Millstones

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Well, Thursday brought the announcement of something we knew anyway: the province is lending up to $110 million to Kruger to keep the Corner Brook paper mill running, citing the argument that the loan was guaranteed with the company’s power assets and would mean $250 million in direct and indirect salaries annually.

Now, for other paper market news from the past month. There’s this, from Jan. 22: “UPM-Kymmene

Corporation will permanently close down the Docelles paper mill in France. ... UPM offers support to employees in order to alleviate the effects caused by staff reductions in relation to the closing of the mill. The Docelles mill employs 161 people. … The production will cease by the end of January 2014. With the closure of the mill UPM will reduce a total of 160,000 tons of its fine paper capacity.”

And this, from AL.com, Jan. 31: “Courtland, Alabama — International Paper is in the home stretch as it gets ready to lay off a few hundred workers and shut down its final two paper machines to prepare for the closure of Lawrence County’s largest employer in March. Laura Gipson, spokeswoman for the Courtland mill, said the plant’s last two paper machines — C34 and C35 — will be shuttered during the next several days and approximately 500 workers will be cut the week of Feb. 10.”

This, from KLPU 88.5 Seattle and Northwest on Jan. 31: “A paper mill in Hoquiam has had its share of ups and downs over the past seven years. It was a major employer and once even referred to as the ‘greenest’ paper mill in the country. It was also a symbol for Grays Harbor County’s effort to reinvent itself after the timber market collapsed. But now the mill is closed for good. In late October 2012, there was a celebration to mark the reopening of the mill. Among those speaking that day was then-candidate for governor, Jay Inslee. ‘It doesn’t matter what the weather is, the brightest place today in the state of Washington is right here at Harbor Paper, that’s for sure,’ he said. Inslee went on to call the mill restart an ‘economic rebirth.’ It meant 175 mill workers had a job again. … Just three months later, the new owners suspended operations.”

In Maine, another newsprint mill laid off 200 people.

“Great Northern Paper in East Millinocket said Thursday that it would halt paper production for up to four months amid high production costs and lower market prices for its paper,” the Portland Press Herald reported on Jan 24. “GNP, which makes paper for newspapers, catalogs and paperback books, said the paper industry has become more competitive than ever, and that continues to drive paper prices down. That means less revenue coming in at a time when the company is paying high costs for wood, pulp and energy, said Great Northern spokesman Scott Tranchemontagne.”

Even more grim?  “Anybody want to buy a paper mill?” was the Feb. 19 headline at KXRO Newsradio in Grey’s Harbour, Ore. “Today is the day that Harbor Paper will officially be sold off piece-by-piece to the highest bidder. An auction will be held starting today at the Quinault Beach Resort & Casino for the facility. Included in the bidding will be auctions for individual parts such as furniture, tools, and the mirrors off the bathroom walls, although ‘Lot 1’ in the auction will be Harbor Paper in its entirety. Over 1,400 lots in all will be put up for bid.”

The announcement that the Corner Brook mill would continue to operate, thanks to government help, might be a bright light today for the region — but it’s more than a dark time in the industry.

Organizations: UPM-Kymmene Corporation, International Paper, Great Northern Paper Portland Press Herald Quinault Beach Resort Casino

Geographic location: Docelles, France, Courtland, Alabama Lawrence County Hoquiam Grays Harbor County State of Washington Maine East Millinocket Harbour, Ore Corner Brook

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Recent comments

  • bob
    February 26, 2014 - 12:41

    Yes ED, paper is like the horse and buggy. Try wiping your butt with your IPad!

  • Ed Power
    February 26, 2014 - 08:24

    One can just see government ministers a century ago, sitting around the cabinet table and discussing the merits of subsidizing the dying industries of their day. One minister fighting for the buggy whip factory in his district, another lobbying for the carriage works in his. Off to the side another minister harrumphs, adjusts his spats and states that automobiles are a passing fad and will never replace the horse. Fast forward to 2014, and their descendants agree to pour $110 million dollars into the buggy whip factory of their generation.

  • Ivy
    February 25, 2014 - 09:49

    The figures that I quoted were not taken from the top of my head and it is public knowledge for anyone who knows how to research. I am sure that the people of Corner Brook and surrounding areas believe this was a great move by government but how long should government try to fill a basket with water.

