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Sept 2003 - Spotlight

Spotlight

Long Hard Summer

It’s been a long, hard summer for the industry in north-western Ontario, with a lot of temporary mill closures—and Weyerhaeuser announcing the permanent closure of its Dryden sawmill—and wood supply problems.

By Dave Lammers

 Hartley Multamaki, vice-president of planning and development for Buchanan Forest Products (inset), on the layoffs that were a direct result of the lack of fibre: “We just didn’t have enough wood to run all of the operations, and that issue is still out there.”

Some say it was the worst summer ever for logging and sawmilling in north-western Ontario, with thousands of workers laid off across the region. But the biggest blow is expected to come this fall when Weyerhaeuser Company will permanently shut down its stud mill in Dryden, leaving 110 workers without a job. “The announcement certainly cut a lot deeper and was a lot more dramatic than anybody would have expected,” says John McInnes, national representative for the Communications, Energy and Paperworkers (CEP) union in Dryden.

Buchanan Forest Products Ltd laid off 1,000 workers in the spring indefinitely, citing the softwood lumber dispute and a high Canadian dollar. However, what everyone is talking about in northwestern Ontario isn’t the 27 per cent countervail or the soaring loonie that has cut deep into exporting profits the past six months. Instead, logging towns are concerned about a lack of wood supply and feel that the Ontario government is eating up too much of available forests with parks and protected spaces. Norm Bush, Weyerhaeuser’s vice-president of operations for Ontario, said the Dryden closure boils down to there simply not being enough fibre available in the region just east of Manitoba to sustain the operation.

The company will boost operations at its newer Ear Falls stud mill—built in 1997 and located north of Dryden—and close the older Dryden facility, effective October 11. The Ear Falls mill currently produces approximately 130 million board feet per year, compared to the 75 million board feet produced at the Dryden sawmill. The potential exists to increase production at the Ear Falls operation by 30 per cent with minimal capital investment, says Bush. “We only have enough timber available to us in north-western Ontario to really fibre one competitive sawmill,” he says.

Reductions in the forestry land base in northwestern Ontario, due to set asides under the Lands for Life and Room to Grow initiatives, have sparked concern about the wood supply situation, and logging and mill jobs in the region.

In fact, Bush agrees with other forest company officials who say the wood supply issue alone will determine which mills in the region continue to operate in the future and which ones are shut down. “That’s a pressure that all of us feel,” he says. “Every time any one of the forest companies goes through the (forest licence) renewal process, there’s always a tremendous amount of pressure to take forest lands and the forest base away from existing licences. At the end of the day that creates a situation where there’s less and less fibre available for everybody manufacturing products out of the forest.”

However, the union representing workers at the Dryden mill accuses Weyerhaeuser of reneging on its commitment to the province to provide jobs. Part of Weyerhaeuser getting its fibre basket was that years ago the company signed agreements that they would maintain and provide sustainable jobs, says McInnes. “Part of that maintaining and sustaining meaningful jobs was the sawmill that has been here in Dryden for years and years, and there was a fibre basket obviously allotted and earmarked for that.”

CEP also blames the government for not doing anything to keep the mill open. “They’re going to move fibre between different companies and Ear Falls. So the lumber that would have been going to the sawmill in Dryden will be going to Thunder Bay or going to Ear Falls or going wherever they’re doing a swap. So the sustainable jobs are being wiped out and the fibre is going elsewhere to be cut and produced into a product—and the government is nowhere on the scene to say, ‘Hey, that wasn’t part of the deal.’ “It’s the worst that I recall,” adds McInnes of the uncertainty the industry faces.

Weyerhaeuser will be boosting production at its Ear Falls stud mill (above), which was built in 1997, and will be closing its older Dryden facility, effective this October.

Bush says the company has looked hard for solutions, and notes while an increase in wood supply might have solved the problem in Dryden, “it’s hard to imagine that the kind of volumes we’d be talking about are out there. “For example, we would need about 400,000 cubic metres of wood (per year) to get Ear Falls competitive. And that’s about how much wood is going through the Dryden sawmill. And then we would need about another 1.6 million cubic metres of wood to have another viable sawmill. That’s simply not out there. We have trouble getting 50,000 cubic metres of wood from someone, let alone two million cubic metres of wood.” In addition to the sawmill closure, Weyerhaeuser has also scaled back operations at its Dryden pulp and paper mill, cutting 220 jobs, for a total of 330 jobs lost in the mill town of 8,000.

