999) notes were an important focus for

conservation campaigns.

In 1994, the Australian government (then the Australian Labour Party)

announced its decision to reduce the volume of native forest chips permitted to be

exported through licences by 20% to around 5 million tonnes, declining to zero by

the year 2000 as areas of forest became covered by Regional Forest Agreements.

RFAs would allow the export of chips without the need for a licence from the

Australian government (Keating 1994). The export limit was increased in 1996 after

the Liberal Party took power, and licences were issued for three years, but the

provisions for RFAs were maintained (Anderson and Hill 1996, Grattan 1996).

Australian conservationists and sympathetic politicians went to Japan to lobby

executives of Japanese companies to reduce their use of wood from Australia’s

native forests. Bills (2001) feels that they had little impact on Japanese executives.

He considers these executives were more impressed with reassurances of senior state

and national government politicians who went to Japan to support the industry.

Bills (2001) concluded that the primary political impact of conservation pressure

was in Australia - by forcing “more difficult and rigorous export licences and, of

course, the RFA process which did result in some reduction in volume for export –

but not in Tasmania. It legitimised new exports out of Victoria!” He also considers

that the results of the RFA process were important in providing the basis for long-

term chip supply contracts.

Overall, Bills “cannot deny that the conservation lobby had some impact on

customers”, but also recognises that conservation pressure impacted on suppliers in

Canada, the west coast of the USA, New Zealand and Chile. He thinks that they all

“were affected more than Australian native eucalypt as the Japanese were genuinely

convinced our native forest management was ahead of those countries”.

540

9. Environmental protection Claro and Wilson (1996)(p.190) argue that “the enforcement of environmental

standards in Australia forced Japan to seek alternative sources in countries with

lower environmental standards”. However, they do not provide any comparison of

Chilean, American and Australian laws, regulations and standards for protection of

environmental values during logging and other forest management activities. Nor do

they provide any comments from members of the Japanese paper industry.

One member of Japanese industry considered that environmental regulations

were not severe in Chile when chip exports began (JapanF 1997). For these kinds of

regulations to be important to Japanese papermakers when deciding their fibre

purchasing policies, they would need to have an impact on short-term and long-term

log and chip prices and supply. The CIF values in Japan of woodchips from the USA

and Chile in 1988 were close to the CIF value of Australian chips. Their CIF prices

increased and surpassed those of Australia through the 1990s. However, the

implications of this for environmental protection depends on the cost of meeting

relevant standards in those countries and whether money was spent on environmental

protection. This may be reflected in the cost of delivered wood.

In the early-1990s, the nominal delivered prices in US dollars of hardwood

pulplogs in Chile and the US South were below those of Australian pulplogs. The

relative positions changed through the decade but appear to be greatly influenced by

exchange rates directed by the stronger US dollar. The nominal delivered price of

US pulpwood increased steadily to 1997 with growing demand. The nominal value

of delivered pulp logs in Chile appears to have increased in the local currency

(pesos). The Australian price in the local currency (dollars) appears to have

fluctuated with a slight increase (WRI 2000) while the Australian dollar weakened

against the US dollar from the late-1980s. Also, in Chile some of the price increase

was due to greater transport costs to retrieve wood further from the chipmills (JapanF

1997), while in seUSA competition from domestic papermakers helped drive up

prices. All the various factors influencing price changes in each country could not be

identified, but the distribution of the Australian model of Japanese ‘pulpwood-in-

paper’ costs may also have contributed.

The level of environmental impacts from pulpwood logging in all three countries

is related to: the type and rate of logging; the kind of logging prescriptions and the

level of adherence; the kind and quality of any regeneration or replanting; the length

541

of time between cutting cycles; and the status of the forests. The relative importance

of these impacts will, to some extent, depend on the perceptions of those making the

judgements. Chapters Eight and Nine indicate that varied, but in some cases

substantial, impacts appear to have been generated in all three countries.

Available but incomplete evidence suggests that logging operations in Australia

may be more comprehensively controlled than in Chile and seUSA. It is possible

that this difference, if it exists, is reflected in wood prices. However, a comparative

analysis of the implementation and impact of these prescriptions and respective

management regimes required to supply forest chips on non-wood forest values and

wood prices is beyond the scope of this thesis.

As much of the woodchips exported from Australia come from public forests,

the relevant logging operations and subsequent management are regulated by

government agencies. However, the management of some public and private forests

has been criticised to varying degrees for the quality, characteristics and rates of

logging, and the impact or potential impact on non-wood values over the short and

long-term (Australia 1977, Recher et al 1980, CSNF et al 1982). While the area of

conservation reserves has increased so has the level of woodchip exports. In Chile

and seUSA, the primary source of woodchips has been private forests.

Chilean law requires the preparation of management plans for logging

operations. However, various authors report that management plans may not be

followed, and there is a lack of inspection and enforcement of forestry laws (Lara

1992, CODEFF 1994, Marchak 1995, Leslie et al 1997, Clapp 1998c).165

Lara (1992)(p.127) considers that Chile’s forestry agency and conservation

interests did not have the strength to counter the political influence of the Chilean

Association of Timber Companies, which includes export chip companies. He

claims that it was “successful in demanding permissivity from the government” over

forestry policy and implementation. Nevertheless, according to one source, in the

mid-1990s Japanese companies did not want to increase the price for chips so they

165 Leslie et al (1997) found that a Chilean company logging native forest for the export of woodchips to Japan did not meet generic independent certification standards which were higher than national requirements. The company had strong economic objectives, but lacked both information on a variety of topics considered important for forest management as well as “a tactical plan for the management of the forest (as opposed to a tactical plan to secure the supply of projected future wood-chip demand). Further, (it) appears to have contravened national regulations at one site where 69.7% of basal area

542

could access some more distant forests because of fear of conservation criticism

(JapanF 1997).

Regulations and guidelines relevant to the establishment of woodchip mills and

logging operations in seUSA have been discussed by Smith and Haldeman (1997).

They argue that legislation that could be used to review the potential impacts of the

establishment of chipmills has generally not been applied, while some permit

systems do not require assessment of the forest and other off-site impacts of

chipmills. Logging guidelines, known as ‘Best Management Practices’, only address

protection of water and soil quality, and are voluntary in ‘southern states’, although

Weyerhaeuser requires they be followed (Speck 1997).

Discussion Conservation pressure on the Australian government in the mid- to late-1980s was

very unlikely to have been the primary factor in stimulating Japanese paper

companies to diversify their sources of hardwood chip supply. Rather, the pressures

were mainly economic and from a variety of sources within and outside Australia.

Within Australia, the implications of the proposed Tasmanian pulpmill seem to be

primary. Major factors outside Australia include: the expanding use of paper in

Japan; the paper industry’s preference for a variety of fibre sources; competition

between Japanese GTCs to compensate for restricted pulpwood supplies in New

Zealand; the ability to quickly gain access to supplies of higher quality fibre in Chile,

seUSA and South Africa; and the price of fibre from these sources.

The situation can also be considered hypothetically. For example, if the licences

for exporting woodchips from Tasmania had not been restricted in the late-1980s, it

is possible that some larger amount of chips would have been exported for some

time. This amount could have been limited by competition from other sources.

However, even if all the pulpwood estimated to be surplus to the amount licensed to

Tasmanian woodchip companies had been used, Tasmania’s role in supplying the

increase would have still been relatively minor. The full 700,000 green tonnes

(about 350,000 Bone Dry Tonnes) of pulpwood would have only been equivalent to

a maximum of 16% of the increase in chips imported into Japan from the USA and

Chile between 1987 and 1990.

had been harvested (technical regulations of D.L. 701, part 2, section 2, article 24, which states that ‘up to 35% of basal area’ can be harvested from a stand)”.

543

However, if the Tasmanian pulpmill had been built, it would have consumed

exported woodchips. North would have linked the sale of chips to that of pulp and

might have gained access to chips from another export scheme. As seen, Japanese

papermakers had begun diversifying chip sources to avoid the impact of the pulpmill.

Thus, an argument could be developed that the failure of the pulpmill proposal may

have helped limit Japanese chip imports from Chile and seUSA and so restricted

potential environmental impacts in their native forests.

The relative strengths and inadequacies of measures to protect non-wood values

in the forests of Australia, the USA and Chile may or may not have impacted on

Japanese strategies for sourcing native forest woodchips. If some impact had

occurred, it could be expected to have been through actual and expected short- and

long-term wood prices. It is clear that if Australia had attempted to supply an

amount of chips equivalent to all or a large part of that sourced from Chile and the

USA, the impact on its native forests would have been extreme. Nevertheless, the

export of woodchips from Chile and seUSA has certainly impacted on their forests.

Determining the actual balance of impacts in the three countries is beyond the scope

of this thesis and does not appear to have been attempted by other researchers.

It seems that conservation pressure in Australia through the 1990s probably

contributed to the desires of Japanese companies to rely other countries for fibre.

However, it does not appear to be more important than other benefits the industry

could gain, such as those provided by using wood of higher quality or not relying on

a single supplier. Forest conservation campaigns also developed in Chile and

seUSA, but the extent of their impacts needs to be studied. Also, as discussed in

Chapter Ten, Japanese paper and trading company sources state that conservation

pressure did not have a great impact on their ability to meet chip demands made on

Australia.

544

Appendix 8.2: Calculations of the approximate areas of native forest needed to supply recent amounts of hardwood

chips exported from Australia and south eastern USA 1. Australia There are no recent published estimates of the area of native forest used each year to

supply hardwood chips to Japan. However, an estimate can be made by applying a

productivity estimate to the volume of chips exported after making an allowance for

wood from plantations and sawmill wastes.

