Sappi S.A. Exploring Closure of Adamas Mill
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Sappi Southern Africa, Johannesburg, South Africa, this week initiated a consultation process with staff and union representatives to cease operations at its Adamas fine papers mill in Port Elizabeth, South Africa, in response to difficult market conditions and sustained input cost increases. The move is inline with Sappi Southern Africa's strategy to improve the competitiveness of its fine paper business by aligning its production capacity to market demand.
Removal of production capacity at Adamas would address the high manufacturing overheads associated with a small mill (Adamas produces about 40,000 metric tpy of a total regional capacity in excess of 1 million metric tpy). Variable costs will be improved by shifting production closer to Sappi's main South African markets and raw material sources.
Sappi Southern Africa acquired the Adamas mill in 1964. It originally produced board for the motor industry and subsequently uncoated printing and writing papers with a significant percentage of recycled fiber.
Commenting on the decision, Alex Thiel, CEO of Sappi Southern Africa said that "we fully recognize and commend the enormous past and ongoing efforts that employees and mill management have undertaken to reduce costs and improve profitability. However, the mill's size, technical age, and high costs of energy and fiber have made it necessary to initiate a review. A final decision will only be made once the consultation process is completed towards the end of July."
Potential closure of the Adamas mill would have no impact on customers as production would be moved to Sappi's Enstra and Tugela Mills.
Sappi will maintain its presence in the Eastern Cape in regard to marketing and sales as well as the collection and purchase of collected fiber (used in recycled paper grades) through Sappi ReFibre.
Sappi also announced that, in partnership with AsgiSA-EC, it have developed a joint proposal with a strategic goal of accelerating the establishment and management of 30,000 hectares of commercial tree plantations by 2020 in the Eastern Cape. This development is expected to create a number of permanent skilled and unskilled jobs. Sappi and AsgiSA-EC have already developed close to 150 hectares in conjunction with the Mkambathi and Sinawo communities.
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