By ERIC REGULY | Saturday, November 5, 2005 | Globe and Mail
American airlines and the Canadian forest products sector have, sadly, a lot in common. Both industries suffer from a capacity glut, brutal competition, legacy costs, waning pricing power, rising energy prices and sinking demand for some products. Four of the Big Six airlines, including Delta and United, are dealing with the grim reality in the bankruptcy courts. You have to wonder whether the same fate awaits some of the forestry firms.
Canada's oil, rocks and trees economy is running on two of three cylinders. The trees are sputtering out, especially in Eastern Canada. The share prices of Tembec, Domtar and Abitibi-Consolidated have fallen between 50 and 70 per cent this year alone. Dominion Bond Rating Service this week downgraded the debt of Domtar and Abitibi. Domtar just killed its dividend and Abitibi may be next. Tembec is a rotting stump of a company and is in danger of becoming a penny stock.
Buying opportunity? Companies in crisis are sometimes worth a flyer.
Samuel Johnson said: "The prospect of hanging tomorrow focuses the mind today," and forestry company bosses are doing a lot of focusing. Surplus mill capacity is being shut down. Assets are being sold to reduce debt and buy time with nervous bankers. Higher-margin products are being pumped out.
But judging from the deteriorating financial performance of the companies, the reshaping isn't happening fast enough. Things are more likely to get worse before they get better, especially if the Canadian dollar keeps rising and energy prices, which have come off their peak, reverse direction.
Forestry companies, especially of the Canadian variety, are complicated beasts. Like French auto makers after the Second World War, some began life as instruments of social policy. Job One was to keep northern towns alive; Job Two was to turn the brutal art of killing trees into a profit machine. Job One hasn't completely vanished from their DNA.
Politicians put pressure on them to keep mills going and use tax incentives to sweeten the argument. The companies are often slow to respond to obvious signs of excess capacity. Sometimes managers know they have to close a mill but wait for a rival to move first -- and wait and wait in a damaging game of brinkmanship.
The other complicating factor is the sheer range of products, from newsprint and ground wood papers to pulp and paperboard. Want to dull up your dinner party? Talk about lignosulfonates, better known as tree-sap chemicals, to those lacking PhDs in tree engineering. A lot of the products can be out of favour at once, with dire results. Newsprint is a fine example of relentless decline. Tembec makes it. Abitibi is the continent's biggest newsprint maker.
The newspaper you are holding may not exist in a decade as more and more readers migrate to the websites. Readership and circulation apparently are in irreversible decline as competing media become more popular. In the United States, circulation has dropped by about 1 per cent a year since 1990, in spite of the big rise in the number of households. In 1950, more than 120 per cent of households bought a newspaper (that is, some households bought more than one paper). Today, only about half of households take papers. Junior is plugged into his iPod; papers are so uncool if you're under 30.
As a result, total North American newsprint consumption has fallen from about 11.7 million tonnes in 1994 to 9.5 million tonnes. Newspapers are not only getting fewer in number and smaller in size, they're also using paper that weighs less. The circulation scandal in the United States, in which certain titles allegedly inflated their numbers, hasn't helped the case for papers as mass-market advertising vehicles. The Newspaper Association of America has forecast a 1-per-cent drop in ad linage this year even as the U.S. economy expands at an impressive rate.
Abitibi and Tembec have been reducing capacity as demand falls. Newsprint prices have gone up recently, but are still well below their mid-1990s peak. The truth is newsprint is in slow, steady decline and the survivors will have to find something more valuable to produce. Abitibi is pushing hard in "equal offset" paper, used in reference and instruction books such as the Dummies guides. The market for such paper is growing. There is no guarantee it will turn around the newsprint maker's fortunes.
The eastern forestry products companies face something close to the perfect storm. They are getting clobbered by the rising Canadian dollar (60 per cent of Abitibi's production is in Canada). Oil prices, while down in recent weeks, are still about $20 (U.S.) a barrel higher than they were a year ago. Profits are vanishing, liquidity is becoming an issue and deals are being done out of apparent desperation. Abitibi has sold its stake in PanAsia Paper, bought only two years ago and touted as its most promising growth asset, so it could pay down debt.
The time will come when the stocks will look attractive again. It's not now.
ereguly@globeandmail.ca
Saturday, November 05, 2005
Sunday, October 30, 2005
Paper mill may have to seek new energy source
By CHRISTINE S. DIAMOND The Lufkin Daily News
Source: Lufkin Daily News | Sunday, October 30, 2005
If Abitibi Consolidated were to reopen its Lufkin paper mill — its only mill to rely solely on natural gas for fuel — some say it would have to convert to another energy source as many East Texas mills have already begun doing.
The price of natural gas fuel was a driving factor in Abitibi Consolidated Inc.'s decision to close the plant in early 2004 after acquiring the plant in 2000.
"The company had every intention of turning the Lufkin mill into a world class facility, however a decline in world markets for supercalendered paper coupled with unexpected high prices for natural gas led to a decision to indefinitely idle the facility," Debbie Johnston, spokeswoman for Abitibi Consolidated, stated in an e-mail interview. "A number of our mills in Quebec, Ontario, and Newfoundland generate their own electricity through hydro-electric generating stations attached to the mills. This means of power generation is very low cost — providing a significant advantage over natural gas or oil."
Traditionally, electric power in East Texas is produced from oil, natural gas and its native lignite coal — which contains high levels of mercury.
As these forms become increasingly cost prohibitive, East Texans are looking at alternative renewable fuels ranging from biomass/biofuels, solar, wind and hydro-electric. While wind-powered technology has vastly improved and the U.S.'s first offshore site is expected to start catching wind off of Galveston Island in five years, the future for wind energy in East Texas is slim compared to the potential of solar and biomass fuels, according to Travis Brown, energy projects director for Public Citizen.
Even though "technology has improved so much — it takes less and less wind to make electricity — about 15 mph ... (East Texas) just doesn't have the wind velocity that would be efficient to sell to the grid and make a profit," Brown said. "Other renewable energy in East Texas that shows promise are solar and even bigger is biomass to generate electricity."
Biomass has been the largest source of renewable energy in the U.S. for the last five years, according to the U.S. Department of Energy.
"Biomass is one of our most important energy resources," states the DOE's Web site. "Biomass use strengthens rural economies, decreases America's dependence on imported oil, avoids use of MTBE or other highly toxic fuel additives, reduces air and water pollution, and reduces greenhouse gas emissions.
"The biggest industrial stakeholder is the forest products industry, which consumes 85 percent of all wood waste used for energy in the U.S. and they are able to generate over half of their own energy from woody waste products and other renewable sources of fuel."
"Over the past 18 months (Abitibi) has continued to support efforts to identify new grades to manufacture, and to develop options for new energy sources that would change the cost structure of the mill and allow it to operate profitably," Johnston said.