Total amount of chips exported in 1999-2000: 7.056 million green

tonnes minus 1. plantation wood

(9% of exports – (Yainshet and Sledge 2001)) 0.635 million green

tonnes and 2. sawmill wastes

(estimate of 0.3 x broadleaf sawlog production (ABARE 2001) (BAE 1977)) 1.05 million green

tonnes

Total native forest chips 5.371 million green tonnes

Assuming a productivity of 100 tonnes per hectare (Lake 1975), and allowing 5-

10% for losses caused by chipping produces an estimate of 56,000 to 59,000 ha.

However, the estimate of sawmill waste chips is probably an overestimate as some

sawmills would not supply chips for export. Also, the calculation does not make an

allowance for thinnings or defects in logs.

Higher pulpwood productivity levels can be found around Australia. For

example, pulpwood production from old forests in seNSW ranged from around 80

tonnes per ha to 200 tonnes per ha (FCNSW 1982). Also, according to Forestry

Tasmania (ForTas 2000), 11,400 ha of Tasmanian public forests were logged to

produce 2.269 million green tonnes of pulpwood in 1999-2000. This is a

productivity of 200 tonnes of pulpwood per ha. However, the Tasmanian Forest

Practices Board (FPB 2000) states that 14,300 ha of public native forests was logged

in that year. This is a productivity of 159 tonnes of pulpwood per ha. The TFPB

also recorded that 20,800 ha of private forests were logged in 1999-2000.

545

Thus, somewhere between 30,000 to 35,000 ha of Tasmania’s forests were

logged to supply pulpwood and sawlogs for the states mills. The domestic use of

pulpwood is unknown but not large compared to exports, so the majority of this area

would supply chips for export. Given that Tasmania supplies about 60% of

Australia’s woodchip exports, an estimate of 50,000 ha for the forest area used in the

late-1990s to supply export woodchips is not unreasonable.

2. South eastern USA This calculation begins with the amount of woodchips exported to Japan from

seUSA, measured in Bone Dry Tonnes (USDC 2001).

This dry mass was then converted into green tonnes by multiplying it by 2

(Neilson and Flynn 1998).

An allowance of 10% was then made for losses in debarking and chipping

(Smith and Haldeman 1997).

This metric mass was then converted to tons by multiplying by 1.1, assuming

that 1 metric tonne is 2204 pounds and 1 ton is 2000 pounds (Emanuel 2001).

This gross amount was then converted to an acreage using a productivity for

pulpwood of 40 tons per acre (Gray and Guldin 1997, Smith and Haldeman 1997).

(The Tennessee Valley Authority uses a conversion factor of 38.56 tons per acre with

clearcutting and 21.89 tons per acre with selective logging (TVA 1993).)

This acreage was converted to hectares by dividing by 2.47 (Neilson and Flynn

1998).

The estimate assumes all woodchips come directly from native forests and none

is from sawmill wastes.

Using these assumptions, Table A.8.2 presents the approximate area of native

forest required to supply stated amount of chips exported to Japan.

546

1995 2.3444 0.05742

1997 3.0695 0.07518

Table A 8.2: Approximate area of native forests required between 1989 and 2000 to supply woodchips from south eastern USA to Japanese papermakers.

Year Exports (millions BDT) Area (millions hectares) 1989 0.4174 0.01022 1990 0.7453 0.01826 1991 1.2158 0.02978 1992 1.7008 0.04166 1993 1.7780 0.04355 1994 1.9186 0.04699

1996 3.1862 0.07804

1998 2.9457 0.07215 1999 2.6829 0.06571 2000 2.2500 0.05511

Total 24.2547 0.59409

547

548

Appendix 8.3: Extracts of interview with James Morrison In 1997, James Morrison was General Manager of the Edmonton office of Daishowa-

Marubeni International.

In the interview, Morrison (1997) commented on the role of Alberta

Environmental Protection: “They (Alberta Environmental Protection) don't have the

resources to do that (play a strong supervisory role) any more.... Well, they've been

cut back, but on the other hand if you transfer the responsibility over to the private

sector why would you want to duplicate it, in a sense.... So what they're doing

instead is moving towards more of a policeman role where they show up with their

whistle 'surprise, surprise' and see if anything is wrong.... Yeah, I think its great.”

“But as the industry grew bigger and bigger they (Alberta Environmental

Protection) just couldn't keep up with the work. You got to remember that they don't

have the information base that we have either - the inventories, the understanding of

all the different aspects of what's going on. They don't have that information base."

549

550

Appendix 9.1: Saito Ryoei – a potted history For more than 30 years Saito Ryoei dominated Daishowa and turned it into one of

Japan’s largest paper manufacturers with international operations that employ

thousands of people. It also helped make him one of Japan’s richest men.

Saito Ryoei was Daishowa's president from 1961 to 1982, but resigned to take

responsibility for the company's poor business performance and his inappropriate use

of company funds. Sumitomo Bank discovered that not only had he overspent on

new plant and equipment, he had used about US$1 billion to finance art, golf course

and personal share purchases. He returned in 1986 as 'Honorary Chairman', removed

his brother as president and fired board members with links to Sumitomo Bank. He

reportedly continued controlling the company through his eldest son, Kiminori who

became president in 1989 (Belsito 1991, Daishowa 1991, DY 1992a).

Saito Ryoei was renown for having run Daishowa as a "One Man" operation,

and both his personal spending patterns and those of Daishowa, when under his rule,

showed the same flamboyance. Banking and other officials were critical of him as

being ‘too autocratic’, and managing as if he did ‘business without keeping accounts’

(DY 1992a). His brother apparently accused him of borrowing Daishowa's funds for

his own personal use (Belsito 1991), and he was also reported to have made business

decisions on the basis of his wife's fortune-telling (Friedland 1993).

He was one of Japan’s major art collectors, but in 1983, Saito severed

Daishowa's ties with Sumitomo Bank because it forced him to sell off much of his art

collection to repay company debts, so for many years Daishowa did not have a main

bank. In 1992, when he used his personal funds to buy ¥10 billion worth of shares

and bail out the company so that it could repay loans, he was reported as saying that

he would never sell his art collection to raise money for the company (JEJ 1990,

1991, Belsito 1991, DY 1992a, Makino 1992, TNW 1992)

He was Japan's top individual taxpayer in 1990, when he paid ¥3.129 billion in

income taxes. He had been among the nation's top taxpayers during the previous few

years and estimated his personal fortune at about ¥100 billion (then more than US$1

billion). At the time he said: "I knew I would have to be the largest taxpayer sooner

or later. Next year, it looks like I'll have to drop to 30th or so on the list, but I've

551

already started thinking about ways to make enough money to stay ranked 10th or

15th" (DY 1991).

Saito’s political allegiances were conservative. Records from the Home Affairs

Ministry and local governments were reported to show that Saito and Daishowa gave

at least ¥164 million to political parties in legitimate donations between 1988 and

1991. More than ¥160 million of this went to the then ruling Liberal Democratic

Party (LDP), including one of Saito's sons, a Member of the national House of

Representatives. A brother of Saito was a former Construction Minister and until

1992 was Governor of Shizuoka Prefecture, Daishowa's home area (Friedland 1993,

MDN 1993).

Daishowa and the Saito family, particularly Saito Ryoei, had a strong influence

over Fuji city’s political milieu and fought the public campaign against pulpmill

pollution (Kouda 1979), as the campaign challenged the very foundations of political

power in the region. Kouda (p.191) says that Fuji city was commonly known as

“Daishowa castle town”, while Saito Ryoei dismissed those who opposed pollution

as only a “few citizens and fishermen who did not enjoy the direct benefits of the

Daishowa Paper Mill”.

One of his sons married the niece of Japan's former Prime Minister, Nakasone

Yasuhiro, while another married into the family of a senior businessman from

Bridgestone Tires. Saito's brother (the former Construction Minister) married the

sister of Toyota Shoichiro, of Toyota Motors and Chairman of Keidanren, Japan’s

Federation of Economic Organisations. (Friedland 1993, Takeda 1995).

The Saito family's holding company, Ashitaka Rinsan Kogyou (later Daishowa

Ashitaka), had debts totalling US$300 million in 1990, much of which were

apparently generated using Daishowa's assets as collateral making Daishowa

guarantor for the loan. Yet, the family itself controlled between 20% to 40% of

Daishowa in the early 1990s, and in conjunction with its extensive land holdings was

reputed to be worth about US$1 billion (Belsito 1991, NFD 1996a).

Saito was reported to have channelled in excess of ¥25 billion from Daishowa to

two affiliate companies building a golf course and industrial complex in northern

Japan, even though Daishowa was in financial difficulties and golf memberships and

land prices had slumped. Apparently, he hoped that the projects’ profits would help

552

rehabilitate Daishowa and benefit himself. It was for paying bribes in connection

with these developments that Saito was arrested in late 1993 (DY 1993a, 1993b,

1993c, 1993d, 1993e, 1993f). In February 1994, he went to trial accused of paying

one of Japan's prefectural governors a ¥100 million bribe (about US$1 million) in

1991 for development favours given to the Daishowa affiliates. At the beginning of

the trial, he apologised saying, "I have caused trouble to so many people, and I regret

it" (TJT 1994). A ‘guilty’ verdict was handed down in October 1995 (TJT 1995).

Saito Ryoei died in 1998.

553

554

Appendix 9.2: Extracts of interview with Tom Hamaoka My interview with Tom Hamaoka (1997), who was then Executive Vice-President of

Daishowa-Marubeni International, was important in providing background

information on some of Daishowa’s history, its position in relation to Oji Paper Co.

and the perspectives and influence of Saito Ryoei on Daishowa’s strategies for

obtaining fibre. To do justice to the information, extracts from the interview used to

support arguments in the dissertation are presented below.

1. Daishowa and competition with Oji Paper Tom Hamaoka joined Daishowa in 1979 but had also worked in the general trading

company Mitsui & Co.. Based on this experience, he considered that Oji, Jujo and

Honshu “had a lot of political clout and they also had the resources and the political

clout of the Japanese trading companies behind them….and I would venture to say

that really Daishowa to a certain degree was blocked out of that political process and

blocked out of major opportunities to receive concessions for raw materials, for

standing timber and so that drove R. Saito outside of Japan and into North America ,

into Australia, into Eden etc in New South Wales. And you're right yes, there is

absolutely no question that that was one of the primary reasons why Daishowa went

outside".

