Great Lakes Paper

Great Lakes Paper

The Great Lakes Paper Company was the operator of the largest and most modern pulp and paper manufacturing facility in the world. The Company employed over 4,000 in Northern Ontario, starting in 1924 as a pulp mill at Fort William, Ontario (now Thunder Bay, Ontario Canada). Great Lakes had a highly developed social network within the company, including a children's Christmas party held at a local arena, and an annual picnic held at a local park, as well as many sports teams and other social groups.

Great Lakes fell victim to trends in the pulp and paper industry in Northern Ontario over the past 15-20 years. Factors in the decline of Great Lakes and the pulp and paper industry in general included trends in advertising, electronic data transmission and storage and the Internet, all of which continue to have adverse effects on traditional print media. Newspaper, magazine and catalog publishing customers increasingly use other forms of media and advertising and electronic data transmission and storage, including television and the Internet, instead of paper products. North American newsprint demand has been in decline for several (annual declines of 5.6% in 2005, 6.1% in 2006, 10.3% in 2007, 11.2% in 2008 and 25.3% in 2009). Forecasts indicate that these declines in newsprint demand could continue for several years.

As well, negative impacts on the survival of the Company included increases in global newsprint capacity, particularly in China and Europe, which resulted in lower prices, volumes or both for the Canadian industry's exported products.

The relationship between industry supply and demand for forest products, rather than changes in the cost of raw materials, determines the industry’s ability to increase prices. Consequently, the industry has been unable to pass along increases in operating costs to its customers.

The major factors contributing to the ultimate merger and demise of the Company are:

• Energy prices, particularly for electricity, natural gas and fuel oil, which have been volatile in recent years.

• Wood fiber costs--wood fiber is the principal raw material used in the business. The primary source for wood fiber is timber. Environmental litigation and regulatory developments have caused significant reductions in the amount of timber available for commercial harvest in Canada. The Province of Ontario has been reluctant to approve new cutting rights pursuant to the Company’s forest licenses and forest management agreements. Legislation and litigation advanced by Aboriginal groups and litigation concerning the use of timberlands, the protection of endangered species, the promotion of forest biodiversity and the response to and prevention of catastrophic wildfires have also affected timber supplies.

Control of the Great Lakes Paper, a long-standing publicly owned company changed over the years and in 1974 was acquired by Canadian Pacific Limited ("CP"). CP changed the Company's name to Great Lakes Forest Products. It was later amalgamated with Canadian International Paper Company becoming Canadian Pacific Forest Products and later spun off as Avenor. In 1998 the Company was acquired by Bowater becoming Bowater Forest Products. In 2007 Bowater and Abitibi-Consolidated merged forming AbitibiBowater.

In 2009 the newsprint portion of the Thunder Bay plant was idled indefinitely leaving only one line of the kraft mill operating and forcing the layoffs of several hundred employees. On April 16, 2009, Bowater filed for bankruptcy protection in the United States and underwent a restructuring. AbitibiBowater now trades as an over-the-counter stock. In February 2010, the largest remaining paper machine (#5) was restarted. In addition, the company renegotiated labor agreements; resized the workforce; rolled out a wage reduction across the woodlands operations; and renegotiated its power agreement. The combined changes resulted in a cash cost savings at the mill of over $150 per ton and AbitibiBowater believes Thunder Bay is now one of the lowest cash cost mills in the industry.