Catalyst Paper Corp. produces pulp and paper, as well as speciality printing papers and newsprint, for the western North American market. (Catalyst Paper Corp.)

A weaker economy and lower paper demand have forced B.C. paper company Catalyst Paper Corp. to cut 127 positions at its Powell River mill, CEO Richard Garneau said Wednesday.

Catalyst Paper's decision aims to save $13 million annually, Garneau said.

"With the significant decline in paper markets in recent months, finding new ways to get work done more efficiently is a priority," Garneau said in a news release.

"The two union locals — CEP 1 and 76 — have worked diligently with us to put a plan in place that addresses today's very challenging marketplace," he said.

Catalyst is headquartered in B.C. and runs four manufacturing mills in the province and one in Arizona, plus another recycling mill in Coquitlam, a suburb of Vancouver, according to its website. The company has about 2,700 employees altogether.

It's the largest producer of specialty printing papers and newsprint in western North America, and also produces market kraft pulp.

Catalyst will take a restructuring charge of up to $12 million to reflect the cost of the downsizing at the Powell River mill, where there are three paper machines.

The paper mill in Powell River, located on the Sunshine Coast about 120 kilometres northwest of Vancouver, will continue to have 350 employees after the downsizing.

The company is working to reduce its labour costs to $80 per tonne and to lighten its tax burden to a sustainable level, Garneau said.

He said progress on both fronts puts the Powell River mill in better shape to survive in the long term.

With files from the Canadian Press