Verso Corp. announced Tuesday that it will begin indefinitely idling its Duluth paper mill by the end of June.
Due to the COVID-19 pandemic, Verso has seen an "unprecedented" market decline in graphic paper, according to a news release.
“After a comprehensive review of post-pandemic demand forecasts and capacity, we made the difficult decision to idle the Duluth and Wisconsin Rapids mills," said President and Chief Executive Officer Adam St. John. "We expect the idling of these facilities to improve our free cash flow. The sell through of inventory is expected to offset the cash costs of idling the mills.”
The Duluth paper mill employs about 225 people, the majority of whom will be laid off. Some employees will remain employed after June 30 to continue limited operations and maintain the facility, though Verso doesn't know how many yet or how long they will be kept on.
The company will explore alternatives for the mill, including marketing it for sale, closing permanently or restarting if market conditions improve.
For the past couple of years the city of Duluth has worked closely with Verso on supporting a request to the Minnesota Legislature to help the company expand.
To preserve jobs, Verso was looking for public assistance earlier this year in the form of a $2 million loan from the state and $242,000 from the city while eyeing a conversion to the production of packaging materials. And in 2016, Duluth Mayor Emily Larson asked the City Council to set a cap on the city's electric utility franchise fee under the proposition that the costs would jeopardize the mill.
"They've been a really good partner," Larson said. "I'm hopeful that we can reactivate that plant either under Verso or in a new ownership form and keep that site operating. It's an important part of Duluth's story."
In a conversation with Verso on Tuesday morning, Larson said she asked how the city can help, and while there isn't anything the city can do at the local level for the Ohio-based parent company, the city plans to continue supporting the future of the mill.
"In the meantime, what we can do is and what we have done is reached out with our career force services to help ensure that people who will be furloughed or laid off will have access to unemployment insurance and other supports for them and their families," Larson said.
Mike Birkeland, executive vice president of the Duluth-based nonprofit Minnesota Forest Industries and Timber Producers Association, said that for every job in a paper mill there's typically another three or four jobs involved in the supply chain, broadening the effect that Verso's indefinite idleness will have on the industry.
"There's no doubt COVID-19 has had an unparalleled impact in ways we have not seen before. The longer this goes the more challenging it gets," Birkeland said. "We've also seen ups and downs with different parts of the markets as well. Certain market sectors have been hit harder than others."
Graphic paper, the type of paper Verso manufactures, is one of the sectors that has been hardest, Birkeland said. The Duluth paper mill has one paper machine with the capacity to produce 270,000 tons of paper a year for uses such as newspaper advertising inserts, catalogs and magazines.
Verso is one of two paper mills in Minnesota that uses a large amount of softwood tree species like spruce and balsam fir, said Ray Higgins, vice president of operations for the Minnesota Forest Industries and Timber Producers Association, meaning there aren't a lot of currently available market options in the area for those species.
"That's a question that's going to need to be determined," Higgins said.
With the number of paper mills lost over the years, the market share is already "extremely competitive and tight on volumes," said Kurt Benson, president of the Timber Producers Association. He added that in addition to paper mill workers and loggers, freight companies that haul wood will be affected as well.
"We just hope people get back to work and we can get back to some kind of status quo here," Benson said.
The Duluth paper mill opened in 1987 and Verso acquired it in 2015.
Verso will also begin idling its mill in Wisconsin Rapids by the end of July. Between the two mills, about 1,000 employees will be laid off.
This story was updated at 6 p.m. June 9 with comment from the Minnesota Timber Association and the Minnesota Timber Producers Association and Duluth Mayor Emily Larson and at 7:41 p.m. to correct the spelling of Ray Higgins' name. It was originally posted at 9:51 a.m. June 9.