DS Smith proposes closure of Monmouthshire mill

The decision will have a knock on effect for the cardboard recycling sector although the mill primarily uses a feedstock pulp – 70% – and 30% recovered cardboard and other material. Mechanical processing of the pulp uses more energy than is used for handling recovered paper.

DS Smith put the reason for the closure down to increasing energy costs which are hitting the recovered paper sector hard. Other UK boardmakers, such as Smurfit Kappa, are also thought to be scrutinising costs as gas prices continue to rise and they fail to pass on enough of the increases on finished product. Closures or adjustments at mills in the UK are expected to continue.

Scrutiny
DS Smith had pointed to possible mill closures in its interim results in December 2005. Then it said that “a number of the Group’s operations are under close scrutiny as a result of the difficult trading environment and high energy costs.”

Sudbrook Mill produces 150,000 tonnes per annum of semi-chemical fluting paper which is a speciality form of corrugated case material (CCM). It is proposed that the closure will be implemented by the end of May 2006.

Sudbrook Mill, said the company, is the most energy-intensive production operation within the Group and its annual energy costs have doubled over the last three years.
A spokesman said: “St Regis has been unable to pass this increase on to its customers and the mill is now making annualised operating losses of approximately 3 million. The decision to propose the closure of the mill has also been made in the context of demand for the mill’s speciality product continuing to fall as customers switch to alternative lower-cost types of paper.”

Kemsley
He added that the proposed closure of Sudbrook Mill is “an important step towards raising the returns of the Group’s UK Paper and Corrugated Packaging operations. Following the proposed closure of Sudbrook Mill, St Regis’ principal mill at Kemsley will represent approximately 60% of the division’s output of over 900,000 tonnes per annum; Kemsley Mill is ranked in the top quartile of European CCM mills in terms of cost competitiveness.”