More paper is beign taken out of the capacity

AbitibiBowater's move to eliminate 1 million tonnes/year of paper production not enough over long-term, says analyst; mill closures to have devastating effect on Mackenzie, B.C.
VANCOUVER, B.C. (The Vancouver Sun)
Friday, November 30, 2007

AbitibiBowater announced sweeping mill shutdowns across Canada Thursday affecting more than 1,000 workers, including the closure of its Mackenzie newsprint mill and two related sawmills.

The closures, to take effect in the first quarter of 2008, will leave 300 to 400 people in forestry-dependent Mackenzie unemployed. The announcement comes a day after lumber giant Canfor announced it is curtailing one shift at its Mackenzie sawmill.

"This is going to have a devastating effect on us," said pulp mill worker Rick Berry, employed at one of the few intact Mackenzie operations, Pope & Talbot's pulp mill.

Pope & Talbot is operating under bankruptcy protection.

The Mackenzie paper mill and sawmills are AbitibiBowater's only assets in Western Canada, Berry said. The paper mill is the town's highest-paying employer.

"With this announcement, the price of my house just dropped 50 per cent," Berry said. "This is a one-industry town. We already have houses for sale, empty houses, and people leaving. Shutting down the sawmills was not unexpected. But the paper mill -- that's a blow."

AbitibiBowater also said it intends to shut down paper operations in Belo and Donnacona, Que., and Dalhousie, N.B. It will also permanently close previously idled mills at Fort William, Ont., and Lufkin, Tex.

AbitibiBowater also announced it is suspending its dividend to shareholders and asking its unions to consider re-opening their collective agreements as part of its plan to weather declining consumption in its export markets that has been exacerbated by the rapid rise of the Canadian dollar.

"These were difficult decisions that were made after careful deliberation and represent the best course of action given the current economic conditions and significant challenge that lies before us," AbitibiBowater president David Paterson said in a news release.

"We are mindful of the impact these decisions will have on the employees and communities affected, and will be working with them to help mitigate the effects.

"We are confident, however, that, as a result of the actions, AbitibiBowater will become a stronger, more globally competitive organization."

The moves will eliminate one million metric tonnes of production a year, curtailments that analyst Paul Quinn said are necessary but may not be enough in the long term.

"This means they are serious about taking out capacity," Quinn said. "The big question is: Is this enough? Over the long-term, I think it is not."

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