Ron Hufford with the Texas Forestry Association in Lufkin said the paper mill will have to reduce its dependency on natural gas.
"Abitibi is going to have to convert to biomass," Hufford said of an alternative fuel process already used by many East Texas wood product mills to supply a large percent of their energy needs.
Outside East Texas the term "biomass" as fuel usually conjures up pictures of cornfields or sugar cane as opposed to the by-products of a timber harvests that are converted to steam energy by a growing number of East Texas facilities.
"Normally when we talk about tree biomass for fuel, we're talking about logging slash/debris — tops and limps left over after a harvest operation, and mill residue — by-products of chips, sawdust, shavings, and bark, that might be used for fuel," said Burl Carraway, with Texas Forest Service, in an e-mail interview.
The use of wood waste for fuel is a favorite topic of Paul Hale, coordinator of the Texas Logging Council, who doesn't endorse using traditional food crops for fuel like soybeans and corn.
"Efficiency has been established in using ground-up and chipped-up wood waste for producing electricity," Hale said in an e-mail interview. "It has not been established yet in producing liquid fuel.
"There is approximately 4 to 5 million tons of limbs, tree tops and wood debris left behind on logging sites in the state of Texas each year," Hale said. "This is not a supply that will go away, this supply is sustainable. Right now it is left to rot each year or to be a fire hazard."
Hurricane Rita exponentially increased the amount of biomass waste available in East Texas. Piles of vegetative and woody debris are being removed from wherever Rita left it and taken by FEMA to empty lots where they are piled up or dropped in pits.
"Obviously, Texas Forest Service would rather see this material being used to make a product or energy, not just wasted," Carraway said. "There is also an air quality issue in that burning this debris produces much more particulate matter than if it were used in an industrial process where 'scrubbing' is required."
Scrubbing is a process industry of any kind uses to reduce the amount of particulates being released into the air.
"Burning the mix of wood waste, tires, and garbage can produce a green product that will prevent landfills full of garbage and tires and leave the forest floor clean," Hale said. "Everything considered, using this resource that is free compared to leaving it behind to rot is not only the answer to efficient electricity, but the prevention of the mammoth sized burial sites for household garbage and tires. This only makes too much sense, we have to find a way to turn that switch on. As a society and responsible citizens, we owe it to ourselves to quit burying this other stuff in the ground and to quit wasting something just because we haven't traditionally used it. Ag refuse including wood waste will be used in the future for this purpose. We should choose the near future.
"This is more than a concept — many companies are already using this stuff to power their mills," Hale said.
According to Texas Commission on Environmental Quality spokeswoman Andrea Morrow, "Vegetative debris and wood waste is currently used as supplementary boiler fuel by several paper mills” including International Paper in Mansfield; Temple-Inland particleboard and paper mill in Orange, and the mill in Diboll; Louisiana Pacific in Carthage; and Mead-Westvaco in Evadale.
On Oct. 19 Norboard Industries, a mill in Jefferson, re-opened its mill after a 21-day shutdown for an conversion that majorly reduced the company's reliance on natural gas, according to Mike Kile.
While biomass has proven to be an efficient fuel source, Hale said the switch will be a costly one for lignite coal plants in the short run.
"Electrical power plants are scared to make the commitment to biomass because there are not enough producers of biomass to supply the plant," Hale said. "Imagine a giant 'on switch.' To turn the switch on overnight to swap resources for power, a power company would have to convert their system spending millions to create several producers that also requires millions invested in each one along with the creation of many jobs, and the coordination of all the contracts and people in the chain of issues connected to it."
However, Hale said, "As pollution laws stiffen in the future, I think the clean burning wood waste will win as being the main resource for electricity.
"Texas is a state that has it's own power grid. It looks very achievable to me if this state wants to make a good change."
At least one company is tentatively looking into opening a biomass energy plant to sell electricity to the grid in Deep East Texas, according to Hufford.
Christine S. Diamond's e-mail address is cdiamond@coxnews.com.
Source: Lufkin Daily News | Sunday, October 30, 2005
If Abitibi Consolidated were to reopen its Lufkin paper mill — its only mill to rely solely on natural gas for fuel — some say it would have to convert to another energy source as many East Texas mills have already begun doing.
The price of natural gas fuel was a driving factor in Abitibi Consolidated Inc.'s decision to close the plant in early 2004 after acquiring the plant in 2000.
"The company had every intention of turning the Lufkin mill into a world class facility, however a decline in world markets for supercalendered paper coupled with unexpected high prices for natural gas led to a decision to indefinitely idle the facility," Debbie Johnston, spokeswoman for Abitibi Consolidated, stated in an e-mail interview. "A number of our mills in Quebec, Ontario, and Newfoundland generate their own electricity through hydro-electric generating stations attached to the mills. This means of power generation is very low cost — providing a significant advantage over natural gas or oil."
Traditionally, electric power in East Texas is produced from oil, natural gas and its native lignite coal — which contains high levels of mercury.
As these forms become increasingly cost prohibitive, East Texans are looking at alternative renewable fuels ranging from biomass/biofuels, solar, wind and hydro-electric. While wind-powered technology has vastly improved and the U.S.'s first offshore site is expected to start catching wind off of Galveston Island in five years, the future for wind energy in East Texas is slim compared to the potential of solar and biomass fuels, according to Travis Brown, energy projects director for Public Citizen.
Even though "technology has improved so much — it takes less and less wind to make electricity — about 15 mph ... (East Texas) just doesn't have the wind velocity that would be efficient to sell to the grid and make a profit," Brown said. "Other renewable energy in East Texas that shows promise are solar and even bigger is biomass to generate electricity."
Biomass has been the largest source of renewable energy in the U.S. for the last five years, according to the U.S. Department of Energy.
"Biomass is one of our most important energy resources," states the DOE's Web site. "Biomass use strengthens rural economies, decreases America's dependence on imported oil, avoids use of MTBE or other highly toxic fuel additives, reduces air and water pollution, and reduces greenhouse gas emissions.
"The biggest industrial stakeholder is the forest products industry, which consumes 85 percent of all wood waste used for energy in the U.S. and they are able to generate over half of their own energy from woody waste products and other renewable sources of fuel."
"Over the past 18 months (Abitibi) has continued to support efforts to identify new grades to manufacture, and to develop options for new energy sources that would change the cost structure of the mill and allow it to operate profitably," Johnston said.
Ron Hufford with the Texas Forestry Association in Lufkin said the paper mill will have to reduce its dependency on natural gas.
"Abitibi is going to have to convert to biomass," Hufford said of an alternative fuel process already used by many East Texas wood product mills to supply a large percent of their energy needs.
Outside East Texas the term "biomass" as fuel usually conjures up pictures of cornfields or sugar cane as opposed to the by-products of a timber harvests that are converted to steam energy by a growing number of East Texas facilities.
