JAY — Verso Androscoggin Mill Manager Marc Connor told selectpersons Monday that the mill needs to compete to stay in business.
He gave an overview of the trends in the coated paper industry, including that the cost to make paper has increased significantly while the demand declined and the profit margin decreased, he said.
Demand for coated papers in North America reached a maximum in 2006. Between 2006 and 2013, the demand fell 5.3 million tons or 39 percent while the capacity was reduced 3.8 million tons or 31 percent, he said.
Since the demand peak in 2006, the No. 3 coated freesheet prices have increased $36 per ton while the costs have increased by $129 a ton, Connor said. Similarly on the coated ground wood No. 4 paper, the market price is up $29 a ton while the industry costs are up over $130 a ton, he said. The paper is used in magazines and other printed material.
Ownership of digital reading devices such as tablets has increased from 8 percent in May 2011 to 42 percent in January 2014. The ownership of smartphones increased from 35 percent in 2011 to 58 percent in January, he said. Mobile shopping has also increased during that time.
Connor also went over the decline of paper mill values over the years.
As an example, he said, on Aug. 1, 2006, Verso Paper Corp. acquired the coated and supercalendered paper divisions of International Paper Co. The purchase as of the acquisition date was $1.4 billion for four mills in Jay and Bucksport, Maine; Quinnesec, Mich.; and Sartell, Minn., he said. Verso Paper Corp. plans to acquire NewPage Holdings Inc. and its eight mills, including one in Rumford, for $1.4 billion by the end of the year.
Verso announced Oct. 1 that it is closing its Bucksport Mill as of Dec. 1.
It is just very difficult to make money with a paper mill, Connor said.
“We’re trying to do a lot of things at the mill to try and reinvent ourselves,” he said, including trying to get into specialty markets.
He asked selectpersons for fair consideration around the Androscoggin Mill’s value.
Verso Androscoggin LLC requested a tax abatement in February for $469 million in valuation for 2013. The town valued the mill and property at $929 million in 2013. The town has until Dec. 1 to make a decision on the abatement request.
A revaluation done by the town before setting the 2014-15 tax rate showed the paper mill and property decreased from $815.4 million of taxable value last year to about $592 million this year. The $815.4 million taxable value did not include more than a $100 million assessment of tax-exempt assets related to the state’s Business Equipment Tax Exemption program.
The town taxed Verso $9 million last year, factoring in two tax-increment financing agreements. This year, after factoring in the agreements, the taxes would be about $8.47 million.
What they pay in taxes affects their ability to survive in the paper industry, Connor said.
There are 860 employees at the Jay mill, he said.
It is his job to make sure the mill continues to operate to support those 860 families and to help support the town as long as possible, he said.
“I need all the help I can get,” Connor said.