Sale Of Duluth Mill Points To Paper Industry Trends

Recycled, Packaging Products Are Growth Markets For Paper Producers

evening sun shines on the beige walls and red and white striped smoke stacks of the verso paper mill
Verso paper mill in Wisconsin Rapids stopped production at the mill at the end of July 2020. Angela Major/WPR

The sale of a closed paper mill in Duluth, Minnesota will bring back at least 80 jobs to the region. It’s the latest move affecting Wisconsin workers in a roiling paper industry.

Verso Corp. announced Monday that it would sell its Duluth mill, which employed more than 200 people in the Duluth-Superior area before it closed last year, to the Virginia-based ST Paper and Tissue. That company, which also operates a mill in Oconto Falls, will invest a reported $54 million to convert the Duluth facility into a manufacturer of recycled-paper napkins and other tissues.

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It’s part of broader shifts in the paper industry that are being felt at other Wisconsin manufacturers and in related industries such as logging. Two growing parts of the paper industry are the production of recycled products and of the corrugated cardboard used for shipping boxes.

“That’s a direction that we’re seeing the industry going: Conversion of mills to make packaging, and the opportunity to make recycled board is also pretty attractive to manufacturers,” said Paul Fowler, executive director of the Wisconsin Institute for Sustainable Technology.

The Verso mill’s sale follows an announcement last week that the South Carolina-based Domtar had been sold to the Canadian company Paper Excellence in a $3 billion deal. Domtar operates mills in Rothschild and Nekoosa. A company spokeswoman said the sale will not affect mill operations, but Domtar has already remade other mills. Last year it announced that it would close and repurpose a mill in Kingsport, Tennessee, turning it into a packaging manufacturer.

Converting mills is expensive and takes time. In its Monday statement, Verso CEO Randy Nebel said the company was “pleased to have found a buyer who plans to operate the Duluth mill in the future.” ST Paper executives told the Duluth News Tribune that it would be between 18 months and two years before the new machines were fully up and running.

Verso’s sale of its Duluth mill also brings attention to the future of the company’s much larger Wisconsin Rapids mill, which it closed in July 2020. That closure laid off about 900 workers, wiping out the central Wisconsin city’s largest employer. In November, Verso said it had put a “pause” on efforts to sell the Wisconsin Rapids mill.

That mill produced glossy paper used for magazines. Besides being much larger than the Duluth mill, Fowler said, it also used different pulp, different chemicals and different processes. Repurposing it would, in turn, be even more expensive, and it’s possible Verso is hoping the economic recovery will restore demand for its product.

For nearly a year, a cooperative of timber producers has been working to purchase the mill. Their negotiations with Verso are ongoing, said Henry Schienebeck, executive director of the Great Lakes Timber Professionals Association.

Lumber prices have skyrocketed in recent months as a demand for wood has outpaced supply from sawmills that are still catching up from early-2020 shutdowns. But the high prices of wood to consumers hasn’t translated into increasing demand to loggers. That’s because there’s still no shortage of the raw material.

Schienebeck said loggers are “cutting wood right now, and it’s piling up because (they) have nowhere to go with it. … When that happens, the price of raw material drops way down.”

In the meantime, though, Fowler said two long-term trends in the industry may be headed for a correction. For years, producers have massively scaled back on production of copy paper and other white consumer paper, and that accelerated in the last year. Today, those products are seeing prices increase. Meanwhile, as many office-based businesses saw their printers and copiers sitting idle while many worked from home, the makers of recycled paper products of all sorts are now seeing a tightening supply of the recovered paper they need to recycle. Many producers may soon be increasing the share of virgin wood pulp that goes into their products.

“That creates an element of opportunity for pulp wood producers,” Fowler said.