Paper mill confirms plans to halve production

Norwegian newsprint giant Norske Skog confirmed today that it will halve newsprint production at its Tasman Mill at Kawerau but said it would convert a machine in Tasmania to produce coated paper grades, thanks in part to the Australian taxpayer.

Norske Skog, in a move signalled in August, said falling demand and unfavourable exchange rates meant that it would shut down one of its two 150,000-tonne-per-year newsprint machines at Kawerau.

The company would not comment on how many jobs were involved, saying the consultation processes would take about two months, but the Engineering, Printing and Manufacturing Union (EPMU) said more than 100 positions could go. About 280 people are employed at the mill at present.

Norske Skog's announcement follows news of 120 redundancies at Solid Energy's Huntly East mine, with up to 400 jobs in the balance at Spring Creek, and last week's announcement that 100 jobs will go at the Tiwai Point aluminium smelter by November.

Consolidation in the newsprint industry has been a familiar theme for Norske Skog over the last few years.

Tasmania-based pulp and paper analyst Robert Eastment said newsprint is under pressure globally because of the digital delivery of news, information and advertising.

New Zealand production of newsprint has been in decline since 2005, when it hit a peak of 377,000 tonnes, falling to only 276,000 tonnes last year.

"It is a really tough market for Norske Skog, but if they are to remain viable in the future then they have to take really tough decisions," Eastment told APNZ. Norske Skog, which is involved in geothermal energy at Kawerau, is pursuing a range of renewable energy opportunities as part of a broader regional diversification strategy.

The company has two other sites in Australasia - one in New South Wales and the other in Tasmania.

It will invest A$84 million ($106.6m) at its Boyer Mill in Tasmania over the next two years to enable the production of coated grades suitable for catalogues. All the catalogue paper used in Australia is currently imported from overseas.

The Australian Federal Government will contribute A$28m in grants to help fund the project and the Tasmanian Government is providing a A$13m loan. Completion is targeted for the first quarter of 2014.

EPMU national secretary Bill Newson said shutting down a newsprint machine would be a blow to the community and a sign of a growing jobs crisis in New Zealand. "It's particularly galling that at the same time Norske Skog is cutting jobs in New Zealand, it's actually investing in jobs in across the Tasman thanks to the support of the Australian Government," he said in a statement.

The mill's partial shut-down will also have implications for the local power generation industry.

Norske Skog accounts for about 2.9 per cent of New Zealand's power demand and the partial closure would further extend the "significant" generation over-capacity in the electricity market, one market analyst said.

"Power consumption has been flat over the last few years and Norske, a major consumer, means more power will go onto the national grid, which will put downward pressure on prices," he said.

The likelihood of flat power demand has put a dampener on the Government's plans for partial privatisation of its generation assets.

The partial privatisation of Mighty River Power, which was to have been held this month, has been delayed until next year while the Government consults with local iwi.