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Newsmaker of the Year: Catalyst Paper Corporation

Paper corporation's Powell River mill survives year of uncertainty
Catalyst Paper Corporation Powell River
ROLLER COASTER: Catalyst Paper Corporation had its share of ups and downs in 2018. The company faced anti-dumping duties applied by United States Department of Commerce to its newsprint products, had to curtail production on Paper Machine 11 in Powell River at one point due to a shortage of fibre, and announced the sale of the local mill to Paper Excellence Canada Holdings Corporation. Getty Images/iStockphoto

Powell River Peak has chosen Catalyst Paper Corporation as its 2018 Newsmaker of the Year.

Nothing else this year, not even the municipal election, impacted Powell River more than the uncertainty of the mill.

The year Catalyst had in 2018 forebode a future without the mill and demonstrated how it is so critical as the linchpin of a diverging economy for Powell River. The company had not come as close to being shut down since 2012 when it was rescued from bankruptcy.

The troubles began on January 11 when United States Department of Commerce slapped the first of its anti-dumping duties on Catalyst mills in Powell River, Port Alberni and Crofton.

The company said it could weather the storm and, at the time, City of Powell River mayor Dave Formosa said Catalyst had faced unfair duties previously and fought them successfully.

“We’ve already had this battle and it was won, by the province and the companies coming together and fighting it," said Formosa.

The 6.09 per cent tariff on newsprint products challenged the company’s competitiveness but it was a minor tiff compared to the next shot fired at Catalyst in the Trump administration’s trade war with Canada.  

On March 14, a 22.16 per cent tariff was imposed on the company’s exports of uncoated groundwood paper products made at all of its Canadian mills, but Powell River was hardest hit.

A commerce department investigation accused Catalyst of unfair trade practices by dumping its produce at below US market value. The paper is used for newspapers, directories, flyers, catalogues and books, and accounts for 60 per cent of production at the local mill.

It was a critical cost challenge for Catalyst, according to company president and chief executive officer Ned Dwyer.

“They pose a threat to our competitiveness and the sustainability of our business and we will continue to vigorously defend ourselves against them,” stated Dwyer in a media release.

The future of the mill hung in the balance and, privately, sources at City of Powell River were questioning whether it would survive the year and, at best, three.

Formosa called it a crisis.

“The worst case scenario is the end of Catalyst,” said Formosa. “It’s a scary situation.”

The Powell River mill is worth approximately $125 million to Powell River’s economy per year, including $40 million in direct payroll to 420 employees, more than $5 million in taxes and another $80 million in indirect expenditure.

Former City of Powell River councillor and chair of the finance committee Russell Brewer said, “This is not a good news day, not good at all.”

The Powell River mill was forced to curtail production on Paper Machine 11 in early April because of a shortage of fibre, energy costs and the US tariffs.  

On April 25, premier John Horgan called a high-level meeting with government, industry representation and the mayors of the three communities affected to discuss a concerted effort to find a resolution with the US.

When Catalyst’s majority shareholders Oaktree Capital Management, Mudrick Capital Management, LP, and Cyrus Capital Partners, LP, sold its two US mills in May to focus on Canadian operations, people wondered if Powell River would be next to go.

Then in July, the province stepped in to protect pensioners.

“If Catalyst sells a mill in BC, specifically in my community, which is my biggest concern, they cannot sell the mill assets only without providing for the deficiency in the pension plan,” said Formosa, responding to the government’s preemptive move. “Regardless of what type of sale it may be, if there is a sale, the pensioners would have to be topped up from the sale money.”

On Wednesday, August 29, when the United States International Trade Commission unanimously rejected the countervailing and anti-dumping duties previously applied, everyone breathed a sigh of relief.

“I was confident that this would come in our favour. I'm more convinced now than ever that it was a ploy to try and get rid of some of the competition while Catalyst was weak,” said Formosa. “We all knew that this was frivolous and didn't make a lot of sense. We're really happy to see this result.”

The loss to the Powell River mill from the anti-dumping duties was estimated to be $6 million per month, according to Formosa, or approximately $42 million since January, but those penalties would be returned in full.

On October 9, the announcement was made that the mill had been sold to Paper Excellence Canada Holdings Corporation (PEC), the largest pulp producer in Canada.

“We clearly recognize the importance of a mill like the one that you have in Powell River; how important it is to both the jobs of the employees there as well as to the community, given the size it has within that community,” said PEC president and chief executive officer Brian Baarda on the day of the sale. “We intend to maintain the operations as they stand today for the foreseeable future. We don't anticipate making any changes.”