PORTLAND, Maine — Madison Paper Industries plans to shut down by May and lay off about 214 employees.
The partners in the Madison mill, Finland-based UPM-Kymmene Inc. and New York Times Co. subsidiary Northern SC Paper Corp., announced the shutdown and end of their joint venture Monday.
“Despite everyone’s best efforts, the difficult decision has been made to cease paper production at Madison,” said Ruud van den Berg, senior vice president of UPM Paper’s Europe and North America divisions. “Demand for supercalendered papers declined significantly in 2015, and the decline is expected to continue. The Madison mill is not cost-competitive and has lost a significant amount of sales in the recent past.”
Union and state officials have attributed the impending closure to steep foreign competition. But an energy group representing the mill blamed high natural gas costs, which caused the mill to shut down for periods during the winter.
The company said some employees will stay on past May to maintain buildings and operate a 27-megawatt hydropower generation facility that it plans to sell.
Duane Lugdon, the United Steelworkers Union representative for Maine, said he and members of the union knew the mill had challenges, with foreign imports chipping taking away part of steadily decreasing demand for its supercalendered paper, which is used in color printing applications, including magazines, retail inserts, directories and coupons.
“We’ve known that the order book had not been full for some time,” Lugdon said. “In February, they moved from a seven-day production schedule to a five-day production schedule, and that’s kind of the writing on the wall.”
For that reason, Lugdon said he wasn’t “overwhelmingly surprised” by the closure.
“But this is a day I was hoping would not come,” he said.
An assistant for Russ Drechsel, president and CEO of Madison Paper, said Drechsel would be in meetings with mill staff until about 9 p.m. Monday and was not available for comment.
Lugdon said he and union members heard official word of the closure early Monday.
Foreign trade, energy
The announcement comes after Madison and Verso Corp. successfully petitioned federal trade officials for tariffs on Canadian imports of supercalendered paper like that produced in Madison.
Public and company officials cheered that decision, saying it would help Madison chip away at competition from Canadian papermakers, which they said undercut them by as much as 5.2 percent in the last half of 2014.
The imposition of tariffs on Canadian imports of supercalendered paper helped, Lugdon said, but the simultaneous drop in the Canadian dollar made up some of the difference, keeping the U.S. an attractive market for producers to the north.
“The work that we put into the trade case and the tariffs that were installed really have lost some of their effect because of the exchange rate,” Lugdon said.
The U.S. dollar on Monday equaled about $1.33 Canadian and its value rose as high as $1.45 Canadian in January. The strength of the U.S. dollar against the Canadian loonie puts more price pressure on U.S. producers.
Tony Buxton, a Portland attorney who represented the mill through the Industrial Energy Consumers Group, said he viewed the exchange rate challenge as more fleeting than the mill’s energy costs, based on his conversations with company officials and observations.
Those wintertime shutdowns made the mill less reliable to its parent company, he said.
“They worked around that for the first year,” Buxton said. “By the second year, they had figured out how to work around it completely, and it became a question of whether the mill would stay open.”
Buxton, who also represents Kinder Morgan’s Tennessee Gas Pipeline before the Maine Public Utilities Commission, said he believes quicker action from state regulators to expand gas capacity could have prevented the Madison closure and others.
The Maine Pulp and Paper Association echoed that call in a statement Monday that also advocated for lower taxes on major businesses, improved transportation infrastructure and money for research and development.
“One can very likely link UPM Madison’s decision to the global decrease in demand for the grade of supercalendered paper produced at that mill,” the association said. “However, this decision is likely not due to demand alone, and we owe it to the 214 employees deeply affected by today’s announcement, and the remaining papermakers employed in mills across the state, to take action.”
Together, Madison and Verso made up all U.S. production of supercalendered paper, but that paper grade was not Verso’s primary focus. Facing the trade challenge and a substantial debt load after acquiring its larger competitor, NewPage, Verso filed for Chapter 11 bankruptcy protection in January in an effort to restructure that debt.
Verso owns a mill in Jay that employs around 565 people.
The Maine Department of Labor said it has assigned a team to help workers through the closure and plans to request money through a federal program for people who have lost their jobs primarily because of foreign competition.
“Our team can answer questions families will have over the next two months and help them plan for this transition,” Labor Commissioner Jeanne Paquette said in a news release. “Our assistance is not limited to unemployment benefits but includes information about health insurance options, career planning, training support and job search guidance.”
The department said the company on Monday would issue a notice under the Worker Adjustment and Retraining Notification Act, which requires employers with 100 or more employees to provide at least 60 days of notice for plant closings or mass layoffs.
Rep. Jeff McCabe, D-Skowhegan, and Sen. Rodney Whittemore, R-Skowhegan, both lamented the news in statements issued Monday. Whittemore said the announcement was “upsetting news for our entire region” and called for a focus on helping the mill’s employees.
McCabe said he “met with workers just last week and heard no hint of this.”
Gov. Paul LePage said in a news release from the Department of Labor that he is “saddened” by the news. He said “this unfortunate situation illustrates the challenge Maine companies face in the national and global marketplace.”
He added it provides a reason for his administration’s call for lowering taxes and working to lower energy costs.
Maine’s entire congressional delegation lamented the closure in statements Monday afternoon.
On Monday morning, Sens. Susan Collins and Angus King issued a coincidental announcement that they have written to the U.S. Department of Commerce asking for help to study and map out a future for Maine’s forest-based industries.