BAILEYVILLE, Maine — The decision by Woodland Pulp’s parent company to add tissue manufacturing operations takes advantage of strong markets for tissue and also will strengthen the position of the pulp mill, according to a University of Maine wood science professor.
Most of the hardwood pulp produced by Woodland Pulp is exported to China.
“It’s much better to see some value-added product made here than just exporting pulp,” professor Robert Rice said Thursday. “It takes them away from a very vulnerable position of being only a pulp mill and puts them in a position to be a mill that produces a finished product,” which is “all a good sign.”
The market for tissue is “fairly strong domestically and internationally,” noted Rice.
“I think this is a win-win for everybody,” he added.
State and company officials announced the $120 million investment by parent company International Grand Investment Corp. on Wednesday. The company will install two tissue machines that will be operated by an affiliate, St. Croix Tissue, and employ about 80 people. When both are operational by the first quarter of 2016, the machines reportedly will produce 60,000 tons of tissue annually. The investment also is expected to spur 200-300 other jobs not directly related to operating the machines.
The new operations will produce “a full range of tissue products” targeted for household consumption and other markets, said Woodland Pulp spokesman Scott Beal on Thursday. Finished product in the form of large rolls will be transported by truck to customers on the East Coast and in the Midwest, he indicated.
The tissue manufacturing operations will be housed in an existing building that formerly housed a fine paper machine. The building will be expanded and renovated with construction work to begin this spring.
About 25 percent of the pulp production at Woodland Pulp will be supplied to St. Croix Tissue, according to Beal. The remaining pulp still will go to the pulp market, almost all of it exported and shipped through Eastport.
The company considered several other locations in the U.S., but proximity to the Woodland Pulp mill was a key factor in the decision, suggested Beal.
“The presence of our pulp mill provided a unique opportunity for vertical integration of the new tissue machine project,” he said.
Rice called news of the company’s intended products “surprising that it’s a domestic market, but the market for tissue is a good one both here and abroad.”
Although even tissue markets can be somewhat cyclical because of population trends, “You can’t replace tissue paper,” noted Rice. “It isn’t a commodity that’s easily replaced.”
Rice foresees little competition with Lincoln Paper and Tissue, Maine’s only other tissue manufacturer, because St. Croix Tissue will produce “such a modest amount” and because of strong market conditions.
Woodland Pulp draws on forest resources within 75-100 miles, according to Rice, a distance that extends well beyond Washington County into Hancock, Penobscot and Aroostook counties. About 70 percent of the wood fiber for the mill is sourced from Maine forests with the remainder from Canada.
The news was hailed by officials from the top of state government — Gov. Paul LePage held a news conference to announce the company’s decision — to leaders of Baileyville, a community of about 1,500 people, as well as company officials.
“A pulp mill that stands alone, it’s very difficult to survive unless … we convert the pulp into a value-added product,” said A.K. Agarwal, CEO of IGIC, who attended LePage’s news conference.
Bert Martin, director of Woodland Pulp, was even more blunt. A New England pulp mill, on its own, “does not have much of a chance to survive the competition from South America and the rest of the world,” he said.
State officials wooed the IGIC investment for more than two years, and LePage met the owners of IGIC in China during a trade mission in 2012.
“When the governor visited China and had lunch with the owner … I think that put the frosting on the cake in terms of this project,” said Martin.
“We’ve had a lot of hits in the last few years, and some of them might be on the table right now,” said state Sen. David Burns of Whiting, an apparent reference to proposed plans for a new state prison that may result in the closure of the Downeast Correctional Facility in Machiasport. “This is a positive thing for our people. It’s an opportunity for people to get jobs and work in that community and enhance the community and be independent.”
“I think this is fabulous,” said Baileyville Town Manager Rick Bronson on Wednesday. The company’s decision was the result of cooperative efforts from Woodland Pulp management, state officials and Baileyville leaders, he said. “We all collectively did the right things, and we got selected.”
“We can all think location is against us here in Maine, but in this case it is not,” observed Bronson. Baileyville is close to the new commercial border crossing in Calais and is served by both rail and the Eastport Port Authority. The St. Croix River also provides water and hydroelectric power.
“The infrastructure is absolutely vital to this investment and other investments,” said Bronson.
The decision to locate the tissue plant in Baileyville may help attract other business, said Bronson, who referred to the community as the “industrial neighborhood of eastern Washington County.” The town has suitable industrial and commercial business sites served by public water and sewer, he noted.
“I can’t say enough about how pleased we are, particularly for Washington County,” LePage told reporters. “When they tell you that the jail in Washington County is the economic engine, you have problems.”
The pulp mill, located next to the St. Croix River on the Canadian border, employs about 320 people, making it the largest employer in a county known for its high rates of joblessness and poverty. It is also the largest taxpayer in Washington County.
The Woodland Pulp mill was acquired from Domtar by International Grand Investment Corp. for $64 million in 2010. It has an annual production capacity of 395,000 metric tons of pulp.