Jacques Boissinot
It's the industry the recovery forgot.
Even as signs point to a slowly rebounding economy, losses are mounting in Canada's forestry sector as it struggles with continued slack demand and a series of structural problems, many that predate the global recession.
Tembec Inc. is the latest example. The Montreal-based company says it is putting up for sale its newsprint mill in Pine Falls, Man., after it locked out its 250 employees Sept. 1 in a bitter conflict over wage cuts.
The proposed move is just the latest in the continued consolidation and downsizing of the sector. Canadian forest and paper companies posted combined losses of $632-million in the third quarter of 2009, up from $552-million in the year-earlier period, according to the latest figures from PricewaterhouseCoopers.
The numbers are "grim," says Craig Campbell, head of the consulting firm's performance-improvement practice for the global forest business.
Canadian lumber exports are still suffering from the "tidal wave of foreclosures" in the U.S. housing market. Meanwhile, the steady erosion of North American newsprint demand will continue as newspapers shrink, Mr. Campbell said.
"Canadian producers have to look at other business models, such as bio-energy, and outside traditional products and outside North America" he said. "Canadian companies haven't invested outside Canada so much. They're struggling to make a buck in Canada."
On the lumber front, foresters in Western Canada remain in staunch cash-conservation mode. In the United States in October, there were just 529,000 housing starts, the lowest since April. That's a quarter of the feverish pace during the peak of the boom in 2005 and 2006.
Yet industry officials hold on to hope for a turnaround. At lumber yards in the United States, where buyers purchase their Canadian spruce, pine and fir, suppliers have dwindled, market watchers say. This, combined with shuttered mills, means lumber prices could spike if demand returns.
"As people start to feel more comfortable with their own financial situation, and life goes on, building will follow," said Ric Slaco, a vice-president and chief forester at International Forest Products Ltd., based in Vancouver. But, he allowed, "the recovery will be slow."
The U.S. housing market peaked in early 2006 and the industry has been in a slump for nearly four years. It could take more than a year for the millions of existing but empty homes - and an equally large number of foreclosed houses - to be sold before new-home building begins to rise, said Russell Taylor, president of consultancy International Wood Markets Group.
"There are so many houses that have to be sold before new homes are built," Mr. Taylor said.
Avrim Lazar, president and chief executive officer of the Forest Products Association of Canada, says the industry is going through a massive transformation as it tries to right itself.
"The question is, when we're done with all this, what will it look like? The best we can say at this point is that it will be more consolidated - there was overcapacity to start with - and it will be more globalized, with less dependency on the U.S.," he said.
"And there will be a different mix of products, with less paper, still big markets abroad for pulp and solid lumber demand. There will be a greater emphasis on bio-products and bio-energy as well."
Bertrand Marotte
David Ebner