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Slow Economy Hits Small-Town Paper Mills

Demand in the paper industry has been dampened by the slow economy and the shift away from the printed page toward the screens of PCs and cell phones.

KIMBERLY, Wis. (AP) -- Earlier this month, workers dabbed their eyes with tissue as sheets of paper rolled out of two massive milling machines for the last time.

After a century of supplying jobs to this town of 6,300 and neighboring communities, the paper-making factory has stopped production, leaving residents worried about their community's future now that its key business is gone.

"My grandfather worked there and my father, and I have three brothers that work there," said Rick Hermus, the Kimberly village administrator, of the local NewPage mill. "A lot of people are wondering what's going to happen."

It's a scene that has played out in small paper towns from California to Maine. The number of jobs in the domestic paper industry has shrunk about 20 percent in recent years as costs rise and imports become cheaper.

Demand all around has been dampened by the slow economy as well as the shift of eyeballs away from the printed page toward the screens of PCs and cell phones.

The mill was built in 1889 and has been Kimberly's lifeblood ever since, producing the glossy paper used in magazines and slick brochures. But NewPage Corp. of Miamisburg, Ohio, decided to shutter the plant, shedding 475 jobs in addition to 125 cut in May.

"Demand has been going down and costs are going up at extraordinary rates," said NewPage chief executive Mark Suwyn. It's hard to raise prices, he added, because customers see paper as a commodity that should be low-cost.

When Sweet Lorraine and Gingerbelle -- the two massive machines named after the wives of former plant owners -- ceased production last week, the town fell into mourning.

"It was an emotional scene," said Andy Nirschl, president of the plant's United Steelworkers union. "A lot of people were breaking down. It was pretty somber."

Wisconsin still has more jobs in the paper industry than any other state, mainly because of its proximity to vast rivers that supply millions of gallons of water for the treatment of wood pulp. Kimberly, about 25 miles southwest of Green Bay, is on the Fox River.

The state had about 35,500 paper-industry jobs in 2007, down 26 percent from the 48,000 jobs it had six years earlier. Nationwide about 117,000 jobs have vanished in that span, according to data from the U.S. Bureau of Labor Statistics.
After Wisconsin, the next largest paper employers are California and Pennsylvania with about 28,000 jobs each in 2007, followed by Illinois and Ohio with about 24,000 each. Each figure represents a decline of about 20 percent from 2001.

The mills that are more susceptible to a sour economy are those that produce fancy products such as catalogs, glossy magazines and glitzy annual reports.

Wausau Paper Corp., in the central Wisconsin town of Mosinee, is one such mill. It makes a number of paper products, including the smooth backing that gets peeled off adhesive labels. It announced last month the closing of one of its two paper machines at its Otis Mill in Maine, eliminating about 150 of its 235 jobs.

A major culprit is foreign competition. Jeff Landin, the president of the Wisconsin Paper Council, said imports have jumped in the last five to seven years, in part because U.S. mills tend to be older and less efficient than newer plants elsewhere.

Another reason is geography, said paper analyst Mark Wilde, managing director at Deutsche Bank. Competition in South America, especially Brazil, is growing quickly -- literally.

"A tree in Brazil grows in six or seven years in the warmer parts. We're talking a 120- to 140-foot tree," he said. "I'm guessing a similar hardwood tree in Wisconsin would take 40 to 60 years to grow that high."

That means pulp can be cheaper for foreign companies than for U.S. firms, which paid an average of $490 per metric ton in 2002 and now pay about $885 per metric ton, Wilde said.
NewPage's Suwyn said one reason the company is closing its Kimberly mill is because foreign competitors aren't playing fairly.

After a 2006 filing by the company, the U.S. Commerce Department imposed antidumping and anti-subsidy duties on some types of paper from China, Indonesia and South Korea. But the decision was overturned last year by the U.S. International Trade Commission, which said the American industry hadn't proven it was being materially harmed by Asian imports.

"If not for that ruling I'm very confident Kimberly would be running today," Suwyn said. "But to stay competitive there's this relentless drive to cut down costs. So we picked the highest-cost mill and shut it down."

Suwyn said the company hopes it can reopen the mill if conditions improve, but workers say they've been told to find full-time work elsewhere.

On Tuesday, workers and community residents were to travel from Kimberly to NewPage's Ohio headquarters to urge NewPage to keep the mill running or sell it to a competitor, options Suwyn says don't make strategic sense.

Back in Kimberly, Bill Van Asten, 46, worked at the NewPage plant for 28 years and said the small town remains devastated by the closure.

"This community's always been all about the mill. Heck, even our high school is the Kimberly Papermakers," he said. "This is going to change a lot of lives, I'll tell you.

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