Pulp and Paper Canada

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Industry News (May 01, 2006)


May 1, 2006
By Pulp & Paper Canada

SOFTWOOD LUMBER

SOFTWOOD LUMBER

SOFTWOOD SPURS STOCK JUMP

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MONTREAL, QC — Speculation of a potential resolution on the softwood lumber dispute saw shares of Canadian pulp and paper companies shoot upwards on March 30.

According to a report by Canada.com, news that Prime Minister Stephen Harper and U.S. President George Bush are making positive headway on the issue translated to a 15 cent gain for Tembec, whose shares closed to $2 on the Toronto Stock Exchange, a gain of 8%. Domtar gained a full 25 cents, to close at $8.15, a 3.2% increase.

The report indicated that western producers, who are for the most part in a stronger financial position than their eastern counterparts, are more inclined to push for a deal, even if it involves some compromise.

“The big western producers like Canfor want to have a permanent settlement. I’m reading that to say that they’d probably be willing to negotiate more leniently than the eastern producers like Tembec and Domtar,” Canada.com reported John Duncanson, a forest products analyst with Jennings Capital as saying. “Tembec and Domtar want all of the duties back, while Canfor and West Fraser are willing to negotiate and leave some money on the table, but only if it brings permanent peace.”

The past four years have seen Canadian companies pay out a total of $5 billion in duties.

MILLS

WEST FRASER CUTS 100 JOBS AT HINTON

VANCOUVER, BC — A total of 100 jobs are being cut at West Fraser Timber’s pulp mill in Hinton, AB. The decision to permanently close a pulp machine and a wood room at the facility prompted the job cuts.

According to a report by Canadian Press, the streamlining will imply an after-tax charge of $25 million, which will be tacked on to the company’s 2006 first quarter results.

Employment isn’t the only thing being slashed by the closures — production of northern bleached softwood kraft pulp will also be reduced by roughly 70,000 tonnes each year.

The company has said it will dole out $20 million over the next two years to modernize another pulp machine at the Hinton mill in an attempt to increase speed and productivity.

MILLS

STALEMATE SITUATION IN PORT HAWKESBURY

PORT HAWKESBURY, NS — Since February, Stora Enso workers in Port Hawkesbury have been locked out of their mill, and a job. But according a report by the CBC, Premier Rodney MacDonald isn’t planning to intervene any time soon.

“We have to respect the fact that both the Stora workers and the union and the employer, Stora, have to be agreeable to get back to the table,” the CBC reported MacDonald as saying in response to opposition MLA’s calling on him to intercede in the matter.

According to a recent report by The Chronicle Herald, Stora Enso has confirmed that unless a ‘satisfactory’ collective agreement is established with its roughly 600 workers, three to five years of stable power rates and tax relief are achieved, the company will consider closing the mill altogether.

“We have not been profitable in Nova Scotia for eight to 10 years, the Herald reported Stora board chairman Bernd Rettig as saying.

MILLS

‘SHAME ON THEM’ CEP SAYS OF DOMTAR’S OFFSHORE PRODUCTION

CORNWALL, ON — “Shame on them,” the Communications, Energy and Paperworkers’ union is saying of Domtar shipping paper production to China on the heels of its closure of the Cornwall mill.

“One of their stated reasons for shutting the Cornwall mill was lack of demand for the product in world markets. Now we find out that the market is still vibrant and is being supplied by a mill in Shouguang, China, where Domtar is a partner.”

The failure to realize plans for a co-generation plant has added to the CEP’s frustration. “While community and union leaders went to Queen’s Park to work on plans for a co-generation plant which could have kept the Cornwall mill open, Domtar clearly already had plans to ship the work offshore. At the end of the day, it was Domtar which rejected the co-gen option.”

Roughly 500 people lost their jobs when the Cornwall mill closed its doors on March 14.

FINANCIAL

WESTERN FOREST PRODUCTS 4TH QUARTER RESULTS

DUNCAN, BC — The fourth quarter was a rough one for Western Forest Products. A fairly active quarter in terms of both acquisitions and closures played into the results, which involved an operating loss of $84.5 million.

The month of March marked the company’s announcement that it would be altogether exiting the softwood pulp business, and along with this came the closure of the Squamish pulp mill. For a sum of $120 million, WFP bought Cascadia Forest Products. It also bought the Englewood Logging Division, formerly owned by Canfor Corporation.

