Green Power; AbitibiBowater

Green Power
Canoe News reported the following: Ontario's energy minister pledged yesterday to do what he can to solve the issues that led an Alberta company to shelve a $300-million Huron County wind turbine project. "We were obviously disappointed to hear it is being shelved," said Energy Minister Dwight Duncan....But Huron-Bruce MPP Carol Mitchell said she spoke to a senior vice-president of the company last Friday. "I think there is a very good chance of the project going forward," Mitchell said. "This is an excellent site for wind. They are committed to moving this project forward and the McGuinty government is committed to moving (renewable energy projects) forward." In a related article, Canoe News reported that Deputy Reeve Neil Rintoul placed blame for the delay on the Chippewas of Saugee native community in Southampton. "One of the bigger factors was the native community. They challenged it is their wind that turns the turbines and (they) want some of the proceeds." Wanda/Bonnie, we will need to update this note by 10:30 am today.

Forestry
The proposed merger of Bowater Inc. and Abitibi-Consolidated Inc. will make the new company one of the largest employers in Northwestern Ontario, with more than 2,000 employees on the payroll between Thunder Bay and Fort Frances. The combined firm, to be known as AbitibiBowater Inc., will be the third-largest publicly traded paper and forest products company in North America, and the eighth-largest in the world, with annual revenues of $9.3 billion.

Forestry sector faces another rocky year

Worst over, but turmoil expected. Job losses, closings will produce smaller, more efficient industry: ex-Tembec CEO
PHOTO CREDIT: CP

SOURCE: LUANN LASALLE | Canadian Press

Thursday, December 28, 2006

Tough times are expected to continue shaking the Eastern Canadian forestry sector in 2007 after a year when thousands of jobs were lost.

Turmoil is expected to continue shaking the Eastern Canadian forestry sector in 2007 after a year that saw thousands of job losses and the closing or idling of dozens of mills and woodcutting operations.

The strong Canadian dollar, higher electricity and fuel costs, falling lumber prices, a soft U.S. housing market and a dwindling supply of wood to harvest have all taken their toll on the industry and remain its biggest challenges.

Forestry industry experts say the job losses and closings will probably continue in '07, though at a slower rate as many high-cost mills are no longer operating. They're also predicting a leaner industry.

Frank Dottori, former CEO of forestry giant Tembec Inc., said the coming year will be difficult, but the industry has already hit bottom in its worst crisis since the 1930s.

"Almost 40 per cent of Quebec's industry is already shut down," Dottori said. "What's camouflaging all of this is the tremendous surge in mining. People who are getting laid off are going into the mining business."

"It's going to get sunny again, but there are casualties when you have these storms," said Dottori, who retired last January after running the company he helped found in 1973 for about 30 years.

"People are going to get put out of business. There's going to be a smaller, more efficient industry when we're finished."

Since January 2003, there have been more than 10,000 layoffs in Ontario and Quebec, and almost 2,000 in Atlantic Canada. Mills in Western Canada, generally larger and more profitable, have been spared widespread closings although some marginal operations have been shut down.

However, lumber producers in all parts of Canada are facing reduced demand for their wood and related building products because of the slump in the U.S. housing market - a development that has already led to a curb in production and could mean more job cuts in the future.

Dottori said the main problem in Eastern Canada is that the cost of wood per cubic metre delivered to sawmills is the highest in the world.

"I think the governments are going to have to address the cost-of-wood issue and take a good, hard look at stumpage and all of the regulations."

He noted Ontario has taken positive steps to address red tape, the cost of road building and rationalization in the industry, while Quebec lags behind.

The cost difference between Ontario and Quebec is close to $10 a cubic metre, Dottori said.

In Quebec, the industry pays high stumpage fees for the quality of the wood and the province has only had sustainable forestry practices in effect for the last 20 years, he said, although it has placed some restrictions on the amount of wood that can be cut.

Analyst Don Roberts agreed there are more mill closings and job losses to come in 2007.

"The industry will just keep getting smaller until what is left will be economic," said Roberts of CIBC World Markets.

"In the short term, what most of them have to pray for is a weak Canadian dollar," he said, while noting he expects the loonie to stay at around 89 cents U.S. in '07.

And unless the U.S. housing market somehow revives, Eastern Canadian forestry firms will continue to grapple with a low-price environment, Roberts said.

"That's why the prices of lumber have dropped so precipitously over the last while," he said.

"The real problem that we have to work out, and we won't be able to work it out until mid or late '08, is that we've got inventory of unsold new homes in the United States. That has to be worked off and that will keep demand low."

There won't be any immediate relief from the pain, but the industry is "beginning to make contact with the light at the end of the tunnel," said Avrim Lazar, president of the Forest Products Association of Canada.

"It's hard to say where the worst is, but the process of restructuring and rationalization isn't going to end," Lazar said.

"It's likely more in the context of getting ready and strengthening rather than in the context of falling apart."

Lazar said restructuring in the Eastern Canadian industry was partly delayed by the long wait for a resolution to the softwood lumber dispute with the United States, which was settled only last summer.

"It put a chill on progress," he said. "It's a world in which you've got to move. The softwood agreement kind of slowed us down in terms of making investment decisions, new mergers, new rationalizations."

The complex, seven-year deal replaces U.S. lumber duties with a Canadian export tax that kicks in when lumber prices fall below certain levels, a move aimed at protecting U.S. producers that allege Canadian softwood is subsidized.

Canadian exporters are also getting back about 80 per cent of the lumber duties already paid, while the U.S. government and producers split about $1 billion U.S. of that money.

Roberts said the softwood lumber deal is a bit "moot" to some extent going forward, because it won't have a big impact on the Eastern Canadian industry because of the relatively low duty rate it faces.

The net effect is "a brave new world" for the industry in Ontario and Quebec, Roberts said.

The Gazette (Montreal) 2006