Commentary: Paper Supply Issues, Mill Closures, and the Printing and Packaging Industries

The price of paper is on the rise. That’s no real surprise to anyone in the printing and packaging industries. In 2021, we saw paper demand grow and supply sink which immediately saw the rise of prices. The very example of the economics of supply and demand in action.

Issues from 2021 — such as raw pulp pricing increases and rising transportation costs — are also carrying over into 2022. Paper and raw materials shortages are commonplace. Additionally, over the last several years, we’ve seen increasing numbers of paper mills shutter their doors around the world.

Early this year PaperMoney outlined all the pulp and paper mill closures in 2021 — and it is sobering to see. A few highlights just from North America:

• Dec 2021:
  • Canfor Pulp Announces Extended Production Outage at Northwood Pulp Mill
  • Resolute Announces Indefinite Idling of Pulp and Paper Operations at Calhoun, Tennesse Mill
  • Paper Excellence Catalyst paper mill in Powell River shutting down indefinitely
• Nov 2021
  • West Fraser Quesnel pulp mill to shut down due to flooding and transportation issues
  • Pratt closing North Carolina facility
• Sep 2021
  • Schweitzer Mauduit facility to close
  • RR Donnelley plant in Lewisburg, Pennsylvania to close
• Jul 2021
  • Sonoco Announces Pending Closure of Two URB Machines
  • Neenah Paper closing Appleton mill
• Jun 2021
  • Clearwater Paper announces closure of Wisconsin facility
• Apr 2021
  • Paper Excellence permanently closes pulp mill in Mackenzie, British Columbia
• Feb 2021
  • Appvion closing Roaring Spring, Pennsylvania mill
  • Paper making ends at Domtar Port Huron, Michigan mill
• Jan 2021
  • Stora Enso will close its Virdia operations in the United States
  • Spartanburg, South Carolina LSC Communications plant to close
  • Georgia-Pacific Closes Operations in Easton, Pennsylvania, End of 2021

And those closures didn’t stop in 2022. PaperMoney’s 2022 Closures and cutbacks article is just as long as the previous year. A few North American highlights:

• Sep 2022
  • Canfor Taylor pulp mill restart not expected until 2023
  • Dunn Paper to close Port Huron mill after 98 years
  • Pixelle Specialty Solutions to Close Mill in Jay, Maine
• Jun 2022
  • WestRock Panama City Paper Mill ceases operations
• Mar 2022
  • Battle Creek Graphic Packaging paper mill set to close in May
  • Graphic Packaging to close facility in Norwalk, Ohio
  • Georgia-Pacific to shut down the 121-year-old Day Street paper mill in Green Bay
• Feb 2022
  • Graphic Packaging to Close in Battle Creek, Michigan in August 2022
  • Columbia Pulp shuts down 'most operations'

Many of these closures are also in small towns, which greatly impact the local communities. In a report by WJHG/WECP in Panama City, Florida, nearly 450 employees were let go when the WestRock paper mill closed. For many Bay County residents, the Panama City Paper Mill was a place many families worked for generations.

“My great-grandpa and my whole family been in Panama. They worked at the paper mill,” J.D. Lister, a contractor worker said in the news article. “They say it’s going to be 450 people, but I honestly think it’s going to be more than that. We have log trucks, we have all the trucks that do the wood chips coming in. We have the chemical trucks, and we have all the railroad people. It’s gone. What are they supposed to do?”

According to another newspaper article by the Sun Journal in Lewiston, Maine, market pulp produced by Old Town Fuel & Fiber was competing with cheap, fast-growing eucalyptus pulp from South America, and the company had no paper machines, tying its fate to global pulp prices. The Great Northern Paper mill in East Millinocket was producing newsprint and paper for books being displaced by digital technologies. Verso’s Bucksport mill produces coated paper used in magazines and brochures, a market where the U.S. has shed significant production capacity in recent years, also in response to the digital shift.

The Pixelle mill in Jay, Maine — which produces specialty label and release papers, as well as industrial and packaging solutions for eCommerce and food service — is scheduled for closure in the first quarter of 2023. The mill employs approximately 230 people who will be affected by the closure.

“Economic forces beyond our control have combined to make profitable operations at the mill unsustainable,” said Timothy R. Hess, president and CEO of Pixelle in a company statement.

The mill endured significant business and financial challenges that were compounded by the April 2020 rupture of one of its pulp digesters, and catastrophic damage impacting the continued operability of the entire pulp mill.

The closure of this mill is significant, though, mainly because it was a supplier of paper release liners in North America — a market that’s already hurting because of a release liner shortage. For additional background and detail about why this particular mill closure is important, be sure to read Alaina D’Altorio’s commentary about what the Pixelle mill closure means for the labeling industry.

But there is a bright spot — albeit a small one — on the horizon. On October 4, 2022, Pixelle announced plans to restart a paper machine in its Chillicothe, Ohio facility. The company is investing $21 million to upgrade and restart the #24 paper machine (PM24) and plans to hire 52 full-time employees to operate and maintain it. Pixelle will also fill 50 temporary positions to support construction and engineering requirements related to the restart.

“The current supply-demand balance in the market and our Ohio facility’s competitive, integrated cost structure has afforded us the opportunity to restart paper machine #24 (PM24) at the Chillicothe mill. This rebuilt machine will add 75,000 tons per year of capacity to serve our customers in the food packaging, commercial inkjet, and other specialty paper segments. These are growing attractive markets,” said Hess in a company statement.

PM24 was originally built as a coated printing papers machine, upgraded most recently in the 1990’s. Pixelle idled the machine in 2017. Several upgrades in the current rebuild will enable Pixelle to produce an attractive product mix. The machine should be fully online shipping quality specialty papers in early first quarter 2023.

While we have seen many mill closures and the transition of paper lines to other, more-profitable lines over the last few years, it’s refreshing to see Hess’ assessment of the food packaging, commercial inkjet, and other special paper segments as “growing attractive markets.”

I’m hoping the same will be true of other paper companies as they also see the benefits of investing in the commercial and packaging industries that have been hit so hard over the years, and especially during the pandemic.