Domtar appears close to making a final decision about whether to convert its newsprint mill in Gatineau, Quebec, to a containerboard mill, following the end of labor negotiations with Canadian union Unifor. According to the union, negotiations were successful and the agreement involves Domtar proceeding with the facility conversion.
South Carolina-based Domtar, formerly known as Paper Excellence Group, confirmed via email that the Gatineau mill conversion is "under review," but it declined to share additional details.
Domtar’s website says its “entry into the packaging business began with the decision in 2020 to convert our Kingsport, Tennessee, paper mill to manufacture packaging materials,” and the facility now has an annual capacity to produce approximately 600,000 tons of recycled linerboard and corrugated medium. “We don’t own or operate box plants, sheet plants or sheetfeeders,” according to the site.
Last week, the union concluded labor negotiations with Domtar regarding the Gatineau site, and the final contract will likely be published by month’s end, said Daniel Cloutier, Unifor Quebec director. As part of the labor arrangement, Unifor members, which account for roughly two-thirds of the mill’s employees, agreed not to bargain, lock out or strike for eight years — on the condition that Domtar would move forward with the mill conversion, Cloutier said.
Domtar agreed to proceed with the mill conversion investment, Cloutier said, although the company has not issued a final decision. Unifor anticipates that should come by autumn, if not earlier.
The labor contract is for a four-year term that would automatically renew for another four-year term if Domtar's investment is a go, Cloutier said. It also will include language about employee pay increases and the ability to discuss non-monetary matters that might arise. The eight-year time frame for no labor action would ensure Domtar has adequate time for facility construction and production startup, according to Cloutier.
“Domtar told us that they are close to a decision making, and one thing that could help them to make that decision was the guarantee that they will have no conflicts at [the] Gatineau plant while they proceed with the construction of the new facility — and also before everything is ready,” he said.
Contemplation continues
This conversion concept has been under consideration for years, even before Paper Excellence Group, Domtar's parent company, acquired Gatineau mill owner Resolute Forest Products in 2023, according to Cloutier. In October 2024, Paper Excellence Group rebranded as Domtar.
In March, Domtar held a news conference to discuss a potential Gatineau mill conversion, according to Unifor, which had representation at the event. At that event, then-Minister of Jobs and Families Steven MacKinnon reportedly discussed potential federal government financial support for the mill conversion, according to Unifor.
The union has long wanted Domtar to convert the mill, rather than close it, to preserve the existing jobs there. As part of the tentative new labor agreement, an additional 25 jobs will be added when the converted containerboard facility is operational, Cloutier said.
Unifor represents 85 hourly production and maintenance workers at Gatineau, but not other employees such as management or clerical staff. Domtar's website says there are 124 employees at the newsprint mill. Approximately 120 other people are employed at the company's sawmill in the same region.
Timing is everything
The decline in demand for graphic paper likely prompted Domtar’s proposed conversion, according to industry analysts.
After decades of declines, “the future doesn't look very good for newsprint. That's no surprise to anybody,” said Myles Cohen, founder of consulting firm Circular Ventures. “So a newsprint mill coming out of the supply chain is probably a smart move.”
He explained that operators have three main options when deciding what to do with a legacy newsprint mill that will cease production: Close the facility entirely, convert it to a tissue mill, or convert it to a containerboard mill. Domtar’s conversion of its uncoated freesheet paper mill in Kingsport to produce containerboard, completed in 2023, means it has experience with that strategy, Cohen said.
Other companies similarly have converted their newsprint mills in recent years, including Cascades' facility in Bear Island, Virginia, which reopened in 2023; Packaging Corporation of America's facility in Jackson, Alabama, which reopened last year; and ND Paper's facility in Rumford, Maine.
The 280-inch-wide machines at the existing Gatineau facility would work well with corrugators, said Michael Roxland, Truist Securities senior paper and packaging analyst, in a May 16 memo to investors. He projected that such a line potentially could produce 350,000 tons to 400,000 tons of recycled linerboard annually, and the conversion could cost at least $350 million to $400 million.
Due to its non-integration and location in Quebec, the mill likely would seek converters in the Northeast and in the Midwest, which is the largest independent producer market, Roxland said. However, he noted that Domtar could experience challenges with finding outlets for the produced board, which he said appears to be the case for the company's Kingsport mill.
Multiple analysts have pointed to an ongoing oversupply of containerboard and for months have predicted that scenario likely would result in mill closures in 2025. So far this year, the multiple companies that have announced containerboard mill closures include Georgia-Pacific, Greif, International Paper and Smurfit Westrock.
“[W]e view additional containerboard capacity as negative” for the industry's supply and demand dynamics, Roxland said in a May 15 note to investors about a potential Gatineau conversion. He explained that “the industry is currently undergoing a significant capacity reset” and approximately 2.3 million tons of capacity closures have been announced or completed so far this year, comprising about 5.5% of the industry's supply.
The containerboard market has grown very little during the last 30 years, Cohen said, "and I think it will continue to grow at a snail's pace." Plus, the trade war continues to throw a wrench in economic forecasting, but analysts generally point to tariffs further tamping down fiber demand.
BofA Securities and Bloomberg Intelligence are among those showing degraded industry sentiment for demand, with both lowering growth projections for the coming quarters. The latter now expects only a 0.5% to 1% demand increase for 2025. Similarly, RaboResearch analysts say tariffs are influencing the containerboard market. They note the potential for decreased demand growth this year, especially considering the material's sensitivity to consumer demand, which is flagging.
"A wild card in containerboard is tariffs. And, are we going to be manufacturing more stuff in North America because of the tariffs?" Cohen said. "I don't think this is going to be a quick turnaround. This is like turning a huge freight ship around: It's very, very, very slow."
But the supply-demand dynamics could look more positive by the time a converted Gatineau mill would begin production, analysts suggest. That could be 2027 or 2028, based on the typical mill conversion timeline of two to three years, they project.
“In the case of Gatineau, it is likely that basic engineering has concluded given the recent conversion announcement, implying another 2.0-2.5 years before a potential start-up," Roxland said.
Cohen also noted the potential for a different economic climate to emerge. “Consumer sentiment hopefully is as low right now as it will get. While no one can exactly predict the future, I'd bet that three years from now, consumer sentiment would be a whole lot better than it is today,” he said.
Adding to that, Cohen stressed that “anybody who is looking to do a conversion — whether it be Domtar or somebody else — really needs to look at the market dynamics,” including demand and viable end markets.
Whether a new conversion would come to fruition also is in question. “These are not easy” and “there are always hiccups,” Cohen said, citing longer time frames and higher costs for fiber facility conversions over the last decade. In addition, retrofitting and upgrading legacy infrastructure often comes with more challenges and costs than building a modern facility from scratch, he said. The Gatineau mill was built in 1926 and has undergone ownership changes since then.
In May 2024, Billerud scrapped its plans to convert its graphic paper mill in Escanaba, Michigan, to a cartonboard production facility. That followed Graphic Packaging International's October 2023 announcement that it would discontinue a $100 million project to add capacity at its solid bleached sulfate mill in Texarkana, Texas. These examples and others prompted analysts to question how many more companies might hit pause on their announced fiber plant conversions.
All that being said, right now Domtar seems poised to push ahead with an investment in Gatineau to develop a containerboard mill.
“It's in their hand to decide if the investment will go or not,” said Unifor's Cloutier. "But the last discussion we had, it was well advanced as a project, and what they needed is the final board decision.”