2. Daishowa’s investments in Canadian pulpmills In relation to Daishowa’s decisions to establish pulpmills in Canada rather than

import woodchips, Hamaoka understood that “the economics was much more to the

advantage of having pulp”.

He explained that “the Chairman's vision was always to try and be ‘number one’

in Japan and he thought that by rather than counting on domestic (softwood) chips

which fluctuated with the amount of North American logs coming in or having to

depend upon for example, the Soviet or south east Asian logs, he decided that North

America - the United States and Canada - was a stable place to do business from a

political perspective and an economic perspective.... And he thought that if I can get

a foothold into North America before the Ojis and the Jujos, you know Daishowa is

going to be able to position itself and its raw material costs are going to be

substantially lower than those of my competitors. That was the driving force behind

the DMI acquisition (the Cariboo Pulp and Paper venture).”

555

According to Hamaoka, the conditions offered by Canadian provincial

governments for pulpwood supply were important in obtaining Daishowa’s

investment. Saito’s “idea was: Gee, the crown ... allocates you (an annual pulpwood

supply) for 20 years... - mind you there's a holding and protection fee, but its so

minimal and really from a resource allocation point of view he says its, unlike Japan,

its nothing, its absolutely nothing - and they'll give you enough fibre to build a mill.

All they want you to do is they want you to invest your dollars in British Columbia,

in Alberta, and they'll give you the wood. And he says you can't ask for a more ideal

situation. He thought it was utopia as compared to Japan and other places.”

The Cariboo pulpmill was established after Weldwood approached Daishowa

and Marubeni to use chips from its sawmills. Weldwood wanted a new, more

profitable market for this wood, which could be supplied more cheaply than chips

coming from forest logs in the USA. Saito also wanted Daishowa to invest in the

Quesnel pulpmill with West Fraser because of cheap fibre and energy. “... West

Fraser approached Daishowa but there wasn't enough to produce a bleached kraft

mill. R. Saito said that he wanted TMP pulp. West Fraser wanted to look after just

its surplus - about 150,000 BDT - of chips which was just the optimum size of a

TMP mill. .... in the late 70s, TMP was developed and was being used in North

America to replace BKP. And the volume of wood needed to make a tonne of pulp

was half that of BKP so the wood costs were lower. So Daishowa decided to invest

in this mill. R. Saito justified his decision with the logic that the two highest costs

for the pulp and paper industry in Japan are energy and fibre and what he was doing

was importing cheap fibre and cheap energy and it can go straight into making

newsprint.”

“At the time people thought that Saito was crazy, but behind Saito's and

Daishowa's reasoning was that it wasn't seen as a market pulp. If Daishowa could

take 65% of the production then he was confident that 35% could be sold. The

market in Japan was there - it can be looked at as an integrated facility.” Hamaoka

considered that "R. Saito, even at that particular time, was way ahead of his time and

his Japanese counterparts.”

556

3. Saito and Daishowa’s strategies for obtaining fibre Hamaoka explained Saito’s attitude to fibre this way: "Again I have to go back to

what R. Saito told myself and Wakabayashi - He who controls the fibre will last in

the long run; if you don't have the fibre, then it just doesn't make any sense at all.”

"R. (Saito) was always looking really for fibre".

According to Hamaoka, Saito also realised joint ventures were important in

gaining access to fibre resources. “ … what (Saito) always said was really to us, that

when he first came he said it was a matter of you have to tie in with established

companies because they're the ones that really do the lobbying; they're the ones that

can provide the fibre.”

4. The establishment of the Peace River pulpmill Hamaoka, said that Daishowa decided that if it was going to put in pulpmill and

paper machine, then it would ask the government for supporting infrastructure. It

wanted roads, a rail spur and existing roads extended, widened and made into all-

weather roads. It also wanted a bridge across the Peace River and offered to pay

half. The government said that a bridge would cost $20 million and Daishowa

agreed to pay $10 million.

Daishowa wanted the provincial government to spend any financial assistance

directly rather than give it to the company to use. As it turned out, this was a wise

decision for Daishowa as the expenditure on infrastructure blew-out far beyond

expectations.

“Now I says: But that's it though. I'm only going to put in 10 million and I trust

that that's what it’s going to cost you guys. Now you guys look after all of this.

You're going to build the road - x kilometers, you're going to put in the rail spur - this

much, and you're going to do this. And they put the whole package together and said

it’s going to cost us 75 million and I says: No, I don't care what it costs you, this is

what I want. And they said: Well, do you want the money or do you want us to do

it? And I says: I want you to do it. I don't want to be responsible for any of this

because I says it will be perceived as a give-away and if I come in under, ok then

what's going to happen is that the public is going to say you gave too much away to

this Japanese foreign national company and it was too much and whatever and I

came back to you. They're going to say Oh Jesus, you know I mean they are taking

you for a ride....You do it. So that was the deal. Seventy five million in

557

infrastructure for development, not only for us but for the north. I would contribute

$10 million into a bridge built across the Peace River and give me the timber rights

for Phase 1, Phase 2 and a paper machine and that's it and you've got a deal. And it

was done. Unfortunately, all the infrastructure cost them about $130 million, but

that's not my fault....That's someone else's money. I mean I wasn't even involved in

that..."

“... If it’s a Canadian company you can do it. If you are a foreign multinational

company, you can't. As DMI you know borrowing money from the government and

things like that with Marubeni's balance sheet... I mean Jesus, I mean you know.

And besides, I didn't want an accountant sitting here and that was one of the

conditions - a government accountant."

558

Appendix 9.3: Streamside reserve criteria in the Eden region

When integrated logging began in the public forests of south eastern NSW,

streamside reserves were not prescribed, but from 1971 forest strips with a total

width of at least 80 metres were left along major rivers and creeks. Later, they were

extended to cover more of the drainage system (Bridges and Dobbyns 1991).

The Scott Report (1975) states that forestry recommendations in NSW at the

time were that a minimum of 40 metres of unlogged vegetation should be left along

either side of permanent or prescribed streams, but noted that the definition of a

permanent stream was vague and such areas were often logged or damaged by

logging. It (pp.97 and 98) presents ‘Conditions for Soil and Water Protection in the

Eden Management Area’ which state that the “reservation on streams is to be as

directed by the Forestry Commission when each compartment is allocated to the

licensee for logging. All stream reservation will be a minimum 40 metres on each

side of the stream and will be greater as considered necessary by the Forestry

Commission. No tree shall be felled, or snig track constructed into the stream

reservation”. Thus, up to this time, the local forester had some discretion as to the

location of reserves, but once determined, they were not be logged.

Also, Miller (undated) states that in 1975, streamside reserves were to be a

minimum of 40 metres wide in a catchment greater than 50 ha with felling and

logging machinery excluded.

The amended 1976 Forest Management Plan specified a minimum 40 metre

reserve on either side of streams in catchments with a minimum size between 30 ha

and 50 ha depending on grade and erosion class, but permitted trees in the outer 20

metres to be felled outwards, while prohibiting logging machinery in the reserve

(FCNSW 1976a).

By 1979, the prescriptions had been weakened further “based on research and

management experience” (Bridges and Dobbyns 1991)(p.122). Catchment size

criteria remained the same, but minimum reserve width was reduced to 20 metres

where the slope was less than 18 degrees and was still 40 metres above this angle.

Trees in reserves (and marked by the forester) could be taken provided no part fell

559

into the watercourse. Machinery could also enter the reserve with permission of the

forester (FCNSW 1982).

By the mid-1990s, the language governing prescriptions had changed with

“should” replacing “shall” when describing important implementation requirements

(FCNSW 1982, Drielsma 1994). For example, the “Guidelines for Logging” (2.3

Filter and Protection Strip) state “A filter strip should be retained where the

catchment area of a watercourse of drainage line exceeds 100 ha. Where erosion

hazard is high the catchment area should not exceed 40 ha” (Drielsma

1994)(Appendix 7-13). Thus, the minimum catchment size increased; the minimum

reserve width where the slope was above 18 degrees was smaller and “should be 30

degrees”. Trees in the strips could still be felled “subject to specification in a

harvesting plan” or “in specially authorised circumstances”, although not into the

watercourse (Drielsma 1994)(Appendix 7-14).

Thus, the prescriptions for streamside reserves were first strengthened and then

weakened, while greater discretion in the management of streamside reserves was

given to supervising foresters. However, reflecting changes brought about by

pressures for more conservative management, calculations of future log supplies in

the late 1990s (SFNSW and BRS 1998) assumed stream reserves of 10 metres and 20

metres for first and second order streams and 40 metres for all streams of 3rd order

and above even though only 80% of third order streams need 40 metre reserves.

560

Appendix 9.4: Sawlog and pulplog criteria in the Eden region

Table A 9.4: Changes in sawlog and pulplog criteria in the Eden region.

1976 1982 1994 Sawlogs

Salvage/optional 30

diameter (cm) None (1) 36

Permitted defect Such that Such that As agreed

Pulplogs

(cm)

Minimum 10 10 10

Butt 20 20

Sources: FCNSW (1976a, 1982), Drielsma (1994).

Minimum log length (m) None (1) 2.4 2.4 (bd=40cm+) (2)

listed 4 (bd<40cm) Minimum small end 25 30 diameter (cm) Minimum centre diameter (cm) Quota 40 40 (=33) (3)

Minimum butt end

listed

allowance royalty is royalty is with above that above sawmiller from same sawlog tree used minimum as a pulplog

Minimum length (m) Standing tree 4.9+ Log 4.9 2 2 or Minimum cross-section 80 (square cm) {approx. equivalent diameter} 10.5

Clear wood thickness (cm)

Minimum diameter (cm)

Toe 10 10

Notes:

1. None listed in the text of FCNSW (1976a)(p.17), but Appendix 6 containing the 1971/72 Pulpwood Assessment used a minimum butt end diameter and minimum log length of 61cm and 4.9 m respectively

2. bd = butt end diameter. 3. Interpolation from minimum butt and toe diameters.

