Big changes coming at Grand Falls paper mill

Changing global economic circumstances for the paper industry have been pressing on the industry in Newfoundland and Labrador for years.

The future of the AbitibiBowater mill at Grand Falls-Windsor, established in 1905, may be known as early as next week, according to CBC News.  This follows an extensive review within the newly merged paper company of all its assets.

There are a few things to bear in mind:

1. If the AbitibiBowater announcement comes next week either right before or right after the Hebron announcement it will likely be swamped by Hebron.  Stephenville wasn't a political crisis in the province because it happened out of easy camera range of the St. John's-based local media.  The story just won't register, especially if Hebron is a bright shiny object waved around to distract attention.
2. "AbitibiBowater manager Brad Pelley said that inside a year, the company has to turn the mill into an operation that's not losing money."  Now there's a quote that doesn't even come close to telling the story.  Despite whatever changes have been made at the GFW mill, surely to mercy, the mill is suddenly in better financial shape because of the heavy provincial government subsidies that flowed in the wake of the Stephenville closure.  Like $30 million of flow over two years to Corner Brook and GFW.
3. Will the provincial government be as combative and feisty about downsizing or machine closings at GFW as it has been in the past?  Here's another policy carryover from the Grimes crowd to Williams' crew: threaten legal action (like stripping all the company's timber licenses) if one of the two machines at GFW is closed, regardless of the economic costs. 

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Update: Kruger machine closure and government subsidies

The official government news release came in the middle of Monday afternoon.

Turns out the provincial government has subsidized the newsprint industry to the tune of $30 million over just the past two years.

In the release, natural resources minister Kathy Dunderdale notes:

"We met with Kruger officials last week and told them very clearly that this was unacceptable. We reminded the company of the support it has received from this government. In the last two years, we have provided over $30 million in assistance to the pulp and paper industry in this province. The company has revisited its plans and moved ahead with today’s action that will see the shutdown of one machine. The impact of their business decision has been lessened because of the significant support this government has provided, and continues to provide, to this industry."

Hmmmm.

The last time issues like this came up, the provincial government wound up shelling out millions in subsidies. In 2006, it was an unspecified amount to deal with a cost problem with operations on the island. Later in 2006, it was a $10 million subsidy on power costs. A bit of simple math suggests that the earlier subsidy was upwards of $20 million but the actual figure was never made public; it could be there have been other subsidies that Dunderdale or her predecessor never announced publicly.

Subsidies to private industry are nothing new for the current administration. In a failed effort to salvage the Abitibi mill in Stephenville, the provincial government was prepared to offer the company upwards of $10-12 million annually to keep the mill open. Bond Papers concluded that subsidy actually worked out to more than the provincial government's tax take from Abitibi's Stephenville operation in certain circumstances.

No one should be surprised if there is a government decision between now and next spring, while the legislature is conveniently closed, to announce further subsidies for the pulp and paper industry in the province.

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Kruger shuts machine at Corner Brook

Faced with declining demand and a high Canadian dollar, Kruger Inc is shutting Paper Machine No. 1 at its Corner Brook operation. The shut-down is for an indefinite period beginning November 5 and will reduce the mill's output by 80,000 tonnes annually.

No sign when the provincial government first learned of the decision, although it was far enough in advance to see the natural resources minister shipped to Corner Brook for a media availability. Kathy Dunderdale told CBC's Radio Noon that the provincial government had "invested' heavily in Kruger's Corner Brook operation in recent years. Dunderdale put the figure at $20 million. That would include a harvesting subsidy announced by Dunderdale's predecessor Ed Byrne to Kruger in March 2006, although the government didn't announce the price paid at the time. That amount would also include a power cost subsidy of $10 million Dunderdale announced last October.

Dunderdale said 83 people will be laid off as a result of the machine closure but that the figure might be reduced to 13 due to layoffs.

Kruger closed one machine temporarily in July, 2007 citing the same reasons as the ones given on Monday.

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Kruger closes CB paper machine, other companies may follow suit

Kruger Inc. announced late on Friday that it was shutting down a newsprint making machine at the company's Corner Brook mill effective July 22.

The company blamed the rising Canadian dollar for the unexpected shut-down.

Other factors also likely played a role, namely surplus capacity in the North American market coupled with surplus production capacity.

Editor & Publisher reported on July 5 that North American newsprint demand fell year over year by slightly over 8% in May and was down 11% in the first five months of 2007. The online edition of the newspaper industry journal also reported:

Further closures by Abitibi-Consolidated Inc. or Bowater Inc. are not likely to come until after the two companies merge, which is slated for late July. Mid-sized companies also are expected to indicate plans to close high-cost machines this year, noted Dillon.

Recently, some producers announced closures. Catalyst Paper Corp. indicated last month that it would indefinitely idle its 134,000 tonnes/year No. 4 newsprint machine at Port Alberni, B.C., by Sept. 1. More recently, a June fire at Abitibi-Consolidated Inc.’s Grand Falls, Nfld., newsprint mill resulted in a decision to shut the mill down for three weeks for repairs. Meanwhile, Kruger Inc. reportedly announced downtime at several mills.

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