Smurfit to Close ‘Unviable’ Slovakian Mill on Excess Capacity

Smurfit Kappa Group Plc (SKG), Europe’s largest containerboard maker, plans to end production at its Sturovo mill in Slovakia due to excess capacity in the industry and cheaper rival production methods.

The mill has a capacity of 200,000 tons of semi-chemical fluting, which along with containerboard is used to make corrugated cardboard boxes, and currently employs 350 people, Dublin-based Smurfit Kappa said in a statement today.

A combination of cheaper fluting, currency movements and government aid for new capacity in central and eastern Europe made the Sturovo mill “unviable,” Smurfit Kappa said.

Containerboard producers have removed about 1.7 million tons of capacity since April last year as demand dropped by as much as 10 percent, or 2 million tons, according to Davy Stockbrokers. More capacity must be taken out if the industry is to rebalance supply and demand as producers plan to add 1.8 million tons of capacity by the end of 2010, Davy analysts Barry Dixon and Robert Gardiner said in an Aug. 13 report.

Smurfit Kappa closed three corrugated box plants in the first half in Spain, the Netherlands and Denmark and announced the rationalization of an Irish operation in July. It’s closed a total of 38 sites since the end of 2005 as part of an ongoing improvement program.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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