FRANKLIN, Va. – Three years ago, International Paper Co. closed an enormous mill here that for generations had churned out white office paper, putting 1,100 people out of work and dealing a major blow to this tidewater city of 8,500.
Now, the world's largest producer of paper products is reopening part of the mill with an eye toward an expanding market in Asia for personal-care products. With about a fifth of its old workforce, IP's Franklin mill is gearing up to begin producing fluff pulp – the soft, white absorbent used in diapers, tampons, and some medical bandages.
"There is a huge, huge opportunity" as families in the burgeoning middle classes of China, India and other Asian countries are seeking more personal hygiene and baby care products, said Rildo Martini, IP's vice president and general manager for pulp.
The mill's transition to making fluff for diapers and other products points to how the U.S. paper industry is diversifying to counteract sinking North American demand for traditional white paper – the stuff of copy machines and printers – in the Internet age. Industry capacity for copy paper has fallen for the past five years in North America. The global manufacturing capacity for fluff pulp totals 6.4 million tons, up from 4.5 million in 2007, according to Rod Fisher, a Norwalk, Conn., consultant who tracks global pulp output. Fluff pulp represents a small portion of an overall pulp and paper market of about 450 million tons annually, he says. In 2011, fluff accounted for only 2% of IP's global sales.
Fluff pulp, the soft, white absorbent used in diapers and tampons, can be made only from the coarse fibers of loblolly pine, a fast-growing tree that thrives in the U.S. South.
World-wide demand for the substance has been rising about 4% a year and is expected to keep growing for years to come. Meantime, North American demand for copy paper has fallen sharply.
Copy paper demand in Asia has increased, but North American mills can't compete with Asian mills in that market, because the paper can be produced more cheaply there.
But the mill on the inky Blackwater River is able to take advantage of Asia's growing desire for fluff because it can be made only from the long, coarse fibers of loblolly pine, a fast-growing tree that thrives in the U.S. South. Its fibers are ground, boiled, bleached and pressed into puffy white material that can absorb what a baby can excrete.
IP, with headquarters in Memphis, also makes fluff at part of its mills in Pensacola, Fla., Riegelwood, N.C., and Georgetown, S.C.
Other paper makers have expanded their fluff production in recent years. Atlanta-based Georgia-Pacific LLC, the world's largest producer of fluff, is converting part of an Alabama mill to produce more. Montreal-based Domtar Corp. converted a portion of its Plymouth, N.C., mill in 2010.
During the recession, copy paper demand in North America "stopped overnight" and IP had to shutter the Franklin mill, said John Faraci, IP's chief executive. "We had no choice," he said. "We didn't have any orders."
The Franklin mill's large operations, southern location, and proximity to a major port made it a logical candidate to restart for fluff pulp production. "We're willing to create jobs where there is demand," Mr. Faraci said.
IP spent $90 million revamping the mill, and is using about one-third of the 3,500-acre site; shutting it down would have cost about $80 million. Another portion of the mill is being leased to a tissue manufacturer that plans to hire 85 workers. IP also is in talks with other companies, including a renewable-energy joint venture, to use the site.
The revival came none too soon for the city, whose economy had been dominated by the mill since the 1880s. Today "closed" signs in storefront windows are common. The city has had to freeze hiring and dip into reserves due to an about $1 million loss this year in tax revenue from the mill. The percentage of City of Franklin residents living below the poverty line was 22% from 2006 to 2010, more than double the state rate. Unemployment sits at 10%. When IP sought to hire 220 workers, 3,000 people applied.
Darnell Lee, 52 years old, was one of the lucky ones. He and his wife were laid off from the mill in 2009. His wife is unemployed but at least now they have one salary, he said.
"That was the best phone call I could have ever got," said Mr. Lee, who works in the mill's shipping department.
The mill's 15-story power-system tower – by far the tallest building for miles – is again illuminated at night. Trucks bearing 22-ton bundles of loblolly logs rumble through the city. Giant machines are whirring and grinding as preliminary operations have begun. And that peculiar mill smell, which one resident described as "like rotten eggs times three," wafts through area streets. Some hate it, but many residents don't mind.
Beulah Thorpe, 69, who lives right next to the mill, said she hushes people who complain about the plant's odor. "That is money you smell," she said. "It is a blessing to see people working there again."