Two companies remove 2 million tons of publication paper from production

Newsprint and magazine paper demand plummets

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SCA Ortviken paper mill in Sweden. Photo SCA via Internet

UPM is closing its mill in Kaipola in Finland close to where it is headquartered and selling off its UPM Shotton newsprint mill in Wales in the UK. The latest announcement follows the closure last month of UPM’s Chapelle newsprint mill in Grand-Couronne, which employed 228 staff and produced 240,000 tons of newsprint annually. The two UPM mill closures remove 690,000 tons of annual newsprint production.

UPM’s restructuring plan given in a public statement to the stock market on 26 August, will lead to cost savings of €75 million based on closing one mill, selling its UK newsprint operation, and streamlining its European and US businesses. UPM Kaipola’s three paper machines’ planned closure would impact approximately 450 positions and lead to a permanent reduction of 720,000 tons of graphic paper capacity – of 450,000 tons of newsprint and 270,000 tonnes of coated mechanical paper. On the other hand, while UPM indicated that paper demand and especially newsprint demand was at a low ebb, it’s paper making business remained substantial and sustainable, and one that it is committed to.

“This is devastating news to Kaipola. While Kaipola has competent teams and well operated machines, external factors such as high logistics costs, regulatory and tax burden, high cost of labor and increasing fiber costs make it the least competitive among UPM’s paper mills,” said Winfried Schaur, executive vice president of UPM Communication Paper, in the company’s statement.

The UPM mill in Wales has considerable assets, including 250,000 tons of newsprint capacity, a recycling facility with a de-inking plant, and access to the UK recycled paper market. It can be converted to the production of carton board.

SCA removes 775,000 tons of publication papers from production

On the same day, Sweden based SCA said the Covid-19 pandemic and lockdowns had forced its exit from publication papers. It is converting its last remaining graphic papers mill, which is in Sweden, to produce chemically pre-treated thermo-mechanical pulp for packaging board and hygiene products. Weak market demand and unprofitable prices for publication paper are the stated reasons. The company said that while the market for publication paper fell by 5% annually since the 2007-09 global financial crisis, demand has fallen by 30 to 40% since the Covid-19 pandemic.

SCA plans to close its Ortviken paper mill within six months, citing weak demand for publication papers. The mill runs three paper machines with a total capacity of 775,000 tons a year of LWC, MWC, and uncoated magazine and catalog paper. The closure of publication paper operations is said to affect 800 employees at the Ortviken paper mill and other SCA operations.

With about 70 million tons of graphic papers still manufactured annually, the SCA mill’s closure in Sweden and the UPM mills in Finland and the UK are not expected to impact supply, which is still above excess global capacity. Nevertheless, removing 940,000 tons of newsprint and 1,15,000 tons of magazine and catalog paper in a short period indicates vast and critical market changes at work.

 

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