  • david
    February 23, 2014 - 09:55

    Mr. bob: Lumber is a cyclic business....and pulp and paper was too. Pulp and paper is no longer cyclic...it's dead. There is no recovery from obselescence. The lowest cost producer will be the one to eventually turn off the lights. Lending money into that dynamic is a game of desperate fools.....et voila.

    • bob
      February 25, 2014 - 08:07

      david, plup and paper is not dead. In 2009, that was the worst year in recent history for pulp and paper prices. I was selling for just over $500 per tonne. And the Canadian dollar was high (which is important because the market trades in American dollars). That is when all the mills started shutting down accross Canada. Today, Plup in papaer (northern softwood) is trading at as much as $1400 per tonne (according to Canfor) and on average, well above $900 per tonne for this brand of pulp and paper (note that other papers made from hardwood and plant material is not as good and does not get as good a price). To put this in to context with lumber, lumber at is lowest point was selling for around $140-$150 for 1000 board feet and today it is up to around $300. Pretty darn near exactly the same percent increase in price as we are seeing for pulp and paper! To deny the two products are not influenced by the same market factors is quite uninformed. SoFactor in the much lower Canadian dollar...You do the math. Again, the CYCLE of market supply and demand has repeated it's self, just as it did for lumber. So you can go around and try to call people fools and other names all you want. The facts do not support your arguement. So perhaps name calling is all that you have left to grasp onto...et voila!

    • david
      February 25, 2014 - 10:05

      Can't see the forest for the trees. Luckily, there's an app for that.

  • Corporate Psycho
    February 22, 2014 - 16:57

    I'm fed up with subsidizing where this crowd works and plays. This is disgraceful. The madness has to stop.

    • david
      February 23, 2014 - 09:44

      "Where they work and play" ?! Yes, when you put it that way, it is simply intolerable.

    • bob
      February 25, 2014 - 09:17

      Arrrggg! You guys don't know what you are talking about. But if this article had a all the facts and some context in it, maybe all these ignorant post would not be made. I thought the news was supposed to present facts? But I guess, as this is presented in teh Opinion section, you will see opinions and you know what they say about opinions...like something else, everybody's got one.

  • bob
    February 22, 2014 - 09:52

    Dear Editor, All of the mill closures that you have pointed out in your article are from American or European Mills. These are our competitors. Mills close when then cannot make money. Weather or not they make money depends upon the cost to produce the product and get it to market and the price you get for it when you sell it (in this case mostly the American dollar or Euro). The Canadian dollar has gone down dramatically since the Mill in Corner Brook was in trouble when the Canadian dollar was so high (making in more expensive to export). The closures of mills in countries to which we export to actually means good things for the Corner Brook mill. There is capacity being removed from the marketplace which will firm up the price. Again, the fact that the all the paper sold from the mill is bought in US dollars or the Euro, means that with the low Canadian dollar, the mill in Corner Brook has in fact now been able to collect 10% more on every sale it makes then it did when it was in trouble (the mill pays it workers in Canadian dollars but gets paid in American). In a marketplace with razor thin margins, this 10% swing in exchange rate is HUGH!! The mill has the best combination of free power (it owns two hydroelectric plants), cheap raw material (as much high quality spruce and fir fibre they want at their doorstep), a world class deep water year round sheltered seaport right on in its grounds, and now, cheap labour (the unions have taken deep cuts to get the mill through its rough patch, something that the local unions did not agree to in Stephenville or Grand falls, with workers taking large pay cuts and giving up about 30% of their pension)... The only thing the mill did not have going for it was the old equipment, which is now targeted for modernization with the money in this loan. And it is a loan secured with 100 of millions of assets (hydro plants and water and fibre rights), it is not a gift. So, for someone to say that this is bound to fail, because others have failed elsewhere, that is a very shallow view. The mills that have closed are the ones that have sprung up in the good times and have not been through the hard times. The fact that the mill has survived up until now when it main customer (the US) was in recession and the exchange rate so bad is in it ‘self, remarkable. It goes to show how strong the mill in Corner Brook really is and how much it really does have going for it. And now that the US economy is better and there dollar is high again, this is a double bonus for Corner Brook Pulp and Paper. Why do you think the government waited to see if the mill turned the corner before it dished out the loan? Why does it seem that the folks on the East coast cannot seem to believe that other areas of the province can actually make a go of it as well as they can (with the new oil industry driving things on the Avalon)? This mill in Corner Brook has been in business for 90 years, not because of the government or the machinery or because tax payers keep it afloat. It has survive all of the high and low cycles in the industry because of it’s strategic marketplace advantages and because it is a renewable resource. Seriously, a 100mill loan which will be paid back with interest by 2033 and which also generated 250 million EACH YEAR in salaries to the Newfoundland economy (as well as keeping the rest of the industry afloat)? How can anybody see this as not a good thing? Right now the government is about to spend 300 million on a power line for Alderon. This is not a loan, this is a gift. But one that will provide a bigger payback to the economy in return (even if only for a certain number of years as this is a non-renewable resource like oil). So how can people actually say that we should not spend any money to make money? Why does the author of this story not understand that the examples that they show of the mills in the US and Europe (or competitors) actually shows how the mill in Corner Brook has actually make it through its darkest hour in the quest to become the last man standing? We are about to see a rebound in the Canadian forestry industry similar to the one after the last big American recession in the 80s. I think that this industry’s obituary is a little bit premature. The lack of faith is downright insulting… But for those not familiar to renewable resources, you can be forgiven. You are the same folks who write off the fishery and put all their faith in the quick and dirty return of oil money. We might not get another 90 years of major economic benefit from this mill in Corner Brook, but I have a feeling that the forestry industry will still be humming along on the west coast long after the last barrel of oil has been taken from the water.

