PORT ANGELES — McKinley Paper Co., a U.S. subsidiary of Mexico-based Bio Pappel S.A.B. de C.V., signed a purchase agreement Thursday to buy Nippon Paper Industries USA’s struggling Ediz Hook factory, said Herb Baez, McKinley’s vice president of operations.
Baez said Thursday in a telephone interview from his company’s Albuquerque, N.M., office that the sale of Nippon will be finalized for an undisclosed price by March 31.
Once purchased, the mill, which has been in existence under several owners since 1920 at the base of Ediz Hook, will become McKinley Paper Co., Washington Mill, according to a prepared statement from McKinley Paper Co.’s public relations firm.
Baez said the mill, shut down since Jan. 21 because of poor market conditions, will continue to be closed for an indefinite period of time while McKinley officials decide what it will manufacture in Port Angeles.
Nippon’s Mill Manager Steve Johnson said in a prepared statement that McKinley Paper Co., Washington Mill, will produce recycled containerboard.
“I know there will be a big transformation at the mill when this is done,” he said Thursday in an interview.
There were about 105 hourly workers at Nippon before the mill curtailed operations in January.
Brando Blore, a mill employee for 42 years, said Thursday that under Nippon, the mill had been scheduled to start up again Saturday. Now, that date has been set back by six months to a year, according to a union official.
Andy Grossell of Port Angeles, president of the Association of Western Pulp and Paper Workers Local 155, told workers that after the sale is finalized, there will be a “complete retooling of the machines to make liner board and heavy-grade products,” according to an email to employees.
“Unfortunately the time it will take to accomplish this retooling process is estimated at the very least six to 12 months,” Grossell said in the email.
“At the end of March the [co-generation plant] will go down as well,” he said in the email.
“This is possibly good news for the community in the long run but not for us in the near future.”
Wages are about $15 to $30 an hour, Blore said.
“Mainly, [workers] are just concerned about what all the details are, whether they will be working for the new company and what the future holds at this point,” he said.
Grossell said that “the suggestion obviously is to peruse the Trade Act benefits you have and start over somewhere new.”
He added that the union would begin meetings Monday “to figure out all the details of how exactly this will go down.
“Right now, that’s what we know.”
McKinley produces containerboard — corrugated and solid cardboard — from recycled cardboard at its one New Mexico paper mill, according to the McKinley news release on the purchase agreement.
Baez said he did not know how long the mill will be shuttered and that it is premature to say how many workers will be hired or rehired once it reopens.
“I don’t want to commit to a time right now because I don’t know,” Baez said.
“Probably the entire facility will go down.”
Nippon’s assets include a biomass electricity co-generation plant, which generates electricity for sale as green energy and also produces steam for the mill.
Baez also did not know if the cogeneration plant will continue to operate once the mill starts up again.
About 12 of the approximately 30 employees who were at the plant Thursday were operating the cogeneration facility, built in 2013 in a plan to revive Nippon at an estimated cost that ballooned from $75 million to more than $90 million.
Plagued with start-up problems, it was the focus of a multimillion-dollar legal dispute between Nippon and FSE Energy, the manufacturer of the facility’s boiler, that was resolved in an undisclosed settlement in January 2016.
“We are going to have to do our study,” Baez said. “We are going to see what it takes to make [the plant] successful.
“We have to evaluate the assets we are getting and how to best utilize them.”
Baez said the company’s objective is “to be a competitive player in the industry.
“We are still looking into the details of the conversion plan. That takes money, and it takes time.
“We will hire union labor as needed.”
Nippon Paper Industries USA, owned by Nippon Paper Industries of Tokyo, produced lightweight paper, newspaper stock and telephone-book paper.
Nippon announced the sale in a statement the company distributed Thursday to employees, decrying “a severe business environment due to diminishing demand for its product.”
Nippon suffered “an extraordinary loss on the sale of NPIUSA’s assets in the settlement of accounts as of the third quarter of FY2016,” the statement said.
“McKinley has an intention to sustain the Port Angeles mill operation and that is agreed with Company’s expectation.”
The mill was built in 1920 as Washington Pulp & Paper Co., then carried the name Crown Zellerbach. Daishowa Paper of Japan purchased it from James River in 1988.
In 2003, Daishowa merged with Nippon Paper Group, and it became Nippon Paper Industries USA.
By midday Thursday, Nippon Paper Industries USA’s website was shut down.
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Senior Staff Writer Paul Gottlieb can be reached at 360-452-2345, ext. 55650, or at pgottlieb@peninsuladailynews.com.