561

It was not possible to examine in detail the influence on log use of all the possible

interactions between pulplogs and sawlogs for this dissertation. However, Table A

9.4 shows that the minimum length for smaller diameter sawlogs was increased by

two-thirds between 1982 and 1994, while the minimum diameter criteria were

altered. Even though the minimum centre diameter for a quota sawlog went down,

the increase in minimum log length meant that many logs that were previously non-

quota sawlogs had to be much longer to become a quota sawlog; they became

pulpwood. As pulplog specifications also became lower, shorter logs could be used

as pulpwood (FCNSW 1982, Drielsma 1994). Thus, the potential volume of

pulpwood from a site increased to include lower quality wood and logs that

previously might have been non-quota sawlogs.

The 1975 assessment of wood availability at Bega stated that in the Bemboka-

Bermagui Group “(d)ue to lower pulpwood royalties, the expected percentage of

sawlogs would be higher than at Eden” (FCNSW 1982)(Appendix 8(ii)).

The SFNSW 1994 EIS (Drielsma 1994)(p.9-13) states that: “No quota sawlog is

sold at a price below the pulp log price”. It makes no such statement about non-

quota sawlogs. According to Phillips (1999), HDA’s price for pulpwood ($24/m3

around Eden) is higher than the price of optional sawlogs ($15/m3).

In the late-1970s and early-1980s, Ray Hammond, former Deputy Chief of the

FCNSW Division of Economics and Marketing decided that the low rate of optional

sawlogs in the intake of Eden sawmillers (7%) compared to the rest of the state

(23%) indicated that logs that would be profitable in a sawmill’s total mix were

being chipped. He felt one possible mechanism for this was the chipmill’s shift from

taking pulpwood as billets to logs which he felt could hide potential sawlogs. He

based this on the difference between the assumed distribution of defect in a long log -

within straight lines joining the actual outer limits of defect at both ends of a log -

and the more likely actual distribution that is narrower than assumed through most of

the log’s length but curving out towards the butt (Hammond 1980, 1981).

However, according to Vince Phillips (2000a) , formerly of Duncan’s Sawmill in

Eden and now with HDA, the quality of non-quota/salvage sawlogs in Eden is lower

than those in Southern region and East Gippsland, so the use of these logs here is

much less than these other regions. Also, because the Eden area does not have a high

562

quality grade one log, the sawing of lower quality mixed species logs meant that

sawntimber production paid a sawmill’s operating costs, while chip sales to HDA

provided the profit. He stated that logging contractors have a financial incentive to

retrieve the maximum quantity of sawlogs, which meant that a sawmill would often

find pulplogs in its stockpile of logs.

According to the Department of Primary Industry and Energy (1998), in 1995-

96, the Eden region produced 42,175m3 of quota sawlogs and 1,695m3 of salvage

logs from public and private native forests. Since 1980, the proportion of salvage

(optional) logs used by hardwood sawmills in the rest of N.S.W. has increased to

41%, but the proportion from Eden’s forests has declined to 3.9%. Thus, the

provision for the supply of 23,000m3 of non-quota sawlogs in the Eden RFA

(Australia and NSW 1999) is slightly less than the guaranteed volume of quota

sawlogs and, if completely used, would comprise about the same proportion of non-

quota logs in the total log intake as used recently in the rest of the state.

563

564

Appendix 9.5: The impact of woodchipping on some fauna in south eastern NSW

Remaining forests in seNSW are important refuges for native wildlife already

depleted by clearing, hunting and competition with introduced fauna. The

distribution and use of these forests is heavily influenced by economic priorities.

They are generally on less fertile soils and in hilly areas that are not necessarily the

optimum habitat for all remaining wildlife species. Forests in nature reserves prior to

the RFA were identified as being those least loggable because of slope, soil and

erosion potential. Within the region’s wood production forests, logging has been

concentrated on flatter areas with richer soils, while the larger unlogged areas are

generally the steepest, least fertile and unlikely to contain suitable habitat for all

wildlife species. Coastal forests became a major refuge for possums and gliders

because of the clearing of lower elevation forests for agriculture. At higher

elevations where land-use changes were small, forests with high nutrient soils are

important for wildlife conservation (Lunney and Leary 1988, 1989).

Despite their recent history of exploitation, the ‘South East Forests’ are reported

to contain: a rich aboriginal heritage; significant areas of wilderness; 41 plant

communities; 40 rare and threatened plant species; 52 species of native mammals; at

least 290 bird species; and 46 mammal, bird and reptile species on the Threatened

Species List of the NSW National Parks and Wildlife Act. Some of those species

are: the Smoky Mouse, Long-footed Potoroo, Southern Brown Bandicoot, Brush-

tailed Phascogale, the Koala, the Sooty Owl and the Powerful Owl (SEFA 1992,

1993). Recher et al (1980) consider that all the gliders, the Koala, several forest bats,

cockatoos, lorikeets, owls, parrots, the Owlet-nightjar, the Scared Kingfisher and tree

creepers are probably the species most sensitive to integrated logging, although they

stated that 10-15% or more of terrestrial avifauna are sensitive.

Lunney and Leary (1988) concluded that clearfelling was having significant

impacts on local wildlife, particularly on species dependent on mature forest, such as

gliders. A decline in some dependent species would also impact on their predators,

such as owls, which need a high abundance of prey. Lunney et al (1988) found large

gully trees were important as roosting sites for bats, while Lunney and O’Connell

(1988) found logged or burnt areas were not favoured by wallabies and wombats

because of lack of cover. Populations of kangaroos, wallabies and potoroos were

565

expected to fluctuate, with some feared declining to extinction levels (Lunney 1989).

The White-footed dunnart is recognised as vulnerable because of a high habitat

specificity (Lunney and Ashby 1987), and two of the region’s most common lizards

are comparatively rare in regrowth forests because of the lack of large rotting logs

and old trees (Lunney et al 1991). Clearfelling was also considered to have the

potential to push remnant local koala populations to extinction (Reed and Lunney

1990).

Three main kinds of recommendations to advance wildlife conservation in the

region’s forests have been made as outcomes of the kind of research cited above.

They were made on the basis that the HDA woodchip scheme would continue in

some form. The first proposes much larger areas of forests, especially old forests, be

reserved from logging (eg Pyke and O'Connor (1991)). The second seeks changes in

the management of forests available for logging, so that the silvicultural regimes, fire

management regimes and buffer zone width “all be specifically related to habitat

quality and ecological values in each coupe” (Jenkins and Recher 1990)(Summary

p.iv). These changes include: wide buffer strips along gullies and drainage lines;

exclusion of logging and heavy machinery from these strips; a prohibition on the

felling of uncommercial tree species; a lengthening of logging cycles; and

sophisticated fire management plans. The third promotes more research on the

impacts of logging and fire on wildlife.

Jenkins and Recher (1990) concluded that there was no evidence to show that

the Preferred Management Priority classification system and the Native Forest

Preservation Program used in Eden’s production forests were sufficient to conserve

the region’s species and communities.

566

Appendix 10.1: Notes for Tables 10.1 to 10.10 This appendix provides information for the notes on Japan’s general trading

companies and paper companies as listed in Tables 10.1 to 10.10.

Company A

Implementation of the company's environmental guidelines etc. is the

responsibility of its Economic Cooperation Department, which is also represented on

the environment committee.

1. This company's environment committee comprises staff. It prepared the

company's environment charter and guidelines, conducts research and public

relations, promotes ‘ecobusiness’ and gives advice to top management.

2. The company has Environmental Activities Regulations and Environmental

Guidelines that incorporate an Environmental Impact Checklist, which was released

in the early 1990s.

3. The company uses its checklist to determine whether a project might have

environmental and social impacts. It is not a detailed assessment of possible impacts,

but it also indicates the existence of company plans to counteract impacts. This

procedure is conducted by staff early in the ringi assessment procedure of potential

new investments. It is not conducted on trade in products. For trade in products, the

company checks whether the seller has obtained all the necessary government

permits.

A staff member said that it is often difficult to fill out the checklist completely

because of lack of knowledge of the local situation, so the main points are done and

the local partner may provide information on some issues. The company seeks to

obey all the necessary regulations of the country in which it will invest, but where

they are less than those of Japan, it will use Japanese standards. Discussions are held

with local authorities on these issues and the approval of these authorities is used as

the criteria for whether the impact of a project is acceptable. If there is a local

partner, it may also discuss the project with local people to gather information on

impacts. Some issues, such as the impacts on people (agriculture, hunting, etc.) are

not covered by local regulations and if this is the situation, then how to balance the

impact and level of protection will be decided on a case by case basis. Sometimes

compensation is paid.

567

One company spokesperson provided some of the information gathered on

environmental issues in the early stages of a feasibility study for a forest/pulpwood

use related project. It included information from the Japan Paper Association on

some environmental regulations and laws that related to nature conservation and

forest use in that area of the country where the proposal was to occur and a statement

from the office of the country's politician responsible for licensing of wood resource

use.

According to staff, monitoring may be conducted of some impacts, or to check

the effectiveness of countermeasures. The company tries to check that the seller is

usually abiding by local regulations after the agreement is signed. The reports from

this kind of monitoring are checked by the company’s Environment Committee.

4. The company employee that I spoke to was unaware of this standard.

Interviews conducted in Tokyo: 22 May, 26 August and 8 September 1997.

5. As a result of the decision to reduce logging in the public forests on the west coast

of the United States of America, the company had to purchase more expensive chips,

but at the time of the interview there was a pulpwood oversupply, so woodchips were

cheap.