    • Maurice E. Adams
      February 22, 2014 - 11:49

      "In a marketplace with razor thin margins, this 10% swing in exchange rate is HUGH!! ".... ????? And why isn't this HUGH advantage keeping the fishing industry's processing plants open?

    • bob
      February 22, 2014 - 12:50

      Where ever we sell fish to the Americans in American dollars it will help. Can you say otherwise, no you cannot. Unfortunately, with so many Americans wrongly boycotting Canadian seafood because of the Seal Hunt , the fisherman are not seeing the benefit that they should and that they deserve. But you would be a fool to suggest that selling you production in American dollars while paying your expenses in Canadian dollars is not a good thing. Please try to dispute that if you wish. It will show what you know about currency trading.

    • Ivy Anthony
      February 22, 2014 - 13:18

      Since 2004 the government has put 1/4 billion dollars into this plant. The plant has not made a profit since 2009. Worker's have taken cuts in pay and there has been millions of dollars tax write offs for this plant. Does sound like something that is working? The market in North America is very fragile because of Asian markets there is little hope that Corner Brook will be the exception to this with all the extra costs of exporting the product from this little island.

    • Ivy
      February 22, 2014 - 13:29

      The North American market is very weak for this product mostly because Asian markets can produce for less cost. This government has since 2004 inserted 1/4 of billion dollars into this mill. There has been millions of dollars worth of tax write offs and the employees had to take a wage cut just to keep it open. Does this sound like something that's working?

    • Maurice E. Adams
      February 23, 2014 - 05:57

      Bob, when faced with a concrete example of how a 10% improvement in the exchange rate is not HUGE when viewed in the context of other really HUGE factors that make the business no longer economic, you do what government and Nalcor has been doing --- spinning the issue (what I call 'hop-scotching"). No one is questioning that the low Canadian dollar helps, but to spin the issue off into a seal hunt issue is ridiculous in the extreme.

    • SayWhat
      February 23, 2014 - 12:14

      Would have agreed with you up until two months ago. That's when Joe Kruger got mega-millions from Ottawa and the Quebec Government to develop cellulite filaments at a mill in that province. Our provincial government used our money for what..to pay off the banks or had these banks become private shareholders in Kruger or CBPP. Also you don't mention and no one else has mentioned the unfunded pension liability. Oh wait, I get it, our government will pump in another 100 million so that little backstabbing hovel won't become a ghost town. Remember a CMHC official said last year that the mill is no longer the big private sector employer that influences the Corner Brook region that has been taken over by the Alberta economy.

