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Forest Products sector captive to shippers: FPAC


May 3, 2007
By Pulp & Paper Canada

The forest products industry pays over $280 million annually in excess freight costs due to the monopoly power of …

The forest products industry pays over $280 million annually in excess freight costs due to the monopoly power of the railways, Avrim Lazar, president and CEO of the Forest Products Association of Canada charged. It is time for the government to take action.

In an address to the Senate Committee on Transport and Communications as part of its study of Bill C-11, an Act to amend the Canada Transportation Act and the Railway Safety Act, FPAC called for an increase in competition within the railway freight system and new measures to provide shippers with the means to challenge unreasonable costs.

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The lack of competition over significant parts of the rail system results in significantly higher transportation costs for Canadian shippers, particularly in those remote areas that are captive to the railways. This affects both rates and service at the majority of our mills across the country.

According to FPAC, the forest products industry is the largest user of rail transport in Canada, contributing $2 billion annually to rail revenues. A recent report by Travacon Research Limited notes that where there is effective competition for rail traffic, payments to railways should not exceed 20% of railway variable costs based on volumes shipped. FPAC says its members paid out an additional $280 million above these costs.

A competitive rail network will greatly benefit not only the forest products sector but also Canadas export sector more broadly, Lazar said.


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