Verso’s Jay shutdown adds to massive drop in U.S. paper capacity

For perhaps the second year in a row, hundreds of Verso paper mill employees in Maine may face losing their jobs around the holidays (late 2015 or early 2016, the company says).

It absolutely sucks, whatever the reason. And the almost unrelenting bad news for paper mill workers in the state hurts more against the memory of what was, for sure.

After Verso announced it would close the Bucksport mill and lay off about 500 workers before the holidays last year, I interviewed Michael Hillard, an economist at the University of Southern Maine. He’s working on a book called “The Rise and Fall of the Paper Plantation.”

He noted that paper mills, throughout the state’s history, have been more than just private employers — they are the hearts of communities, were the “crown jewel” of the state’s economy and hold a status more akin to public institutions.

But “industries don’t last in one place forever,” Hillard noted then. Though it didn’t have to be that way.

“There is a thinkable economic scenario in the last 25 years that could have done a lot more to save what has been the crown jewel of our state’s economy,” he told me back in October.

Other countries have invested in new technology at a faster pace, Hillard said.

Information Verso shared in court earlier this year demonstrated just how other countries — particularly China, Vietnam and India — have added capacity for coated groundwood (read: Bucksport) and coated freesheet paper (read: Jay).

China’s government, in particular, Hillard said, has funded advances in manufacturing technologies that make it harder for North American producers to compete.

Verso presented the market information in the form of an affidavit from economist George Hay, arguing in court that it had legitimate business reasons (not industry consolidation conspiracies) for closing the Bucksport mill before its $1.4 billion acquisition of competitor NewPage.

(The International Association of Machinists and Aerospace Workers, which represents 58 former Bucksport mill employees, maintain Verso and NewPage have violated federal antitrust laws through various mill closures. The Department of Justice has argued against that allegation.)

From 2001 to 2014 (not including Verso’s Bucksport closure or the latest Jay and Wickliffe, Kentucky, reductions), the United States made up 28.8 percent of the reduction in production capacity, mostly for coated groundwood grades used mostly for things like catalogs, magazines and advertising.

Coated freesheet grades are typically used in magazines, brochures and other applications you might call glossy.

Tariffs are one way to address the problem of international competition, where warranted, but that process is long and difficult. Verso and Madison Paper Industries filed I-don’t-even-know-how-many pages of evidence and testimony in favor of tariffs on supercalendered paper from Canada, which it won in a preliminary decision last month.

And amid that foreign competition and rising capacity, industry experts project demand for printing and writing paper will continue to decline by about 2.6 percent per year, through 2019.

And the results of that, Hay alluded to in general terms in January, writing: “Due to declining demand for publication paper, additional capacity closures are inevitable regardless of Verso’s closure of the Bucksport mill.”

In fact, Verso and NewPage together (again, absent Bucksport and the latest Jay and Kentucky closures) made up about half of the total capacity reductions from 2001-2014.

And of those capacity reductions by state or Canadian province, Maine’s losses are trumped only by Wisconsin’s.

Darren Fishell

About Darren Fishell

Darren is a Portland-based reporter for the Bangor Daily News writing about the Maine economy and business. He's interested in putting economic data in context and finding the stories behind the numbers.