Investors sought for Sault-based mill.

The North used to be associated with the great outdoors and quality living, now it seems to he associated with job loss and economic upheaval. Sault Ste. Marie is once again facing the disturbing trend of harsh economic times. The Domtar plant in the Sault has announced it is reducing its workforce by 130 employees and closing its hardwood mill operation in the city. The announcement came as a bit of a surprise to the community, but efforts are already in place to limit the damage.

"We only found out when they made the announcement last week," says Mayor John Rowswell. "It caught us by surprise, no question.

Domtar attributes the decision to close the mill to poorer quality hardwood stands and the rising cost of travelling long distances for great lengths of quality hardwood. Domtar is also blaming the difficult market conditions for selling the hardwood product.

"Domtar would have taken everything into consideration and the decision was not made easily," says Lynn Gibson, advisor for regional communications in Espanola.

"We hate to close operations," says Richard Descarries, Domtar's manager of regional communications. "We are not in the business to close operations."

The Sault Ste. Marie hardwood mill facility has accumulated financial losses of $25 million in the last four years, Gibson says:

"There have been efforts to try and reduce the losses, but with the instability of the markets, all the softwood lumber taxes and the duties across the border, it has affected the efforts," says Gibson.

The quality of the fibre Domtar was receiving was not optimized for the kinds of machines the mill has in place, and was ultimately generating a lot of waste.

"It makes it difficult to remain profitable," says Descarries.

The City of Sault Ste. Marie is hoping to work with Domtar to see what can be done to keep the hardwood operation running, even if Domtar will not be involved with operating a hardwood lumber mill.

"We want to see what we can do to work with a potential business to keep the hardwood mill running," says Rowswell.

The mayor says key forestry personnel in the community have told him there is still good potential and opportunity for hardwood. The city would be supportive of any business that would like to come forward and run the operation.

"We know there is a reasonable amount of wood supply to run a hardwood mill operation in Sault Ste. Marie," says Rowswell.

The city has initiated a full-fledged diversification strategy that will look at building on value-added wood products. The economic development corporation has set up a task force to work with Domtar and the Ministry of Natural Resources to identify and attract a new proponent to establish and set up new operations.

"We recognize the private sector is going to be the salvation to drive in a new hardwood mill in Sault Ste. Marie," says Bruce Strapp, president and CEO of the Sault Ste. Marie Economic Development Corp. (SSMEDC). "We are just going to pave the way."

The corporation will have dedicated staff resources working on this process full time. The SSMEDC will also have a forestry sector specialist working on contract with them. The city has been working on forestry value-added opportunities for some time and has experienced some success in the past in attracting new investments. The city also realizes they have to have good discussions with Domtar to find a solution.

"We have to work with Domtar in a positive relationship because they are still a corporate player in Sault Ste. Marie with their softwood lumber operations," says Strapp.

Rowswell believes his community will survive the closure and they are not prepared to accept the losses.

"From our point of view there will be a sawmill cutting hardwood lumber in our community," says Rowswell. "It may not be with Domtar, but there will be someone here operating."

The hardwood mm closure is slated for the end of January 2003. The sawmill made 18 million board feet of hardwood lumber a year. The remaining. 50 employees will continue to dry and plane softwood lumber for other Domtar operations. Domtar is also closing their Daveluyville, Que. plant. The company has set up an $18-million provision to cover costs from the mill closures. The union is working with Domtar to develop packages for the workers affected by the closure.