POLITICAL

NOT ONTARIO, NOT MANITOBA, BUT MANTARIO

HALIFAX, NS — Whenever the issue of separatism is brought up, at least in a political sense, one immediately thinks of Quebec. However, according to a recent report by the Chronicle Herald, this may no longer be accurate.

Citing frustration with the dire situation of their main industry, pulp and paper, and the lack of attention and aid being directed to the problem, the Chronicle Herald reported that ‘separatist fervour’ is hitting Ontario hard.

‘Dalton McGuinty, Ontario’s premier, seems to be taking this threat seriously,’ the Herald reported. ‘On a flying visit in late February, he flagged up a $220 million package to subsidize road building and to lower the stumpage fees charged by the province for felling trees. This followed two other schemes worth a combined $680 million.’

Not everyone in northwestern Ontario is taking the bait, however. Energy rates, which cost twice what they do in Quebec or Manitoba, remain a sore spot in the province. The three-year price cap on prices for industrial users has done little to alleviate the pressure.

Although McGuinty has conceded to consider local price differentials, nothing concrete has been confirmed.

As the Herald addressed, ‘the northwest, self-sufficient in power, objects to paying for expensive nuclear power plants near Lake Ontario, built to meet southern demand.’

‘Secessionist sentiment in northwest Ontario has waxed and waned before,’ the report said. ‘But Livio di Matteo, an economist at Lakehead University in Thunder Bay, says it has never before been so strong. He would prefer more autonomy within Ontario, but accepts that there would be political benefits in joining Manitoba to form a new province called, perhaps, Mantario.’

PAPERCLIPS

WATER LOGGED

Sally Ramsey, founder of Ecology Coatings, discovered waterproof paper that she could write on, almost by accident.

According to a report by News.com, Ramsey was demonstrating to a chemical company representative how quickly one of Ecology’s coatings dries when exposed to ultraviolet light. In an attempt not to make a mess, she placed a piece of paper underneath the object she proceeded to spray. After the demonstration, she exposed the paper to UV light to dry it, thereby making it easier to throw away. It was this critical moment that led to the discovery. “On a whim, she checked to see if the coating, which was enhanced with nanoparticles, made the paper impervious to pencils or inks,” the report said. “For a minute, I was really disappointed. I could write on it all over the place. Then something clicked,” Ramsey recalled.

The coating, combined with an apparatus Ramsey set up in her lab, rendered the paper waterproof without making it waxy, crumbly, or altering its characteristics. After being submerged in water for close to three months, Ramsey’s original writing on the paper remained intact.

Although, as the report indicated, ‘the process is in its infancy,’ Ecology contends the method could do away with separate plastic coverings or waterproof tags
that cover shipping labels.Source: News.com

FINANCIAL

‘WE CAN’T DO IT IN THEIR PLACE’ AUDET SAYS OF AID PACKAGE

MONTREAL, QC — The $925 million pledged to Quebec’s faltering forestry industry won’t go far in terms of turning things around, the Quebec Forest Industry Council says, but the sum, promised to be distributed over the next four years, has added fuel to the softwood lumber dispute fire, and has vexed the Coalition for Fair Lumber Imports.

“We just think it’s another outrageous form of Canadian subsidy,” said Barry Cullen, executive director of the Washington, D.C. based organization. “It’s pretty hard to compete with an industry that seemingly is supported in all different directions by the Canadian governments up there,” he added. “We don’t get that kind of largesse from our government down here.”

The government has guaranteed $436 million for silviculture and cost reduction, $100 million of it in the form of tax credits for building forest access roads, and an additional $120 million as a 15% capital tax credit on investments over the next three years. A total of $44 million will be set aside for a support program for forest workers and $20 million for loans to small-and-medium-sized businesses.

A total of $425 million will be reserved for loans, including $350 million for loans to companies that have paid out countervailing and anti-dumping duties to the U.S., using the tariffs as a guarantee.

On the other side of the spectrum, Jacques Gauvin, deputy chief executive officer of the Quebec Forest Industry Council said the package falls short of what the sector needs.

“What we see is certainly an effort, we acknowledge that. But it’s certainly not the level of help we expected. The programs still require companies to invest the bulk of funds,” he said. “The problem is, we don’t have the money to do that. It would be a good program for a healthy industry, which is not our case right now.”

Audet’s response was clear. “The government will not take the place of the private sector in the implementation of the forestry strategy. Many enterprises are in difficulty because they have not modernized. It’s clear they don’t want to invest, and we can’t do it in their place.”


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