UPM announced further steps for the consolidation of the supply side of the publication paper market in Europe, closing down PM 6 at its Schongau paper mill Germany and accelerating its exit plans for its Steyrermühl plant in Austria.
The company said it would permanently close PM 6 at its Schongau mill in Southern Germany by the end of Q2 2023. The machine has an annual output of 165,000 tpy of newsprint grades including improved grades and uncoated mechanical publication paper (SC). UPM says production on the mill's other two machines PM 7 and PM 9, which are more cost-competitive, will continue. In addition UPM has four other uncoated publication paper machines in Germany and Finland, which together with the two PMs of Schongau have a total capacity of 1.8 million tpy.
In addition UPM decided to bring forward the planned stop of production at its Steyrermühl plant in Austria by six months. Production at the plant would be stopped by the end of Q2 2023 already, thus exiting about 320,000 tpy of capacity from the market. At present UPM Steyrermühl produces newsprint and Machine-finished specialty papers (MFS) on one machine (PM 4).
Originally paper production on PM 4 was planned to be stopped in the last quarter of this year. The new owner Heinzel will rebuild PM 3, which was idled back in 2017, to produce lightweight MG kraft paper from early 2024. Further plans for PM 4 are not known yet. UPM said the decision to close production at Steyrermühl earlier than planned would have no impact on the plans for the site and its employees as communicated in June last year when Heinzel and UPM announced the sale of the plant.
UPM said that the PM a the Schongau mill is planned to be closed after the closure of the consultation process, which is to start immediately. The machine closure would reduce personnel at the mill by about 135 employees.
In the case of Steyrermühl UPM is to recognize extraordinary charges of €10m in its Q1 2023 results. For the planned closure of Schongau PM 6, the company is to record restructuring charges of €26 in its Q1 2023 results. The planned actions are estimated to result in annual fixed cost savings of €13m.
UPM says it is reacting to the structural decline in demand for publication paper in Europe which has been going on for more than a decade. The company explains it needs competitive production and an efficient use of its assets.
During the past few months, demand for publication paper in Western Europe has been weak, and utilisation of machine capacity in the paper industry has been very low. Destocking of paper piled up last year when supply was tight is said to be one of the reasons for demand being so low, but declining paper consumption due to structural changes accelerated by high prices is also playing an important role in the present market situation.