"Normally when we talk about tree biomass for fuel, we're talking about logging slash/debris — tops and limps left over after a harvest operation, and mill residue — by-products of chips, sawdust, shavings, and bark, that might be used for fuel," said Burl Carraway, with Texas Forest Service, in an e-mail interview.
The use of wood waste for fuel is a favorite topic of Paul Hale, coordinator of the Texas Logging Council, who doesn't endorse using traditional food crops for fuel like soybeans and corn.
"Efficiency has been established in using ground-up and chipped-up wood waste for producing electricity," Hale said in an e-mail interview. "It has not been established yet in producing liquid fuel.
"There is approximately 4 to 5 million tons of limbs, tree tops and wood debris left behind on logging sites in the state of Texas each year," Hale said. "This is not a supply that will go away, this supply is sustainable. Right now it is left to rot each year or to be a fire hazard."
Hurricane Rita exponentially increased the amount of biomass waste available in East Texas. Piles of vegetative and woody debris are being removed from wherever Rita left it and taken by FEMA to empty lots where they are piled up or dropped in pits.
"Obviously, Texas Forest Service would rather see this material being used to make a product or energy, not just wasted," Carraway said. "There is also an air quality issue in that burning this debris produces much more particulate matter than if it were used in an industrial process where 'scrubbing' is required."
Scrubbing is a process industry of any kind uses to reduce the amount of particulates being released into the air.
"Burning the mix of wood waste, tires, and garbage can produce a green product that will prevent landfills full of garbage and tires and leave the forest floor clean," Hale said. "Everything considered, using this resource that is free compared to leaving it behind to rot is not only the answer to efficient electricity, but the prevention of the mammoth sized burial sites for household garbage and tires. This only makes too much sense, we have to find a way to turn that switch on. As a society and responsible citizens, we owe it to ourselves to quit burying this other stuff in the ground and to quit wasting something just because we haven't traditionally used it. Ag refuse including wood waste will be used in the future for this purpose. We should choose the near future.
"This is more than a concept — many companies are already using this stuff to power their mills," Hale said.
According to Texas Commission on Environmental Quality spokeswoman Andrea Morrow, "Vegetative debris and wood waste is currently used as supplementary boiler fuel by several paper mills” including International Paper in Mansfield; Temple-Inland particleboard and paper mill in Orange, and the mill in Diboll; Louisiana Pacific in Carthage; and Mead-Westvaco in Evadale.
On Oct. 19 Norboard Industries, a mill in Jefferson, re-opened its mill after a 21-day shutdown for an conversion that majorly reduced the company's reliance on natural gas, according to Mike Kile.
While biomass has proven to be an efficient fuel source, Hale said the switch will be a costly one for lignite coal plants in the short run.
"Electrical power plants are scared to make the commitment to biomass because there are not enough producers of biomass to supply the plant," Hale said. "Imagine a giant 'on switch.' To turn the switch on overnight to swap resources for power, a power company would have to convert their system spending millions to create several producers that also requires millions invested in each one along with the creation of many jobs, and the coordination of all the contracts and people in the chain of issues connected to it."
However, Hale said, "As pollution laws stiffen in the future, I think the clean burning wood waste will win as being the main resource for electricity.
"Texas is a state that has it's own power grid. It looks very achievable to me if this state wants to make a good change."
At least one company is tentatively looking into opening a biomass energy plant to sell electricity to the grid in Deep East Texas, according to Hufford.
Christine S. Diamond's e-mail address is cdiamond@coxnews.com.
Saturday, October 29, 2005
Amazon Forests Depleting Rapidly
Source: Internet Scout Report
Amazon “stealth” logging revealed
http://news.bbc.co.uk/2/hi/americas/4362760.stm
Does Brazil have to choose between economic growth and preserving the endangered Amazon?
http://www.economist.com/world/la/displayStory.cfm?story_id=2597880
Deforestation patterns in the Amazon
http://earthobservatory.nasa.gov/Newsroom/NewImages/images.php3?img_id=16511
The causes of Deforestation are Complex
http://earthobservatory.nasa.gov/Library/Deforestation/
New highways drive accelerating deforestation in Amazon
http://www.scienceblog.com/community/article2744.html
Stanford scientist develops satellite to study Amazon
http://daily.stanford.edu/tempo?page=content&id=12852&repository=0001_article
Amazon drought emergency widens
http://news.bbc.co.uk/2/hi/americas/4344310.stm
Despite earlier claims by the Brazilian government that the rate of deforestation in the Amazon had fallen by as much as 50%, scientists from the U.S. and Brazil have found that the Amazon Rainforests are being depleted more rapidly than previously thought. The deforestation is so rapid and expansive that the only effective means by which to measure is by using satellite imagery. Satellite imagery not only detects vast tracts of clear cutting, it is also able to detect selective logging. Selective logging is a process in which loggers only cut down valuable trees, leaving the remainder of the forest alone. Logging companies claim that this process is much more environmentally friendly than clear cutting. While this may be true, environmentalists believe that tree removal of any kind can be detrimental to an ecosystem. They claim that the process of building roads and bringing heavy equipment into these forests is disruptive and damaging. The scientists producing this study claim that deforestation of the Brazilian Amazon has been underestimated by as much as 60%. The Brazilian government stated that although they welcomed the research the numbers were exaggerated. Deforestation is only one of many environmental calamities causing harm to the Amazon. A severe drought, coupled with severe cases of industrial pollution, is making the Amazon a severely endangered ecosystem. [CMH]
The first link is to a BBC News article on the new evidence on “stealth” logging as well as the new deforestation numbers based on the satellite images. The second link is to an article studying the economic issues of deforestation. The third link illustrates the deforestation patterns in the Amazon using the satellite images. The fourth is a link, which examines the many issues surrounding deforestation in social, economic, and environmental terms. The fifth link is an article discussing issues of highway construction and its connection to deforestation and pollution. The sixth link is to an article detailing the satellite developed at Stanford University designed to study the Amazon. The final link is an article by the BBC with information on the severe drought plaguing the Amazon. [CMH]
Friday, October 21, 2005
Researchers: No way to halt tree-killing beetle's destruction
October 21, 2005, 11:12 AM | Detroit Free Press
COLUMBUS, Ohio (AP) -- The Canadian government and some U.S. researchers say there's no way to stop an Asian beetle from steadily spreading to attack and kill all 10 billion ash trees in the United States and Canada.
The emerald ash borer was found in the popular shade trees just three years ago in the Detroit area, but researchers suspect it arrived as much as a decade ago. The U.S. government has stuck with a strategy of cutting down swaths of trees to keep it from spreading, but more researchers are saying that approach will at best slow the insect.
The beetle is concentrated in Michigan, northern Ohio and Indiana, and southern Ontario. Small infestations were found in Maryland and Virginia. If it uses Ohio or Michigan's Upper Peninsula as a bridge, it could devastate dense ash forests from Minnesota to Maine.