6. According to a company spokesperson, the company is researching involvement

in the hardwood and softwood woodchip trade and beginning involvement in foreign

plantations for woodchips, so staff will study conservation issues before investing.

International business dealings such as joint venture plantation schemes are regarded

as good for general trading companies because they provide the opportunity to invest

in both the demand and supply side of the operation.

7. This company’s questionnaire response stated that the determination or will of the

paper manufacturers is the most important. The application of new recycling

technologies was important if more recovered fibre was included in high quality

wood-free papers. Staff felt that the best way to reduce the cost of waste paper to

manufacturers was through general economic changes that would flow onto the

waste paper sector. Transport and labour costs are very high. More public relations

effort is needed to change the public’s attitude to waste paper and paper products.

568

Company B

1. According to this company's environment officer, the roles of its environment

department are to: understand the changes in environmental issues, laws and

international treaties and how they influence business, and to make the necessary

arrangement to ensure the company complies with those laws (if such issues cover

more than one department, then the environment department will coordinate

distribution of the relevant information); watch for environment-related business

opportunities and provide that information to the Business Department; provide news

and education material for staff on environmental issues; participate in

environmental related activities outside the company; and manage the environmental

risk caused by business activities.

2. The company's environment officer stated that the company also follows

Keidanren's guidelines on foreign investment development.

3. Each company department has the option to make its own rules for managing

environmental issues. This is decided by the department's manager. According to

the environment officer, at the time of the interview only 50 of the company's 170

business departments had decided to prepare a voluntary environmental management

system. The departments responsible for woodchips and pulp were not among them.

4. According to this company's environment officer, each department that makes its

own rules for the management of environmental issues usually conducts its own

environmental audit once a year and the results of the audit are reported to the

environment department. Also, the internal audit office will periodically conduct

checks and audits of environmental aspects, primarily on whether business activities

are proceeding in compliance with environment-related laws and regulations. He felt

that it may be a good idea for the company to consult with non-governmental

organisations if one knowledgeable on an issue exists. However, there is no history

of such consultation.

The company’s environment charter says that departments only need to consult

with the General Manager of the Planning and Coordination Department via the

environment department if: there is a question about the ability to adhere to

environmental protection laws; the company might be affected by environmental

protection issues; or, if a corporate response is needed on conservation issues.

Ultimately, it will be the company president who decides on what is needed to be

569

done if such a problem arises. According to the company's environment officer,

there has been no investigation by the environment department of any woodchip or

pulp operation in which the company is involved.

5. According to the company's environment officer, the company decided that the

ISO 14001 standard will be introduced, but it had not decided when. A draft system

of implementation has been prepared. He also considered that the company would

be able to consider how to handle audits of woodchip and pulp related investments

when the ISO 14001 is introduced.

6. Staff involved with waste paper considered that relevant laws and regulations

were not having much effect.

7. The questionnaire response considered that all the points were relevant but felt

that the stability of both waste paper supply and demand for recycled products were

probably the most important. A key point was said to be a shift in paper making

resources from pulp and chips to waste paper.

Interviews conducted in Tokyo: 19 and 27 June, 25 and 27 August, and 11

September 1997.

Company C

1. This company's environment committee is responsible for overseeing the

performance of each company group in relation to its environment policy. Each

group has its own business and environment policy.

2. The company's environment charter states that it has a policy of conducting

environmental checks before investing in new operations and other audits after

operations begin to ensure that environmental protection measures match the terms

as agreed. However, according to the company's environment officer, it did not

conduct environmental audits of two woodchip operations in the North America or

its mill in South America before deciding to invest - an Environmental Impact

Statement was performed on one of the chipmills but not its use of forests.

3. This company's environment officer said that the department once conducted an

internal audit of the company's global operations, including affiliated pulp

operations. Information was provided by related companies in response to a

questionnaire, and environment department staff visited sites. Comment from

outside the company was not included. They audit could not find any problems with

570

its environmental performance, so the company decided that it was possible to carry

on all operations without any changes. The results of this audit were not made

public.

The company’s environment officer said that it assumes that any log that it

purchases for export as chips from South America has been cut according to local

laws and regulations and so are produced in an environmentally-sound manner.

Also, there is no specific policy for the purchase of logs from the southern USA, but

the officer considers that because the forests are regrowth, there should not be any

conservation problems.

4. This company has a forestry code that states the company will comply with all

relevant laws and regulations, but will meet higher standards if it considers those

regulations are below its own standards or where it is thought irreparable

environmental harm will be caused. This statement also includes principles by which

the company or its subsidiaries are to conduct forestry operations on land that is

entrusted to them. It has prepared a draft code of forestry practice which sellers of

logs to its new export chip mill in North America should comply.

5. The company has an interest in the ISO 14001 standard, but has made no formal

response to it. Staff were studying the standard, but consider that is it is not a big

factor in the company's operations because the practical application to a trading

company seems difficult.

6. In the response to the questionnaire, the company said that these controversies

were generated by environmental protection groups far from the region and not by

regional inhabitants. It said that no controversy had occurred between regional

inhabitants and government over the operations of this company or related

companies. This was restated by the company’s environment officer in interviews.

According to the environment officer, the company’s decision to trade in

woodchips from South America and the southern USA was based on price

competitiveness, in particular due to the influence of international exchange rates.

He stated that he did not know of any company that may have invested in or begun

using South American chip supplies because of conservation pressure in Australia.

7. At the time of the interview, this company was involved in foreign plantation

establishment that required the clearing of native vegetation.

571

Interviews conducted in Tokyo: 28 May and 4 September 1997.

Company D

2. Staff said that the company's general stance on environmental issues was first

released about 10 years before the time of the interview, but had not been revised. It

has been included in the company's activities standards and states that the company

will give careful consideration to environmental matters in its business activities and

will strictly check whether or not there are factors that will produce environmental

destruction. The environment department has a draft Environmental Charter.

4. Staff said that the company has no detailed statements on forestry-related issues

and there is no process within the company to check how products are produced.

6. The company is studying ISO 14001 but has not yet decided to introduce it.

According to a member of this company's environment department, because trading

companies have no direct impact on the environment (mainly indirect through buying

and selling) the cost-effectiveness of introducing such a standard is not great.

However, because customers are beginning to require that it be used for products, the

company will probably introduce it. The staff member said that there was also a

proposal for an ISO standard for forestry activities but he considers that it is difficult

for a GTC to evaluate the impact of forestry.

1. This company's environment department was established in the early 1990s and

conducts environmental education within the company. Also, it is responsible for

communication with government and citizen groups on environmental issues,

receives criticisms from outside the company on environmental issues, investigates

necessary responses to new laws, and works with Keidanren and Nihon Boueki Kai

(Japan Trade Association) on environment-related activities.

3. According to one staff member, the ringi route of decision making within this

company does not require that an investment proposal or loan is reviewed by the

environment department, but the general manager of the Business Department is

responsible for environmental matters. This method of approval had led the

company into problems, eg with an investment in a leasing company that provided

machinery used in a major foreign construction endeavour that was criticised for its

potential environmental and social impact.

5. There are no regulations on the purchase of forestry (woodchip, pulp, paper)

products but the company tries to purchase plantation grown products.

572

7. One company document states that the company is promoting plantation projects

in Asia, Australia, Central and South America to produce woodchips so as to balance

regional economic development with environmental conservation.

8. This general trading company is not greatly involved in the woodchip trade.

According to staff, one company that invested in a joint venture plantation project

with this company did so, in part, because it would be able to say that its products are

produced in an environmentally-sound manner.

Interviews conducted in Tokyo: 26 May and 18 August 1997.

Company E

1. A statement on this company's general stance on environmental issues was

provided by a member of this company's Corporate Communications Department.

At the time of the interview, it contained information that was to be placed on the

company’s World Wide Web site.

2. The company has an environmental department but it does not appear to be

proactive on environmental protection. Staff said that the department basically

oversees environmental issues as they relate to the company's business activities. Its

main activities are passive, reacting to events outside the company, for example by

updating information on environmental laws as they affect the company. It

sometimes organises seminars for company employees. However the officer

responsible for woodchip procurement said that his main sources of environment-

related information are foreign contacts and newspaper articles.

3. This company’s staff could not provide any formal written policy on

environmental issues, but the above-mentioned general stance on environmental

issues was provided. This company is a member of the Nihon Boueki Kai (Japan

Trade Association), so company staff considered that the association's policy of

acting "in harmony with society" could be seen to cover environmental issues.

According to staff, the company’s president makes the ultimate decision on how

environmental issues are to be handled within the company.

In early 1999, information was obtained on this company’s environmental

philosophy and activities. This information indicated that the company had

conducted some such activities, including environment-related committees since the

early 1990s. The inability of staff to provide such information at the time of the

573

interviews can be considered to be an expression of the lack of integration of

environmental philosophies and guidelines into the company's day-to-day activities.

4. Staff said that there is no formal policy directing the involvement of this company

in the woodchip/pulp/paper trade area, nor a company requirement for consultation

with the general public, other than that required by local authorities, and that there is

no policy for checking the environmental impact of either products that the company

trades in or the activities that it is involved in, other than that required by local

authorities.

5. The company's general statement on the environment says that it is looking to

introduce the ISO 14001 standard but does not give a time frame.

6. This company sought woodchip supplies from Chile, seUSA and South Africa

because of the limits imposed on exports from Australia by the licensing system. It

applied for additional volumes in the early- and mid-1990s.

7. According to the officer responsible for woodchip procurement, the company

follows the way of thinking of the paper companies and accepts that products are

being produced in accordance with local laws, and that the logging operations are

based on sound forestry practices.

9. The company is investing in plantations, in part, because of the possible

restrictions on native forest supplies for conservation purposes. The staff member

interviewed said it would be preferable that the plantations be used to expand its

wood trade activities rather than to replace wood from native forests.

