PAPER AND packaging group Smurfit Kappa is to close its recycled containerboard mill in Valladolid in Northern Spain. LAURA SLATTERYreports.

The mill, which has a capacity of 130,000 tonnes, is one of the older and less efficient mills owned by the company and is being closed in the next three months as part of a rationalisation plan. The closure will reduce Smurfit Kappa's recycled containerboard capacity by 70,000 tonnes in 2008.

Smurfit Kappa will also increase its production downtime to remove 80,000 tonnes of capacity from the market, mostly between now and the end of April, in order to improve the balance between supply and demand and reduce its increasing inventory levels.

The firm said the cash cost and impairment charges of its actions would be detailed in its first-quarter results, due to be published in May.

Davy Research analyst Barry Dixon said the removal of inefficient containerboard capacity was "a brave move at this point in the cycle", when most plants are making decent returns. "The increase in downtime is a concern in that it may reflect a slowing in corrugated demand in Europe."

Goodbody Stockbrokers analyst Robert Eason said the company's comments on rising inventories were a concern "in terms of the ability for the industry to push through further containerboard price increases to offset the continued upward pressure on input costs".

Smurfit Kappa fell 4.3 per cent to €7.20 on the Iseq yesterday.