The fear that less fibre will continue to mean fewer jobs in northwestern Ontario has a group of mayors on Lake Superior’s north shore, east of Thunder Bay, lobbying the province on the issue. “Out of (the government’s Lands For Life program) there was an agreement that approximately 12 per cent of the fibre supply would become protected, and everyone seemed to be able to live with that,” explains Michael King, mayor of the community of Terrace Bay. “Since that time, significantly more, we feel, has been protected with other initiatives including the Room To Grow initiative which has a number of triggers that will cause further reductions. We feel that it’s more like 15 per cent and, so far, with the Room To Grow initiative, that adds another eight per cent on top of that. Depending on how you crunch the numbers some estimates go as high as 30 per cent.”

The result, says King, is that forest companies are being forced to go farther and farther into the bush to find wood for mills in the region—at a much higher cost. “It’s not uncommon to see fibre being brought in from Quebec, Manitoba, Alberta, and even from the US into our area,” says King. “The reason for the mills to be here in the first place is because this is where the forests are. And if you surround them with protected lands and cut off the supply of fibre, pretty soon there’s not a reason for these mills to be here.” In August, the mayors were granted a meeting with officials from the province’s Ministry of Natural Resources to air their concerns. “We’re asking for a moratorium to be initiated immediately that there be no more further withdrawals of fibre and that an independent analysis be done in our area to determine the economic impact of the withdrawals that we’ve had to date,” explains King.

Weyerhaeuser also points to the separate issue of an excess sawmill capacity of eight to 10 billion board feet in the Canadian market, and warns that the situation could get worse in north-western Ontario if the US economy takes a downturn and record housing starts return to normal levels. “Unless things turn around, we can expect to see more market curtailments and more pressures across the whole industry in terms of other sawmill closures,” says Bush. He adds: “We recognize that these are also very trying times for many others in north-western Ontario and many other communities. What we need to do is to get our mills competitive so we can minimize the future impact on our employees and communities.”

Other communities hit by layoffs in north-western Ontario include White River—a town of 1,000 largely dependent on forest company Domtar which announced a six-month layoff of its 200 workers at the end of June. West of Thunder Bay, Kenora Forest Products laid off its 220 workers for one month in mid-July, sending shivers through that largely mill-dependent town. Even forestry giant Buchanan Forest Products—north-western Ontario’s largest employer with nine mills in the region that produce more than a billion board feet a year—has curtailed some of its operations including layoffs at Great West Timber and Northern Wood in Thunder Bay. As recently as a year ago Buchanan was still booming and couldn’t find enough logging contractors to feed its mills.

However, things came to a head in May when Buchanan announced it could no longer endure such a harsh climate for doing business, and laid off one in five of th company’s 5,000 workers. “Obviously the 27 per cent tariff has been a problem for us since it came into effect,” explains Hartley Multamaki, Buchanan’s vice-president of planning and development. “What ended up triggering the curtailment of operations in our organization was the strength of the Canadian dollar. Suddenly it all came together and that was the straw that broke the camel’s back. “Some companies have shut mills down in response to these pressures,” he adds. “What the Buchanan group has done is scale back operations—but we still maintain a presence in the communities that we operate in. We would like to return to our normal operating levels as quickly as possible, but recognizing the reality out there, something is going to have to change before that is going to happen.”

Multamaki also acknowledges the issue of wood supply and recalls layoffs a year ago that were a direct result of a lack of available fibre. “We just didn’t have enough wood to run all of the operations, and that issue is still out there.” Notably, Buchanan initially had concerns about Bowater’s decision to open a new sawmill in Thunder Bay—up and running since May. But Multamaki says the problem isn’t too many mills but rather “too many land-base removals and too many guidelines” that force loggers to leave trees standing in areas where they are cutting.

Another factor is the age class of the forest where harvesting and silvicultural operations have occurred over the last 40 or 50 years. “We knew there was a gap coming up and we’re starting into that,” says Multamaki. “So it’s a fairly complex issue that is contributing to this wood supply concern. “Are there solutions to it? Absolutely. We just need to have the fortitude to do a comprehensive review of the wood supply issue and make the right choices. There has to be a balancing act out there that doesn’t negatively affect jobs and the communities that rely on those jobs.”

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