Apr. 29, 2006. 07:49 AM | RICK WESTHEAD | BUSINESS REPORTER
Terrace Bay, Ont.— For the better part of 37 years, millwright Tom Long watched fleets of trucks and rail cars leave the Neenah Paper mill on the outskirts of this remote northern Ontario town, carting processed pulp and paper to buyers as far away as Oklahoma and Alabama.
Long would often watch the daily procession and wonder why the payloads weren't shipped beyond North America.
"The only thing you hear about nowadays is how much building China is doing," said Long, who retired last year after working at Neenah Paper for 37 years.
"They've got a billion people in China, and we're making fibre for Kleenex," the 56-year-old said. "All you have to do is get them to blow their nose with our stuff and we'd do great."
Sitting in a coffee shop in Terrace Bay, Long has just summed up an issue that has stumped Canada's forest-industry leaders and politicians alike: why has Canada failed to develop an overseas market for lumber and pulp and paper?
One problem is extreme transportation costs, said Don Campbell, vice-president and resident manager of Bowater Canadian Forest Product Inc.'s Thunder Bay operations, which include a sawmill and pulp and paper mill. Shipping to some of Bowater's customers in Korea — by rail to Vancouver and then by boat — can cost more than twice as much as getting the product to North American buyers.
But the benefits of increased overseas sales are obvious.
By selling more forestry products to countries such as China, India and Korea, Canada would be less dependent on the giant U.S. market. That might ease any ill effects of the newly signed Canada-U.S. softwood-lumber agreement.
Under the terms of the new agreement, Canadians will face quotas on U.S. sales when prices are low, although not when prices are high.
In an interview yesterday, Ontario Minister of Natural Resources David Ramsay pointed out that, unlike Canada's previous softwood-lumber situation, the new agreement allows room for Canadian exports to grow in lockstep with U.S. demand for timber.
British Columbia has been the most proactive province in pursuing markets beyond the United States, forest industry experts said. Three weeks ago, B.C. Premier Gordon Campbell announced the province would spend $10.5 million to promote the province's wood around the world.
"We have to reduce our dependency on the American marketplace," Campbell said at the time. "If we don't reach to China, Korea and India, I can tell you, Russia and South America will be going there, and we'll have all sorts of competitors."
In 2002, meanwhile, Natural Resources Canada announced the so-called Canadian Wood Export Program, which provides for $35 million worth of public money over five years. Even so, Ramsay said fast-growing markets such as China's haven't figured in his plans.
`They've got a billion people in China, and we're making fibre for Kleenex'
Tom Long, retired millwright
"The U.S. is our primary market; we've been trying to get that straightened out," he said.
Still, Industry Canada statistics suggest that Campbell's marketing dollars are well spent — at least in parts of the world.
While the value of softwood lumber Canada has exported to its three biggest customers — the U.S., Japan and the U.K. — has dropped in each case over the past four years, lesser-known markets showed strong gains over the same time period.
For instance, Canada in 2005 exported $8.6 billion worth of softwood timber to the U.S., down 9 per cent decline from 2001. The $1 billion in lumber sold to Japan was down 30 per cent over the same period, while sales to the U.K. slipped 8 per cent to $64 million.
China, the fourth-biggest purchaser, bought $55 million worth of lumber from Canada last year, nearly double the 2001 figure. Other countries that have bought much more Canadian softwood in recent years include the Philippines ($40 million), South Korea ($27 million) and Mexico ($8 million).
To be sure, some long-time forest industry workers see reasons why Canadian wood isn't coveted overseas.
For starters, labour costs in Canada are more than in countries such as Indonesia and Brazil, adding to the final price. Moreover, in more temperate climates like Brazil's, it takes just 10 years for a newly planted tree to become harvestable, said Ron Falzetta, another retired Neenah Paper worker.
"It's at least five times that in Canada," Falzetta said. "We maybe have 90 days a year where there's guaranteed to be no frost. That's a short growing season."
Still, Falzetta and others said Canada can compete with other pulp and paper producers on quality.
Many of the trees Neenah Paper harvests are swamp spruce trees.
"After 50 years, those trees aren't any bigger than this," Falzetta said, putting his fists side by side.
"The rings are so close together you can't even see between them. That makes for strong paper."
Some industry officials said the forest sector is making strides toward helping it become less dependent on the U.S. For instance, instead of churning out two-by-four studs, some mills now focus on producing door frames and joints.
Some Ontario mills are in the process of producing laminated beams, which are coveted in earthquake-prone Japan.(+)
