Michigan may provide up to $200 million for Billerud paperboard product mill investment

Billerud continues to evaluate investments to transform and convert its Escanaba, MI, mill into a paperboard production mill, and is close to receiving up to $200 million from the state of Michigan

Michigan’s House and Senate passed legislation on January 26 that includes up to $200 million in state tax dollars for improvements at Billerud in Wells Township. The legislation must be signed by Michigan’s Gov. Gretchen Whitmer, a Democrat.

The paper mill is planning $1 billion in upgrades.

The $200 million investment in Escanaba would allow Billerud to expand from paper production to paperboard and carton board used for packaging, according to the Michigan Economic Development Corp’s December description of the project.

There is an ongoing study to determine the feasibility of Billerud’s project to convert the Escanaba mill to paperboard. The company expects the study to be completed by mid-2023. Billerud’s board of directors will then decide if it would approve the conversion project.

“For the first quarter of 2023, we expect more challenging market conditions with slower demand for graphic paper, sack and kraft paper and paperboard,” Billerud’s CEO Christoph Michalski said in the company’s earnings call on January 27.

“Customers’ destocking and the future economic uncertainty are expected to have a temporary negative impact on sales volumes.”

Related to the conversion to paperboard in Michigan, Michalski recently told Packaging Europe that “graphic paper is not what we should be producing, considering our strategic focus on packaging materials, but we saw the potential for a change in production” in the US.

“Being close to the market is becoming increasingly important,” he added. “Ten years ago, we were talking about a global economy and that it didn’t matter where production was located, but everything is different now, and everyone is aware of the issues in the supply chains. Everyone wants to minimize the risks and is moving from global to more regional networks.”

Michalski said Billerud would ensure they have sold volumes for at least half of the capacity if they were to start up a new boxboard machine at the Escanaba mill.

“The strong market for graphic paper means that we now have much greater flexibility in implementing our strategy,” Michalski said. “We will most likely convert the other line as well (at Escanaba), but it may take longer than planned. We initially said 2029, but if the trend in graphic paper continues, it may very well be a few more years.”

If the Escanaba project moves ahead, it appears that Billerud would be looking for the conversion to be completed in 2025, according to Michalski’s comments in the Packaging Europe story.

The company envisions the US paperboard machine at Escanaba that would have a US twin to the KM No. 7 at Billerud’s Gruvön mill in Sweden. The KM 7 capacity is 550,000 tons per year, according to Packaging Europe.

This article was first published in PPI Pulp & Paper Week, the industry’s most trusted pulp and paper market news and prices for North America. Speak to our team to find out more and subscribe to our newsletters.

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