Great Northern Paper in East Millinocket said Thursday that it would halt paper production for up to four months amid high production costs and lower market prices for its paper.

GNP, which makes paper for newspapers, catalogs and paperback books, said the paper industry has become more competitive than ever, and that continues to drive paper prices down. That means less revenue coming in at a time when the company is paying high costs for wood, pulp and energy, said Great Northern spokesman Scott Tranchemontagne.

After Thursday’s afternoon shift, the mill planned to stop production for up to 16 weeks. All 256 workers will be retained for at least two months as the company works to improve operating efficiencies relating to water and energy usage, among other areas. The company could not comment on the status of workers after the first two months.

GNP’s production stoppage follows a decision by Verso Paper Corp. earlier this month to idle its Bucksport mill for about two weeks to control inventory at a time of high paper supply on the market and a spike in natural gas prices. Other Maine paper companies have limited production or shut down parts of their operations this winter as extreme cold spells triggered a spike in wholesale prices for natural gas and electricity.

“Like any business, Great Northern Paper must operate in a way that is sustainable over the long term. We take very seriously our responsibility to employees, customers, suppliers and investors. The responsible action at this time is to temporarily stop production and restructure the company,” Tranchemontagne said.

During the halt in production, GNP said it will work on measures to lower its production costs, as well as work with suppliers to resolve outstanding bills with vendors and local taxes, in addition to maintaining communication with customers to meet their future needs.

The company, which is owned by Cate Street Capital of Portsmouth, N.H., said it had been preparing to convert the mill’s heat system to natural gas so that its biomass boiler could be used to power two paper machines, but extremely volatile natural gas prices make this option too costly.

“We must operate both paper machines in East Millinocket to be viable, but the high cost of converting to, and heating our mill, with natural gas has made this option impossible at this time,” Tranchemontagne said.

“Stopping production was an extremely difficult decision to make, but continuing to run the mill under the current conditions is neither a viable nor responsible option. We need to fix fundamental, long-term issues, as opposed to applying short-term fixes,” he said.

Cate Street Capital bought two shuttered paper mills in East Millinocket and Millinocket in 2011. It reopened the East Millinocket mill that same year and relaunched the Great Northern Paper brand.

“The LePage administration looks forward to GNP’s success in the long term and will work with them to put them in that position,” Gov. Paul LePage’s spokeswoman, Adrienne Bennett, said in a written statement. “A major economic factor for business success is the cost of electricity. Maine companies will continue to identify creative ways to save money as a result of high electricity rates.”

Another Cate Street Capital subsidiary, Thermogen Industries LLC, is on track for the completion of a $25 million loan guarantee that will fund a torrefied wood operation on the site of the former Millinocket mill, which closed in 2008. Torrefied wood is turned into wood pellets that would be shipped primarily overseas as an alternative cleaner-burning fuel for coal-fired power plants.

Jessica Hall can be contacted at 791-6316 or at:

jhall@pressherald.com

Twitter: @JessicaHallPPH