Boxboard: Fusion Paperboard plans to shut Connecticut coated recycled mill in September

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Boxboard: Fusion Paperboard plans to shut Connecticut coated recycled mill in September

July 25, 2014 - 11:15

OAKLAND, CA, July 25, 2014 (PPI Pulp & Paper Week) -Three years after acquiring the Sprague coated recycled paperboard (CRB) mill in Connecticut, OpenGate Capital is winding down operations at Fusion Paperboard toward a Sept. 22 permanent shutdown, according to the company and local press reports.

Mill management cited market conditions,The Dayin Connecticut reported.

"As you all know, we have been working hard to overcome the significant challenges in our business, and despite tremendous effort, we have made the difficult decision to wind down our operations over the next several weeks," sales and marketing VP Hank Somer informed customers on July 23.

The 146,000 tons/yr mill operates a 148-in Beloit machine and is the fourth largest CRB producer in North America with a 6% market share, according to RISI. It employs about 140 workers, and is the largest employer and taxpayer in Sprague, in southeastern Connecticut, paying $250,000 to the town in 2013. The mill dates to 1962.

OpenGate acquired the mill from Cascades in June 2011, and said then that the mill and a carton plant in Hebron, KY, generated combined revenues of $100 million. Fusion shut the Hebron plant last year. Cascades was considering closing the Sprague mill before selling it to OpenGate. Cascades acquired the Sprague mill from Caraustar in 2006 for $14.5 million.

The mill buys 12,000 tons/month of recovered paper furnish including old corrugated containers (OCC) and double lined kraft corrugated clippings.

Fusion produces InverKote and InverFreez CRB grades made from 100% recycled fiber with a minimum of 60% post-consumer content. Both grades are RPA-100% certified, and carry FSC and Rain Forest Alliance certifications.

RISI shows the mill in the fourth quartile of costs.

Local surprise.Despite being widely known as a high cost CRB mill in a competitive recovered paper market in the Northeast, the Fusion closure surprised local officials and some boxboard industry players.

Fusion last year rebuilt the press section and overhauled a turbine at Sprague in a $6 million project that included a $3 million loan from the state of Connecticut.

"I think this was a complete surprise to everyone," said a state senator from the Sprague area.

The town last year forgave a $50,000 building permitting fee, worked to secure a utility agreement for the mill, and halted a planned sewer rate hike. A solar farm project on the mill property was planned to create a new revenue stream, and earlier this year the mill reached a six-year labor contract with Steelworkers Union Local 1840.

A union leader told theNorwich Bulletinthe mill has a 17-day backlog of orders for pizza boxes and bakery boxes, and he was afraid the company "is going to dismantle its paper machine and ship it out of state, making it unlikely that a new company would take over."

The local official toldThe Dayshe had no indication OpenGate would "walk away" from the state loan. It had begun paying the loan in December.

Fusion Paperboard owes the state $2.02 million and a state Dept of Economic and Community Development (DECD) spokesman told theNorwich Bulletinthe company is responsible for the balance of the loan plus a 7.5% penalty.

"DECD includes measures in each business assistance agreement to safeguard the state's investments. Agreements typically require businesses to maintain operations within the state for no less than 10 years," he said. "Failure to meet this provision automatically requires the recipient to immediately repay the financial assistance plus a penalty."

"This is bad for Fusion but good for the CRB market," said a boxboard producer contact, of CRB supply and demand in North America.

"Another shutdown?" asked a surprised CRB buyer.

The news also added fuel to a hotly contested primary battle for governor of Connecticut, press reports added.

Two Republican candidates commented on the mill closure, criticizing the Democratic incumbent's tax and business policies.

"Fusion Paperboard's unfortunate decision to close their plant in Sprague will be very hard on their workers, their families, and the town of Sprague," said candidate Tom Foley. "It didn't have to happen."

"Connecticut is broke," said candidate John McKinney.