Ash makes up 10 percent of Ohio's forests, and the tree is found in forests throughout the eastern United States. Many cities planted ash trees after the devastation of Dutch elm disease, and its strong wood is valued for furniture and baseball bats.
Ohio agriculture officials announced Thursday the beetle has spread farther east in the state, to a golf course and three other scattered properties near the Ohio Turnpike in Erie County. Money came through this fall for crews to attack spot infestations in Delaware County in central Ohio and Auglaize County in western Ohio.
The Canadian government's official position is that the technology and efforts available cannot stop the ash borer's march, a forestry official told The Associated Press in an e-mail.
"It is well-established and is much too difficult to detect at low levels, and pesticides do not work well enough to be used in a quarantine context," said Ken Marchant, a forestry specialist with the Canadian Food Inspection Service, which regulates exotic pests. "It is the general consensus of quarantine experts here that EAB (emerald ash borer) will continue to spread despite past, present and future actions to control it."
Ohio is sticking with the containment strategy and believes it can beat the pest, said Melissa Brewer, spokeswoman for the Ohio Department of Agriculture. (*)
Wednesday, October 19, 2005
Ontario calls on Prime Minister to help our forest industry
SooToday.com | Tuesday, October 18, 2005
ONTARIO MINISTRY OF NATURAL RESOURCES
*******************
Statement by Minister of Natural Resources David Ramsay
TORONTO — Ontario’s Minister of Natural Resources, David Ramsay, issued the following statement:
With the Government of Canada's announcement of support for the Province of Quebec's forest industry through an investment of $50 million, all Ontarians now eagerly await the Government of Canada's support for Ontario's industry.
The Prime Minister made a commitment to the people of Ontario that the federal government would support this province's industry through a national strategy.
Minister Ralph Goodale two weeks ago echoed the Prime Minister's commitment to a national strategy.
A truly national strategy must treat all provinces equally, taking into account the special challenges and opportunities that exist, helping to overcome the former and embrace the latter.
The forest industry employs 88,000 Ontarians directly and is second only to automobiles in exports from the province.
It generates $18.7 billion in product shipments annually, including $8.5 billion in exports and $1.5 billion in federal taxes.
Last month I announced Phase 2 of Ontario’s $680 million package of new investment for our industry at a time when this government is overcoming a budget deficit.
Given the Government of Canada’s fiscal position, achieved through the leadership and perseverance of the Prime Minister, I would hope that the federal government's package would match and complement ours.
There is no quick fix to the issues facing the forestry sector.
All levels of government need to work together to find long-term solutions and to develop an attractive and prosperous business climate.
We need to encourage both reinvestment to modernize existing facilities and further investment in new opportunities.
Tuesday, October 18, 2005
Forests and floods
New UN study rejects myth that deforestation and logging cause major flooding
Thailand, 13 Oct 2005 -- The massive flooding this week in Central America has prompted the press and well-intentioned advocacy groups to blame the flooding following heavy rain from Hurricane Stan on excessive runoff caused by “extensive deforestation.” But in a report that seeks to separate fact from fiction when it comes to forests and floods, the Food and Agriculture Organization of the United Nations (FAO) and the Center for International Forestry Research (CIFOR) say there is no scientific evidence linking large-scale flooding to deforestation. The same holds true, according to the report, for recent flooding in China, Thailand and Viet Nam.
The report, “Forests and Floods: Drowning in Fiction or Thriving on Facts?” should prompt close examination of the many issues surrounding major flood events —and an abandonment of the myth that deforestation is the root cause. The report comes as major floods around the world are taking place, particularly in the Asian lowlands, Eastern and Central Europe and Central America.
“Government decision makers, international aid groups, and the media are often quick to blame flooding on deforestation caused by small farmers and loggers,” said Patrick Durst, Senior Forestry Officer for FAO Bangkok. “The conclusion is not only wrong, scientifically, but such misguided views have in the past prompted governments to make life harder for poor farmers by driving them off their lands and away from the forests, while doing nothing to prevent future flooding.”
The FAO/CIFOR report acknowledges that forests can play a role in minimizing runoff that causes localized flooding. But it concludes that there is no evidence that a loss of trees significantly contributes to severe widespread flooding. […]
“Planting trees and protecting forests can have many environmental benefits, but preventing large scale floods is not one of them,” said David Kaimowitz, Director-General of CIFOR. “The frequency of major flooding events has remained the same over the last 120 years going back to the days when lush forests were abundant.”
FAO/CIFOR report point outs that the sharp increase in the economic and human losses attributed to flooding is caused not by deforestation but mainly by the simple fact that more people are living and working in flood plains. As a result, many floods that previously would have been only minor events now become major disasters.
“We need to stop blaming people who live and work in and around forests for floods that affect entire river basins, and instead consider the effect of a wide variety of land-use issues, which can in some instances include poor logging techniques,” said Dr. Pal Singh of the World Agroforestry Center. “Policy makers and development agencies have a moral and ethical responsibility to pursue solutions that are rooted in the best available science.”
As far back as the 19th century and continuing to the present, the conventional view has been that forests prevent floods by acting as a giant sponge, soaking up water during heavy rainfalls. But the massive floods that are blamed on deforestation almost always occur after prolonged periods of rains, which saturate the soil, including forest soil, so that it can no longer absorb additional water. Rainfall then has nowhere to go but into rivers where it fills them to the point of overflow.
But according to FAO and CIFOR analysts, there can be a political interest in leaving the conventional wisdom about forests and floods unchallenged. For example, it allows governments to respond with logging bans and give the appearance to the public they are taking decisive steps to stop flooding. The practical effect of such policies is to force poor farmers—who are routinely portrayed as major perpetrators of “illegal logging”— to abandon their lands. For example, catastrophic floods in China, Thailand and the Philippines prompted logging bans that put millions of people out of work. […]
More information at:
http://www.fao.org/documents/show_cdr.asp?url_file=/docrep/008/ae929e/ae929e00.htm
Friday, October 14, 2005
Forestry industry facing tough fight
10 / 13 / 2005 - Vol. 1, No. 20 - Ontario Edition
Production costs, changing markets hit competitiveness
By Charles Wyatt - Business Edge | Published: 10/13/2005 - Vol. 1, No. 20
Ontario's $19-billion forest industry is still on life support despite the provincial government's recent $330-million aid package.
"The Ontario forest industry operates in one of the highest-cost jurisdictions in the world," says Jamie Lim, president of the Ontario Forest Industries Association (OFIA). "The government's package hasn't changed that."
The OFIA represents 29 Ontario forestry companies managing 90 per cent of the wood fibre on Ontario's Crown lands.
Since January 2005, 10 Ontario paper and wood production mills have been shut down with the loss of hundreds of jobs. There have been more than 2,300 permanent job losses in the Ontario forest industry in the last three years, according to the OFIA.
In late September, the provincial government announced a five-year $330-million aid package to help the troubled industry respond to changing global markets, increasing competition from low-cost countries such as Russia and China, escalating fuel and electricity costs, and a rising Canadian dollar.
