Upper Peninsula paper mill may see $1 billion manufacturing investment

• A historic paper mill in Escanaba could receive a $1 billion investment after receiving a $29.4 million state tax break 
• Billerud, the mill’s owner, said it is looking to retool the historic plant as it transitions its product line  
• The factory is Michigan’s largest manufacturing employer north of Midland.

The paper mill that’s anchored the economy of an Upper Peninsula city for over 100 years moved closer to a $1 billion retooling on Tuesday after the state made possible a tax break for its Swedish owner Billerud, which is considering shifting production from paper to more lucrative packaging products in Escanaba.

Billerud received approval for a 15-year Forest Production Processing Renaissance Zone on Tuesday from the Michigan Strategic Fund, the public funding arm of the Michigan Economic Development Corporation. The zone will allow the company to save an estimated $29.4 million in state taxes, the MEDC said.

However, Billerud may make additional requests for funding assistance in early 2023 as the company makes a final decision on changing production at this historic manufacturing site to newer, in-demand products used as packaging for cosmetics, pharma and healthcare, luxury drinks and baked goods.

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The tax break approved Tuesday “is an important first step,” according to Jeremy Webb, interim managing director of business development projects at the MEDC in a briefing memo.  

If the full $1 billion investment is ultimately approved by the company, the changes will make the 2,000-acre site in Escanaba and Wells townships “the cornerstone of (the company’s) expansion into North America,” Webb said.

Billerud has planned to make the upgrades in Escanaba since it acquired the mill from Verso — along with a mill in Quinnesec, about 50 miles west, on the Wisconsin border — late last year. 

Changes involve shifting from making typical paper used for products like catalogs and mass mailings to so-called boxboard, a product that’s driving 25-percent annual revenue growth this year, Billerud CEO Christoph Michalski told investors on October 25 during a conference call. 

Boxboard is  “a more technologically advanced paper product,” according to company statements.

For Escanaba, a port city of about 12,400 people, the potential advanced manufacturing investment signals the potential for a vibrant future for the mill, which for decades has been “the lifeblood of this community,”  said Marty Fittante, CEO of InvestUP, a private-sector economic development organization based in Marquette.

The facility has generated an annual economic impact of $356 million to the Escanaba region, said Fittante. It employs nearly 900 people, with another 400 working in Quinnesec. Hopes for retaining those jobs was a goal of the MEDC decision on establishing the tax-free zone, officials said. 

The factory is Michigan’s largest manufacturing employer north of Midland. 

With the anticipated shift in production, a significant segment of the Upper Peninsula’s manufacturing base would move from serving existing markets to emerging ones, Fittante told Bridge Michigan on Tuesday. That’s important for the region as it tries to hold onto population and create job growth.

The expansion at Billerud also would be a sign of progress for the state, Fittante said.

“For Michigan to be healthy, we need to have economic growth in opportunity that spans both peninsulas,” he said. “And I think this is a really important reminder that the Upper Peninsula is anchored to be part of helping the state prosper.”

Billerud already makes the high-yield pulp at the center of the boxboard in what it described as cutting-edge equipment at its factory in Sweden. An expansion means similar equipment will be added in Escanaba, bringing the more competitive product to Michigan along with a low-energy production footprint.

One machine would be added in 2025, the company said, with a second machine added in 2029. Some changes have already been made as part of the product shift in Escanaba, which now produces labels, and Quinnesec, where the machines have been reconfigured to add specialty products. 

That will allow the Escanaba site to continue to operate, the MEDC’s Webb said, as crews start “reconfiguring (it) to fit this massive piece of machinery.”

The mill started pulp production in 1912, adding paper manufacturing in 1920. It expanded many times over the years, including when it was operated by Mead. By 2020, it employed about 900 people, making graphic and specialty paper used in products such as magazines, books, direct mail and labels, according to the Iron Mountain Daily News. 

Escanaba, located in Delta County, is the third largest city in the Upper Peninsula, behind Marquette and Sault Ste. Marie.

Delta County’s population has climbed and dropped over decades, bouncing from about 35,000 people to just under 40,000 several times since 1970. By 2021, it was at 36,826, up 3.4 percent — or 1,200 people — in just one year.

But the region can expect population and employment declines by 2050, according to data from Don Grimes, an economist at the University of Michigan. Among the 15 counties in the U.P, only Houghton is expected to increase its population by more than 4 percent by 2050. Marquette can expect growth of up to 4 percent, while the others are forecast to decline by at least 4 percent.

Modernizing the Escanaba mill would help the Michigan community avoid a massive closing as the paper market contracts, Fittante said. It also would keep the forest product supply chain alive in Michigan. 

Quentin Messer Jr., president and CEO of the MEDC, would not say whether Billerud may request additional state funding to fulfill the product transition, including incentives from the large-scale Strategic Outreach and Attraction Reserve (SOAR) Fund. 

Kevin Kuznicki, the company’s North America deputy president and general counsel, said in a statement that it will work with the state and employees, including unions, as it finalizes its plans and incentive details. 

Tuesday’s focus was to approve the renaissance zone, said Messer of MEDC, “and then continue to move forward.”

“Obviously, there are other things that we have to go out and earn, and we will continue to engage …. with the company.”