All of us from the paper world remember Bill Gates’ prediction regarding end of paper era. We were arguing with it but financial crisis and electronic revolution made some of such forecasts realistic. Let’s look at facts and figures.
“The paper industry faces severe challenges due to high raw material, energy and logistics costs, and considerable overcapacity. The profitability of our paper business is clearly below the level required to run long-term sustainable operations. The planned restructuring would further strengthen the cost competitiveness of UPM’s paper operations and reduce the future need for major maintenance investments”, says UPM’s president and chief executive Jussi Pesonen.
The demand for printing paper is going down. Producers around the world have to reduce prices in order to sell their paper. The results are widely known – minus in P&L account, cost reduction plans, mass layoffs and finally bankruptcy case.
Some big players that are financially strong and have low-cost mills can idle machines or shut down mills if necessary to keep the market in balance. Small producers have to think of permanent close and diversifications.
Paper maker UPM-Kymmene permanently removes 1.2 million tonnes of magazine paper capacities in Finland , Germany and France , and 110,000 of newsprint capacity in Germany
The planned measures include:
- permanent closure of the UPM Myllykoski mill in Kouvola in
- permanent closure of the UPM Albbruck mill in
- permanent closure of the paper machine 3 at the UPM Ettringen mill in
- transfer of the sheeting lines from UPM Albbruck mill to UPM Plattling mill in
- sale or other exit of the UPM Stracel paper mill from UPM Paper Business Group (to be completed within 12 months)
- restructuring of overlapping paper sales and supply chain network as well as global functions.
In addition, UPM says it plans to temporarily close the paper machine 2 producing uncoated fine paper at UPM Nordland Papier in Germany and streamline operations in Pietarsaari pulp and paper mills in Finland
Norske Skog is talking to work councils about a deal to sell its Parenco mill and Reparco Group recovered paper business in the Netherlands
Parenco has a total publication paper capacity of 265 000 tonnes.
After unsuccessful search for an investor, Norwegian specialty paper manufacturer Hunsfos Fabrikker is to be liquidated. Production at the mill in Vennesla has been idle since 22 September this year when the commencement of the insolvency proceedings was announced.
By the end of 2012, it is estimated that about 400,000 to 600,000 tons will be shut down in North America in order to balance supply and demand.
In October, Verso Paper Corp said it will shut down three paper machines permanently to reduce its annual production capacity by 11 percent.
Wausau Paper will permanently close its Brokaw paper mill in Wisconsin by end of QTR1 Y2012, cut 450 jobs and exit its print and color business by selling the brands it owned to Neenah Paper Inc.
NewPage, which is under Chapter 11 bankruptcy protection, making it nearly impossible to shut down a machine or mill in the short run. Besides, NewPage claims it has already mothballed all its high-cost machines.
Last year, Canadian paper maker Catalyst Paper Corp permanently shut the 58-year-old Elk Falls
Russian producer of packaging paper – Segezha Pulp and Paper Mill – has stopped production in December because of the recent weakening in demand
Raw materials
According to the mills’ official statements all these decisions were driven by dramatic and irreversible market demand decline and rising costs of key raw materials and energy. Such words leave a hope that the situation will be better when e.g. pulp prices go down. But according to some analytics prices of pulp are at the bottom today. In response to weakened demand for pulp Norwegian pulp producer Södra stopped three pulp mills in November: at Södra Cell Tofte pulp mill, at Södra Cell Folla and Södra Cell Mörrum in Blekinge.
Is there any way for paper mills to prevent the prices from collapsing next year?