    • bob
      February 24, 2014 - 21:35

      Oh my! So many uninformed comments and so little time. First off Maurice, you were the one who was “ridiculous in the extreme” as you were the one who started talking about the fishery in the first place, not me (seriously your comment is right there on this page!!). I had to address your comment as you asked why the fishery was not booming in sales to the US, and I did, but it was you who brought it up sir, not me. So it is ironic indeed for you to complain about that now, don’t you think? And say what, when you call my town a backstabbing hovel, you are not making an argument about the merit of the loan to the mill. You are just sounding frustrated that your argument was shot down and being emotional. So you dislike Corner Brook, get over it and try not to revert to childish name calling please. This is not me against you, we are discussing whether or not this was a good move by the government. And ironically, this deal is good for the whole island and not just Corner Brook (or Backstabbing Hovelville if you prefer). Did you not read that this is a loan and not a gift? The government is getting its’ money back with interest. Also, the head of the lumber industry was on the radio just this morning saying how that this deal has saved the entire industry in NL (saving jobs on the East and West coasts as well as central). So, it is not just me who can see the sense in this loan. When I read some of the comments on here I just shake my head. But I think that you actually do know that I am right and now you are just getting personal because you feel mad because you have no real argument that has not been shown to be wrong. And Ivy, I don't believe the mill has been "given" 250 million since 2004 as you say. They did sell off some of the land rights that they had to the government some years back, but this was land that they owned before confederation and the government wanted to get it. And this current 110 million you are adding on here is a secured loan, not a gift. But still, even if it was a gift of 250 (similar to the 300 million that the government is giving to Alderon, or the 600 million plus per year that the government is giving to Nalcor), 250 million a year comes back from this mill every year in salaries. That has been stated in articles on this very site. So even if they had to put in 250 million in 10 years, they (the gov) still see 2.25 billion come back in return in that same time! 1000% return in 10 years! Imagine if you could get that kind of return on your rrsp? You could retire tomorrow. And btw, lumber and pulp are connected... the log purchase agreements between the pulp mills and the sawmills. The waste from the sawmills gets used for stock in paper mills and their small and short logs go to the paper mills. The industry is intertwined, and just like the lumber industry that is on the rebound, so is the pulp and paper industry. I know family members who work at the mill and apparently, they do not have an issue with orders for their paper. It is not like people stopped buying newspapers. In fact, now that the American economy has recovered, it is not just lumber that is in demand. The more companies operating in the US, the more advertising that goes into the printed media (newspapers, flyers, etc..). So for anybody to suggest that the rebound in the states does not help the mill, that is not true. As it is showing in the amount of work going on at the mill this year. I know a millwright who was going to leave for Alberta 2 years ago, and now that he decided to stick it out and stay, he says that he is making more money now in overtime, even after taking pay cuts etc., than he did in the past few years before the pay cuts, due to the fact that they are going flat out on new work. But hey, I realize that I persons experience does not necessarily tell the whole story, but still, it is very good to see that they are really busy this year down there. And all of the people talking about how the money is just going to pay the banks? You have not read the details of the agreement (probably why you don't know about the interest being paid as well). Of that 110 million, 75 million is set to be used for reinvestment in the mill to modernize it. You guys on here really need to read the information that is available on the company website, on the government website, and on the Montreal Gazette. You will discover the details of this agreement and then you can start making some informed comments. Nobody disagrees that newspaper demand has slowly declined overall in the past few decades (especially with the internet). But it is the inefficient mills that are the ones that close and then it becomes a race to be able to make the best paper for the cheapest price. If you think that Chinese newspaper is what the Chicago times is looking for your crazy. They do not have the same species of trees in Asia and they use crops for fibre (not that same quality). Their paper is not the same quality as North American paper. They have to ship it much farther and that drives up cost. Their mills also do not have the same ISO qualification as the mill in Corner Brook. They don’t have the same environment certifications that the Corner Brook mill has and many customers require that. They also don't have a free trade agreement and are subject to tariffs. So, the mill in Corner Brook has actually weathered the storm and it does have a future. Again, say what, the money is, according to the plan, supposed to help with providing capital to stave off the banks, but also 75 million is supposed to go back into the mill. Then the company also has to top up the pension fund as well. And, if the company does not do this, as you seem to think, Newfoundland gets two more hydroelectric power plants! So how do we lose? If the mill survives for another 30 years, we win! If the mill closes in 6 months, we get two hydro plants, sell the excess power using the new power line to NS, and again we win!! I suspect that was one reason why the government was so eager to move ahead with this loan (they know if it fails they can make money in the power business. I just cannot understand how people can be against this. I can only guess you just don't know the facts, or that you just like to see things fail. Nobody expects a bunch of cheerleaders to pop up on here. But if people would at least have the decency to learn the facts of what they are posting on, that would be a little less irresponsible. Please check out the article on the Montreal gazette, they have a good summary of the agreement, the interest equation, and the responsibilities of the company to put the money back into the mill in upgrades and restoring the pension fund... If you read all the facts and still don’t like this deal, then I guess I will have to respect your opinions. But unfortunately for you, your opinion does not matter. The deal is signed. The Mill was saved. A community has avoided turmoil. Families have not been split apart as Dad goes off to Alberta. Workers are still able to go to work and come home and be with their families. Read stories to, and kiss their kids goodnight. And guess what, despite all the energy you have spent complaining about this loan, and wishing hardship for the folks working at the mill, it has cost you and will cost you nothing. So please, for the love of god, move on. Soon, you will be able to complain about the fact that we are getting a new hospital out here. Whatever makes you happy!

