Norske Skog Closing Mill in Norway

The management of Norske Skog has recommended closing down production at the company’s paper mill in Follum, Norway. The company has recommended the mill be closed no later than March 31, 2012.

In announcing its recommendation to the board of directors, Sven Ombudstvedt, president and CEO of Norske Skog, says Norske Skog sells less paper than before because of the shift toward electronic media.
“Therefore, we unfortunately no longer need as many paper mills.”

While acknowledging efforts Norske and mill employees have taken to improve the financial position of the mill, Ombudstvedt says earnings have deteriorated year by year. Small mills are expensive to operate, he comments, and Norske Skog has phased out a number of small mills in Norway and in other nations during the past five years.

Follum is Norske Skog's smallest mill in Norway and it has the highest costs per metric ton, according to the company. The mill, described on the Norske Skog website as being “located in the middle of the Norwegian woodland,” uses all wood chips for its feedstock.

Alternatives for the continued operation of Follum were investigated but management says it could not find a solution. “We do not need more competition and more paper in the market,” says Ombudstvedt. “We need fewer competitors and less paper in the market. Continued operation of Follum with another owner would make the situation considerably more difficult for our other mills in Norway.”

The mill produces newsprint, magazine paper and book paper. Annual production capacity at the mill is 290,000 metric tons.