You are the owner of this article.
You have permission to edit this article.
Edit
top story

International Paper spins off plant near Columbia, retains Georgetown mill

  • Updated
IMG_3182.JPG

International Paper's South Carolina mills are in Georgetown (above) on the coast and Eastover in the Midlands. File

Digital communications have already sifted away demand for printer and copier paper over the last couple decades. Coronavirus shuttering offices accelerated that trend.

For that reason, International Paper is slicing so-called free sheet paper production from its balance sheets in the second half of 2021, including the company's Eastover Paper Mill near Columbia. 

Eastover and several other mills will fall under a new spinoff company that will be run by International Paper's senior vice president of industrial packaging. But beyond a boost for stockholders, major changes are unlikely at legacy paper giant's largest mill.

International Paper will transfer shares of the new company to its stockholders and will retain its own ownership shares in the new, free-standing company, which it estimates will have $4 billion in annual sales.

The company said it is not planning any operational changes for the nearly 40-year-old mill that employs 700 workers in Richland County.

The company's other South Carolina mill in Georgetown, which produces more specialized products, including the paper sticks used in cotton swabs and the paper backing to adhesive labels, will remain under the International Paper banner.

CEO Mark Sutton said on an investor call this month that turning the printing papers segment into a standalone company would create more value by keeping the company focused on cardboard and fluff pulp, the absorbent material used in diapers and other goods.

But the move had analysts speculating about the future of what International Paper calls SpinCo, the copy paper spinoff, with several saying the move makes it a more likely acquisition target. Mark Wilde, an analyst with Bank of Montreal, said he doesn't know what will ultimately happen to SpinCo.

"But the Eastover Mill itself will probably be running for quite a while," he said, even if it changes hands. That's because the facility is International Paper's largest and most cost-effective.

The pandemic has brought on declines up to 30 percent in the printing and writing paper segment. Before that competition was already heavy between manufacturers, said Patricia Marques, a paper industry consultant with Fisher International who also spent 15 years working for International Paper.

"Companies are playing the last man standing strategy," Marques said. "The ones that survive are the ones that have very low cost."

By Sutton's estimates, Eastover is one of the top three free sheet mills in North America. 

Get all the latest industry happenings from the Midlands, plus exclusive development news and more in your inbox each week.


"Eastover is probably going to be one of the very last mills to make white paper," Wilde said, estimating it will still be producing a decade from now, whether that's for SpinCo or another owner.

In the United States, International Paper's Georgetown, Selma, Ala., and Ticonderoga, N.Y., sites make similar products. Abroad, there are three more in Brazil and one each in France, Poland and Russia. 

Georgetown County Economic Development Director Brian Tucker said, based on his conversations with International Paper, he expects the mill to operate well into the future. With about 750 employees, the mill is Georgetown County's largest employer.

One analyst's thoughts about the Georgetown mill are that it's a bit more up in the air.

That's because the bulk of production at Georgetown is in fluff pulp and it is possible International Paper could choose to exit that business, Wilde said. The company has struggled to make its large investment in the sector profitable despite a number of initiatives to improve performance.

All of the major paper companies — International Paper, Domtar and Packaging Corporation of America — are facing the same decline issues and are making similar decisions when it comes to adapting for the future. Most are turning to cardboard boxes used by e-retailers, like Amazon, an industry sector that the pandemic has sent booming.

Packaging Corp. has converted mills in Jackson, Ala., and Pensacola, Fla. to cardboard box production.

Domtar has opted to either close mills, like its million-ton Portland, Ala., operation, or convert mills, like its Bennettsville operation, to fluff pulp or container board.

Georgia Pacific, once the fourth-largest paper company, shuttered all of its paper operations in 2019.

"White paper is a shrinking market and over time there's going to be more consolidation and more mill closures or conversions," Wilde said.

And the pandemic is forcing decisions now rather than companies holding out a few more years.

"I think most companies assume, even as we get a vaccine, they’re probably not going to recover all the volume they've lost," Wilde said. "That's because, even when we go back to work, our habits probably changed quite a bit."

Get up-to-the-minute news sent straight to your device.

Topics

Breaking News

Columbia Breaking News

Greenville Breaking News

Myrtle Beach Breaking News

Aiken Breaking News