11. This company has a limited trade in imported waste paper because it regards it as

a risky business. Apparently, trading companies have discussed the possible impact

of increased waste paper utilisation on the import of woodchip and pulp supplies, and

they recognise that they use of these products could go down.

8. These plantations are being established with the intention of forming part of wood

supply for the Japanese paper industry. However, if Japanese domestic paper

demand is not sufficient to meet the supply, then it is possible that they could be used

to satisfy another market.

10. Staff understood that waste paper collection had been increasing, in part,

because of local government regulations.

Interviews conducted in Tokyo: 3 June and 15 August 1997.

574

Company F

2. According to a recent company annual report, the company has an internal policy

document for managers that is meant to assist them in meeting the twin objectives of

economic growth and conservation of the environment. In the decision-making

process, managers are meant to find an optimal balance between these goals. A

request for this document was rejected because it is confidential (Personal

communication, September 1997).

The company did not provide a formal statement on the kind of forestry it

supports, but a recent annual report states that the company both advocates and

practices sustainable forestry.

1. The company's environmental guidelines state that the company should be careful

of the impact of its business activities on natural ecosystems and the local and global

environments. Also, the company must comply with relevant laws and treaties on

environmental protection as well as Keidanren's Global Environment Charter and

other charters. The company says it will deal in products that reduce the impact on

the environment and conserve energy and resources.

3. This company does not have a formal statement on forestry as part of its

environmental guidelines, but its guidelines include its involvement in plantation

forestry in Brazil as an example of its contribution to protecting forests. It is now

involved in large-scale plantation projects around the Pacific Rim, in places such as

Chile, Australia, New Zealand and Vietnam. Also, it is involved with the waste

paper trade.

4. According to staff of this company, conservation pressures were one motivating

force for the company to establish plantations. However, it was said to not be a big

factor as the ‘industry's consciousness’ has moved towards plantations because they

allow companies to maintain and expand their supply volumes better than native

forests. The expansion is not due to outside short-term conservation pressures, rather

it is an independent activity in preparation for the industry's future 20 years from

now.

Interviews conducted in Tokyo: 20 May and 26 August 1997.

575

Company G

1. This company's environment committee links the company’s various divisions

and was reestablished in response to the decision to introduce ISO 14001. According

to environment department staff, the department's staff is limited.

Company staff consider that company responsibility for the products it trades in

begins from the point of purchase and that beyond that it has no responsibility.

However, it can have some influence over affiliated companies.

2. This company has a statement on 'sustainable development' which advocates the

use of renewable resources in ways that do not deprive future generations of their

due economic and social benefits.

There is no clause in its agreements with suppliers that wood should only be

taken from "sustainably managed" forests, but company staff say that the company

does this.

According to company publicity material, in the early 1990s it adopted a set of

guidelines to deal with environmental problems which expects employees will

attempt to avoid causing damage to, and protect, the environment through their

business activities.

3. According this company's publicity material, it introduced a system for in-house

environmental auditing and checks to ensure that action is being taken on

environmental problems in the course of company activities. This check is meant to

be conducted each year.

However, according to a staff member of this company's environment

department, the number of staff in this department is limited and it does not have a

“real assessment system or set of procedures for checking the impacts of its activities

or those of its sellers”. The company's Business Department must determine whether

the seller is complying with all relevant laws. If the environment department is

asked, it can assess whether the seller is obeying relevant environmental regulations

using information from the Business Department. It can submit a report to relevant

decision-makers based on the reputation of the supplier and legal aspects. The staff

member realised that this style of operation sounded vague but that, because of the

legal and ethical situations, they have to rely on suppliers for information.

576

The company did not have a formal policy on consultation with public interest

groups before making paper-related fibre supply investments. However, as with

other individuals, it must comply with local government regulations when purchasing

land and changing land uses etc. which can include public hearings.

4. A member of this company's environmental department was sent several times to

investigate an export woodchip scheme in which it was financially involved in after

unfavourable publicity and complaints about the scheme. Although this staff

member said he felt that the scheme could be operated within the criteria of

sustainable forest management, he recommended that it not be expanded and that it

be stopped if market conditions allow. However, at the time of the interview, it was

operating.

5. Staff said that the company does not have a policy requiring a clause in its

purchase/supply agreements to take only wood from forests managed for sustained

yield, but that in fact this is what happens.

6. Staff said that the company will use the ISO 14001 to check the impact of

resource use as far it can. Now the company checks a supplier’s licence, but because

the fibre supply situation is much more complicated, staff felt something like the ISO

14001 standard is needed to verify and document the claims and assurances of

suppliers.

8. These plantations are to be in tropical areas and at least some of them are to be on

former agricultural land purchased by the company.

7. Although this company only listed Canada as an area of fibre supply with a forest

conservation controversy, the export woodchip scheme as mentioned in Point 4 could

also be regarded as controversial.

9. As a general thought, staff considered that if wood supplies are restricted or

priced higher, then paper companies will move onto plantations, but the speed of

such a transition should be left to the market.

Interviews conducted in Tokyo: 22 July and 8 August 1997.

577

Company H

1. This company does not have a formal environmental policy, but considers that

because its primary resource is recovered fibre, it is contributing to environmental

protection.

Interview conducted in Tokyo: 13 June 1997.

1. This company’s Environment Committee's main responsibility is to make

decisions on internal company environmental issues including auditing of operations.

7. The primary reason for plantation establishment by this company is to secure fibre

resources, not just because it considers they are becoming scarcer, but also because

competitors are investing in creating their own plantation supplies throughout Asia

and the Pacific. The company plans that by early the next century, its woodchip

supply will come from native forests and plantations owned by the company and

others.

Company I

2. The preparation of the environmental statement did not receive input from outside

the company.

3. Although the company environment charter does not specifically refer to the use

of sustainably managed forests, staff state that they consider it appropriate to use

forests which are under ‘sustained yield’ management.

4. The company has a target foreign hardwood plantation area and it expects that the

wood from these plantations would be supplemented from foreign plantations that

are not owned by the company.

5. The parent company participates as an adviser to domestic subsidiaries and

affiliated companies in their auditing procedures; it had not conducted audits of

foreign operations. Staff had not heard of environmental audits of operations that are

outside the direct responsibility of the company.

6. Company staff consider that native forests in Tasmania, Australia are well

managed.

However, according to one company document, this company considers that

overseas markets, especially the fast-growing Asian market, offer tremendous

opportunities as demand for paper is increasing strongly. In response, it is stepping

578

up it international business activities, and while promoting new business it is

expanding foreign plantations.

8. According to staff, the company’s strategy is that plantation material will

eventually be used to replace lower quality native forest hardwood pulpwood, so the

company would eventually move out of forests supplying this kind of wood.

9. This company encouraged its papermills to increase the waste paper content

of their newsprint to a stipulated percentage, but left it to the mills as to how this

should be achieved. The rate is a voluntary target to be achieved within the

operating conditions of the mills, and at the time of interview, there was no cost

incentive to implement this content level, so not all the mills had reached the target.

Other of the company's pulpmills would need de-inked pulping facilities, but at the

time of the interviews, there was not an economic justification for such investment.

Interviews conducted in Tokyo: 26 June, 24 July and 3 September, 1997.

Company J

1. This company's basic reason for establishing its own plantations is to secure its

own resources. It feels that in the future obtaining resources will become more

difficult because of increased pressures for forest conservation. It considers that it

needs these plantations even though it is not sure of their economic profitability.

A company spokesperson said that it is in the process of developing a target

plantation area (personal communication, 19 September 1997).

2. The company will use more waste paper in a new mill, but its official statements

do not contain target rates for waste paper use.

3. The company appears to react primarily to government and other pressures rather

than taking a proactive position. For example, in relation to seUSA from where this

company sources some of its wood, a spokesperson heard that the suppliers had

began to try to cooperate to ensure that the forests they are exploiting will be

managed on sustained yield.

4. No reply was provided on this issue.

5. Substantial controversy surrounded this company's woodchip supply area in

Australia (Tasmania), while more recently conservation campaigns have developed

in Chile from where this company also sources woodchips. In an interview, a

579

company spokesperson said that the situation in Tasmania had been regarded as a

serious problem, but not now.

6. The company considers that the impact of conservation campaigns on forest wood

supply on the west coast of the USA have been/will be counteracted by the closure of

pulpmills in the area, so freeing up previously committed resources. It is also using

more regrowth trees which it considers are not under threat from conservation

campaigns.

8. Company staff said that the company does not have a specific policy for reducing

its use of native forests and replacing that wood with plantation material. However,

the company is concerned that it may be forced to make such replacements. It does

expect to replace lower quality chips from native forests with plantation wood.

Company K

2. The company's environment charter makes comments on all 3 topics. It says that

the company is encouraging sustainable forest management overseas and promoting

plantation development. Staff say that the main thrust and objective of the

company's resource strategy in relation to its environmental charter is the

establishment of plantations and this is even given priority above native forest

logging.

7. Some of the land the company purchased overseas for plantation establishment

was native forest, but the company was prevented from replacing remaining native

forests it had not already cleared by changes to relevant laws. The company intends

that some of this forest will be selectively logged.

Interview conducted in Tokyo: 11 September 1997.

1. The implementation of this company's environment charter is handled by the

company's environment department, but the responsibility for the forestry section of

the environmental charter is that of the Overseas Wood Supply Department. Staff

said that the preparation of the charter was done internally and did not involve people

from outside the company because it was thought that there were not many

specialists who could contribute.

3. According to staff, the company conducts environmental audits of its pulp/paper

mills, but not of foreign logging operations that supply the company with wood.

580

4. This company imports native forest woodchips from Australia and seUSA - and at

least some of the specific and/or general areas or woodchip facilities that supply this

company have been the targets of conservation campaigns. The company considers

that the forests in seUSA are well managed. The environment department of this

company recommended that the company stop its use of wood from mangrove

forests which were being converted into shrimp farms - imports continued but at low

levels. At the time of the interview, staff said that the company intended to stop its

use of mangroves in the near future. The company considers that if a government

says that logging can proceed, then even if non-government conservation groups

object, the logging can proceed.

