By PHILIP HOPKINS

 

OPAL, which is suing the state government $402 million for breach of contract, lost more than 350 employees when white paper production was forced to close at the Maryvale Paper Mill because the government did not supply the hardwood timber guaranteed in the Wood Pulp Agreement.

Before the government’s alleged breach of contract, the Maryvale Paper Mill employed more than 850 team members, Opal documents show. Its operations supported direct and flow-on jobs across Victoria.

The mill now employs more than 500 team members and is still a major employer in the Latrobe Valley, where it has operated since 1937.

Despite the white paper closure, Maryvale Mill still generates $387 million in revenue annually, employing 539 full-time equivalent workers who receive $90 million in wages and salaries.

A report by consultancy REMPLAN for Opal, says this direct economic activity generates about $111.1 million in value-added to Latrobe City’s Gross Regional Product.

Following this direct impact, demand for intermediate goods and services is likely to increase revenue for local supply chain industreis by $164.3m, support 304 supply-chain-related jobs and generate a further $55.1 million in value-added.

These supply chain effects include multiple rounds of flow-on supply chain effects: pulp, paper and paperboard manufacturing boosted by $25.6 million; professional, scientific and technical services $16.7 million, and basic chemical, cleaning and polymer manufacturing by $14.2 million.

The total output impact in Latrobe City is $622 million. For every dollar of direct spending, a further $0.61 is captured elsewhere in the municipality.

Opal alleged the state government breached its wood supply agreement made in 1996 with Amcor, the then operator of the Maryvale Mill, to supply pulpwood. The agreement was due to expire in June 2030.

In 1998, Amcor assigned its rights top Paper Australia P/L, now trading as Opal. Under the agreement, the government state-owned enterprise VicForests provided Opal with eucalypt wood, a critical material for white paper production. In November 2022, the government advised Opal it would be unable to fulfill its contractual obligations to supply wood.

For the 2022-23 financial year, a reduced supply of wood was supplied to Opal by VicForests. Opal says the government did not intend to supply any wood in the future, forcing the company to terminate the agreement in May 2023.

With no viable wood alternative to replace the wood supply, Opal was forced to close its white pulp and paper production at Maryvale in early 2023, resulting in the loss of more than 400 jobs across Australia.

“The closure, together with the reduction in production volumes, consequential redundancies an d the severe commercial impacts on the entire Opal Group arising from the loss of its white pulp and paper business, has caused – and continues to cause – Opal to suffer substantial loss and damage,” the company said in a statement.

Opal hoped the Supreme Court action would determine the matter “fairly and in a timely manner.”