After $110M Sale, Pine Bluff Paper Mill Takes Stock

The Pactiv Evergreen paper mill at 5201 Fairfield Road in Pine Bluff. Suzano SA of Brazil paid $110 million for the mill, a similar one in North Carolina and Pactiv Evergreen Cadron Creek chip mill in Menifee (Conway County). (Steve Lewis)

Brazilian pulp and paper giant Suzano has a vision for the mill it is acquiring in Pine Bluff, but precisely what that is poses “the $64,000 question,” Arkansas forestry expert Matthew Pelkki says.

It’s really an $80,000-a-year question to many of the 800 or so workers at the Pactiv Evergreen plant in economically distressed Pine Bluff.

Suzano announced last month that it paid $110 million in cash for the 68-year-old Arkansas facility and a similar one in North Carolina. The largest pulp producer in the world, Suzano says it plans to continue operating with the current Pine Bluff team.

Pelkki said he has no reason to doubt that, but in the long term, he foresees other options for Suzano that could have major implications for timber jobs in the region. The company could invest in modernizing the mills, or fit them into the vertically integrated approach it has perfected in South America.

It could even scrap them and sell their equipment piecemeal, said Pelkki, director of the Arkansas Center for Forest Business and a professor at the University of Arkansas at Monticello.

With the average Arkansas paper mill paying more than $80,000 a year and the Pactiv mill helping to uphold 2,200 other logging, trucking and support jobs beyond its gates, Pelkki said the stakes are huge.

“How many jobs in Pine Bluff pay $80,000 a year?” Pelkki asked. “That’s well above the Arkansas average. It’s more than the starting pay for assistant professors at the University of Arkansas.”

In a written statement to Arkansas Business, Suzano said the acquisition is part of its strategy to become “a sizable and competitive player in the global packaging segment.” The company described the Pine Bluff mill as a “high-quality asset that is ideally located” logistically.

“We intend to work closely with existing suppliers to ensure we can capitalize on new growth opportunities for the mill,” the statement said. “We have been in business for over a century and have a very clear understanding of … the enormous value of working closely with suppliers, on-site teams and local communities.”

Jobs for Current Workers

Suzano, based in Salvador, Brazil, said the plant offers low energy costs, access to plentiful local timber and proximity to rail, highway and water transport.

Daniel Thomas, a U.S.-based spokesman for Suzano, said the Pine Bluff mill “produces liquid packaging board and cupstock used to make fresh beverage cartons, paper cups and other fiber-based food and beverage packaging.”

The acquisition includes Pactiv Evergreen’s Cadron Creek chip mill in Menifee (Conway County).

Suzano said the deal is subject to customary regulatory approvals. “Once approved … all existing labor contracts and job positions will be immediately transferred to Suzano,” the statement said. “In total, this transaction will impact approximately 850 employees” in Pine Bluff, Waynesville and Menifee.  “We believe the ready supply of local wood is a real asset for the mill and, therefore, do not foresee any changes to current relationships with suppliers.”

Pelkki said he takes the company at its word, but acknowledged that business strategies can change.

“They are extremely experienced in pulp and paper operations,” he said. “But they are also a vertically integrated company, which means that at least in Brazil, they grow their own trees for processing.”

U.S. companies have largely abandoned that approach. “International Paper, Clearwater, Georgia-Pacific, Domtar, they basically got rid of their timberlands in the 1990s and 2000s, and the timberlands got thrown off into real estate investment trusts,” Pelkki said. “They no longer own the trees. They’re buying trees from someone else.”

Pelkki’s fear for the Pine Bluff region’s economy is that Suzano could take a cue from Georgia-Pacific, which is already importing eucalyptus timber from Brazil to feed its tissue mill in Crossett.

“There’s such an oversupply of eucalyptus,” he said. “It can grow three or four times faster than loblolly pine. In 10 years you can get saw-timber-size trees. My concern is that Suzano is going to think about using the same process [in Pine Bluff].”

If the company commits to eucalyptus, it could stop using Arkansas pine, Pelkki said. “Since we’ve seen it before, there’s a possibility that it happens again. And if it does, the logging industry won’t have a source to take wood to. Landowners won’t, either. And then the workers that are on the green end, those that manage the incoming trees and process them, they won’t be needed anymore at the mill.”

‘Hope for the Future’

Local economic officials are more confident.

Allison J.H. Thompson, president and CEO of the Economic Development Alliance for Jefferson County, said her organization is “feeling very positive” about the Pactiv-Suzano deal.

“That facility has been for sale for a little while, and this company has the size and wherewithal [to succeed],” Thompson said in a telephone interview. “My hope for the future is that they not only acquire it, but invest in it and take it to the next level. That often happens when a new owner acquires a facility.”

She noted that the plants were Suzano’s first major investment in North America. “We’re hoping that this is one that they really want to make their flagship here,” she said. “My understanding is that they want to utilize the experience that is already in the mill.”

Suzano said on its website July 12 that it would “work alongside Pactiv Evergreen’s team, leveraging its operational knowledge and experience in the paperboard business to enhance the structural competitiveness and profitability of the acquired assets.” It described the Waynesville and Pine Bluff plants as “already comparatively well-positioned on the cost curve of the North American packaging industry.”

The company said the deal would add about 420,000 metric tons per year of integrated paperboard to Suzano’s production capacity.

Sold for a ‘Song’

Pelkki, the UAM professor, believes Suzano can easily afford to invest in the two U.S. mills, which he said Pactiv Evergreen sold for “a song.”

Why did Pactiv sell? “That is something only the corporate folks would know, so I can only speculate,” Pelkki said. “The mill is quite old [opened in 1956], and so is the one in North Carolina.

“Pactiv Evergreen isn’t getting out of the pulp and paper business, but in that industry, companies face internal competition with other mills they own,” Pelkki added. “In the United States, companies are going with the mills that are producing better margins.”

He noted that Suzano paid $110 million for two U.S. paper mills that would cost $2 billion apiece to build from scratch. “A single paper machine in those mills costs close to $400 million.”

Both mills have the ability to produce more paper products than they have been, he noted.

“Suzano might look at this and say, we’re going to invest and modernize this mill. That would be absolutely wonderful, and that’s exactly what I’m hoping is going to happen.

“But I can’t just be unicorns and rainbows,” Pelkki continued. “I have to think about what the bad side could be. If things completely fell apart for Suzano, they could probably scrap those two mills and get their money back.”

Suzano expects to complete the acquisition by the end of this year.