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There Is Blood On The Streets of The Canadian Forest Industry
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By 250 News
Prince George, B.C. - Forestry Critic Bob Simpson says we are watching the beginning of the end of forestry as we have known it in this province.
Simpson, the MLA for Caribou North, says that in order to have a viable forest industry it is going to need to look fundamentally different than it does right now.
Simpson says many of the forest companies have survived longer than most analysts said they would.
The forestry critic says some economists are predicting the Canadian dollar could reach $1.20, which would almost seal the fate of the forest industry.
The collapse of the US housing market, a Canadian dollar worth today $1.07 south of the border, and a duty of 15% have made companies even like West Fraser (who are known as bench mark operators) " To hurt real bad ".
"If the producers would get together they could change the market" Simpson says, "they could simply dry up the supply of wood moving across the border thereby sending the price up". But the problem says Simpson , "is that everyone in the industry has been playing a game of chicken seeing if they can hang on for dear life. "
John Brink echoes those sentiments. The President of Brink Forest products says "We are taking a ’hell of a hit’, from the export tax and we are continuing to put product into the US market that they don’t need." Brink says we need to shrink the supply and then the price will move up.
According to Brink, most of the timber is held by three major companies in this province, "Canfor, West Fraser and Tolko, they control about 75 to 80% of the fiber. The small companies don’t have the deep pockets to compete in this market. "
A forestry analyst describes it this way;
1,000 board feet costs about $265 Canadian to produce. But that same 1,000 is only selling for $204 Canadian, and there is a 15% duty tax to pay as well (approx $30) so what you are really getting for the lumber is $174 dollars per one thousand feet. That means a mill is losing about $90 dollars (Canadian) for every one thousand board feet that crosses the border.
John Brink says everyone is suffering "There is blood on the streets and we can’t do much about it".
Bob Simpson says there are yet further problems; "The producers can’t get rail cars to move the product and that makes the problem even larger." Simpson says the CEO’s of many companies have been complaining that CN is not living up to the promises made that the industry would be better served by them. "Costs have gone up and the service has dropped. CN has a monopoly in the top half of the province, you either ship CN or you don’t ship at all and they set the price. "
Simpson says at least in the southern half of the province, where CP has a monopoly, companies have been trucking their product across the border then putting it on Burlington where they get a better rate.
Why are the mills staying open,? Brink and Simpson both say that in part, it is due to the fact companies are afraid to shut down and lose their labour pool . Once those people pick up and leave it will take a long time to get them back. In addition, the pulp mills need chips and the only way to get them is from the mills. So companies like CANFOR have been keeping their supply lines open.
Simpson and Brink also agree that In the next few weeks there will be further breaks in the production with companies taking down time that will be lengthened to try and weather the storm. "Everyone and I mean everyone will be taking down time in order to survive" says Brink.
The Canadian dollar closed last night at $1.07624 compared to the US dollar.
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