Chinese company also wants to restart mill
The Georgia-based owner of Newberg's shuttered paper mill now says it's open to "all options" for selling the mill, after the Newberg Graphic published a story documenting the company's efforts to assure the mill's papermaking machinery is turned into scrap metal so it can't be reused to make pulp or paper.
Oregon's recycling industry has high hopes that an empty paper mill in the Northwest can be restarted, providing a market for the mountains of scrap paper that is piling up since China halted purchases of mixed paper and plastics collected in our curbside recycling program.
Rahul Kejriwal, a businessman with ties to the paper industry in India, was rebuffed in his effort to buy the mill from Atlanta's Westrock Co., and was told the equipment must be demolished. Westrock had inked a contract to sell the plant to Idaho-based KBD Enterprises in January, including a six-page list of papermaking equipment that had to be scrapped as a requirement of the sale. The leaked sales contract was included with other documents submitted last month by the Association of Western Pulp and Paper Workers in a bid to get intervention by the antitrust division of the U.S. Department of Justice.
Westrock official reaches out
Westrock initially didn't return calls requesting comment for the story, but on June 11 Westrock Director of Corporate Communications John Pensec said the KBD Enterprises deal died because the buyer couldn't fulfill the terms of the $8.25 million purchase agreement.
"That particular transaction failed to close by the contract's deadline, which was May 29," Pensec said. "We're disappointed it didn't close because the potential buyer was not able to obtain financing."
Kejriwal had offered to pay $15 million for the mill, though only $5 million of it would come up front, with the balance paid $1 million per year for 10 years. Kejriwal has been supported by the millworkers union, which wants to get its laid-off workers re-employed in Newberg.
Pensec said Westrock couldn't negotiate with Kejriwal at the time because it was under a contract with KBD, but now Westrock is open to multiple purchase offers that have come in.
"At this point, we're evaluating all options for the site," Pensec said. "We're assessing the best use of the Newberg facility."
Those options include restarting it as a paper mill, although the company would expect a higher selling price for a buyer planning to operate a mill, he said.
Greg Pallesen, president of the Association of Western Pulp and Paper Workers, was skeptical that Westrock had a real change of heart.
"That's great, fantastic news, if Westrock is truly serious. And if they are, they would be calling Rahul (Kejriwal) ASAP," Pallesen said when told of Pensec's remarks.
Westrock also previously told the union they wouldn't allow the papermaking equipment to be reused, during formal labor talks when the work force was being laid off, Pallesen said.
"We've been told a lot of things from Westrock that are not accurate," he said. "They continue to be concerned about their public image and not (the) substance about what they're doing."
Pallesen said Kejriwal wants to use local recycled paper to make newsprint in Newberg for export to India, which is not directly competing with Westrock.
The union's letter to antitrust officials raised concerns about Westrock's pending bid to buy Kapstone Paper and Packaging Co., which owns Washington mills in Longview and the Seattle area, among other holdings. Pallesen worries the Longview mill also could be closed.
Pensec declined to say whether his company has been contacted by federal antitrust officials. The Kapstone purchase is still being reviewed by regulators, he added.
Another would-be buyer of the mill has also surfaced. Mu Lin, who graduated from Portland's Reed College in 2016, said he talked to an agent for Westrock in 2017, before the KBD Enterprises deal was in the works, about his father's Chinese company buying the Newberg mill.
His father owns Forest Packing Group, based in Zhejiang, south of Shanghai, which makes boxes and other container board. The company employs about 1,800 people, Lin said, and had sales of about $500 million last year.
"They basically told me that the paper machines have to be destroyed," Lin said. "There was no negotiation about it, no matter how much we offer."
Lin said his father's company could pay more than the $15 million offered by Kejriwal, and it would all be in cash.
The Lin operation would restart the mill using locally-collected recycled paper scraps to make pulp or new paper products.
There's a shortage of pulp to make paper in China, Lin said, but the Chinese wastepaper is of "worse quality" than Oregon's recycled paper.
Experts say it would cost $500 million to $1 billion to open a new paper mill in the Northwest, a conservative estimate that's considered unlikely.
The Newberg mill has four major assets that any mill requires — papermaking equipment, ample water supply, rail access and cheap electricity — said Jerry Powell, editor and publisher of Resource Recycling Inc., a leading industry trade journal based in Portland.
What it doesn't have, according to one of the last workers laid off from the mill, is the equipment that extracts fiber from recycled paper products. That equipment, according to former millwright Mike Herron, was disassembled and shipped off to Westrock's mill in Georgia in early 2016. The cost to replace that equipment would be in the millions. Prior to its purchase by Westrock in August 2015, former owner SP Fiber Tech boasted that more than 75 percent of the fiber used to make newsprint had come from recycled materials.
There's a recent trend in the U.S. paper industry of closing down mills to reduce supply and drive up prices, Powell said. The same thing happened when International Paper's mill closed in Albany, he said. "Elsewhere it's a common strategy."
It's probably a good business move for Westrock to assure the mill is closed, Powell said, adding "You want to take out the threat that someone will compete against you."
But it's "terrible" news for Oregon's recycling sector if a paper mill can't be reopened here, he said.
Mixed paper represents about 60 percent of what Oregonians put in their curbside bins, and that scrap paper is now piling up in bales at area recycling facilities.
"Losing the mixed paper market will destroy curbside recycling," Powell said. Without the mixed paper, he can foresee curbside recycling shrinking to small monthly pickups of mostly plastics and cardboard.