International Paper shuts paper, paperboard mills
Cutbacks will slice 2.1 million tons of annual capacity
Tom Stundza -- Purchasing, 10/23/2009 12:45:14 PM
With paper and paperboard purchasing trends remaining sluggish, International Paper has announced plans to close paper and containerboard mills in Franklin, Va.; Pineville, La., and Albany, Ore.
To be closed permanently at these plants are 600,000 tons/year of uncoated free sheet; 140,000 tons/year of coated paperboard and 970,000 tons/year of containerboard. IP also is permanently shuttering its already idled 430,000 tons/year containerboard machine at its Valliant, Okla., mill.
Overall, these shutdowns represent around 4% of North American containerboard capacity and 5% of North American uncoated free sheet capacity. Following these closures, which will take place through mid-2010, IP will have around 10 million tons of North American containerboard capacity, 2.6 million tons of North American uncoated free sheet capacity, and 1.7 million tons of North American coated paperboard capacity.
Since the onset of the global recession, the decline in demand has generated "excess capacity in our North American paper and packaging businesses, and these decisions will better match our supply with our expected customer demand," says CEO John Faraci in a statement.
Faraci expects containerboard and coated paperboard demand to resume growth as the economy rebounds but "demand is not expected to return to 2008 levels in the near future," adds Faraci.
George L. Staphos, analyst at Bank of America-Merrill Lynch
Research, says he has been expecting permanent containerboard capacity closures
of around 1.5million to 2 million tons throughout the supply base. "Further, we
had anticipated uncoated free sheet capacity closures given continued secular
headwinds."
Bad news for buyers: "Given the demand declines, we expect that these capacity
closures will ultimately help to support future pricing initiatives," Staphos
says.
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