The plan includes a Forest Sector Prosperity Fund of $150 million over three years to encourage forestry companies to expand and modernize. The private sector will have to pay most of the costs of the projects, however.
"We basically think the $150 million could lever up to $1.2 billion in new investment," provincial Natural Resources Minister Dave Ramsay said when he made the announcement in Thunder Bay.
The forestry loan program is similar to the provincial government's $500-million package for the auto sector, which has generated billions in new investments from Ford and General Motors.
Premier Dalton McGuinty has admitted the package will not prevent more mill closures and layoffs, but says it is aimed at helping the province's forest companies be more competitive. "It's designed to help put the industry on a stronger footing going forward. It is not designed, because it would be impossible to do so, to protect all existing jobs," McGuinty says.
In June, the government announced it would provide up to $350 million in loan guarantees to stimulate investment.
Ontario's forest industry, the second largest after auto manufacturing, has annual sales of about $19 billion and provides direct and indirect employment for about 250,000 people, the OFIA says. It pays $2.5 billion annually in provincial, municipal and federal taxes and provincial stumpage fees.
Higher delivered wood costs and increasing energy costs are having a significant impact on forest products producers in Eastern Canada, where costs are 60 per cent higher than in Western Canada, according to Natural Resources Canada. The recent elimination of price protection on electricity rates in Ontario has boosted prices by more than 30 per cent.
The industry and dozens of Northern Ontario communities now hope an appeal to the government to reduce energy costs in the north may stem the tide of mill closures.
A final report in May from the Minister's Council on Forest Sector Competitiveness said the Ontario forest industry "is in crisis" and "urgent action is required to prevent predictable and irreversible consequences for communities, business and workers.”
The 17-member council was created last November by Ramsay.
The council report warns of the imminent closure of 12 mills in Northern Ontario and the loss of 7,500 direct jobs and more than 20,000 indirect jobs in northern and southern Ontario.
The pace of mill closures has been steady. In July, Abitibi Consolidated Inc. announced the permanent closure of one newsprint machine and the shutdown for an indefinite period of another. In September, Norampac Inc. announced the closure of its 150,000-tonne containerboard facility in Red Rock and the loss of up to 175 jobs.
On the eve of the announcement of the Ontario government's new aid package, Uniboard Canada Inc. announced the permanent closure of its New Liskeard operation, which will eliminate 73 jobs.
The plant's manufacturing unit costs were higher than the industry average, the company said in a news release.
The cost to deliver cut timber from the forest to mills in Ontario is $55 US per cubic metre, compared to $36 in Manitoba and $44 in B.C., Lim says. "That's a $20 gap."
The OFIA did not expect the government's package to close the $20 gap in one step, Lim says, but it was expecting it to bring costs below $50. Under the announced program, costs "dropped by a dollar," she adds.
For the Ontario forest industry to begin to recover, remain competitive and keep investment in the province, the cost of delivered wood must be reduced significantly, Lim says. "There may be some firms out there that can access the prosperity fund, but you still have at the end of the day the highest wood costs."
The OFIA was not alone in saying the government's aid package failed to address the situation.
"We're not happy with what they've done," says Norman Rivard, chair of the United Steelworkers of America IWA Council, which wanted timber-cutting rights tied to the northern communities and a review of mill closures.
"The package may help the companies. It doesn't do anything to help the Northern Ontario communities and keep jobs in the communities."
Ontario's Communications, Energy and Paperworkers Union called the government's package "pathetically anemic" and says it will do nothing to help the troubled industry.
Greenstone Mayor Michael Power, who is also head of the Northwestern Ontario Municipal Association, says the government "fell far short on reducing delivered wood costs," although the Prosperity Fund may help Greenstone get a proposed $300-million strand board plant.
"We are anxious to see the details of the minister's prosperity fund to learn what, if any, new opportunities might exist for this proposed plant. My goal for Greenstone is that we get this investment."
Greenstone is about 215 kilometres northeast of Thunder Bay.
The government's announcement did not include the 50-per-cent reduction in provincial fuel-tax credit for hauling wood from the forest to the mills, or return to the provincial government financial responsibility for primary road construction and maintenance, as the minister's council report had recommended.
"The government chose not to respond to that (the fuel-tax credit)," OFIA's Lim says. "It was really critical these be addressed because they go directly to reducing delivered wood costs.
"Plants in Ontario are closing not because the industry isn't modernized, but because it operates in one of the highest-cost jurisdictions in the world," Lim says. "Forest companies have already invested hundreds of millions of dollars in modernizing their plants in Northern Ontario."
Weyerhaeuser invested $350 million in a new plant in Kenora in 2002. Bowater Canadian Forest Products in the past few years invested hundreds of millions of dollars in Thunder Bay to build one of the world's most modern sawmills, Lim says.
"Companies seek out low-cost jurisdictions to operate in," Lim says. "That's just what they do."
Lim now hopes there will be an announcement later this month from the government on what it plans to do about high energy costs. "That's the other part of the puzzle."
The industry is asking the government to allow the creation of new supplies of lower-cost energy. The annual electricity costs for the Ontario forest industry are about $500 million and represent up to one-third of operating costs, the council's report says.
Manufacturing plants in Manitoba and Quebec have electricity costs 50 per cent less and 20 per cent less, respectively, according to the Association of Major Power Consumers of Ontario.
The Ontario mining industry has also asked the government to lower the price of electricity because it makes its products uncompetitive.
"I am disappointed, but not discouraged. This government certainly has shown willingness to listen and work with us, more than any other previous government in 20 years," Lim says.
"For the first time, the forest industry is on the radar screen at Queen's Park," she says.
- With files from The Canadian Pres
(Charles Wyatt can be reached at wyatt@businessedge.ca)
Production costs, changing markets hit competitiveness
By Charles Wyatt - Business Edge | Published: 10/13/2005 - Vol. 1, No. 20
Ontario's $19-billion forest industry is still on life support despite the provincial government's recent $330-million aid package.
"The Ontario forest industry operates in one of the highest-cost jurisdictions in the world," says Jamie Lim, president of the Ontario Forest Industries Association (OFIA). "The government's package hasn't changed that."
The OFIA represents 29 Ontario forestry companies managing 90 per cent of the wood fibre on Ontario's Crown lands.
Since January 2005, 10 Ontario paper and wood production mills have been shut down with the loss of hundreds of jobs. There have been more than 2,300 permanent job losses in the Ontario forest industry in the last three years, according to the OFIA.
In late September, the provincial government announced a five-year $330-million aid package to help the troubled industry respond to changing global markets, increasing competition from low-cost countries such as Russia and China, escalating fuel and electricity costs, and a rising Canadian dollar.
The plan includes a Forest Sector Prosperity Fund of $150 million over three years to encourage forestry companies to expand and modernize. The private sector will have to pay most of the costs of the projects, however.
