Chinese company to buy Rumford paper mill

Nine Dragon Paper of China announced Friday that it will buy the Catalyst paper mill in Rumford. (Russ Dillingham/Sun Journal)

RUMFORD — Catalyst Paper announced plans Friday to sell the Rumford paper mill and a mill in Wisconsin to a subsidiary of Nine Dragons Paper of Hong Kong for $175 million.

An operations center in Dayton, Ohio, is also included in the sales agreement.

Nine Dragons Paper is the largest containerboard producer in China and the mills would be its first in the U.S.

Containerboard is a type of paperboard specially manufactured for the production of corrugated board, which is used for corrugated boxes. More than 95 percent of all products in the United States are shipped in corrugated boxes, according to the American Forest & Paper Association.

Catalyst had owned the Rumford mill for three years and about 620 people work there. A spokeswoman for Nine Dragons Paper said no layoffs are planned. In a news release, the company also referenced but didn’t specify “future capital investments.”

The announcement was treated as tentatively good news by industry watchers and the head of the Rumford mill’s largest union.

“They’re a paper outfit; they’re not an investment or holding outfit that may be doing paper or cars or airplanes,” said Local 900 President Gary Hemingway, who met with company representatives Friday.

“It looks good, and they’re going to accept our contract and all the benefits and wages,” Hemingway said. “I think they could actually fix the mill up.”

Gov. Paul LePage tweeted Friday that he was happy to welcome Nine Dragons Paper’s investment.

“I met them earlier this month, and I believe this will be the beginning of a strong relationship that will benefit Maine’s people, economy and our paper and forest products industry for years to come,” LePage wrote.

In its news release, subsidiary ND Paper said the sale will diversify Nine Dragons’ manufacturing base and give it “access to high-quality virgin fiber, resulting in increased access to a more secure and cost-effective channel for raw material supply.”

It also said investment and expansion would be coming: “The acquisition and future capital investment in growing the mills’ capabilities in high growth packaging paper and pulp products will help invigorate the local Wisconsin and Maine economies, allowing them to stay competitive and prosper in the global market.”

“We are very pleased to welcome the Rumford and Biron mills to the Nine Dragons family,” Nine Dragons Chairwoman Yan Cheung said in a statement.

“We are committed to making these mills more competitive on a global scale, while staying true to our core values as an environmentally friendly and socially responsible enterprise with utmost respect for our employees,” according to the statement. “We look forward to working with the teams and communities in Maine and Wisconsin as we embark on this next phase of expansion together.”

Forbes magazine’s World’s Billionaires index on Friday listed Cheung’s net worth at $2.1 billion and noted that her husband and younger brother, also with the company, were also billionaires.

Mark Wilde, an industry analyst from BMO Capital, said he was already hearing talk about the company converting Rumford from coated paper to containerboard.

“It’s not necessarily the most obvious place to do a mill conversion to make containerboard,” he said. “There are a lot of mills down in the southern U.S. that seem like they might be a little better positioned, so I’m a little surprised by this deal.”

If that chatter was right, it could mean good things locally, Wilde said.

“It’s a much better market than the coated paper business, which has been shrinking for about 15 to 20 years,” Wilde said. “The paperboard market has actually been growing a bit. Assuming that’s what they do, and they get it done, it probably gives that mill a little better outlook for the future.”

Just three months ago, the Verso paper mill in Jay announced a $17 million upgrade to one of its paper machines to make packaging products.

In China, Nine Dragons Paper relies on recycled paper waste to make its containerboard, Wilde said. But the Chinese government has started to clamp down on the import of paper waste.

“I think Nine Dragons is probably looking globally at other ways to make paperboard if this situation with tighter waste paper imports into China is a permanent move,” he said.

Lloyd Irland, a longtime industry analyst in Maine and head of The Irland Group, said the sale might be a way to gain some control over the fluctuating fiber market.

“They don’t have enough of a paper industry to produce all of the fiber they need,” Irland said. “They don’t have big enough forests to produce all the fiber they need, they never will. It’s probably good (news), but wait and see. It can’t be a bad thing for that mill to be owned by a really well-capitalized entity and an entity that wants fiber.”

He noted that it’s also hardly the first time Maine mills have seen foreign investment: The Woodland mill has a Hong Kong owner.

Spokeswoman Elizabeth Baldacci said Nine Dragons owns eight paper mills in China and one in Vietnam.

Asked about early talk of converting the Rumford mill, she said: “ND Paper will be evaluating the strengths and capabilities of the mills in order to understand what appropriate investments may be needed to enhance the mills’ competitiveness globally. Their focus at the moment is on conducting business as usual on a day-to-day basis.”

Rumford Town Manager Linda-Jean Briggs said Friday she had heard rumors about a company coming to visit the mill.

“I hope Nine Dragons Paper will be an asset to the community of Rumford,” she said. “I look forward to meeting with them and strategizing how we can work together.”

During the 3:30 p.m. shift change Friday, Jeff Tyler of Woodstock said he’d seen news about the sale on Facebook. He was working at the mill as a contractor for Bancroft.

“As long as they keep it open, I don’t care,” Tyler said.

A news release from Catalyst thanked employees and noted that “their hard work and dedication have vastly improved these operations.”

Catalyst also said the sale, which is expected to close at the end of the second quarter, will allow it to repay outstanding debt and focus on its Canadian operations.

Rumford Falls Times Editor Bruce Farrin and staff writer Marianne Hutchinson contributed to this report.