UPM shutting down Canadian paper mill for up to a year

Permanent closure possible if exchange rates do not improve

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The Finnish paper company UPM has announced that it is closing its paper mill in Miramichi, in eastern Canada, for several months. The closure could last for up to a year.
      The reason for the stoppage is the strong Canadian dollar, which is causing many problems for the factory. Miramichi sells its paper to the United States, from where it gets weak US dollars in payment. The factory has to pay for its own operating expenses in strong Canadian dollars.
      The Canadian currency has strengthened from the sale of oil and metals, which have grown more expensive recently. The positive cash flow is pushing up the value of the Canadian dollar.
     
UPM hints that Miramichi might be closed permanently. "During the stoppage we will continue to examine what to do, but the fact is that starting up the factory will require significant changes in the business environment", says UPM director Jyrki Ovaska.
      Miramichi has 600 employees, who have been through many trials and tribulations. Two years ago the factory was shut down for eight months by a strike, and soon after the labour dispute was resolved, UPM stopped production at the factory for three months. After the shutdown, employees and the company agreed on a pay cut.
     
Under UPM, Miramichi has cut costs and streamlined itself with a heavy hand, but this has not lifted the factory into profitability. Even severe measures will not help, as there is no real fat left that could conceivably be trimmed away.
      Miramichi's two paper machines produce coated magazine paper (LWC) in one of the most modern facilities in North America.
      UPM bought Miramichi seven years ago. The factory is a consolation prize of sorts; somewhat earlier the company had failed to acquire the US paper company Champion.
      In the fray of the battle, UPM actually changed its own name to Champion, before the US company International Paper came out ahead in the bidding war.
     
During the shutdown, UPM will deliver paper to its American clients from its Bland paper mill in Minnesota, and from its installations in Europe. Transatlantic exports will help the competitive situation in Europe, because the weak dollar has meant that Europe is increasingly importing paper from the United States.
     
Modest sales revenue from magazine paper, sparked by unexpectedly low prices and the weak US dollar, are forcing UPM to write off EUR 350 million from its balance sheets.


Previously in HS International Edition:
  UPM announces three-month shutdown of Canadian paper mill (8.12.2005)
  Canadian paper mill strikers: UPM resorted to contemptible lies (8.6.2005)

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