Sappi closes European paper mill as persistent economic decline forces business reevaluation

11 Oct 2023 --- Sappi has confirmed the closure of its Stockstadt Mill in Germany, with the paper producer conceding that the global economic downturn has “proved to be much tougher than anticipated” and put “significant pressure” on its business, particularly in Europe.

On July 6, 2023, the company began a consultation process on the possible closure of the mill, which has now been completed and includes a social plan for employees. The mill’s closure is expected to be completed during Q1 2024, and an agreement has also been struck to sell the site. Once all closure elements are taken into account, the impact is expected to be cash-neutral.

Sappi has also commenced a consultation on the future of its Lanaken Mill in Belgium as the industry battles with depressed markets, geopolitical instability and weak economic growth.

Focus on packaging
The paper and packaging leader says it will continue to position itself for future growth opportunities — including new packaging opportunities.

“Sappi continues to position itself for growth and increased profitability in line with our group Thrive25 strategic focus. This includes reducing exposure to the graphic paper segment while expanding Sappi’s presence in packaging, specialty papers, pulp and biomaterials,” says Steve Binnie, CEO of Sappi.

“Recent investments across our South African, American and European operating businesses demonstrate this priority. We will, therefore, continue to review the viability of all our operations and make changes when necessary.”Sappi has established a social plan for its hundreds of employees at the closing Stockstadt Mill.

Marco Eikelenboom, CEO of Sappi Europe, adds: “These are globally challenging times, and we are faced with overcapacity in graphic paper, forcing us to take extended periods of costly commercial downtime. As the recent over-stocking by customers reduces, it has become very clear that demand will not return to previous levels. Combined with input cost pressure, we do not see this situation — caused by factors beyond our control — improving in the foreseeable future.”

While continuing to serve the graphic paper market through its competitive assets, the overall priority of the European business will be to grow the packaging and specialties segment, specifically within flexible packaging, functional papers, self-adhesives including glassine, labels and dye-sublimation categories.

New energy normal
According to a recent Rabobank report, Europe has gone from being one of the lowest cost paper producing regions in the world to the highest. To remain competitive on the world stage, Europe’s paper producers must act together to decarbonize their energy supplies and reduce prices by transitioning to new technologies, the report’s authors told us.

Surging energy costs have encouraged the consolidation of major paper packaging suppliers, most notably Smurfit Kappa and WestRock, which announced a US$34 billion mega-merger in September.

Sappi’s mills
Sappi Lanaken Mill is an integrated pulp and paper mill employing 644 workers with a production capacity of 165,000 tpa of pulp, which is used to produce 530,000 tpa of coated wood-free paper, mainly sold into the European print market.

Sappi Stockstadt Mill is an integrated pulp and paper mill with a production capacity of 145,000 tpa of pulp (for internal use) and 220,000 tpa of coated and uncoated wood-free paper mainly sold into the European print market.

By Joshua Poole