Surprised anyone interested in Abitibi mill: analyst

An industry analyst said there is still so much newsprint on the market that he's surprised a European company is interested in reviving a century-old mill in central Newfoundland.

A representative from an unnamed German company recently toured the former AbitibiBowater mill in Grand Falls-Windsor.

The Newfoundland and Labrador government said while the signs are positive, it is far too early to expect a new operator will take over the mill, which AbitibiBowater shut down in early 2009 amid a worldwide economic crisis.

But Stephen Atkinson, an analyst with BMO Capital Markets, said the provincial government which expropriated AbitibiBowater's assets in late 2008 would have to put plenty on the table to lure a new operator.

"You would have to throw in the wood, you would have to throw in the power and you'd have to throw in a competitive labour contract, and that's before you start," Atkinson told CBC News.

More importantly, Atkinson said the current economics in the newsprint industry are sour. He said there is still too much newsprint being produced for North America, and that the demand is shrinking.

To reopen Grand Falls-Windsor, he said, there would need to be a major increase in demand for paper in Asia. He said the climate is not right for an older mill to be relaunched.

"I am surprised," he said in an interview.

"Not only do you have the wood and labor costs to deal with but of course the other thing is the freight, depending on where you want to ship it," he said.

Newsprint prices have been climbing since the Grand Falls-Windsor mill shut down. However, Atkinson said small papermaking machines, the strong dollar and high labour costs do not make Grand Falls-Windsor attractive.

To make it work, he said, a new operator will need lower costs and higher market demand.