Weak market factor in mill closure.

High energy costs and a weak newsprint market are being blamed for the permanent shutdown of one machine at AbitibiConsolidated's Kenora plant and the idling of two others.

The company is also shutting down part of its Iroquois Falls paper mill in northeastern Ontario.

"Energy costs have (increased) approximately 65 per cent so far this year compared to last year's average," Abitibi's public affairs manager Denis Leclerc says. "That's a major increase and this has put the (Kenora) mill in a vulnerable position."

Leclerc says the Kenora mill is one of the most costly in the company's portfolio and was selected for restructuring for that reason. As of June 18 the mill's paper machine No. 8 was decommissioned and paper machines No. 9 and 10 were temporarily idled.

The move affects nearly 500 employees; 147 jobs have been cut at the northwestern Ontario mill and 333 workers have been temporarily laid off until the fall.

The shutdowns will permanently reduce the company's newsprint capacity by 180,000 tonnes annually.

"Our intention is to restart machine No. 10 when the newsprint market improves," Leclerc says. "For machine No. 9, what we want to do is convert it; instead of newsprint, what we want to produce is value-added paper. This will give the machine a second life.

"By shutting down paper machine No. 8, we will then be in a better position to improve the overall cost of that mill."

The changes to the Kenora mill complete the commitment made at the time the company's $7-billion Donohue Inc. acquisition was announced in February 2000 to remove 400,000 tonnes of high-cost, excess newsprint capacity.

In Iroquois Falls, Leclerc says the decision to close the mill's specialty paper machine No. 1 this fall is not due to high energy costs, but rather is a means to trim production. The 86-year-old machine, which has been making "non-core product" - construction paper - will be shut down Sept. 14, leaving the Iroquois Falls mill to run as a one-machine newsprint operation.

The closure will affect 200 workers and eliminate 53,000 tonnes of "non-core specialty grades" from the company's annual production.

"Our main objective at Iroquois Falls was to ensure the long-term viability of the machine and integrity of the mill," Leclerc says. "We had many, many discussions with our employees to try to find a way to make that old machine more profitable with the long-term vision."

The company had asked workers at the mill for concessions, including a reduction in the workforce over the next three years and a no-strike, no-lockout agreement to 2010. Three of the mill's four unions accepted the proposed restructuring program, Leclerc says.

"The fourth one has rejected (it), so we had to make the decision to close the machine. By shutting down paper machine No. 1, we will be able to improve the operating performance of the machine that we have left there."

He says there is little chance the nearly 350 workers affected permanently by the closures will find employment elsewhere in the company, because in order to improve overall operating performance, the company has been looking at cutting jobs at all of its mills.

"It's really difficult because we are doing the same thing at other mills and other mills have put together plans and programs in order to reduce the operating costs of those mills. One way of doing this is to reduce the workforce in order to reduce costs.