Verso Rapids Closure Impacts Wood Products Industry

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For Wisconsin Rapids (OnFocus) – Recently the Council on Forestry met to discuss, among other things, the reach of the effects of the Verso mill closure in Wisconsin Rapids. Bob Peterson, manager of wood procurement at Domtar’s Nekoosa mill spoke with the group, saying the two mills have co-existed for the entire 20 years he had been with Domtar, sometimes fighting each other and sometimes helping each other.

The closure of that mill, he said, certainly has impacts on not only the Nekoosa mill, but others as well. The effects will also be felt in the supply chain, he said. He mentioned his supply base, stating that a producer may bring him a certain amount of wood, but a much larger amount to Verso. His producers, then will have wood that his facility simply cannot absorb. That will make things difficult for his producers, as they need those sales to survive.

“The reality of all this is,” he told the Council, “as things adjust, I am going to see suppliers that currently supply me disappear.”

This is not good news for an industry that has already been greatly affected by the economic impacts of COIVD-19. Market reductions in the paper industry in the lakes states have been significantly affected by this, and the Verso closure will move to exacerbate that.

The Nekoosa mill, he said, has been “pretty blessed” compared to some others in the system. Mill downtime and slow ups raise fixed costs, and when a mill is not running at 100 percent, it quickly impacts the supply base. Adding that closure to the market slowdowns, it accelerates the problems of the supply base.

While many may think it is a great thing for Domtar that the big mill up the river is not there, that is not the case, Peterson said. There may be some opportunities, but as the supply base for Domtar is effected, it will have an effect on the mill as well.

“While this doesn’t necessarily mean I won’t have adequate supply or supply base, but it’s not going to be a fun thing for everyone to go through,” he said. Those are some issues the industry faces within the state, he said. Making plans for the future, he said, is very uncertain and difficult, as the Rapids mill may start back up at some point.

Another mill associated with the Verso mill that is closing, Peterson said, makes cores that Domtar buys for its Nekoosa location. Without Verso, he said, it is likely that mill will no longer be there to supply those cores. Nekoosa also used byproducts from the Verso mill that will no longer be an economic opportunity for them.

From a Domtar perspective, Peterson said, they are looking that the short-term perspective. They are concentrated on getting through the economic downturn spurred on by COVID and to handle their current challenges. The long-term goals of the company, he said, have not changed. Those goals are to safely produce high-quality, affordable products that customers want.

Wood, he said, seems to be produced more efficiently and cost-effectively in other places. That has always been a place where the industry has struggled regionally. Purchasing sustainable wood, too, is also important.

The overall economic effect of the Verso closure, according to DNR forest products team leader Colin Buntrock could reach $900 million. Managing forests may become more difficult in the wake of this closure, as well as the Duluth closure. Historically, approximately 80 percent of wood produced in Wisconsin is consumed by mills in Wisconsin. Approximately 25 percent of pulp wood consumed by mills in Wisconsin was consumed by the Rapids Verso plant, creating a large gap between supply and demand.

Henry Schienenbeck of the Great Lakes Timber Producers Association talked to the group about markets specifically. Balsam from Wisconsin, he said, was consumed primarily by the Duluth Verso mill before the closure. Biron takes a small amount of balsam, but with most of that market gone, there will not be a demand for balsam for quite some time, according to Scheinenbeck. He wondered what the management tactic would be for balsam with demand being almost non-existent.

“One of the counties is telling the guys they don’t have to cut the balsam, but they have to pay for it,” he said. “Standing is not going to work too well for long. That’s for sure.”

He wondered if wood such as balsam would be cut and left for forest management benefits.

These are just some of the decisions counties and others will have to look at as they look to manage their forests. County forests rely on management for revenue, and it remains to be seen what the future of that looks like.

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Beckie Gaskill
Author: Beckie Gaskill