BAILEYVILLE, Maine — The Montreal-based Domtar Corp. says it is idling its pulp mill in the eastern Maine town of Baileyville for an indefinite period because of the poor global economy.

The layoff begins May 5 and will affect more than 300 employees.

The mill has an annual hardwood pulp production capacity of 398,000 metric tons.

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“Current worldwide economic conditions with weaker global demand for pulp, historically high inventory levels and depressed prices make it extremely challenging for northern hardwood pulp mills to compete. With no immediate recovery in sight, we must temporarily reduce our pulp manufacturing capacity,” John D. Williams, Domtar’s president and chief executive officer, said in a press release Thursday.

Baileyville is not the only community worried. Eastport also is bracing for the worst. Domtar is Eastport’s largest shipping customer, sending most of its pulp overseas to foreign markets.

“Everyone in the port of Eastport certainly considers this news extremely saddening for all those affected,” Eastport Port Authority director Chris Gardner said Thursday. “Knowing the quality and dedication of the work force of the Domtar mill over the years of its operation, all were hopeful that it could weather this global economic situation that has faced us all.”

Gardner said the port was ready to help. “The port of Eastport and the [Baileyville] mill have enjoyed a tremendous partnership over the years, and we cannot stress how much we hope these circumstances can improve in time, and we remain committed to finding ways to facilitate that improvement,” he said.

About 70 jobs will be affected in Eastport, said Roland “Skip” Rogers, general manager of Federal Marine Terminals Inc. “When we load a ship, we probably are employing 65 or 70 people. We have 40-plus longshoremen, then we have the people who are working in the office here, and we have the truck drivers [who deliver the pulp],” he said.

Thursday’s grim news comes on the heels of last year’s banner year when the port, which has been in operation since 1981, shipped the most pulp tonnage ever. “We had 376,873 tons,” Rogers said. “We had 30 cargo ships.”

“Domtar’s announcement this morning was not entirely unexpected,” said Brian Schuth, president of the Eastport City Council. “However, we are hopeful that this temporary closure will be brief and Domtar will soon be back in production. The impacts will be significant.”

For months now, Baileyville residents have been bracing for the worst amid rumors of an impending shutdown.

“It is like a geometry problem that you don’t know enough about to ask the right questions or ask for the right help,” Baileyville interim Town Manager Dottie Johnson said Thursday. “This is going to be a big impact and I think even if we looked at the worst-case scenario [the mill shutting permanently], we wouldn’t be able to think of everything that could go wrong.”

The town knows about shutdowns.

In June 2007, the company announced it was shutting down its paper side of the mill for a period of time. Two months later, the company closed the paper operation permanently, throwing 150 people out of work.

That still left the pulp mill operating with 300 employees, but the eventual closure is why those workers are so worried now.

“They are very down,” the interim town manager said of the workers. “I think that this has been looming for some time. In our heads, we always had the idea, but in our hearts, we hoped for something different.”

Johnson said company officials told her recently that the mill was losing money, selling wood pulp for $200 less per ton than they can make it. “So they are not going to be in business long doing that,” she said.

There were few smiles in town Thursday.

Jean Lawless, who was at the town’s minimall on Route 1, said she was worried. “[Worried] for the working people,” she said.

Donald Moore, a retired millworker, was in the checkout line at the local supermarket. He predicted a lot of people would leave the area even though the shutdown was supposed to be only temporary. “No jobs around,” he said.

“Everyone is scared,” checkout clerk April Lewis added. “It’s scary not knowing when the next paycheck is coming.”

Janet Johnson said she was worried the layoff might be permanent. Asked if she and her husband, who works for the mill, would leave if it closed, she said, “I don’t know. We have all of our family here. So we don’t really want to go anywhere. But I don’t know what choices we have right now. I guess we are just going to have to wait and see like everybody else.”

Domtar spokesman Scott Beal stressed Thursday that the shutdown was temporary. “I wouldn’t say this is the worst possible news. The worst possible news would be a permanent shutdown, but that isn’t what we announced,” he said.

But there is no announced startup date. “The demand for hardwood pulp has collapsed and has actually been in decline since last fall and pricing has fallen through the floor,” he said. “And even industry experts right now can’t seem to agree how long these conditions are going to present themselves.”

Some of the company’s biggest competitors are in Latin America where eucalyptus pulp is produced. “These are big mills and most of them are new. They are huge. They sometimes are three to four times our size in capacity, and we understand that there is more production capacity being constructed and being brought on line in the next couple of years,” Beal said. “Those are some of the things we are up against in the global market place.”

Domtar officials said they were committed to working with Gov. John Baldacci to explore steps that could help mitigate the impact of the shutdown.

Baldacci announced at a press conference Thursday that he had appointed Rosaire Pelletier, a paper industry expert, to work with Domtar over the coming months. He said the state’s “rapid response team” was being sent to the area to assist workers who face at least temporary layoffs.

The governor said Domtar officials had assured him they wanted to bring the plant back up again when the market recovered. But, the governor said, the state would look at all options just in case, including exploring ways to convert pulp mill waste into biofuels at the plant.

Similar work is being done in conjunction with University of Maine researchers at the Old Town Fuel and Fiber Mill formerly operated by the Atlanta-based Georgia-Pacific. “One door closes and another door is opened,” Baldacci said.

Soon after they learned of the shutdown, Washington County’s legislative delegation met with the governor. “Today’s announcement is a sobering reminder of the human impact of the global economic downturn,” the delegation said in a prepared statement. “We all feel this terrible news very deeply, and we are united in our determination to work together to leave no stone unturned to ensure an effective response,” Reps. Anne Perry, D-Calais; Howard McFadden, R-Dennysville; David Burns, R-Whiting; Dianne Tilton, R-Harrington; and Sen. Kevin Raye, R-Perry, said.

And Maine’s federal leaders also weighed in on the subject.

“We will work to alleviate the stress of these layoffs on Washington County and help provide access to any available forms of federal assistance that may assist our fellow Mainers during this tragic time and to help find gainful employment,” U.S. Sens. Olympia Snowe and Susan Collins said in a joint statement.

“This news couldn’t come at a worse time for the workers and their families,” U.S. Rep. Mike Michaud said in his statement. “As a millworker for nearly 30 years at Great Northern Paper Co., I know how devastating this news is for these workers and their families. Mainers have rallied for each other during difficult times in the past and will do so now.”

Domtar Corp. is the largest integrated manufacturer and marketer of uncoated freesheet paper in North America and the second-largest in the world based on production capacity, and also is a manufacturer of paper-grade, fluff and specialty pulp. Domtar, which employs nearly 11,000 people, also produces lumber and other specialty and industrial wood products.

BDN writer Kevin Miller contributed to this report.