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Paper industry continues to feel the pinch

The UK paper industry continues to feel the pinch of escalating energy prices with DS Smith announcing the proposed closure of one of its mills.

Sudbrook Mill in Monmouthshire, south Wales will close at the end of May with the loss of 135 jobs after fuel bills more than doubled in the last three years, leading to annual losses of around £3 million.

DS Smith group communications manager Peter Aubusson said: “A number of the groups operations are under close scrutiny as a result of the difficult trading environment and high energy costs.

“Sudbrook mill is the most energy-intensive production operation within the group and its annual energy costs have approximately doubled over the last three years. St Regis (the company’s paper division) has been unable to pass the increase on to its customers and the mill is now making annualised operating losses of approximately £3 million.”

Last week, the Confederation of Paper Industries suggested that as the UK recovers more and more paper, it could be faced with an acute problem as a growing amount of it is sent abroad for processing.

But DS Smith suggests the closure is an important step towards raising the returns of its UK paper and corrugated packaging operations.

Following the proposed closure, Kemsley mill in Kent will represent approximately 60% of the division’s output of over 900,000 tonnes per annum. The site is ranked in the top quartile of European Corrugated Case Material mills in terms of cost competitiveness.

There has been a drop in demand for the 150,000 tonnes of a speciality form of cardboard casing the Sudbrook mill produces each year.

Made from recycled paper and wood pulp, the product is mainly used to make boxes and trays, but demand has fallen as customers switch to a lower cost paper.

It is estimated that the proposed closure will result in an exceptional charge to the profit and loss account in the financial year 2005/06 of the order of £22 million.

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