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Verso scales back
October 12, 2011 - Jim Anderson
Verso Paper’s decision to shut two paper machines in Minnesota and another in Maine is alarming, but there is also a need for perspective.
The machine being shut in Bucksport, Maine, dates to the 1930s, according to the Bangor Daily News. About 125 jobs will be eliminated from a workforce of 700. (Verso also continues to employ nearly 900 workers at its mill in Jay, Maine.)
Although the Bucksport machine had been extensively upgraded over the years, it was recently shut down for roughly nine months because of market conditions. Verso will still operate three other machines at Bucksport.
Verso says that shutting the machine at Bucksport will reduce the company’s annual coated groundwood capacity by 90,000 tons or about 10 percent. Coated groundwood paper is typically used in catalogs and magazines.
In Sartell, Minn., Verso will be closing two of its three machines, both of which date to pre-1910. The mill will continue to operate a lightweight coated machine from the 1980s that represents about two-thirds of the plant’s annual business, according to the St. Cloud Times.
Sartell will be losing about 175 of its 425 workers. The supercalendered machines that will be shut down in December produce the type of paper used in newspaper inserts. Although demand is fairly stable, the machines were no longer cost-effective, according to Verso.
Pat Gibney, manager of the Sartell mill, told the St. Cloud Times that there have been discussions about idling the machines since he began working at the mill in 2004.
Paper mills continue to face challenges because of the recession, market changes (i.e., you’re reading this electronically, not on paper) and global competition.
At Verso’s Quinnesec mill, where some 475 jobs remain intact, a $43 million energy project is slated for completion by year’s end.
The Quinnesec public and paper facility, established in 1985, is relatively new, but it’s by no means immune to ongoing market pressures. There have been three owners in its lifetime.
My (mildly) educated guess is that Quinnesec will remain viable for decades to come, even as the paper industry today struggles mightily and builds no new mills in the U.S.
The Quinnesec mill has been praised by Verso as the lowest-cost coated freesheet paper producer in North America.
While mills in China — a prominent emerging global competitor — face a shortage of wood supply, that’s not the case here. China also faces serious environmental issues. It’s been estimated that a quarter of its population has no access to safe drinking water. There’s at least some evidence that China is awakening to the need to curb pollution.
Labor costs in Asia remain low, but that may not be the ultimate factor in determining the fate of the paper industry in the U.S.
A 2010 study by the Economic Policy Institute in Washington, D.C., concluded that labor accounts for 8 percent of production expenses at U.S. mills, versus 4 to 6 percent in China, where mills have historically received huge government subsidies.
If that’s the case, it would seem that labor costs alone won’t spell doom for efficient facilities like Quinnesec.
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