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Are We There Yet?

The simple answer is no. We are not there yet. At least if “there” refers to the recovery of Canada’s battered and bruised forest industry. But things seem to be on the mend here at home and externally, including with our southern neighbor and the largest customer for our forest products – The United States of America.


November 10, 2011
By Bill Tice editor
The simple answer is no. We are not there yet. At least if “there” refers to the recovery of Canada’s battered and bruised forest industry. But things seem to be on the mend here at home and externally

The headlines in an early April edition of the Globe and Mail’s Report on Business optimistically touted, “U.S. Economy Begins to Wake Up.” The article proclaimed, “the United States is catching up with the global recovery,” and “more data this week indicate the rebound from the worst recession since the 1930s is gaining traction.”

To substantiate the story line, the Globe reported, “U.S. services companies, which represent almost 90 per cent of the world’s largest economy, expanded the most in more than three years in March.” They also pointed to U.S. pending home sales, which catapulted 8.2% in February, the largest increase in that statistic since October 2001. And they highlighted the U.S. Treasury Yield, which “touched” 4%, something it hasn’t done since June of last year.

Could they be right? Let’s hope so, as any boost in the U.S. economy, even a small one, is a boost for Canada, and in particular our forest industry. It’s been a gruelling ride for many companies on both the harvesting and processing side of the forest products business and the bloodshed garnered by the layoff axe and the calling in of loans by lenders has been indiscriminately rough on both employees and employers.

On the north side of the 49th Parallel, we are also seeing positive signs – companies expanding, investing, and growing, and for many, opening the tightly clutched purse strings to make capital investments for the first time in 24 months. In late March, we had Conifex announce that they were in the process of buying former AbatibiBowater assets in the crippled northern B.C. interior town of Mackenzie. It was welcome news for the town’s residents, who have been hit particularly hard by the downturn. The Conifex deal will bring two sawmills back to life, albeit they will be combined into one upgraded and expanded mill, and although the company has said they will sell off the newsprint assets that form part of the deal, they have indicated they will keep and run the co-generation power plant that was associated with the newsprint plant.

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Conifex will also acquire an annual allowable cut (AAC) of more than 900,000 cubic metres, bringing the company’s total AAC to approximately 1.6 million cubic metres.

 On the other side of the country, a shutdown Fraser Papers’ plant in Quebec will be revitalized by Vancouver, B.C.-based Fortress Paper. The new owners have secured $102.4 million in financing from Investissement Quebec and have said they will invest $153 million in the facility, converting it to a specialty cellulose mill. Future plans also include a 25- MW biomass powered co-generation plant.

And, we have China. The B.C. and Canadian governments are working hard to forge long-term deals that will see more Canadian wood go to China, taking some of the heat off the U.S. market and diversifying our customer base. B.C. alone is predicting that, by the end of this year, 20% of the province’s wood production will be delivered to China – double what it was in 2009.
So, back to the question of, “are we there yet?” The answer is still no. We have a long road ahead of us and for many companies and individuals that make up Canada’s forest industry; they are at the bottom of a very deep hole. The good news is the hole may not get any deeper and the survivors can start the long climb back to profitability. We will get “there,” but maybe the question should be how long do we have to wait?

 

Bill Tice, Editor
btice@annexweb.com