"We basically think the $150 million could lever up to $1.2 billion in new investment," provincial Natural Resources Minister Dave Ramsay said when he made the announcement in Thunder Bay.
The forestry loan program is similar to the provincial government's $500-million package for the auto sector, which has generated billions in new investments from Ford and General Motors.
Premier Dalton McGuinty has admitted the package will not prevent more mill closures and layoffs, but says it is aimed at helping the province's forest companies be more competitive. "It's designed to help put the industry on a stronger footing going forward. It is not designed, because it would be impossible to do so, to protect all existing jobs," McGuinty says.
In June, the government announced it would provide up to $350 million in loan guarantees to stimulate investment.
Ontario's forest industry, the second largest after auto manufacturing, has annual sales of about $19 billion and provides direct and indirect employment for about 250,000 people, the OFIA says. It pays $2.5 billion annually in provincial, municipal and federal taxes and provincial stumpage fees.
Higher delivered wood costs and increasing energy costs are having a significant impact on forest products producers in Eastern Canada, where costs are 60 per cent higher than in Western Canada, according to Natural Resources Canada. The recent elimination of price protection on electricity rates in Ontario has boosted prices by more than 30 per cent.
The industry and dozens of Northern Ontario communities now hope an appeal to the government to reduce energy costs in the north may stem the tide of mill closures.
A final report in May from the Minister's Council on Forest Sector Competitiveness said the Ontario forest industry "is in crisis" and "urgent action is required to prevent predictable and irreversible consequences for communities, business and workers.”
The 17-member council was created last November by Ramsay.
The council report warns of the imminent closure of 12 mills in Northern Ontario and the loss of 7,500 direct jobs and more than 20,000 indirect jobs in northern and southern Ontario.
The pace of mill closures has been steady. In July, Abitibi Consolidated Inc. announced the permanent closure of one newsprint machine and the shutdown for an indefinite period of another. In September, Norampac Inc. announced the closure of its 150,000-tonne containerboard facility in Red Rock and the loss of up to 175 jobs.
On the eve of the announcement of the Ontario government's new aid package, Uniboard Canada Inc. announced the permanent closure of its New Liskeard operation, which will eliminate 73 jobs.
The plant's manufacturing unit costs were higher than the industry average, the company said in a news release.
The cost to deliver cut timber from the forest to mills in Ontario is $55 US per cubic metre, compared to $36 in Manitoba and $44 in B.C., Lim says. "That's a $20 gap."
The OFIA did not expect the government's package to close the $20 gap in one step, Lim says, but it was expecting it to bring costs below $50. Under the announced program, costs "dropped by a dollar," she adds.
For the Ontario forest industry to begin to recover, remain competitive and keep investment in the province, the cost of delivered wood must be reduced significantly, Lim says. "There may be some firms out there that can access the prosperity fund, but you still have at the end of the day the highest wood costs."
The OFIA was not alone in saying the government's aid package failed to address the situation.
"We're not happy with what they've done," says Norman Rivard, chair of the United Steelworkers of America IWA Council, which wanted timber-cutting rights tied to the northern communities and a review of mill closures.
"The package may help the companies. It doesn't do anything to help the Northern Ontario communities and keep jobs in the communities."
Ontario's Communications, Energy and Paperworkers Union called the government's package "pathetically anemic" and says it will do nothing to help the troubled industry.
Greenstone Mayor Michael Power, who is also head of the Northwestern Ontario Municipal Association, says the government "fell far short on reducing delivered wood costs," although the Prosperity Fund may help Greenstone get a proposed $300-million strand board plant.
"We are anxious to see the details of the minister's prosperity fund to learn what, if any, new opportunities might exist for this proposed plant. My goal for Greenstone is that we get this investment."
Greenstone is about 215 kilometres northeast of Thunder Bay.
The government's announcement did not include the 50-per-cent reduction in provincial fuel-tax credit for hauling wood from the forest to the mills, or return to the provincial government financial responsibility for primary road construction and maintenance, as the minister's council report had recommended.
"The government chose not to respond to that (the fuel-tax credit)," OFIA's Lim says. "It was really critical these be addressed because they go directly to reducing delivered wood costs.
"Plants in Ontario are closing not because the industry isn't modernized, but because it operates in one of the highest-cost jurisdictions in the world," Lim says. "Forest companies have already invested hundreds of millions of dollars in modernizing their plants in Northern Ontario."
Weyerhaeuser invested $350 million in a new plant in Kenora in 2002. Bowater Canadian Forest Products in the past few years invested hundreds of millions of dollars in Thunder Bay to build one of the world's most modern sawmills, Lim says.
"Companies seek out low-cost jurisdictions to operate in," Lim says. "That's just what they do."
Lim now hopes there will be an announcement later this month from the government on what it plans to do about high energy costs. "That's the other part of the puzzle."
The industry is asking the government to allow the creation of new supplies of lower-cost energy. The annual electricity costs for the Ontario forest industry are about $500 million and represent up to one-third of operating costs, the council's report says.
Manufacturing plants in Manitoba and Quebec have electricity costs 50 per cent less and 20 per cent less, respectively, according to the Association of Major Power Consumers of Ontario.
The Ontario mining industry has also asked the government to lower the price of electricity because it makes its products uncompetitive.
"I am disappointed, but not discouraged. This government certainly has shown willingness to listen and work with us, more than any other previous government in 20 years," Lim says.
"For the first time, the forest industry is on the radar screen at Queen's Park," she says.
- With files from The Canadian Pres
(Charles Wyatt can be reached at wyatt@businessedge.ca)
Wednesday, September 28, 2005
Forestry sector awaits provincial aid
Keith Leslie / Canadian Press / Wednesday, September 28, 2005
TORONTO -- Ontario's forestry sector is hoping a provincial aid package to be unveiled Thursday will equal the government's $500-million incentive plan for the auto industry.
"We would hope so," Jamie Lim, president of the Ontario Forest Industries Association, said Wednesday. "When you contribute over $1 billion in tax revenues annually, when you have annual wages that are $4.8 billion, that's a considerable amount of revenue that we're contributing to the prosperity of the province."
Natural Resources Minister David Ramsay declined to provide details of the aid package, but said it would be similar to the auto sector plan that encourages companies to invest and expand in Ontario.
"The framework is similar in that we're looking at a program that would incent investments," Ramsay said. "That's what the auto sector does, and we need to do the same thing to help the industry get into the 21st century and modernize."
The government has not yet spent the entire $500 million in the auto sector package, but has successfully used it to gain major expansions in Ontario from General Motors and Ford.
Premier Dalton McGuinty has said any government support for the forestry sector "would act not as a bailout," but would rather provide incentive for new investment.
The industry says Ontario is quickly losing its competitive edge in the global forestry market after being hit hard by rising fuel and electricity costs, a higher Canadian dollar, and increased competition from low-cost countries such as Russia, China and South Korea.
