When Expera Specialty Solutions came to town last December, it looked like the chance for a fresh start for the Old Town mill. Within a month of acquiring Old Town Fuel and Fiber, the Wisconsin-based papermaker revived the mill and began pumping out pulp destined for its paper mills in the Midwest.
But less than a year later, Expera announced that high wood costs, a weak Canadian dollar and a significant increase in pulp capacity in the market had taken the wind out of the Old Town mill’s sails. Expera said it would close up shop in Old Town by the end of the year.
“The combination of these forces does not allow sustainable operations even with a dedicated and talented team of employees,” Expera CEO and President Russ Wanke said in a news release announcing the closure.
According to Expera spokeswoman Addie Teeters, paper production at the company’s four Wisconsin mills won’t be affected by the closure in Old Town.
Unfortunately, this isn’t the first mill closure Old Town has had to endure. In the last 35 years, the mill has changed hands six times, including three times in the last decade. So far, no buyer has publicly stepped forward to take over from Expera and union representatives continue to look for a buyer.
But the Wisconsin papermaker’s imminent departure shows that the Old Town mill’s sole reliance on pulp production in a market flush with competitors, both domestic and international, has hampered its efforts to succeed.
‘A huge wound’
Up until a decade ago, the Old Town mill produced both pulp and paper, specifically tissue, under the ownership of paper giant Georgia Pacific. But in 2006, Georgia Pacific said that “the mill’s tissue and pulp manufacturing assets [were] no longer required to service our customer base,” and shuttered the mill.
After it closed the mill, Georgia Pacific dismantled and removed the tissue machinery from the mill’s campus. Later that year, when it sold the mill to Red Shield Environmental, it came with the provision that for at least five years there would be no tissue production.
Red Shield revived pulp production and launched an effort to produce biofuel to diversify the mill’s operations.
Rumors persisted around that time of a tissue revival, as the five-year window barring it expired in fall 2011, according to the BDN archives. Of course, that never happened and a biorefinery moved into the space once occupied by the tissue machines. Then, like Red Shield before it, Patriarch Partners declared bankruptcy, closed the mill and left town in August 2014.
A look at the mill’s recent history shows its post-tissue days have been less than stable.
“Obviously, the destruction of the tissue asset hurt the mill. It took away its ability to add value to its pulp,” said Duane Lugdon, United Steelworkers International Union representative and a 42-year veteran of the pulp and paper industry. “Losing that capacity was a huge wound from which it has never recovered.”
Would Old Town have been more sustainable if its tissue machines were still producing today? “It’s hard to say,” said Lloyd Irland, a forest products industry consultant. “Tissue is the one grade that still is growing. We’d have to know whether the Georgia Pacific tissue machines were cost-competitive, or if they could be made cost-competitive at a modest cost.”
Tough times in pulp market
For a small pulp mill to compete in today’s global pulp market “is pushing a very large boulder up a very steep hill,” said Irland.
“Pulp only is not a lucrative model,” Lugdon said. When the pulp market is down, he said, a mill that can’t add value to its pulp takes a hit, and because of foreign competition the market has been down for some time.
Much of this growing competition has come from Asia, particularly China and Indonesia. Many of the mills in those two countries, Irland said, have been built in the last 20 years, compared with Maine mills that are in some cases a century old.
Not only that, but some can churn out substantially more pulp than a mill like Old Town, he said. One mill in Indonesia, Irland mentioned, can produce up to 2 million tons of pulp a year; Old Town’s capacity is about 200,000 tons a year.
With mills churning out pulp overseas, a large inventory of readily available pulp has lingered on the market over the last few years, said Robert Rice, professor of wood science in the School of Forest Resources at the University of Maine in Orono.
“Why make it if you can buy it cheaper?” he said.
Additionally, the strong U.S. dollar has made pulp and paper imports cheaper than what is domestically produced. For example, the Canadian dollar has been on a steady decline since 2014 and as of Wednesday is worth only 71 percent of the U.S. dollar. Across the border, this is a potential boon to Canadian manufacturers, in particular pulp and paper producers.
Because pulp prices are based on the U.S. dollar, any weakness in the loonie means U.S. papermakers can get Canadian pulp at a lower price than they could from domestic producers, or if they produced it themselves.
While a weak loonie gives Canadian pulp a competitive edge over U.S. pulp, Irland said it’s not yet clear whether U.S. papermakers are importing more pulp from north of the border.
Expera’s spokeswoman declined to say where the papermaker will get pulp with the loss of production in Old Town.
A future in tissue
Meanwhile, as part of a $120 million expansion, Woodland Pulp is adding two tissue machines to its pulp mill in Baileyville at a time when other mills across the state have closed or reduced capacity.
These two tissue machines are expected to generate 60,000 tons of tissue a year in addition to the mill’s existing pulp production. About 80 new jobs will be created as a result.
With the future of the Old Town mill again up in the air, could there be a future in a tissue revival?
Lugdon and the union continue to look for a buyer for the Old Town mill, as well as the mill in Lincoln.
“We’d support the addition of tissue capacity,” Lugdon said. “Anything that can be done to add value to the pulp [by adding tissue capacity] would be a boon, and would make the mill more viable. We’d enjoy seeing that happen.”