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West Fraser to permanently close Eurocan operation in Kitimat, B.C.

West  Fraser Timber Co. Ltd. will permanently close its Eurocan integrated pulp and paper mill in Kitimat…

West  Fraser Timber Co. Ltd. will permanently close its Eurocan integrated pulp and paper mill in Kitimat, B.C. as of January 31, 2010, putting more than 500 people out of work.

The company says the 40-year-old mill, which produces linerboard and kraft paper, has historically struggled with high costs and negative returns. A contributing factor to the mill’s problems in recent years has been sawmill curtailments in the region, which have reduced the supply of lower-cost residual wood chips to Eurocan and increased the mill’s reliance on more expensive whole log chips.

“We deeply regret the impact the mill closure will have on our 535 employees, their families and the community and we will ensure those who are affected are treated with fairness and respect,” said Hank Ketcham, West Fraser’s chairman, president and CEO.

The Eurocan site operates a kraft pulp mill, chemi-mechanical pulp mill, and two paper machines.

In addition to its ongoing challenges, the mill’s situation took a dramatic negative turn during the past year, West Fraser reports. Since December of 2008 Eurocan has experienced a drop of approximately 40% in the net selling price of its products. This decline has been driven by the global economic slowdown, the rise of the Canadian dollar, and severe competition from low-cost paper producers in other countries.

“A deep and thorough review by the company looked at ways to offset the steep decline in Eurocan’s financial results,” Ketcham said when announcing the closure. “Unfortunately, even with the most optimistic projections the business fundamentals of the operation have deteriorated to the point where permanent closure is the only reasonable alternative.”

Kitimat has population of about 9000, and is located about 640 km north of Vancouver, on the B.C. coast.

The Eurocan mill was built in the late 1960s. West Fraser became a joint venture partner in the 1980s and acquired the operations in 1993. The mill produces about 450,000 tonnes of paper per year.

West Fraser is an integrated wood products company producing lumber, LVL, MDF, plywood, pulp, linerboard, kraft paper, and newsprint.