May 23, 2018
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Paper’s Challenges

Robert F. Bukaty | AP
Robert F. Bukaty | AP
A paper mill sits idle in Millinocket.

If the men who walked through the gates at the Great Northern mill in 1911 were on hand for the hoped-for reopening of the Katahdin region mills, they probably could tour the facilities and understand the production process.

But if the manager of the plant in 1911 were to review the business plan for the revived mills — or, for that matter, any mill operating in Maine today — there likely would be a lot of head scratching.

Paper mills remain a vital part of Maine’s economic landscape. But for many Mainers, the perception lags behind the real nature of these businesses. For the industry to continue to thrive, its assets and challenges must be understood. The fate of Cate Street Capital’s bid to reopen the Millinocket and East Millinocket mills relies on this understanding.

Paper mills employ about 7,500 people in Maine. About half that number worked in one mill in Jay 30 years ago. But fewer employees does not mean less paper production. In fact, production has increased steadily since 1990, and now exceeds the peak production of the past. Maine is the second largest (to Wisconsin) paper-producing state in the country.

One mitigating factor of fewer jobs is an average salary of $60,000, nearly twice the average Maine average income.

John Williams, president of the Maine Pulp and Paper Association, says the key costs for 21st century paper mills are pulp, people and energy. Maine mills have access to an abundant supply of pulp. Labor costs, though, put mills at a competitive disadvantage with their Asian and South American counterparts.

The hard truth is that modern mills are highly automated and rely more on computer-operated equipment than experienced mill workers.

Another daunting challenges some Maine mills face related to labor costs is that equipment has not been upgraded in recent decades, so the paper-making process is more labor-intensive than it ought to be, Mr. Williams said. Those upgrades also bring energy efficiency.

This third component, the cost of energy, has cursed the Katahdin region mills. Relying on oil-fired power plants is a major impediment to economic viability. Brookfield Asset Management, after purchasing the Millinocket and East Millinocket mills, spun off the hydro power component of the company, leaving the mills facing high energy costs.

A paper mill thinking about energy production as a source of revenue isn’t an aberration. It’s the future. Verso, the company that operates paper mills in Bucksport and Jay, now sees the sale of electricity as one of its principal revenue streams, along with paper.

“Getting into the energy market does make some sense. I think it’s a pretty natural fit,” Mr. Williams said.

So, too, does getting into a niche paper market. Sappi’s Westbrook mill makes a kind of paper that is made into molds into which composites are poured to create things like car dashboards, he said. Directory paper, used in telephone books, may not provide a big enough market.

So as the Katahdin region holds its breath, hoping for a successful take over of the mills, policymakers and the public should embrace a more accurate view of the industry’s assets and challenges.

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