Shutdowns, sales and uncertainty
Wisconsin papermaking landscape sees changes
Wisconsin’s shifting papermaking landscape has continued to change over the last year, most recently with Atlas Holdings LLCoffering to buy Verso Corp. last week, and two paper companies announcing shutdowns in the Fox Valley.
The pandemic threw a wrench into some parts of the papermaking industry, as companies that made paper for offices, schools or events were hit with a sudden drop in demand. Verso shut down its mills in Wisconsin Rapids and Duluth, Minnesota, because of the decline for those mills’ products, while mills that made packaging products, grocery products, tissues and hygiene products saw a boom in demand and struggled to keep up.
In the past two months alone, Wisconsin’s paper industry has seen a slew of change, both good and bad, including:
Atlas Holdings‘ offer to buy Verso this week came as state Democrats and Republicans spar over how best to aid a cooperative or other buyer of the Wisconsin Rapids mill and help restore some of the roughly 900 jobs that were lost when the mill closed.
Neenah Inc.’s decision to close an Appleton plant that makes filtration products. The plant employs about 100 people.
Clearwater Paper’s decision to close its Fox Crossing tissue plant and lay off about 300 workers.
Domtar’s announcement in May that it would merge with Paper Excellence, bringing new ownership to its mills in Rothschild and Nekoosa. Combined, those mills employ about 740 people.
What’s unclear is whether these changes are a post-pandemic shakeout, a continuation of a trend that predated the coronavirus, or just a collection of individual business decisions.
A season of change
Atlas Holdings, in a filing with the Securities and Exchange Commission, said the company is offering $20 per share for Verso’s outstanding stock shares, in a bid to out Verso entirely.
In a letter to Verso, Atlas said the company already is a long-term Verso investor and it’s “extremely enthusiastic about this proposed transaction.”
At this point, it’s only an offer. Verso’s board of directors would need to approve the sale, and Verso’s shareholders would also need to vote their approval. So far, Verso said the deal is unsolicited, and while Verso is considering its options, there are no guarantees it will reach negotiations or a deal with Atlas.
It’s too soon to tell what that means for the Verso paper mill in Wisconsin Rapids that has been idle for a year. Nor is it clear how it affects the work of a task force of local and state officials and a cooperative created by timber companies to try to find a way to restart the mill and bring jobs back to the area.
As Wisconsin Rapids continues to navigate the pandemic’s hit to the paper industry, two other paper companies announced plant closures in Wisconsin, as well.
In June,Clearwater Paper announced it would close its plant in Fox Crossing by the end of July. The paper mill there ran three tissue machines and 10 converting lines. At the time of the announcement, the company’s president and CEO, Arsen Kitch, said the location and its assets could not compete cost effectively in the markets it served. The Spokane, Washington-based company also has about a dozen other locations across the country, focusing on pulp and paperboard manufacturing, tissue converting and tissue papermaking.
Clearwater Paper declined to answer further questions about its closure of the Fox Crossing mill.
In July,Neenah Inc. announced it would close its paper plant in Appleton by the end of September. The company estimated the shutdown would boost its annual earnings by up to $8 million in the long run, although the company would have initial costs associated with closing the Appleton location.
Neenah Inc.’s corporate communications director, Missy Elam, told USA TODAY NETWORK-Wisconsin the Appleton facility, which creates products used in air, oil and fuel filtration, hasn’t created the value the company expected. She said the operation is no longer a competitive asset and doesn’t align with the company’s long-term goals.
The Georgia-based company has mills across North America, Europe and Asia.
In May, Paper Excellence announced its plans to purchase Domtar in an allcash deal valued at $3 billion. Once that transaction is complete, Paper Excellence will continue operating Domtar as its own business, and all Domtar mills will continue to be led by the Domtar management teams. Domtar has paper mills in Nekoosa and Rothschild.
Scott Suder, president of the Wisconsin Paper Council, said the merger signals an investment in the industry, and the decision will produce stability for Domtar’s operations in Wisconsin.
COVID-19 challenges continue
Suder said the pandemic brought many challenges to the industry. Those hardships were different depending on what the mills produced.
Some paper companies shifted quickly to institute safety protocols to protect employees, contractors, visitors and consumers in order to be able to operate at peak capacity to meet the skyrocketing demand for personal products and medical supplies.
Those mills produced tissue products, packaging for food and other products, building products and shipping containers, packaging for agricultural producers, hygiene products and grocery products. The medical field also turned to paper products in the pandemic, helping both COVID-19 patients and the medical professionals treating them.
“Wisconsin’s papermakers were key producers and shippers of the products which were critical in the fight against this worldwide pandemic,” Suder said.
In contrast, paper mills that focused on free sheet paper were hit hard with a sudden drop in demand. Paper mills that produce paper for offices, small businesses, schools and events found themselves with nowhere to send the products.
Overall, the pandemic accelerated the pace of paper industry consolidation for both coated and uncoated manufacturers, said Hamed Khorsand, an analyst with BWS Financial Inc. who has followed the paper industry and its publicly-traded companies since 2016.
“Coated or uncoated, it’s an eroding industry,” Khorsand said.
A bright future or a shrinking industry?
Suder said the long-term outlook for
Wisconsin’s paper industry remains bright despite the recent upheaval.
