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Sappi, a global producer and supplier of diversified paper, packaging products and dissolving pulp, on Thursday announced it will permanently shut Paper Machine No. 9 and the majority of its biomass energy complex at its Westbrook mill.
The move will result in layoffs of about 75 employees.
Also yesterday, Pennsylvania-based Pixelle Specialty Solutions LLC said it will lay off 59 workers in Jay as it suspends pulp production there.
Sappi said its machine shuttering is designed to improve the mill's overall cost structure and enable the company to operate more cost effectively in the global marketplace. The company's product offerings will not change.
Sappi plans to shift all of the machine’s base paper production to its mills in Skowhegan and Cloquet, Minn.
"As a global manufacturer of innovative wood fiber products, a good cost position is important to our long-term success," Mike Haws, president and CEO of Sappi North America, said in the release. "Unfortunately, the Westbrook mill's earnings have been under pressure as a result of widespread commoditization in the marketplace and legacy mill costs.
"This restructuring will enable Sappi to compete more effectively and allow the Westbrook facility to focus on its core competencies of specialty coating, texture application and customized product designs, restoring the site as a healthy financial contributor."
The mill's remaining assets, which support Sappi's casting and release paper business, will continue to operate and produce a variety of papers and films to meet customer needs.
As a result of the changes, a restructuring charge of approximately $14 million is expected during Sappi's fourth quarter, in addition to $8 million of accelerated depreciation to be recorded this year.
The company said it would work closely with employees, local unions and various agencies to provide information and outplacement services. Sappi will also support efforts to help affected employees find new jobs.
The machine is expected to close by late 2020.
In response, the Professional Logging Contractors of Maine said the machine closure and layoff will worsen an ongoing crisis for Maine loggers and forest truckers.
Declines in demand for paper and other wood-fiber products caused by the pandemic have prompted similar shutdowns, slowdowns and closures across the globe.
In Maine, the announcement is the latest blow to the state’s logging industry which, as a result of the pandemic, has seen declining demand for wood from mills and resulting low prices and quotas. Compounding the blow is the loss of the Pixelle Specialty Solutions pulp mill in Jay as the result of an explosion in April.
“Time is running out for many Maine logging and trucking contractors, and if we lose these companies many will not be coming back no matter what happens to markets in the future,” said Dana Doran, executive director of the Professional Logging Contractors.
Westbrook is a vital market for Maine logging and forest trucking companies in the southern half of Maine, consuming some 275,000 tons of woody biomass per year and representing $7.4 million in revenue to logging companies.
Although some of the paper production handled by the No. 9 machine will shift to Sappi’s Somerset Mill in Skowhegan, the loss of the biomass energy market represented by Westbrook will remove one of the last outlets for chipped low grade wood, tree tops and limbs left in the state following shutdowns and slowdowns at biomass facilities throughout Maine in recent years.
In a statement, Gov. Janet Mills said the Maine Department of Labor stands ready to help the laid-off employees by providing unemployment insurance, job training and other appropriate assistance.
“I spoke with Sappi North America’s CEO this morning, and he assured me that the company’s operations at the Somerset Mill are unaffected by this decision and that the mill is in an economically productive position for the long term,” Mills said.
“Sappi is a valued employer in our state, and my administration will continue to support their ongoing R&D efforts in Westbrook, which are crucial as we continue to transform and revitalize our forest products industry, a vital pillar of our state’s economy that supports the livelihoods of thousands of Maine people.”
A year ago, members of three unions at the Westbrook paper mill of Sappi North America Inc. voted to ratify three-year contracts that include pay raises and better benefits.
The Professional Logging Contractors of Maine on Wednesday afternoon released a statement, saying, “We are deeply concerned for those, including many of our own members, whose livelihoods will be affected by this event, and we urge support for efforts to rebuild and restart the mill. The mill is a vital market for Maine loggers and truckers, and in the current already challenged economy the good jobs it supports both in the Jay area and at logging and trucking companies across Maine are vital to the future of our state's rural communities.”
In a statement, U.S. Rep. Chellie Pingree, D-Maine, said she was saddened by the closures of Sappi’s Paper Machine 9 and the majority of the energy complex at its Westbrook mill, and the end of pulp production at Pennsylvania-based Pixelle Specialty Solutions LLC’s Jay mill.
“Both the mills in Westbrook and Jay have been valuable employers in Maine for decades,” Pingree said. “They’ve contributed so much to research, development, and innovation of Maine’s forest products industry, but at the forefront of my mind are the people whose livelihoods are directly impacted — this is difficult news.”
U.S. Sen. Susan Collins, R-Maine, said in a statement, “The announcements by Sappi and Pixelle today that they are laying off a total of 134 people at their mills in Westbrook and Jay are difficult news for the employees, their families, and the surrounding communities.
“I stand ready to assist any and all affected workers in whatever way I can, particularly given the added economic challenges already facing individuals and communities as a result of the COVID-19 crisis.”
In February, Pixelle acquired the Jay mill and another in Wisconsin, both owned by Verso Corp. (NYSE: VRS), for $400 million.
The Jay mill suffered an explosion in April due to a rupture inside a pressure vessel that converts wood chips into paper pulp, according to published reports. Because no workers were in the immediate vicinity, injuries were avoided.
This spring the PLC led early efforts to mobilize a national effort to secure federal relief for loggers similar to that already earmarked for the fishing and farming industries. That effort is now centered around a proposal put forth by the 34 member associations of the American Loggers Council that would reserve $2.5 billion to provide a loan program for contractors that harvested or delivered wood to various mills across the country in 2019.
If approved by Congress and President Donald Trump, contractors would be able to apply for low-interest bridge loans through the U.S. Department of Agriculture to assist them with their ability to continue business operations for the next 12 months while markets attempt to recover.
If a company that applies for and receives the funding can prove that their revenues or volume delivered are down 10% or more from 2019, the funds will be treated as a grant and forgiven. If company revenues are down less than 10% than what they declared in 2019, the funds will become a low interest loan and need to be repaid.
The proposal is expected to be part of the relief measures considered by Congress when it returns to session later this month.
A survey of the membership of the Professional Logging Contractors of Maine conducted in May 2020 on the impact of COVID-19 on Maine's logging and forest trucking companies revealed 88% of respondents had been negatively impacted by the pandemic. Since then, the situation has worsened, and currently many members are operating at approximately half capacity, suffering significant revenue losses and contemplating shutdown and layoffs by August, normally a peak harvesting month.
“Westbrook is just the latest reminder that our state’s logging industry and the rural communities that rely on it are all now at risk due to factors beyond their control,” Doran said. “This is an industry that hates to ask for help and which rarely receives it, but our leaders in Washington need to understand it is an industry vital to our economy and future, and both will suffer if we do not act to protect it.”
Maine’s loggers are part of the state’s forest products sector, which is worth an estimated $7.7 billion annually.