Delay over £500m paper mill
DEVELOPERS behind a multi-million pound recycled paper mill on Teesside said construction would go ahead - but not yet.
They said they remained committed to the project, despite the sharp contraction in the British newspaper industry, which remained its target market.
Ecco Newsprint chief executive, Marcus Moir, said he still believed there was a case to be made for import substitution - foreign newsprint accounts for around 60% of consumption in the UK - despite a downturn in demand.
The mill would not compete on price, he said. Publishers were more interested in quality and value, while local authorities were anxious not to be seen to be sending locally collected paper for recycling abroad. He said he was not “overly concerned” about raw material prices, which have continued to rise, because “the UK is producing an enormous surplus of recovered paper which is why so much is exported”.
Newsprint remains one of the industry’s biggest costs. Prices have risen 20% this year to around £450/t, but European demand had already shrunk by 2% by the autumn of 2008. Since then, recessionary pressures and a collapse in advertising revenues has seen a swathe of newspaper titles axed across the country.
The hold up in development of what will be the UK’s biggest paper recycling plant was forced not by nervousness over future returns, but delays in getting financiers to commit to the project, said Mr Moir.
The cost of the development, which was announced in 2007 when the company secured a 125-year lease on 66 acres of land at Wilton owned by One North East, had spiralled by £100m to nearly £500m by April of last year. But the company said it now expected “substantial reductions in construction costs”.
“Construction will start when we have completed raising the money,” said Mr Moir, who previously said it would be financed by banks and private equity.
“It’s a slow process,” he admitted. “It’s a question of getting all those people who may be interested in funding us to make their commitments.”
Meanwhile, a rival recycled mill is due to open at King’s Lynn in Norfolk later this year. It would not, however, make a huge dent in the market, which was the highest consumer of newsprint in Europe, said Mr Moir.
The company pointed out that over the past two years 3m tonnes of production capacity had been stripped out of North America and Europe as mills closed, while some commentators speculate that a further 1m tonnes will disappear over the next 12 months.
“The country still imports 60% of what it consumes,” said Mr Moir.
When it is eventually up and running, the plant will produce 420,000t of high quality newsprint a year.
Share
