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Coastal Challenges

These are historic times to be in the Canadian forest industry; troubling, but exciting nonetheless. Whether you’re on west or east coast, or in the middle, there’s lots to think about, as established companies and even whole sectors struggle, while new players and sectors emerge. Let’s start with the coasts, and their traditional players.


November 16, 2011
By Scott Jamieson
These are historic times to be in the Canadian forest industry; troubling

On the West Coast, a piece of big-wood logging history is vanishing with the failure of Hayes Forest Service. Hayes was a full-service, one-stop-shop for coastal forestry, handling it all from felling and roads to helicopters and heli maintenance. It was the face of the industry you’d like to show potential recruits, with its modern offices and new gear. We featured the operation several times over the years, most recently in 2006. At that time, the coastal industry felt that bigger was better as far as costs were concerned (or maybe it was just to bust the unions), and so turned to the 87-year-old logging company, and other large players, to step up. And step up Hayes did, making some very happy equipment dealers at the time. They looked the part, and word had it that they uncovered more than a few inefficiencies in the old company jobs. No kidding.

But contractor or company, big is big, and big can mean slow. Fast forward a few years, and Hayes is no more than a coming auction date, and a big one at that. Whatever you feel of the monster contractor concept, Hayes didn’t seem too nimble on its feet when markets and volumes fell. No temporary move to aggregates or road maintenance for this logger. Still, the struggles of being a volume-based producer in a declining market makes them no different than most of the Canadian forest products industry.  

Now it seems the only ones who’ll get fully paid from this collapse are the bank and the Hayes family itself ( I don’t know why, I just report it).The rest have to hope that the contractor’s iron sells at good value if they hope to see more than 60 cents on the dollar. But with a fire sale of that size (up to $16 million worth) and in this market (who’s buying?), I wouldn’t spend that money until I saw it.

When the dust settles, and if the BC Coast’s big wood or second growth business recovers in some new form, a betting man would put money on an industry supporting more, and smaller contractors. Not two-men crews perhaps, but the days of the million meter logger are all but gone.

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Rock & Hard Place
Head to the other coast, and watch another sad drama unfold in central Newfoundland. There, a once “have-not” province has become a “have” province, and everything from standards of living to pride and a brighter sense of future have emerged. Now energy-rich, neither governments nor communities seem to have patience for the mixture of pleading and threats that have long been part of the dialogue here when the established forest industry talks.

One of the biggest players, AbitibiBowater, is trying to negotiate with both government and unions to navigate a major restructuring of its forestry and newsprint operations. Few could argue the need, as the company struggles with losses approaching a cool billion this year and financial strain as it looks to re-finance some $600 million in 09. Talking of this, CEO David Paterson recently said he’ll have to take some 600,000 metric tons of newsprint out of the market in 2009 to balance supply and demand.

In the old days, such talk might have both government and union scrambling in central Newfoundland to find a way to keep the mill open. But with other fish to fry, and a sense that AbitibiBowater’s current stance is based on desperation rather than sound business or environmental principals, the locals don’t seem to be biting. In early November, the union voted 88% against the restructuring plan. Perhaps it was a negotiating stance, although the few I spoke with seemed to feel that if all the changes the company wanted in both mill and woods were really essential to survival, maybe it was time to let go.

In the woods, the plan is based in large part on getting cheaper fibre by moving from the cut-to-length (CTL) logging the MNR has long preferred to almost 100% whole tree chipping in the woods. It has worked elsewhere perhaps, but anyone who’s spent time in the scrubby woods around those parts would be understandably concerned with the potential environmental downside. Economic drivers aside, bunchers, skidders, and full-tree (nutrient) removal might not be the best option for the mix of bog, rocks and shallow soils of central Newfoundland.

Last news was that the government was resisting this move, as were the contractors, none too thrilled to be financing million dollar machines to replace their paid systems, and to go through another steep learning curve, all while the company is teetering on the brink, and telling everyone who’ll listen how marginal the operation is. I might have to pay another visit to central Newfoundland and see what’s really up, but it seems to me that if a scheme seems unacceptable to the workers, the loggers and machinery owners, and the landowners (government), and poses questions regarding long-term environmental and financial sustainability, maybe it’s not such a good idea after all.

Like I said, coast to coast, there’s never a dull moment these days. One thing’s still true – Where’s there’s wood and demand, there is opportunity. In many parts of Canada, that may mean new players making new products, but someone will be making something from it. And sometimes, finding the new requires letting go of the old.

 

Scott Jamieson,
Editor/Group Publisher
1-888-457-3155, ext 24
sjamieson@forestcommunications.com


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