To underline the crisis, the industry points to recent decisions by Abitibi-Consolidated to idle its newsprint plant in Kenora, Ont., pending government aid, and by Toronto-based Grant Forest Products to invest $400 million in two plants in South Carolina.
Ramsay agreed the forestry industry is in trouble, and said the province would not wait for a promised aid package from the federal government before going ahead with its own plan.
In addition to the fund, Lim said mill owners want a 50 per cent fuel tax credit for hauling wood from forests to mills, and they want the province to resume paying for the construction and maintenance of logging roads.
"We don't see that road recommendation as looking for help because those roads are public roads," Lim said. "The government should be in the business of constructing and maintaining public roads."
The province is also expected to suggest ways of helping mills with energy costs by helping them build co-generation facilities to produce their own electricity from waste steam.
Lim said the forestry crisis should not be considered a problem exclusive to northern Ontario. She said there are mills in urban areas in the south of the province -- and an estimated 13,000 jobs -- that are also in jeopardy.
"This is a problem for Ontario and for Ontario's prosperity," she said. "When a mill closes in the north, it stops buying goods and services in southern Ontario." (*)
TORONTO -- Ontario's forestry sector is hoping a provincial aid package to be unveiled Thursday will equal the government's $500-million incentive plan for the auto industry.
"We would hope so," Jamie Lim, president of the Ontario Forest Industries Association, said Wednesday. "When you contribute over $1 billion in tax revenues annually, when you have annual wages that are $4.8 billion, that's a considerable amount of revenue that we're contributing to the prosperity of the province."
Natural Resources Minister David Ramsay declined to provide details of the aid package, but said it would be similar to the auto sector plan that encourages companies to invest and expand in Ontario.
"The framework is similar in that we're looking at a program that would incent investments," Ramsay said. "That's what the auto sector does, and we need to do the same thing to help the industry get into the 21st century and modernize."
The government has not yet spent the entire $500 million in the auto sector package, but has successfully used it to gain major expansions in Ontario from General Motors and Ford.
Premier Dalton McGuinty has said any government support for the forestry sector "would act not as a bailout," but would rather provide incentive for new investment.
The industry says Ontario is quickly losing its competitive edge in the global forestry market after being hit hard by rising fuel and electricity costs, a higher Canadian dollar, and increased competition from low-cost countries such as Russia, China and South Korea.
To underline the crisis, the industry points to recent decisions by Abitibi-Consolidated to idle its newsprint plant in Kenora, Ont., pending government aid, and by Toronto-based Grant Forest Products to invest $400 million in two plants in South Carolina.
Ramsay agreed the forestry industry is in trouble, and said the province would not wait for a promised aid package from the federal government before going ahead with its own plan.
In addition to the fund, Lim said mill owners want a 50 per cent fuel tax credit for hauling wood from forests to mills, and they want the province to resume paying for the construction and maintenance of logging roads.
"We don't see that road recommendation as looking for help because those roads are public roads," Lim said. "The government should be in the business of constructing and maintaining public roads."
The province is also expected to suggest ways of helping mills with energy costs by helping them build co-generation facilities to produce their own electricity from waste steam.
Lim said the forestry crisis should not be considered a problem exclusive to northern Ontario. She said there are mills in urban areas in the south of the province -- and an estimated 13,000 jobs -- that are also in jeopardy.
"This is a problem for Ontario and for Ontario's prosperity," she said. "When a mill closes in the north, it stops buying goods and services in southern Ontario." (*)
Friday, September 23, 2005
Forestry worker dragged from tent by bear
A forestry company employee is recovering in a Winnipeg hospital following a vicious attack from a black bear in Northwestern Ontario.
By Mike Aiken / Miner and News / Thursday September 22, 2005
A forestry company employee is recovering in a Winnipeg hospital following a vicious attack from a black bear in Northwestern Ontario. About 4 a.m. Wednesday, employees of Moose Creek Reforestation working in the Pakwash Forest between Ear Falls and Red Lake -- about 150 km northeast of Kenora -- were asleep when one of them was dragged from their tent into the woods.
“This bear meant business. He wasn’t going to back off,” Bill Skene, an Abitibi-Consolidated contractor, said.
While the others tried to beat away the predator from their colleague, the animal reared and threatened to swat his tormentors, before dragging the man further from his tent. The employees were eventually successful in saving the man, who was rushed to an ambulance for medical attention.
Medical staff at the Red Lake hospital transferred him to Health Sciences Centre in Winnipeg, where the victim was reported to be in stable condition, with puncture wounds and abrasions to his back, upper arm, head and shoulder.
“This is terrible. Something has to be done. There’s too many bears out there,” said Skene in calling for better controls on aggressive bears.
Skene, a veteran of the logging business, said he’s seen more nuisance bears this year than any other in his 20-year career. Although equipped with pepper spray in case of an attack, the employee never had a chance to use it, Skene said, adding the man had been working in the bush for much of the past eight years.
Poor berry crops
“There’s a bear problem in Ontario and the government has to deal with it,” Skene said.
The attack is likely related to poor berry crops and a lack of food in the woods this summer, causing the bear to do unusual things in search of food, said Norm Hissop, Kenora spokesman for the Ontario Ministry of Natural Resources.
It has nothing to do with the demise of the spring bear hunt in Ontario, he said. “That’s the knee-jerk reaction,” said Hissop.
While Hissop reported only one incident in Kenora last year and six across his MNR territory, his statistics are already well above those levels for this year, he said. However, Hissop noted there are similar problems in Manitoba -- even though the province has a spring and fall bear hunt in place.
The attack is the latest in a number of reports from across the country, including attacks on farm animals in the Kenora area earlier in the month and on Sept. 6, a Cambridge, Ont. woman was killed and her husband mauled by a black bear in Missinaibi Lake Provincial Park, about 80 kms north of Chapleau.
In Manitoba, Harvey Robinson, 68, was killed Aug. 26 after encountering a black bear near his home in the Rural Municipality of St. Clements. Earlier this month, Lac du Bonnet farmer Dennis Heckert and his dog were also attacked but lived to tell the tale. (*)
Saturday, September 17, 2005
Speakers outline woes facing forest industry
September 14, 2005 / By Melanie Béchard / Fort Frances Times
Politicians, industry leaders, and private citizens expressed their desire to work together to solve the problems facing the forest industry in Ontario during a public meeting here last night.
Six speakers addressed a crowd of nearly 150 people in the auditorium at the Memorial Sports Centre to discuss the past, present, and future of the forestry sector, and why it is asking for help from the provincial government.
Coun. Tannis Drysdale, who helped organize the meeting, opened it by outlining the major events in the forest industry over the last year, including the creation of the Minister of Natural Resources Council on Forest Sector Competitiveness last November, the release of that council’s report back in June, and the government’s proposed course of action.
