Paper Industry Restructuring Intensifies as Mill Closures Mount in 2026

Profitability Crisis Drives Closures

Low margins remain the primary force behind capacity reductions. When mills cannot generate adequate returns, companies face difficult choices between investing in upgrades or permanently closing facilities.

Recent closure announcements cite similar factors:

• Energy costs have risen faster than product prices
• Labor markets remain tight, pushing up wages
• Environmental compliance requires ongoing capital investment
• Graphic paper demand continues structural decline
• Chinese competition limits pricing power

Consolidation Activity Accelerates

Companies with market valuations below their asset replacement costs become attractive acquisition targets. Healthier competitors can acquire struggling mills, extract synergies, and potentially return them to profitability.

UPM's proposed joint venture with Sappi for their European graphic paper operations exemplifies how companies are restructuring to manage declining markets. The combined entity, valued at approximately 1.4 billion euros, will have greater scale to rationalize capacity and reduce costs.

North American Challenges Compound

Trade friction adds complexity to the North American market. Higher tariffs on Canadian lumber have reduced sawmill activity, which in turn reduces the supply of residual wood chips available to pulp mills.

What Comes Next

Industry observers expect 2026 to bring continued volatility:

• Additional mill closures, particularly in graphic paper grades
• More merger and acquisition activity among mid-sized players
• Potential bankruptcies for highly leveraged companies
• Private equity taking public companies private