Before the pandemic, the industry had started diversifying its products based on consumer needs and demand for products that are sustainable and more environmentally friendly, Suder said. And one of those trends focuses on more fiber-based and sustainable products. Focusing on that demand has sparked a wave of new products and services, he said.
Paper-based packaging materials are more sustainable and renewable, and they can be recycled up to seven times, according to the Wisconsin Paper Council.
In an interview with USA TODAY NETWORK-Wisconsin in March, Dennis Schoeneck, president of the Timber Professionals Cooperative, said the group’s attempts to organize the Consolidated Cooperative to own and run the Wisconsin Rapids paper mill would be good not only for the state’s economy, but for sustainability, as well. He said the work that goes into maintaining forest lands helps the environment overall, including combatting climate change.
Because of the pandemic, Suder said, the Paper Council has seen a number of “macro trends” that focus on a growth in demand for personal hygiene products and a significant jump in online shopping. He said they expect those trends to continue for “some time.”
Paper mills in Wisconsin have benefited from online shopping and shipping trends, in particular.
Green Bay Packagingopened a new $500 million paperboard mill this year, completing a project that CEO Will Kress once described as “a leap of faith.” After 21⁄2 years of construction, the company was eager to open the mill to address the spike in demand for boxes and other packaging driven by the coronavirus and online shopping. The company had sold all of its inventory at that point in the pandemic and needed the new paper mill to keep up with demand.
Suder said the industry produces thousands of specialty paper products for personal hygiene, medical protective equipment and supplies, food packaging and processing, pressure sensitive liners, pharmaceutical supplies, hightech manufacturing, clothing and communications, and the industry will continue to innovate to meet these needs and demands.
Demand for coated paper and other specialty products cratered during the coronavirus pandemic, but the postpandemic recovery has sent demand skyrocketing for the near term, said Khorsand.
“Right now, we’re in a state where demand has outpaced production because of the opening,” Khorsand said. “There are routine price increases across the board no matter what the paper type.”
The good times will only last so long, though, and Khorsand said Wisconsin Rapids cooperative leaders should not plan on the demand for coated paper, the mill’s primary product, to last.
“Look for something else to produce,” he said. “Be in the planning stages for something two or three years out, max. … Business is great now, but six months from now you might have a different situation.”
Steven Deller, a University of Wisconsin-Madison economist and part of a group that studied the impact of Verso’s closure in Wisconsin Rapids, said he thinks the paper industry in Wisconsin is declining for reasons similar to what happened in Maine, where he worked at a university before coming to Wisconsin.
The problem in both states, he said, is that many of the plants are old and companies are finding it doesn’t make sense to invest in aging facilities. Instead, they are building new, often in the south to reduce transportation costs by being closer to timber producers in warmer places where trees grow faster.
That consideration was part of Kress’ leap of faith to stay in Green Bay. He previously said there would have been benefits to building the new mill out of state, but the workforce here was a primary consideration in staying put.
Georgia-Pacific Corp. is among those that have invested in an existing Wisconsin mill. The company is completing a conversion of the boilers at its Broadway tissue mill in Green Bay from coal to natural gas. The last smokestack is coming down now, part of Georgia-Pacific’s plan to remove its coal-handling systems and other obsolete equipment this year and next.
The company’s shift to natural gas is part of a push toward sustainability, supported by reduced fuel costs, that also includes recycling two-thirds of the water the plant uses and reducing its overall electricity consumption.
“It makes sense in Wisconsin to continue investing in the toilet paper making industry here, but office paper manufacturing or newspaper manufacturing — it just doesn’t make sense to invest in these older plants,” Deller said.
Meanwhile, ND Paper, a subsidiary of Hong Kong-based Nine Dragons Paper, has invested in mills in both Wisconsin and Maine.
ND bought Catalyst Paper Corp.’s mills in Biron, Wisconsin, and Rumford, Maine, in 2018 for $175 million, and then converted a paper machine in Biron from white paper to containerboard and expanded the mill at an additional cost of $189 million.
Where does Wisconsin stand in the paper industry?
Suder said Wisconsin continues to hold the title of the No. 1 paper-producing state in the country, with an economic impact of more than $18 billion. He said the state has been consistently at the top spot, and despite recent changes to mills in the state, the Wisconsin Paper Council expects the state to hold the lead for the foreseeable future.
“The industry remains strong, and we have recently seen major investments in Wisconsin paper mills, including Green Bay Packaging’s $500 million new recycling mill in Green Bay as well as ND Paper’s $189 million expansion project in Biron,” Suder said. “We will also continue to be renowned as a leader in sustainability and environmentally friendly products.”
While Suder is optimistic about Wisconsin’s lead in the paper industry and opportunities for growth, Deller said that status may not last long term as hard decisions are made about the value of aging mills and the continued allure of southern locations.
“I think you’re going to have to see Wisconsin Rapids and the region saying we have to look beyond paper, we have to look beyond wood processing,” Deller said. “We shouldn’t ignore it. We shouldn’t abandon it, because there’s still market opportunities there, but we need to think about moving beyond it.”
Brad Star and Renee Hickman contributed to this report.
Contact Caitlin at cshuda@gannett.com or follow her on Twitter @CaitlinShuda.