Domtar negotiates $3-billion, 15-year deal to supply paper to Appleton
February 28, 2012 By Pulp & Paper Canada
Appleton and Domtar Corp. have reached a tentative agreement in which Domtar would supply Appleton with most of the uncoated base paper the company needs to produce its thermal, carbonless, and other specialty paper products. The historic…
Appleton and Domtar Corp. have reached a tentative agreement in which Domtar would supply Appleton with most of the uncoated base paper the company needs to produce its thermal, carbonless, and other specialty paper products. The historic 15-year supply deal is valued at more than $3 billion over the life of the agreement. Appleton is one of the world’s leading specialty coaters, and while Domtar is the largest integrated manufacturer of uncoated paper in North America.
Integrated is the key word here.
Explaining the deal, Mark Richards, Appleton’s chairman, president and chief executive officer, said that non-integrated paper mills, those not capable of producing pulp from logs or wood chips, are distinctly disadvantaged and no longer competitive. Worldwide demand for pulp has driven its market price to historic highs.
“Because we buy pulp on the open market, it costs Appleton considerably more to make base paper than it costs a producer like Domtar, which can supply its own pulp. Our proposed operational changes, as difficult as they may be for many of our employees in West Carrollton, are needed for our company to remain competitive,” Richards said.
The proposed supply agreement would result in a reduction of approximately 330 jobs at the West Carrollton mill. Assuming the plan is finalized, approximately 100 employees would be retained to continue to operate the thermal paper coating facility. Employment and operations at Appleton’s integrated pulp and paper mill in Roaring Spring, Pa., would be unaffected by the agreement.
The agreement is pending discussions with representatives of West Carrollton’s Local 266 of the United Steelworkers.
The proposed supply agreement would reduce the company’s exposure to unpredictable market costs for pulp and waste paper.
Domtar would gain significant and predictable volume for its base paper business driven by demand in Appleton’s growing global thermal paper business.
John D. Williams, Domtar’s president and chief executive officer, stated, “This proposed agreement provides us with an opportunity to repurpose and replace high volume communication paper capacity to specialty paper grades, while securing a growing business long-term.”
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