Forestry: Green hope or no hope?
There's a ray of green light visible at the end of the very dark tunnel where Canadian forestry product workers, communities and companies have struggled since the business began to implode in 2003.
Since then, production has tumbled; mills have closed; at least 38,000 workers — and perhaps 50,000 — have lost their jobs. The forest companies' shares are trading for a fraction of their former prices.
Residents of Mackenzie, B.C., marched through the town in May to voice their concerns over the dying forestry sector. (Robert Doane/CBC)Yet Avrim Lazar, president and CEO of the Forest Products Association of Canada (FPAC), is wildly optimistic about the future.
In a report on the group's website, Lazar acknowledges that the sector is facing "arguably the worst times" in its history. But Canada's high environmental standards will again make its products a hot commodity, he says.
As world demand rises, buyers will want to know that the paper and lumber they use was produced cleanly. They will reject products from illegal loggers, countries that don't control deforestation and tropical plantations using land that could grow food.
"The industry's environmental responsibility may be a virtue now, but in the near future, it will be a key market advantage and translate into jobs for Canadians," Lazar says.
Craig Campbell, a forestry specialist with PricewaterhouseCoopers, agrees there is a green future for the industry, but as the consulting company's website notes, environmental friendliness has not been an easy sell.
"The Canadian industry has struggled to get this message out as a way of differentiating itself from competitors," it says.
Worldwide competition
Some of those new competitors from South America and Asia are doing very well, shaking up the international industry to the detriment of traditional forestry product producers from Canada, the United States and western Europe.
Wood from tropical countries is often cheaper than Canadian wood. This picture was taken in Indonesia. (Achmad Ibrahim/Associated Press)These new players have two advantages, Campbell says. They use cheap, fast-growing trees, and they have new, efficient plants with modern technology.
They can undercut older producers and jump on opportunities when they arise.
But the Canadian industry is facing more than just new competition:
Demand for newsprint, once a staple of Canadian producers, is falling as newspapers shrink.The dollar's rise has made products more expensive for buyers in the key U.S. market.Demand for Canadian lumber is falling as American homebuilders pull back because of the credit crisis.U.S. trade actions have hurt the industry.Local costs for wood and energy are too high.Union critics complain the industry has failed to make the proper investments.Whatever the cause, the effects are clear. The 2007 PricewaterhouseCoopers ranking of international forest industries found Canada's industry had a negative return on capital. Ten of the 13 Canadian companies in the survey lost money and were poor performers in terms of investing to replace old equipment.
Even FPAC, the industry lobby, acknowledges that only a minority of Canadian mills are competitive.
"While there are some world-class mills in Canada, only a minority of operations boast first- or second-quartile status, the result of older technology and higher input costs," the group's 2007 review says.
Given the industry's poor economics, Campbell has a question about its plans to promote its environmental benefits: "How are they going to fit that in with the economic challenges?"
300 communities depend on forestry
Yet while workers and communities wait for the green future, there is the problem of today. Across the country, more than 300 rural and remote communities rely on the forest industry, a June 2008 Senate report on rural poverty says.
Those communities are facing job losses that come with "hundreds of mill closures," says Dave Coves, president of the Communications, Energy and Paperworkers Union (CEP).
It's not just the mill jobs; in a community where the mill is the main employer, once it closes, workers have no choice but to leave. Once that happens, the bakers, barbers, teachers and tradespeople have to move, too, as the call for their skills disappears.
As those communities suffer, die and disappear, "homes can now be purchased on a credit card," the Senate report says. Property values tumble, and the municipality loses its tax base, forcing cutbacks that make the communities less attractive.
Let's call a meeting
It's a grim prognosis for single-plant communities, and yet aside from the green hope, there are not a lot of ideas out there. The Senate report's main recommendation on forestry was for Ottawa to "immediately" call a meeting to develop a national forestry strategy.
The Forest Products Association of Canada predicts that Canada's high environmental standards will make its wood products a hot commodity in the near future.(CBC)"If the crisis in the forestry sector has a silver lining, it is this: governments, industry and unions have a clear opportunity to chart a new course for the next generation of forestry sector workers and their rural communities," the report said.
The CEP, although it has talked about taking control of the resource, also called early this year for a sectoral council to develop a strategy.
The industry group wants governments to lift barriers it says prevent companies from merging and to cut costs, such as fees charged for wood and taxes. Reducing such charges "is a prerequisite for renewal," FPAC's website says.
The federal government announced a $1 billion, three-year program in January 2008 to help single-industry and other vulnerable communities. It's too early to determine whether it's really helping, but a lot of the focus is on retraining individuals.
The federal government is also encouraging new forest technology. "The forest industry must look to new products and processes if it is to keep, let alone expand, its place in the global market," the Natural Resources Canada website says.
And provinces have their own programs tailored to meet local needs.
And yet for communities with old, expensive mills, there may be only one, unpleasant, solution.
"They've got lead tied to their feet," says Campbell. "They've got to go down."
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