5. Staff stated that the company does not intend to cut native forests for plantation

establishment, rather it intends to use already cleared land.

6. At the moment, it seems like the company will use the plantation material for use

in Japan, but one company document says that it aims to be a leading, global paper

manufacturer that will conduct foreign business activities. This indicates that it may

be prepared to use such plantation material in international markets.

7. Staff said that the company is trying to shift to using plantations and reduce the

amount of wood it uses from native forests.

Interviews conducted in Tokyo: 16 June and 4 September 1997.

Company L

1. This is one of the smaller paper makers and while it has a been forced to take

action to make its use of some resources more efficient, it did not provide a

comprehensive environment charter covering attitudes towards fibre resource use.

The policy statement it gave covered activities for 1997 and stated that the company

would observe environmental regulations, protect local environments and advance

environmental controls. The three activities it was acting on in that year were related

to improving water use, air pollution control facilities and reducing and recycling

mill wastes.

2. The only statements that could be found were by the company president in an

industry newspaper, but were not primarily about managing fibre supplies.

3. This company was advised by its forestry subsidiary that there was no community

opposition to the woodchip operations in the tropical regions that supply this

581

company, and that because the area was replanted after cutting there was no

environmental damage. Company staff understood that there was some local

opposition to native forest logging in South America for the supply of woodchips,

but that this is no longer the case as they were told that opponents are now more

concerned about the clearing of land for agriculture. The company also understands

that the volume of available pulpwood in its South American native forest supply

area is large and that the supply is sustainable.

The company's balance of new fibre is: imported - 60%; domestic - 40%. South

American native forest chips and mangrove chips are used basically because they are

cheap. Staff state that domestic supplies are more expensive but are of better quality

for papermaking and the company also has strong links to domestic suppliers which

provides incentives to use domestic wood.

4. This was the only company that placed itself first in this answer to the

questionnaire. Staff said that it did so because it felt the company has some

responsibility as the main wood user. It is an idealistic position based on an ethical

perspective, as the company has not experienced any problems with conflicts

between wood supply and conservation.

5. This company is small and is not involved in plantation establishment.

6. Staff of this company stated in an interview that they understand that the logging

of natural forests for its woodchips is being done selectively, without clear felling.

As a result, the company does not feel that there is any conservation problem with

this kind of logging and that it is not necessary to consider shifting its supply of

wood from native forests to plantations. While there is some controversy

surrounding the use of native forests, because logging is not causing any problems,

the company is not concerned whether it is preferable to use plantations.

In answer to a follow-up question about changing the use of fibre from native

forests to plantations because its South American and south east Asian sources

provide a low quality fibre, staff replied that if the cost and quality were satisfactory,

then the company might investigate the possibility. If there was no big differences,

then there would be no need to consider changing from the current situation.

7. Over the last 2 years the company has increased its use of wastepaper by 40% and

also its use of kenaf and coating clay.

582

8. This company considered that a plan is needed to expand demand for, and

ensuring stable supplies, of recycled paper products. As such it supported

government and company guarantees for minimum and maximum waste paper prices

and restrictions on access to pulpwood supplies and imported pulp.

9. The company has a plan and the technical potential to increase the waste paper

content of some high quality papers, but it says it needs expanded consumer demand.

The increase would be from 5% to 10% by the year 2000. The company considers

that a 5% waste paper content in these papers is already high, so regards this as a

serious attempt to contribute to recycling of waste paper.

Interviews conducted in Tokyo: 5 June and 22 August, 1997.

Company M

1. Staff said that they see the maintenance of biological diversity as a difficult issue.

The company considers that environmental issues are complex without uniform

global consensus. The company is still in the stage of developing its own position,

measures and solutions to environmental issues that affect it.

2. The responsibility for the company’s environmental charter is that of the

Technical Research and Development Department

3. Staff say that the company's policy is to only take wood from forests managed in

the legally acceptable manner on a sustained yield basis.

4. The company conducts its own studies of the wood availability from the new

areas it enters to see if production for the area is on a sustained yield basis. In the

case of seUSA, it obtained growth data, logging volumes etc on a state/block basis,

and concluded that logging could be conducted on a sustained yield basis.

5. The company is planning to establish its own foreign hardwood plantations. The

company considers that it is acceptable to both import wood fibre from already

established plantations and to establish plantations on already cleared land.

The reasons this company decided to establish plantations are basically business

related. Plantations will provide a stable supply of pulpwood and increase the

available pulpwood supplies to the company. An important factor was the expected

competition for pulpwood resources in seUSA from American paper companies.

The company also considers that plantations will provide environmental benefits.

583

6. This company stopped using South American beech supplies and replaced them

with eucalypt plantation supplies because of quality preferences.

7. The company now expects that there will only be a very gradual increase in the

use of waste paper as the paperboard market is saturated and the increases can only

occur in the established products that use waste paper because of quality and cost

limitations. Staff said that if Japanese consumers are willing to pay more for

products containing waste paper, then the paper companies will respond.

Staff said that the company has received requests from commercial customers

for paper products that use more waste paper but have the same quality and the same

price, but it cannot do this now. The company expects to be able to do this, but not

for quite a few more years.

Staff consider that inhibitors to greater waste paper use are the need for Japanese

paper makers to integrate pulp and paper production to be cost effective and compete

against imported papers, and market fluctuations (although these are less important

than the need for cost effectiveness).

Thus the staff think companies face a dilemma where the need to be competitive

conflicts with the desire to use more waste paper for other reasons. Another major

problem for waste paper use will be the continuing overcapacity of the paper

industry.

This company did not answer the questionnaire. The interview was conducted in

Tokyo on 2 September 1997.

584

Appendix 10.2: Content of the questionnaires used to obtain information from Japanese paper companies and

GTCs This appendix presents the English versions of the Japanese language questions

contained in the different questionnaires. It does not reproduce the format of those

questionnaires.

1. Questionnaire to paper/board companies.

JAPAN'S PAPER INDUSTRY AND FIBRE RESOURCE MANAGEMENT ISSUES A questionnaire for some Japanese paper and paperboard companies There are 3 sections to the questionnaire:

1. Some basic data about your company 2. Forest conservation and fibre supply

3. Paper recycling If the space left to answer any question is too small, please attach a separate sheet. Please return to:

Ian Penna Department of Geography and Environmental Studies

University of Melbourne Parkville, 3052 Victoria Australia Please complete and return, with copies of your company's latest annual report and any environment protection-related policies, by 31st January. Company Name Respondent:* Name: Position: * Person to be cited as responsible for answers to questionnaire. Contact person** Name: Position: Phone no.:

E-mail no.:

Please list the total pulpwood and other fibre supplies used by your company in Japan during the financial year ending 31 March 1996.

Fax no.:

**Person to be contacted for interviews etc. COMPANY FIBER SUPPLY DATA

585

FIBER SUPPLY ISSUES AND CONSERVATION

1. Is your company aware of any forest conservation controversies in any domestic forest/plantations or foreign forests/plantations used to supply your company (or its subsidiary or associate companies) with pulpwood or pulp or paper for operations either in Japan or abroad (eg. objections by citizens to your supplier's logging and/or attempts to stop logging for conservation or other related social reasons)? If so, please state the locations.

2. Have any of the controversies mentioned in your answer to Question 1 caused your company any problems? If so, please describe the most important controversy only, including: the location of the forest (country, region, etc); the relationship between your company and the rights to wood supply from

that forest (eg. company-owned forests, supplier company forest concession, etc);

the use to which your company puts that material (eg woodchips for domestic paper production, pulp production for international sale, etc);

the importance of the supply to your company; the nature of the problem and/or objections (eg. desire to stop logging) and

the kind of objectors ( eg. community group, local government etc); other information you consider important. 3. In relation to Question 2; has this conservation controversy had an impact on your company or the supply of products from this area to your company, and if so how? 4. In relation to Question 3; how did your company handle this problem/impact? 5. In relation to the area mentioned in Question 2; has the likelihood of more such controversies in that area affected your company's planning, negotiation of supply contracts or investment in mills or resource establishment in that area? If so, how? 6. Has the likelihood of such problems in other areas affected your company's planning, negotiation of supply contracts or investment in mills or resource establishment? If so, please list the areas and describe how the most important only was affected? 7. In general, who do you consider is responsible for solving these kinds of resource management problems? (Choose one or more from the following and rank in order of importance)

the national government of the country concerned the state or local government where the logging occurs the relevant forest manager or owner your supplier your company Unsure Other (please state)

Please explain your answer. 8. What effort is your company making to reduce potential conflict between forest conservation and logging of native forests in Japan and any other country from which you obtain pulpwood, pulp and paper supplies?

