Domtar, Tembec two I-beams in a pod.

Consolidation will be the key word for the forestry industry in the next one to five years, according to private and public experts alike.

New supermills and value-added facilities are replacing traditional sawmills, bringing forth a new wave of competition--and cooperation--in the industry.

No longer can communities afford to have two sawmills within a stone's throw of one another, with both running one shift each. Instead, supermills like the one Tembec Inc. is developing for Chapleau will input 147,000 per thousand board feet measures a year. The company will use the existing facility in Chapleau, but add a third shift, thereby creating 49 new positions. These new jobs will help offset the 67 permanent jobs lost by the closure of the Domtar sawmill in that town. Tembec has agreed to purchase Domtar's boiler and kiln facilities, which will help increase lumber output.

"(Domtar's) wood will be coming to Tembec's mill," Jim Lopez, vice president of Tembec's forest products group, says.

Domtar will receive approximately $14 million from closure costs and asset write-offs.

Meanwhile, Tembec's Opasatika mill will issue pink slips to 78 workers and permanently shut down March 4. However, the company's Hearst mill will add 37 new positions to fill a third shift.

They will also close their Kirkland Lake sawmill and allocate 100,057,000 cubic metres of wood supply to Domtar's Elk Lake facility. Domtar will add an extra shift there, making way for 56 new positions. Additional wood supply will mean an increase in the company's competitive position, a spokesperson for the company states. It will also enhance job security for company employees and contract businesses relying on harvesting and hauling activities.

Kirkland Lake sawmill to shut down

Tembec will cease the Kirkland Lake sawmill operations March 4, 2005 and redirect the company's focus to a value-added partnership with Domtar in the same community.

Both companies will invest more than $9 million to refurbish Tembec's existing mill into a facility that will manufacture finger joints for I-beams in housing construction.

"Everybody gets excited about value-added (initiatives), but that facility will use all the material in the northeast that is available for that type of product," Lopez says.

"There is no room for a second facility of that type. We are going to suck up all the material available."

The plant, which is expected to open at the end of 2005, will use approximately 40,000 mill feet per year of spruce pine and fir, which is less than half the supply that was feeding their sawmill property.

"It's easy to make a profit on a consistent basis with finger joints," Lopez says.

"Value-added will be more stable."

Tembec will operate and manage the plant, and wood supply will come from current independent operators' licences. As the value-added facility ramps up production, Lopez expects three shifts to operate within two years and a fourth shift in three to four years.

"There is a great demand for this product. It is much more stable than a two-by-four."

Lopez says no extra additions will be constructed on Tembec property, but refurbishment contracts will be announced closer to spring.

Richard Garneau is a senior vice-president with Domtar's forest products division.

"The rationalization of operation in the north is a result of some challenging times."

High energy costs, a declining United States dollar, countervailing and antidumping duties on softwood lumber exported to that country, as well as a forecasted reduction of wood supply, have forced the streamlining exercise, he says.

www.domtar.com

www.tembec.com

By KELLY LOUISEIZE

Northern Ontario Business