Domtar mill sold; 300 jobs to be retained

An international investment holding company that trades almost exclusively in hardwood pulp has bought the Domtar hardwood market pulp mill in Baileyville. The approximately 300 people who work at the mill have both a new corporate owner, International Grand Investment Corporation (IGIC), and a new mill name, Woodland Pulp LLC. Employment at the mill is expected to remain constant.
On October 1 Domtar Corporation announced that it had sold the mill, hydro-electric assets and related assets located in Baileyville and New Brunswick to IGIC. No timber lands were included in the sale. Domtar Vice President of Communications and Investor Relations Pascal Bossé says, "The buyer is committed to secure a supply of hardwood pulp. We were looking for a transaction that worked for everyone." Bossé explains that Domtar's strategy in the future is to focus more on softwood pulp and paper. "This is a good transaction for stakeholders, but it's also in the best interest of the men and women" who work at the mill.
IGIC Director Bert Martin says, "We bought the mill because it's a good mill. We'll operate it as it is with the same salary and benefits for employees." The long‑term goal is to make it cost competitive, but Martin says that there are no plans at this time to invest in mill infrastructure or expand the operations. In a prepared statement, Domtar noted that IGIC is committed to maintaining and enhancing the Woodland mill's PEFC and FSC(R) certifications, to ensure sustainable and responsible fiber sourcing.
The mood at the Woodland plant is upbeat, says Scott Beal, spokesperson for the mill. "Folks that I've talked to are very encouraged. They recognize that this is a good decision on the part of Domtar. Now we're aligned with a business entity whose strategic purpose is pulp." Beal notes that the mill's general manager, Rick Polinski, will stay on during the transition and then return to his home state of Pennsylvania. The new general manager will be IGIC Director Bert Martin.
IGIC incorporated in Delaware in 2009 as a U.S.‑based holding company that represents international, individual investors in pulp trade and imports. According to Martin, IGIC is owned by a Chinese engineering and trading company whose principal, Mr. Chiu, trades in pulp. Martin says that Chiu trades over 700,000 tons per year and bought the Woodland mill because of the pulp production. "All the pulp will be shipped to China."
Federal Marine Terminals Manager Skip Rogers says the shipments through the Port of Eastport should remain close to the same. The smaller freight carriers that have been taking pulp to Europe will most likely be replaced with larger carriers going to China. He explains that if the volume to China "goes up, then I would hope that we would be released of the warehouse load more than once a month." These details, he says, get worked out between the carrier and the shipper, "but one ship every four weeks would be problematic." The larger ships are generally more efficient, he notes, so stevedore hours are not likely to increase, just scheduling may change. "There are so many variables," he adds.
Three new large mills have been built in China, says Zeynep Turk, senior trade specialist and director of development at the Maine International Trade Center, "hence the increase in pulp demand especially for hardwood pulp, which they don't have and North America has. They are trying to develop a continuous supply chain." She notes that, for the months of 2010 through July, over 60% of Maine exports of pulp were to China at $121.7 million out of $199.6 million total pulp exports.
This is IGIC's second pulp mill acquisition in the United States. In February 2010 IGIC purchased Cascade Pacific Pulp, a mill located in Halsey, Ore. At the time of the sale the Halsey mill employed close to 170 people and annually produced approximately 180,000 tons of bleached and unbleached specialty kraft pulp. Martin says that the mill operation in Oregon is going well.
Domtar has been one of the top 10 producers of market grade pulp in the global market. Hardwood pulp production, which was not a primary company activity, was at 780,000 tons, or 2.8% of the global market. Numbers provided by Bossé show that the North American hardwood pulp market has a 2010 capacity of 2.975 million tons of hardwood pulp out of a worldwide capacity of 28.5 million tons. The Woodland mill has an annual production capacity of 400,000 tons. China's total capacity in 2010 for market pulp, hardwood and softwood, is at 1.065 million tons. Turk says that the Baileyville plant's annual production capacity "is pretty significant to IGIC's 700,000 tons."
The Woodland mill has been a part of the region's economic and cultural fabric since it was built in 1905 by St. Croix Pulp and Paper. In 1964 it was purchased by Georgia Pacific and sold by them in 2001 to Domtar. In 2007 Domtar stopped operating the one paper machine at the facility and continued with hardwood pulp manufacturing. In 2009 the mill shut down for six weeks because of economic conditions in the pulp market. The shutdown caused great concern in the Downeast region for the longterm prospects of mill employees, their families, the secondary industries affected by the shutdown and the Port of Eastport, which at the time had only the mill as its client. The mill reopened in June 2009, and sales of pulp have been robust.
The Woodland mill was Domtar's only non‑integrated hardwood market pulp mill. Domtar President and CEO John D. Williams says, "The majority of our market pulp activities is in softwood and fluff pulp grades.... We concluded that this transaction was in the best interest of the company, in terms of strategy, and for the mill as it continues the employment of its dedicated workforce."
Senator Susan Collins said in a prepared statement, "During our conversation, Mr. Williams assured me that this sale would protect the jobs of the mill workers and, in his judgment, bring new market opportunities to the mill because the new owner has a greater knowledge of Asian markets than does Domtar."
Said Senator Olympia Snowe, "I am encouraged that International Grand Investment Corporation includes leadership with experience in our state and it is my sincere hope that this transition will ultimately provide stability for the region and to each and every person at the mill."
In a prepared statement, Governor Baldacci commented on the sale, "I have appreciated Domtar's commitment to the Woodland mill.... I also want to welcome International Grand Investment Corporation, the mill's new owners, to Maine."