UPM Plans Further Capacity Reductions of Uncoated Paper in Europe

UPM plans to permanently close paper machine 6 at UPM Schongau, Germany, reducing the annual capacity of uncoated publication papers by 165,000 tonnes by the end of Q2 2023.

March 22, 2023 (Press Release) - UPM announced plans to adapt its uncoated publication paper capacity to a long-term profitable customer demand. The capacity reductions are planned to take place in Germany and Austria:

• UPM Communication Papers plans to permanently close paper machine 6 at UPM Schongau, Germany, reducing the annual capacity of uncoated publication papers by 165,000 tonnes by the end of Q2 2023.
• UPM Communication Papers accelerates the earlier announced stop of production at its Steyrermühl mill by six months. The exit of a total annual capacity of 320,000 tonnes of newsprint will take place already by the end of Q2 2023.

Production on the cost-competitive paper machines 7 and 9 in Schongau as well as on the four other uncoated publication paper machines of UPM in Germany and Finland is planned to continue with a total annual capacity of 1,800,000 tonnes.

The employee consultation process in Schongau is planned to start immediately in line with local legislation. The machine is planned to be closed after the consultation process has been finalized. Would the plan be implemented, the total reduction of personnel at UPM Schongau is estimated at 135.

The COVID-19 years caused demand disruptions in the graphic paper markets, followed by a period of high inflation and unprecedented volatility last year. Now that volatility is subsiding, the graphic paper market is returning to its long-term trend of declining demand which has characterized the industry for over a decade.

"The continued long-term decline in graphic paper demand forces us to continue our efforts to ensure cost competitive production and that our assets are in efficient use in all circumstances," said Massimo Reynaudo, Executive Vice President, UPM Communication Papers. "We are aware that these are difficult news for our employees who have demonstrated their loyalty and commitment over such a long time. In a declining market, competitiveness in company operations is key to substantiating our long-term commitment to the publication paper market and to remain as a reliable partner to our customers. UPM aims to handle the restructuring measures in a socially responsible manner and will engage now in a fair dialogue with employee representatives."

At the same time, UPM has decided to stop the newsprint production at its Steyrermühl newsprint mill by the end of Q2 2023. "We thereby accelerate the plans to ensure competitive production at our remaining newsprint paper machines in Europe. This decision will have no impact on the plans for the Steyrermühl site and its employees as communicated on 21 June 2022*," the company said.

*PaperAge editor's note: UPM to Sell Its Steyrermühl Newsprint Mill in Austria to Heinzel Group.

For the planned closure of Schongau PM 6, UPM will recognize restructuring charges of EUR 26 million as items affecting comparability in its Q1 2023 results.

The planned actions are estimated to result in annual fixed cost savings of EUR 13 million.

UPM delivers renewable and responsible solutions and innovates for a future beyond fossils across six business areas: UPM Biorefining, UPM Energy, UPM Raflatac, UPM Specialty Papers, UPM Communication Papers and UPM Plywood.

SOURCE: UPM