February 27, 2020
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Unique challenges, common goal: Maine paper industry eyes survival strategy

PORTLAND, Maine — One challenge looms large over the future of Maine’s paper industry: all of the state’s mills are different.

The details of each mill’s operations can become blurred behind the recent spate of bad news for the paper industry. Work in paper mills has declined sharply in the last few years. Closures, bankruptcies, sales and stock exchange delistings blend together to paint a dire picture.

But each mill is a unique business, with different costs, different mixes of products and markets, and different margins.

“Every mill has its own story,” Donna Cassese, chairwoman of the Maine Pulp and Paper Association, said. “They make different products and their costs to produce those products are different.”

Take the recent bankruptcy announcement of Lincoln Paper and Tissue and Expera Old Town’s plan to close its pulp mill by year’s end.

In Lincoln’s case, a boiler explosion ended on-site pulp production. The mill’s CEO said buying pulp from others was more costly and ate into its profit margins.

In Expera’s case, decreasing pulp prices played into the decision to close.

One mill closes and says, “pulp’s too costly,” and another says, “pulp’s too cheap.”

Pardon?

What’s missing is basically every other detail about each business that factors into their bottom line.

Some mills are net generators of electricity, some have long-term contracts for wood supply, some are in markets where demand is growing, but slower than supply.

“Although we certainly have a lot of common goals, each story in terms of the financial piece is very different,” Cassese said.

The Maine Pulp and Paper Association plans to focus on those shared goals up and down the supply chain at its Nov. 17 summit in Bangor, but the industry’s long-term success hinges on more than just public policy, Cassese said.

“It’s critical that each of the mills has their own solid plan in terms of manufacturing and marketing. Those are the onuses on us, and that includes investment and [research and development],” Cassese said. “And then there’s the piece that we can’t do much about, which is the public policy part. It’s going to take both of us working together in order to maintain this industry.”

Last year, Maine’s paper mills paid about 10 percent of the state’s $2.6 billion in manufacturing wages. About 6,180 people were on payrolls of paper manufacturers.

More cuts are coming this year in Old Town and Jay and the fate of the Lincoln mill will be decided Tuesday in a bankruptcy auction. But there’s also foreign investment coming to St. Croix Tissue in Baileyville and opportunities for the surviving mills to increase output.

“There are still some great things going on and I think this is kind of our call to arms,” Cassese said. “We have to still work as partners to keep these remaining mills successful.”

Complex challenges

The daylong summit Nov. 17 at the Bangor Hilton Garden Inn will offer panels spanning the supply chain, focusing on energy, transportation, taxes, workforce development, wood costs, lessons from a Minnesota task force and an assessment of how competitive Maine is with other states.

It is the first summit hosted by the Maine Pulp and Paper Association since it restructured, cutting its full-time executive director position and putting coordination in the hands of law firm Pierce Atwood.

Cassese said the industry group needed to increase its visibility “to get more vocal and represent ourselves more strongly than we had in the past.”

“The summit is really just the start of the work and I think it will energize folks and get us on the map again,” Cassese said. “We’re still an important industry in Maine and we all need to work together.”

One session will feature state lawmakers talking, in part, about what they learned after tours of mills in Madison, Skowhegan and Baileyville.

And in one session, Eric Kingsley, vice president of the consultancy Innovative Natural Resource Solutions, will discuss how reductions in papermaking capacity have not led to lower wood fiber prices in heavily wooded Maine, which faces some of the highest prices in North America.

He wrote about the topic in September for the blog of the wood price tracker Forest2Market, noting that closures in East Millinocket and Bucksport together cut the paper industry’s pulpwood demand by about 1 million tons a year, but prices in the Northeast have risen.

“Based on price reactions and current market dynamics in the Northeast, it’s pretty clear that there isn’t a single reason that pulpwood prices have remained strong while demand has dropped,” he wrote.

The challenges extend down the supply chain, including a lack of logging and trucking capacity, wanting freight rail capacity, less predictable weather and a diversified market for wood and related products, according to Kingsley and Cassese.

Cassese said the combination of those things, all at once, can push prices up and up.

“We’re all wanting the same sticks of wood, and then you couple that with three bad days of weather and then without the logging capacity,” said Cassese, who in her day job is the managing director of wood resource strategy at Sappi North America. “Then you’ve got an empty millyard and that’s going to drive up prices as people are competing against each other.”

But wood supply, too, is an area where the problems differ among mills, based on existing purchasing agreements, storage capacity and access.

Cassese said the summit plans to tackle discussions about all of those topics, including training workers in related forest industries, getting young people into the paper industry and policies that might encourage more small woodlot owners, particularly in southern Maine, to harvest trees on their land.

“There are still great jobs and we still need talented people,” Cassese said.

 


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