Aug 032012

By Nick Worth
Citing increased costs of raw materials and a declining market for newsprint, Catalyst Paper announced the permanent closure of the Snowflake recycle paper mill Wednesday.
According to a Catalyst Paper press release, the mill will stop production on Sept. 30.
“The decision to close Snowflake is an extraordinarily difficult one given the exceptional effort that em-ployees, unions and public officials have given to address the unique challenges at this mill,” Catalyst President and CEO Kevin J. Clarke noted in a statement. “We understand and regret the difficult impact within the Snow-flake community and surrounding region created by closure of the mill. I want to acknowledge and thank all who have given us their unwavering support and co-operation. There were no stones left unturned.”
The closure of the mill will affect more than just the mill’s 308 employees, though.
“It’s going to devastate Navajo County,” said County Assessor Cammy Darris.
She noted that the paper mill paid $568,678 in taxes to the county last year. Of that amount, Darris said, $47,268.56 went to Navajo County. The rest of the tax money was distributed as follows:
* Snowflake School District, $343,024.41;
* Northland Pioneer College $97,846.89;
* School Equalization, $33,642.53;
* Navajo County Health District, $15,506.07;
* Navajo County Flood Control District, $14,843.27;
* Fire District Assistance Fund, $7,899.19;
* Northern Arizona Vocational Institute of Technology, $3,949.58;
* Navajo County Library District, $3,949.58;
* Heber/Overgaard School District, $744.86; and
* Silver Creek Flood District, $3.62.
Darris said the closure would have an additional effect on the county.
“Those 308 people won’t be spending money in Snowflake, Taylor or Show Low, so our sales tax revenues will be going down,” she said.
“We’re very concerned and disheartened over the whole thing,” said Snowflake Mayor Kelly Willis. “It was like a dark cloud came over us. It’s devastating.
“The paper mill was the main economic engine for the community,” Willis said. “Any time you lose your most vital economic engine, it’s like you’re losing your lifeblood. You’re losing a lot of what sustains the com-munity.”
Willis said although it was known that the mill was struggling, the announcement was still surprising.
“The paper mill has been a part of our community for so long,” he said. “You just don’t expect something that big to close down.
“They’ve (Catalyst) tried to keep it going and all the employees tried hard to keep the mill going,” Willis said.
Willis said the ultimate impact of the closure would not be known for some time.
“The trickle-down effect will be tremendous,” he said, noting that he would attempt to get someone from the company to attend the next Snowflake Council meeting to explain the possible impact on the community and on the area.
Taylor Mayor Fay Hatch said he received a phone call at 6 o’clock Monday night informing him of Cata-lyst’s decision. He said he was told the mill would be scrapped.
“I laid awake all night,” he said. “We’re all still in shock, walking around in a daze.
“This is going to affect everyone in town,” Hatch said. “Schools, restaurants, everyone.
“No one will be untouched by this,” he said. “They (Catalyst) pumped a lot of money into these two towns.”
Hatch said the impact would be felt throughout the area, noting that the mill has many employees who live in Show Low, Pinetop-Lakeside, Heber, Clay Springs and Holbrook.
According to the Catalyst release, newsprint demand has dropped more than 10 percent annually since the latter part of 2008. Along with the decreased demand for new and recycled newsprint, the price of old newsprint (ONP) has increased 163 percent since 2009. Increased freight costs have also had a negative effect on the mill’s profitability.
A $5 per ton increase in ONP price has a negative impact of approximately $2 million on the “earnings be-fore interest, taxes, depreciation, and amortization” (EBITDA) and results in approximately a $1 million loss in earnings. Catalyst notes the Snowflake mill has generated negative EBITDA since 2009.
In an effort to improve the profitability of the Snowflake mill, Catalyst implemented a number of measures since buying the mill in 2008, including a switch to the production of higher grade specialty papers, capital in-vestment, improvements in productivity, quality and service, and competitive labor agreements. The company has also attempted to sell the mill as a going concern.
“Reduced quality of ONP as municipalities moved to single stream waste recovery combined with ONP price volatility driven by export markets were obstacles on the input side. Added to these challenges are the protracted demand decline for recycled newsprint and other printing papers. While we did everything possible to prevent this outcome, employees, vendors and customers needed the certainty that today’s (July 31) an-nouncement provides,” Clarke said.
Clarke and other Catalyst executives met Wednesday with employees and union representatives at the Snowflake Mill and Apache Railway Company to outline the closure plan. Catalyst will honor its obligations to employees, and will work closely with suppliers, customers and regulators through the wind-down of opera-tions. The site will subsequently be prepared for sale and repurposing.
Mayor Hatch said the towns of Taylor and Snowflake need to work together to come up with a plan to help local citizens affected by the closure.
“We need to put our heads together with the mayor and council in Snowflake, and find some way to ease the shock for the employees who are losing their jobs,” he said.
“We are not going to lay down,” he said.

Photo courtesy of Catalyst Paper
Production at the Snowflake recycle paper mill will cease on Sept. 30. The decision was made by Catalyst Paper officials after efforts to make the mill profitable or sell it were exhausted.