  • david
    February 22, 2014 - 09:37

    By the time it's all over, the mill in Corner Brook will have received more in government assistance over the last decade of its life than it provided over the first 80. That no one notices or cares is what makes Newfoundland the economic powerhouse it is.

    • bob
      February 22, 2014 - 12:23

      david, you are wrong. The mill has Provided many more times back to the province as it has ever received. And it is not getting a handout with this loan. This loan is secured (with assets worth more that the 110 million) and Kruger has to pay interest on it. 4% in the first 3 years and then the cost of borrowing plus .5% after that. So the government is actually making money on this loan, plus there is $250 milling a year in salaries staying in the province. So how is that costing the government money? It is a shame that more people don't know that facts on this and how the government really did get it right this time. And I consider myself a liberal yet I fully support the gov on this. And yes I am from the west coast, but I don't work for the mill. I have worked in BC as an systems analyst for the largest lumber producer in north America who also owned many pulp and paper mills and I can tell you first hand that the plan for all the mills was to survive the bottom of the cycle (which we have already past) and be there for when the maket picks up (which it has). So, I can understand how people who are not from the industry can be unaware of the way things work, but it is kind of surprising and disappointing how much sting and malic is being shown here by some of the comments. It is like people are wishing hardship upon others. It is really disgusting and says more about the commenters than the comments.

    • david
      February 22, 2014 - 13:13

      Lenders make a modest profit on loans that get repaid. They lose the entire amount on loans that don't. I think it's a very good bet that Corner Brook Pulp and Paper will never, ever be in a position to repay this loan. If it repays any at all, it will be its senior bank debt first. So the only "merit" of making this loan is it accomplishes kicking the can down the road for some completely different politicians to write off the loan when default occurs. You know what makes Schedule 1 banks so good at lending? It's that they are very careful to only lend to businesses that are likely to repay. The banks won't lend any more money to CBPP. Banks aren't as intoxicated and confused by a 5% interest rate as you are. [....FYI, neither is our government. But they do know that people like you can be duped with a completely immaterial, irrelevant 5%, whereas everyone cries bloody murder if it was "interest-free".....]

    • bob
      February 24, 2014 - 22:13

      david, You have already read my comments (supposedly) and you already know that the loan is secured (remember the two hydroelectric plants they get)? You know this but you continue to post that they will get nothing if the mill fails. You are wrong about this as this is a secure loan (the power plants!) and it is right here on this page in black and white, yet you continue to try to conceal this in your comments. It is futile to try to have a debate with you. But at least you did admit that you were wrong about the interest (even though you tried to say that it was not very much and that it was insignificant and the cibc interest rate was… yada yada yada…). Why can’t you just admit that your first comment was wrong as you didn’t know the facts before you posted?? But anyway, the absolute truth of this debate david, is this; you are against the loan, and I am for it. The loan is signed and delivered. So, too bad for you! I came on here and commented because I saw so many uninformed comments, I thought I could show people the facts and where they can go and verify the facts for themselves. I thought that I could add some context and fact to the discussion as it was clear that it was lacking. I quickly realized that some people don't care about the facts. They want to be mad and complain about something and that is that. Very pathetic existence, but that is not my issue to deal with, so I won't lose any sleep. Because, you can say what you want and get as upset as you want, and the mill still has the loan and the workers are still working. Your negativity and contempt for others is powerless. We still exist. Checkmate!

  • Dolf
    February 22, 2014 - 08:16

    Major employers have pulled out of cities and towns in Newfoundland & Labrador over the years and despite the predictions of doom & gloom those cities and towns continue to thrive, some even more prosperous than before. We should have pulled the plug in Corner Brook many years ago.

    • bob
      February 22, 2014 - 13:00

      I am not sure that these cities are actually thriving. Surviving yes, but thriving?? They were definitely better off with that industry in their towns than without them. To suggest otherwise is not accurate. At this point in time, when the worst is already over and the market factors recovering (mostly due to the Canadian dollar vs. the American), that would be a huge mistake...