586

PAPER RECYCLING 9. Has your company increased its rate of wastepaper recycling over the last 20-30 years? If so, why? If not why not?

increase

stay the same

cheaper wastepaper for papermakers

make raw materials alternative to waste paper more expensive (eg through a

10. Does your company think Japan's paper recycling rate should:

decrease

vary with the market unsure other (please state) Please explain your answer. 11. What factors do you think are governing Japan's recycling rate? the market for waste paper and paper containing recycled fibres government laws and regulations a combination of these unsure other (please state) Please explain your answer. 12. What factors do you consider to be the most important if the recycling rate is to be increased? Choose as many as you wish and rank according to importance: increased consumer demand for recycled products paper manufacturers unilaterally deciding to increase the wastepaper content

of their papers

higher wastepaper prices for wastepaper collectors more expensive alternative raw materials (i.e. woodchips and virgin pulp) governments restrict access to woodchips and virgin pulp more efficient wastepaper collection systems advances in recycling technology stabilisation of waste paper prices stabilization of waste paper supply unsure other (please state) Please explain your answer. 13. Which of the following actions would your company consider to be inappropriate measures to increase Japan's paper recycling rate? Choose as many as you wish. government tax exemptions or subsidies for 'recycled' paper products

tax or levy) government guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers company guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers restrict access to imported and domestic woodchips and imported pulp

through regulations pay all paper consumers (businesses and households) for the purchase of their

waste paper purchase of paper products with minimum levels of waste paper content by

587

government, government department and public organizations establish a buffer stock scheme that stores waste paper for release in periods

of low supply/high demand charge consumers(i.e. businesses and households) for the disposal of wastes

(including paper) introduction of a product disposal tax all of the above are appropriate unsure other (please state) Please explain your answer. 14. Which of the following actions would your company consider to be appropriate measures to increase Japan's paper recycling rate? Choose as many as you wish. government tax exemptions or subsidies for 'recycled' paper products make raw materials alternative to waste paper more expensive (eg through a

tax or levy) government guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers company guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers restrict access to imported and domestic woodchips and imported pulp

through regulations pay the paper consumer (businesses and households) for the purchase of their

introduction of a product disposal tax

unsure

waste paper purchase of paper products with minimum levels of waste paper content by

government, government department and public organizations establish a buffer stock scheme that stores waste paper for release in periods

of low supply/high demand charge consumers(i.e. businesses and households) for the disposal of wastes

(including paper)

none of the above are appropriate other (please state) unsure Please explain your answer. 15. If your company uses in waste paper, what would be the minimum set of conditions for your company to voluntarily increase this use? Please choose as many as you wish. increased consumer demand for recycled products; cheaper market price for waste paper cheaper wastepaper for trading companies and papermakers; higher wastepaper prices for wastepaper collectors; more expensive alternative raw materials (i.e. woodchips and virgin pulp); reduced supplies of woodchips and virgin pulp; more efficient wastepaper collection systems; advances in recycling technology; waste paper prices become stable; none of the above would cause an increase in waste paper use

other (please state). Please explain your answer

588

16. Does your company plan to increase its use of waste paper by recycling? If so, please explain in what products and to what content level. If not, please explain why not. 17. If your company uses imported waste paper, please explain why? CONFIDENTIALITY REQUIREMENTS: Please mark as appropriate. Responses to the following questions can be used freely stating the name of the company and respondent: Company Fibre Use Data

3 8 13

1 6 11 16 2 7 12 17 3 8 13 4 9 14 5 10 15 Responses to the following questions can be used, but the name of the company and respondent are not to be used: Company Fibre Use Data 1 6 11 16 2 7 12 17

4 9 14 5 10 15 Please attach copies of any policies your company has on environmental problems as they relate to your industry and company plus a copy of your latest annual report. Environmental policies attached Have no environmental policies Annual report attached

589

2. Questionnaire to General Trading Companies.

JAPAN'S PAPER INDUSTRY AND FIBRE RESOURCE MANAGEMENT ISSUES A questionnaire for some Japanese General Trading Companies There are 3 sections to the questionnaire: 1. Some basic data about your company 2. Forest conservation and fibre supply 3. Paper recycling If the space left to answer any question is too small, please attach a separate sheet. Please return to: Ian Penna Department of Geography and Environmental Studies University of Melbourne Parkville, 3052 Victoria Australia Please complete and return, with copies of your company's latest annual report and any environment protection-related policies, by 31st January. Company Name Respondent:* Name: Position: * Person to be cited as responsible for answers to questionnaire. Contact person** Name: Position: Phone no.: Fax no.: E-mail no.: **Person to be contacted for interviews etc. COMPANY WOOD FIBER, PULP AND PAPER TRADE ACTIVITIES Please mark the kind of trade your company does in woodchips, pulp and paper? Foreign Source Foreign Source Domestic Source Domestic Source Domestic Sale Foreign Sale Domestic Sale Foreign Sale Woodchips/ Pulpwood Pulp Paper Waste paper

590

FIBER SUPPLY ISSUES AND CONSERVATION 1. Is your company aware of any forest conservation controversies in any domestic forest/plantations or foreign forests/plantations used to supply your company (or its subsidiary or associate companies) with pulpwood or pulp or paper for operations either in Japan or abroad (eg. objections by citizens or governments to your supplier's logging and/or attempts to stop logging for conservation or other related social reasons)? If so, please state the locations. 2. Have any of the controversies mentioned in your answer to Question 1 caused your company any problems? If so, please describe the most important controversy only, including: the location of the forest (country, region, etc); the relationship between your company and the rights to wood supply from

that forest (eg. company-owned forests, supplier company forest concession, etc);

the use to which your company puts that material (eg woodchips for domestic paper production, pulp production for international sale, etc);

the importance of the supply to your company; the nature of the problem and/or objections (eg. desire to stop logging) and

the kind of objectors ( eg. community group, local government etc); other information you consider important. 3. In relation to Question 2; has this conservation controversy had an impact on your company or the supply of products from this area to your company, and if so how? 4. In relation to Question 3; how did your company handle this problem/impact? 5. In relation to the area mentioned in Question 2; has the likelihood of more such controversies in that area affected your company's planning, negotiation of supply contracts or investment in mills or resource establishment in that area? If so, how? 6. Has the likelihood of such problems in other areas affected your company's planning, negotiation of supply contracts or investment in mills or resource establishment? If so, please list the areas and describe how the most important was affected. 7. In general, who do you consider is responsible for solving these kinds of resource management problems? (Choose one or more from the following and rank in order of importance)

the national government of the country concerned the state or local government where the logging occurs the relevant forest manager or owner your supplier your company Unsure Other (please state)

Please explain your answer. 8. What effort is your company making to reduce potential conflict between forest conservation and logging of native forests in Japan and any other country from which you obtain pulpwood, pulp and paper supplies?

591

PAPER RECYCLING 9. If your company trades in waste paper, has it increased this trade over the last 20-30 years? If so, why? If not why not? 10. Does your company think Japan's paper recycling rate should: increase decrease stay the same vary with the market unsure other (please state) Please explain your answer. 11. What factors do you think are governing Japan's recycling rate? the market for waste paper and paper containing recycled fibres government laws and regulations a combination of these unsure other (please state) Please explain your answer

13. Which of the following actions would your company consider to be inappropriate measures to increase Japan's paper recycling rate? Choose as many as you wish.

12. What factors do you consider to be the most important if the recycling rate is to be increased? Choose as many as you wish and rank according to importance: increased consumer demand for recycled products paper manufacturers unilaterally deciding to increase the wastepaper content

of their papers cheaper wastepaper for papermakers higher wastepaper prices for wastepaper collectors more expensive alternative raw materials (i.e. woodchips and virgin pulp) governments restrict access to woodchips and virgin pulp more efficient wastepaper collection systems advances in recycling technology stabilisation of waste paper prices stabilisation of waste paper supply unsure other (please state) Please explain your answer.

government tax exemptions or subsidies for 'recycled' paper products make raw materials alternative to waste paper more expensive (eg through a

tax or levy) government guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers company guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers restrict access to imported and domestic woodchips and imported pulp

through regulations pay all paper consumers (businesses and households) for the purchase of their

592

waste paper purchase of paper products with minimum levels of waste paper content by

government, government department and public organizations establish a buffer stock scheme that stores waste paper for release in periods

of low supply/high demand charge consumers(i.e. businesses and households) for the disposal of wastes

(including paper) introduction of a product disposal tax all of the above are appropriate unsure other (please state) Please explain your answer. 14. Which of the following actions would your company consider to be appropriate measures to increase Japan's paper recycling rate? Choose as many as you wish. government tax exemptions or subsidies for 'recycled' paper products make raw materials alternative to waste paper more expensive (eg through a

tax or levy) government guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers company guarantee of a minimum and maximum wastepaper sale price for

wastepaper dealers restrict access to imported and domestic woodchips and imported pulp

through regulations pay the paper consumer (businesses and households) for the purchase of their

waste paper

more efficient wastepaper collection systems;

waste paper prices become stable;

purchase of paper products with minimum levels of waste paper content by government, government department and public organizations

establish a buffer stock scheme that stores waste paper for release in periods of low supply/high demand

charge consumers(i.e. businesses and households) for the disposal of wastes (including paper)

introduction of a product disposal tax none of the above are appropriate other (please state) unsure Please explain your answer. 15. If your company trades in waste paper, what would be the minimum set of conditions for your company to voluntarily increase this trade? Please choose as many as you wish. increased consumer demand for recycled products; cheaper market price for waste paper cheaper wastepaper for trading companies and papermakers; higher wastepaper prices for wastepaper collectors; more expensive alternative raw materials (i.e. woodchips and virgin pulp); reduced supplies of woodchips and virgin pulp;

advances in recycling technology;

none of the above would cause an increase in waste paper use unsure

593

other (please state). Please explain your answer. 16. Does your company plan to increase its trade in waste paper? If so, please explain in what way. If not, please explain why not. CONFIDENTIALITY REQUIREMENTS: Please mark as appropriate. Responses to the following questions can be used freely stating the name of the company and respondent: Company Fibre Trade Data 1 6 11 16 2 7 12 3 8 13 4 9 14 5 10 15 Responses to the following questions can be used, but the name of the company and respondent are not to be used: Company Fibre Trade Data 1 6 11 16 2 7 12 3 8 13 4 9 14 5 10 15 Please attach copies of any policies your company has on environmental problems as they relate to your industry and company plus a copy of your latest annual report. Environmental policies attached Annual report attached Have no environmental policies

594

Minerva Access is the Institutional Repository of The University of Melbourne

Author/s:

PENNA, IAN

Title:

The political ecology of the Japanese paper industry

Date:

2002-11

Citation:

Penna, I. (2002). The political ecology of the Japanese paper industry. PhD thesis, School of

Anthropology, Geography and Environmental Studies, University of Melbourne.

Publication Status:

Unpublished

Persistent Link:

http://hdl.handle.net/11343/39484

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