UPM to close 720,000 tpy Kaipola mill and to sell Shotton mill

UPM's Kaipola newsprint and magazine paper mill
26 Aug 2020 − 

UPM will take almost 1 million t of newsprint and magazine paper capacities from the market. The company has announced drastic measures, which will include the elimination of an estimated 840 jobs.

UPM has announced drastic measures to adapt its publication paper capacities to customer demand in an effort to ensure its future competitiveness. Following a period of very weak demand in the graphic paper segment, the company announced plans to permanently close its newsprint and magazine paper mill in Kaipola and to sell its Shotton newsprint mill for conversion purposes. Both mills are part of the UPM Communication Papers division. These actions will take almost 1 million t of capacities from the market.

UPM will also reorganise and streamline activities at its pulp mills, its Tervasaari specialty paper mill and in its forest organisation. Final plans will be made after completion of co-determination negotiations.

Kaipola to be closed by the end of 2020

The Kaipola mill in Finland operates three machines with an overall capacity of 720,000 tpy, of which 450,000 tpy are newsprint and 270,000 tpy are coated mechanical paper capacities. The planned closure affects 450 jobs. UPM intends to shut down the site by the end of 2020 at the latest, stating that high logistics and labour costs, among others, make it the least competitive among UPM's paper mills.

UPM wants newsprint PM at Shotton to be rebuilt

The Shotton mill is located in Deeside, Wales and produces newsprint with a capacity of 250,000 tpy. UPM wants to look for a buyer which would rebuild the machine to other products. "We look for outside opportunities for alternative long-term use of the mill as newsprint consumption continues to decline. the paper machine is technically flexible to support conversion especially into containerboard production," said Winfried Schaur, EVP of UPM Communication Paper.

UPM's top priority is to maintain its competitiveness. "UPM is committed to maintaining competitive operations under all circumstances. It means adapting capacity to customer demand and increasing efficiency of operations," said the company.

It explained that graphic paper demand was in structural decline, with the Covid-19 related lockdown measures from March onwards intensifying the trend. While there were early signs of normalisation in graphic paper demand after the lockdowns, the economic outlook for these products had deteriorated globally, UPM added.

However, the company remains committed to the graphic paper business and does not plan to abandon it completely. According to UPM, the world market for graphic papers still exceeds 70 million t, whereof more than 20 million t in Europe. "Even if declining, these markets offer profitable business and good cash flow for mills with a competitive cost structure," the company commented.

A total of 840 positions might be eliminated

UPM's announced far-reaching measures do not only apply to Kaipola and Shotton, but to other business activities as well. Although co-determination negotiations are yet to be concluded, the company estimates that its current plans will impact approximately 840 positions in total.

Besides the closure of Kaipola, which would cut 450 jobs, UPM also plans to reorganise and streamline its business function teams across Europe and North America, which would affect 170 positions.

Another 110 jobs might be cut at the pulp mills Kymi, Kaukas and Pietarsaari of the company's UPM Biorefining division as the company wants to optimise the cost-structure and advance digitalisation.

In its forest organisation, 60 positions could be eliminated due to cost-efficiency measures, while the UPM Specialty Paper division considers cost-saving measures at the Tervasaari specialty paper mill which would reduce the number of jobs by 50.

This article is an excerpt from our article on UPM's restructuring plans.

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