“For the last 20 years, the forestry sector has demonstrated its ability to create jobs and prosperity throughout Ontario,” Coun. Drysdale said.
When the industry began to cry for help last year, the Minister’s Council set to work and came up with a report containing 26 recommendations to ensure a secure future for it.
The government’s response was to offer $350 million in loan guarantees.
“Loan guarantees are what the government gives you when the banks won’t give you any money,” explained John Harrison, manager of the Abitibi-Consolidated mill here and one of the speakers at last night’s meeting.
“The last thing we need right now is more debt, believe me.”
“The offer will not resolve the problems facing the industry,” Coun. Drysdale noted.
As a result of government inaction, the Ontario Forestry Coalition was formed, including the Northwestern Ontario Municipal Association, the Ontario Lumber Manufacturers’ Association, the Ontario Forest Industries Association, and the Nishnawbe-Aski Development Fund.
The coalition is focusing on four main issues it wants the province to address:
•a 50 percent fuel tax credit on the provincial portion of the tax when hauling fibre from the forest to the mills;
•a reliable supply of energy at reasonable prices;
•that the government assume 100 percent of the construction and maintenance costs of primary logging roads, and 50 percent of the costs of secondary forestry roads; and
•a business climate competitiveness fund similar to the one offered to the automotive sector.
The coalition made its demands heard at the recent Association of Municipalities of Ontario meeting in Toronto last month, Coun. Drysdale noted.
After meeting with NOMA representatives and other coalition members, Premier Dalton McGuinty agreed to put a package together for the forest industry in Ontario.
“Since our meeting in August, we have heard nothing from the government,” Coun. Drysdale said.
For this reason, she stressed it is important that the community mobilizes to make sure the issue isn’t forgotten.
Postcards addressed to the premier, demanding the government take action, were made available to those on hand at the meeting. The signed cards were collected at the end of the evening to be sent to Queen’s Park.
The speakers, meanwhile, discussed various aspects of the forest industry.
Harrison talked about the industry on a global level. While many mills in Ontario ship their product to the United States, so do companies in China, Brazil, and Sweden—meaning local mills must compete on a global scale.
In addition, there has been a downward trend in consumption of newsprint and uncoated free sheet since about 2000. More recently, the weak U.S. dollar has cut into profits, as well.
“Ontario wood prices are among the highest in the world,” Harrison said. While the world average cost for a cubic metre of wood is $35, that same amount costs $55 in Ontario.
All this, coupled with the rising costs of energy, fuel, and chemicals, means it is becoming increasingly difficult for mills to stay in business.
“The historic profitability of the mill [here] is steadily declining,” Harrison warned. “We expect to be unprofitable in our kraft mill here this year.”
But this does not spell doom for the local mill.
“There is a road map for recovery,” Harrison said, citing the Minister’s Council report. “It contains key recommendations that could put us back on the road to profitability.
“But the government is not going to take action unless they hear support from the public,” he stressed. “We need your help to get the right business climate in Ontario to be sure we can be prosperous in the future.”
Former mayor Glenn Witherspoon then said a few words on behalf of the Town of Fort Frances as Mayor Dan Onichuk was not in attendance at last night’s meeting.
Thunder Bay-Rainy River MP Ken Boshcoff also was unable to attend last night. He is in Indonesia this week with Fisheries and Oceans minister Geoff Regan at the APEC Ocean Ministers’ Meeting.
“When the auto industry coughs, every premier brings a Kleenex. They certainly don’t do that for this industry,” Witherspoon noted.
Gary Rogozinski, president of the Fort Frances Chamber of Commerce, presented a picture of what would happen to the town should the mill here close.
The mill employs about 700 people directly, he noted. If the average household is made up of three people (according to the 2001 census), then the closure would affect 2,100 people directly, or about 25 percent of the town’s population.
The mill employs another 100 wood-processing contractors as well as other staff, including security personnel, which would drive that percentage up to 30.
In terms of dollars, the mill pays out $56 million every year in wages and benefits. Assuming 50 percent of those wages are spent in the community, that’s an infusion of more than $27 million into the local economy annually.
About 60 percent of mill employees have spouses who work, earning an average of $35,000/year, and a total of $7,350,000 spent in the community.
In addition, the mill pays about $4.5 million a year to local vendors, $2.9 million on taxes, sewer, and water, a $1.5 million subsidy for three megawatts of power, and $800,000 for gas and diesel.
Rogozinski pointed out since the mill maintains the local logging roads, which often are used by tourist outfitters, hunters, and others, those roads would become unusable after five-10 years if the mill were to close.
Abitibi-Consolidated alone maintains 1,100 km of road.
It is difficult to estimate the financial impact the loss of those roads would have, but it could cause a drop in tourism, Rogozinski warned.
Altogether, if the Fort Frances mill were to close tomorrow, and assuming all its employees and their families would leave the area to find work elsewhere, it would amount to an annual loss of more than $71 million for the town’s economy.
“That’s a conservative number,” Rogozinski said, noting it likely would be closer to $100 million in a more detailed analysis.
Mark Alderson, manager of the Ainsworth OSB mill in Barwick, said he wanted to be present at last night’s meeting here to point out that the problems in the forestry sector affect the oriented strand board industry as well as pulp and paper mills.
“We’ve been drastically affected by wood costs in the last year-and-a-half,” he said. “It’s very important to the whole area.”
The final speaker of the evening was Ontario NDP leader and local MPP Howard Hampton. He brought along a handout for those on hand outlining the hydro costs for mills in different provinces across Canada.
A paper mill in Ontario using 30 million kWh/month will pay about $2.2 million in hydro—almost double what a mill in Quebec would pay for the same amount of hydro and more than double what one in British Columbia or Manitoba would pay.
As a result, many companies have stopped making investments in their mills in Ontario because they are less profitable while they make investments in their ones in Quebec, B.C., and Manitoba.
That will have dire consequences for Ontario mills in the long-term, Hampton warned.
“You may not be shut down today or next year, but you become less and less competitive over a four- or five-year period,” he said. “That’s where virtually every paper mill in Ontario is now.”
A less competitive mill also is more likely to see layoffs and shutdowns.
“When the market is down, mills in Ontario will take the down time,” Hampton said, noting the mill in Kenora has been shut down for six weeks or two months at a time during periods of low profitability.
He also suggested the mill in Fort Frances could begin to see similar “down time” if the province’s policies don’t change soon.
While the forest industry struggles, the provincial and federal governments have been providing investment packages to the auto, film and television, casino, and aerospace sectors, Hampton said.
“The government can’t come to Northern Ontario and say, ‘Not for you.’ That’s not fair,” he argued.
Following the speakers, the floor was opened to comments and questions from the audience. A few people came forward, including some current and retired mill employees.
Most were in agreement with the panel of speakers, and expressed hope that they could successfully lobby the provincial government together for a positive outcome. (*)
Subscribe to:
Posts (Atom)