Miramichi mill to close temporarily

Finnish paper giant UPM said Tuesday it is shutting downits Miramichi operations for at least nine months to a year, and warned the closure could become permanent.

Work will stop inAugust, affecting about 600 employees. The mill is Miramichi's biggest employer.

The UPM paper and groundwood mills will be closed because the company'sexport business is suffering from the strongCanadian dollarand the declining price of coated magazine paper in North America.

"The Miramichi management and employees have succeeded in steadily improving the efficiency of the mill," said Jyrki Ovaska, president of UPM's magazine paper division. "Unfortunately, their efforts could not overcome the challenges in the business environment."

Ovaska said the company will work on a business plan to make the mill operations profitable,but he admits there will have to be significant changes from the current situation for the plant to reopen.

"The closer we are getting to the parity between the U.S. dollar and the loonie, the more difficult it will get to run an operation like we have in Miramichi," he said. "This is a critical issue for the Canadian paper industry in general. We are not having these difficulties here alone. It is apparently at a level that is unsustainably high, and making our lives very difficult."

Last August, UPM received a $5-million assistance package that included a $1.5-million forgivable loan from the New Brunswick government.

Pat Roy, national representative for the Communications, Energy and Paperworkers Union, said he wasn't expecting Tuesday's announcement.

"We knew there were downturns coming, but we never expected nine months or 12 months shutdown," Roy said. "We know that the other companies, like Abitibi, Bowater, or Kruger, they're going down for a month or two."

A decision on whether to reopen the mill will be made in 2008, based on market conditions, the company said.

Tuesday's announcement comes on the heels of a Friday announcement thata nearby Weyerhaeuser oriented strand board mill, closed temporarily in February, will remain closed permanently.Weyerhaeuser also blamed a weak market in the U.S. and the risingCanadian dollar for its hardship.