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Domtar decision to shut down Espanola mill took Unifor rep by surprise

Union head says workforce will mothball mill to be ready for any new owner
Domtar Espanola (file photo)

Domtar’s decision to indefinitely idle its Espanola pulp and paper operation took Chris Presley by surprise.

The president of Unifor Local 74 was ushered into a meeting with plant officials at 9 a.m. Tuesday morning and informed of the news. A corporate release hit the business newswires shortly afterwards.

“Absolutely not,” said Presley, when asked if he had any advanced warning of Domtar’s decision to idle and begin winding down its pulp and papermaking operation this fall. “It was completely out of the blue.”

The decision announced Sept. 6 by the South Carolina-headquartered forest products giant to mothball the mill for more than a year will impact 450 jobs in Espanola. The mill is the town’s primary private employer.

Presley said the move could “cripple” the community that’s hosted a pulp and paper plant since the early 1900s, beginning as the Spanish River Pulp and Paper Company. Domtar acquired the mill during a takeover of E.B. Eddy in 1998.

The union local was in negotiations for a new contract, the previous collective agreement having expired on May 22. A strike vote was taken, but Presley said his membership wanted to work with the company “as much as possible” even with the future of the mill in doubt.

The Espanola mill has been up for sale since late last year, just before a ruling by the Canadian Competition Bureau to resolve concerns related to Domtar’s acquisition of Resolute Forest Products and its strengthened hold on pulp production in Central and Eastern Canada.

Presley said it was common knowledge round town for months that the mill was on the block. But, he said, negotiations continued with the current ownership.

On a very trying day, Presley said the news of the mill idling was a rude awakening for many around town.

“There’s shock. I hate to say but there were children in schools in Espanola that were crying because they understand the severity of it (idling) and the impact it has on the mill.”  

With Local 74 representing about 250 members, Presley said that equates to about 500 households that rely on the mill as a primary source of income, not just within the Town of Espanola but communities along the north shore, including into the suburbs of Sudbury, about 70 kilometres to the east.

In a company news release, Domtar president Steve Henry called Espanola a chronically high-cost mill to operate and maintain.

Presley refrained from commenting on that assessment, adding he’ll have more to say after meeting with company officials. For now, he said, the membership’s job will be to make sure the mill is shut down so as to be turnkey for a new buyer.

“My focus, and the local’s focus, is ensuring that we put the mill into idle in the most responsible manner that we can to facilitate a positive restart.

“We need to look to the future and we need to make sure we protect the investment in whatever capacity we can.”

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The Espanola mill has been on shaky ground since late last year as Domtar has gone through major reorganization in Canada.

Domtar was acquired by the Paper Excellence Group in May 2021. Both companies announced their plans to acquire Resolute Forest Products in July 2022.

The Competition Bureau voiced concerns that this merger would reduce competition of northern bleached softwood kraft pulp in central and eastern Canada. 

To settle this issue, the result was an agreement for Resolute, a Domtar subsidiary, to sell the Thunder Bay pulp and paper plant to Atlas Holdings recently. Domtar’s Dryden pulp mill is now in the hands of First Quality Enterprises and dubbed Dryden Fibre Canada.

But Domtar had already placed Espanola on the block.

Bonny Skene, Domtar’s regional public affairs manager, said there were many factors that contributed to Domtar’s decision, but stated the age of the mill, its operating and maintenance situation, makes it unviable to continue running it.

“You’ve got age of asset. It requires a lot of maintenance. You have a complex operation. It’s a specialty paper mill integrated with a kraft pulp mill. That introduces complexity, that introduces cost. There are reliability issues related to age of asset that raises maintenance costs.”

Back in 2019, Domtar promised to make multi-million-dollar competitive upgrades to Espanola with a major capital project that can received federal and provincial government support. Those capital upgrades never took place.

Skene said the cost to update the mill “well exceeded” the original project budget by a significant amount. 

“We got to the very early stages and then it was halted because we were having to invest so heavily in operating losses, high cost and maintenance.”

On the sales front, Skene said it’s been quiet when it comes potential buyers for Espanola.

“At this point, there’s been no proposal that’s come to fruition.”

She was aware of past discussions with an interested party, but she is not aware of any active discussions.

Espanola annually produces 280,000 tonnes of northern bleached softwood kraft pulp and 69,000 tonnes of specialty paper products like food-grade wrapping, sterile packaging for medical products, even paper baking cups.

Skene said that production capacity will not be picked up by other mills within their system.

This latest move reduces Domtar’s only Canadian presence to its Windsor paper mill outside Sherbrooke, Que.

Skene said the company will take appropriate measures to ensure that the parameters of the workers’ collective agreement are respected. She said Domtar wants to be as supportive as possible for those workers and families affected.