Forest industry 'under the gun'

By John McKinley - Cowichan News Leader and Pictorial - January 19, 2008

The combination of high wood costs, low availability of wood because of the lumber market in the U.S. and the high Canadian dollar mean 2008 will be the defining year for the forest industry.

RELATED STORIES

• Forest crisis prompts regulatory review
  BC Local News
• Munns Lumber files for bankruptcy protectionMesachie Lake-based Company $8 Million In Debt
  Lake Cowichan Gazette

Pulp-and-paper businesses are in an emergency situation and to survive they must allow some mills to fail to preserve the overall health of the industry, a Catalyst Paper boss says.

“We’re absolutely under the gun at this point,” said Don McKendrick, vice-president of operations for Catalyst’s Crofton division.

“If we talk about the industry as a whole, we’re at a crisis situation.”

McKendrick added the next 12 months could mark a vital turning point for the entire industry.

“The combination of factors, the high wood costs, low availability of wood because of the lumber market in the U.S., the (high) Canadian dollar — all those factors rolled together mean my take is 2008 will be the defining year for those in the industry,” he said.

McKendrick said he believes there will be a more determined force on the part of the companies to eliminate unviable business operations.

“We’re absolutely an industry in crisis and it has to restructure itself,” he said.

“There are too many mills that shouldn’t be operating and should be allowed to go down.”

McKendrick said he isn’t being heartless about the matter. Instead, he’s a realist when he says some mills should disappear from the landscape.

“This is where you get small communities that suffer as a result of that and I have sympathy for them, but if you simply keep these mills alive you make the rest of the industry sick and that’s been going on for several years,” he said.

“Those that come out of this will be stronger, but many will not come out — I’m talking about mills, machines and companies.”

Bill Routley, president of United Steelworkers, Local 1-80 said he’s not surprised by the comments.

“That’s typical of some business thinking, that cutthroat way of not caring about workers or communities — it’s all bottom-line oriented,” he said.

“There are going to be people who have the knee-jerk reaction that we have to go around and shut everything down, but I don’t believe that’s the right way to do things.”

In fact, said Routley, the industry should take this time to invest in itself.

“I don’t believe we have to shut places to save the industry, I believe you have to look at other options,” he said.

“Are the only things we can make two-by-fours and two-by-sixes? We have to look at value-added products.”

That’s a view shared in a recent B.C. Pulp and Paper Task Force report on the state of the industry that recommends, among other things, funding research that encourages knowledge-creation and innovation, while at the same time supporting the sawmill sector.

Indeed, said McKendrick, who noted Catalyst is looking for ways to utilize every available part of a felled tree.

“We take the bark and the sawdust from the tree and that’s a tremendous opportunity for some of these new technologies that will generate products like these bio-fuels, biologically refined fuels or additives for other chemical industries or simply being burned to create electricity,” he said.

But it takes cash to do that, he said, money that could be found if Crofton got a break on North Cowichan taxes.

“Here in the Cowichan Valley I pay exactly twice the taxes to the municipality than I would on average anywhere else in North America,” he said.

“I paid $8.5 million last year, but remember, as a site, we provide our own fire protection, primary first-aid, security and our own water — in fact we supply water to the town of Crofton.

“We’re not getting anything for that money.”

McKendrick said he’s not asking for a handout, but if Crofton was located outside B.C. it would be paying only half the taxes it does now.

With that kind of extra cash, McKendrick said Catalyst could be cutting-edge.

“In the pulp-and-paper industry, we’re very capital intensive and you need to have the ability to reinvest and put the capital back in to modernize equipment on more sophisticated control strategies or more efficient, reliable equipment.”

Pulp and paper is a $4-billion industry in B.C. that provides jobs for 30,000 British Columbians and contributes more than $600 million in revenues each year to all three levels of government.