Abitibi to close Kenora mill

Newsprint giant Abitibi-Consolidated Inc. will permanently close its mills in Stephenville, Nfld. and Kenora, Ont., cutting more than 600 jobs, after failing to find cost-cutting solutions to make the operations viable.
The announcement late yesterday followed a long period of talks between the Montreal company, its unions, and provincial governments in Ontario and Newfoundland and Labrador.
“We could not find a viable long-term solution to return the two mills to profitability,” chief executive John Weaver said in a statement announcing the shutdowns.
“These decisions are difficult but essential to achieve our objectives. We recognize the hard work of many committed people but after much effort, we simply could not overcome the inherent challenges facing these operations,” he added.
Abitibi did not say how many job losses would result. The Kenora mill employed about 320 people when it was idled while the Newfoundland mill employed about 300.
The company idled the mills in October, and said it would shut them down for good unless it got concessions in labour contracts and power prices, and solidified wood supply deals to make sure the mills could compete.
The Communications, Energy and Paperworkers Union rejected an offer the company put on the table last week for the 300 employees at the Stephenville mill—a major industrial employer in the economy of western Newfoundland.
Abitibi had warned it would be a final offer, but union executives called it “nothing but garbage.”
Yesterday’s closures take 344,000 tonnes of capacity out of the company, following on the heels of 90,000 tonnes of previously announced capacity removal—from one small machine already shut down at Kenora.
Capacity shutdowns tend to firm up newsprint prices.
In the fourth quarter, Abitibi will take writedowns of about $155 million before tax, including mill closure costs of about $50 million.
Analyst Frederic Beausoleil of National Bank Financial said the closures were expected as the Montreal-based company had fingered the two mills as being among their most inefficient in an operations review conducted earlier this year.
Although the Newfoundland-Labrador government offered up to $150 million over three years in energy abatements, the union apparently would not budge and Abitibi had to announce the closure.
Beausoleil said there was no broad underlying reason for the closures. Most Canadian pulp and paper companies face the same issues of high energy and fibre costs, and the higher Canadian dollar.
The smaller size of the closed mills also makes them less efficient in the face of those factors, he said, plus competition from new, lower-cost mills emerging in South America.
Newsprint consumption also is on a slow decline, as, for example, the Internet cuts into classified advertising in newspapers.
Newfoundland Natural Resources minister Ed Byrne said the news was disappointing.
“The premier talked to John Weaver, the president of the company tonight, and asked him to hold off,” Byrne said.
“We’ll see what happens tomorrow and we’ll go from there.”
Stephenville Mayor Tom O’Brien said he was disappointed but not surprised by the decision. “As a community, we have to try to pick up the pieces and move forward,” he remarked.
Abitibi spokesman Denis Leclerc, director of corporate affairs, refused to blame the unions, insisting the mills were victims of many factors and global competition.
“The two [provincial] governments were very co-operative in the search for solutions,” Leclerc added.
The United Steelworkers, meanwhile, called for quick government action.
“The government has sat on its hands while the unions tried to negotiate a decent settlement to keep the mill in full operation,” said Wayne Fraser, the union’s director for Ontario and the Atlantic.
He said the closure of the Kenora mill must be met with aggressive provincial government action to pull the company’s licence to timber rights in the Kenora wood basket.
“The Steelworkers’ union is requesting that there be a meeting as soon as possible among unions, Abitibi, and the federal and provincial governments to discuss an immediate reversal of the closure decision,” he added.