Domtar has shut down its pulp mill in Lebel-sur-Quévillon "due to unfavourable economic factors," the company announced Thursday.

The mill, which has 425 employees and produces 300,000 tonnes of pulp a year, was closed at the end of the business day Thursday.

Downward pressure on prices, increasing costs of fibre, energy and transportation, the stronger Canadian dollar and higher labour costs contributed to the decision, Raymond Royer, president and CEO, said in a statement.

"The pulp mill at Lebel-sur-Quévillon will be up and running as soon as economic factors allow the mill to operate profitably," he said.

Domtar recently reported an operating loss of $50 million for the third quarter, compared with an operating profit of $66 million in the comparable 2004 quarter.

Lebel-sur-Quévillon, located 466 kilometres from Montreal in northwest Quebec, "is considered as the natural child of Domtar," the town's website says.

Domtar began to plan the mill in 1963 and the site of the future town was cleared a year later.

The company employs almost 60 per cent of the workers in the community of 3,800.

The situation facing Domtar and Lebel-sur-Quévillon is being repeated across the country.

Domtar's move came the same day the federal government announced a program to ease the burden on forestry companies and the communities that depend on the industry.

Domtar's stock price fell steadily for a year, from a high of $15.09 to a low of $4.70, hit just after the third-quarter profit report was released.

Since then, it has recovered some of the lost ground, closing up 10 cents at $6.50 in TSX trading Thursday.