Kirkland Lake seeks value in mill.

Tembec's Kenogami mill may be operating at considerably less capacity, but it could still have a good future.

Charles Gagnon, vice-president of corporate relations for Tembec, says that a community committee struck to determine the mill's viability as a value-added wood mill took a break during the Christmas holidays, but is getting back to discussing options for the mill.

"Everything is still under study," says Gagnon. "We're drying and planing at the mill and we're still bringing in wood from Cochrane. As soon as the market dictates, we will start the sawmill again. In the meantime, we're looking for products in the field of value-added."

"Right now, we're going through the business-plan exercise," says Don Studholme, clerk and director of economic development for the Town of Kirkland Lake.

The term, value-added refers to additional manufacturing of wood products beyond the traditional milling and planing, which results in additional uses for the product. Among the options being considered for the Kenogami mill are the production of finger-joint or laminate products.

"We're working hard to study the options that are available to us," says Gagnon. "There is also some caution not to say everything we've got in mind for competitive reasons."

"We like to keep what we're looking at to ourselves," says Studholme. "The lumber industry is very competitive and we don't want to give the competition a heads-up."

Tembec shut down the milling operations at the Kenogami mill in October 2002 due to weakness in the softwood lumber market from a decrease in price and low housing starts in the United states, the major market for many Canadian lumber companies. Countervailing and anti-dumping duties imposed last year added considerably to costs for Canadian mills, says Gagnon.

There were 38 employees already laid off, but the shutdown resulted in an additional 23 employees laid off. Only 19 employees remained to operate the drying and planing operations.

"There has been a misconception that we're closing the null indefinitely. It's just not the case," says Gagnon. "We're putting roundwood in the yard so we can start up the sawmill when the market dictates. It's in a slump now, but we expect it to pick up again when housing starts in the United States. pick up."

Gagnon stressed that Tembec does not simply close up shop and move out of a community, instead the company looks for alternatives for a mill if one area of operation does not appear feasible.

"It would be easy to shut down the mill and walk away, but that is not Tembec's way. The plan has always been to find a solution...but at the end of the day, we are in the business to make money. If we can't, then in the end we can't operate.

"For the long term, the Kenogami mill just isn't a viable sawmill," Gagnon says. "In today's market, you have to have huge volumes of wood and a good long-term fibre supply, so we're looking for alternative projects."

Studholme says the shut-down has had an effect on the Kirkland Lake community.

"At one point, we had as many as 60 people working when the mill was operating at full capacity, but any closure is a hardship that affects all the supporting industries," Studholme says. "It goes from the trades people who contracted out to the mill, to the retail people who sell clothes, to the grocery stores that sell their food."

He says that the current economic difficulties are part of an overall trend of decreasing fortunes for northeastern Ontario, which the community is working hard to try and reverse. The work of the committee looking at value-added wood products for the mill is one part of that effort.

"With the numbers we're looking at, we see it bringing employees back to where it was and maybe even exceeding that number," Studholme says. "Our conversations with Tembec have been very positive."

Gagnon says Canadian lumber companies are also looking forward to a ruling on the trade dispute by the World Trade Organization (WTO) in March, followed by a North American Free Trade Agreement (NAFTA) ruling by August. In the meantime, the United States may try to strike a deal, but anything offered so far as been "nonsense," Gagnon says.

Gagnon added that the fortunes of the wood market are cyclical, and, while the current market is similar to what was seen in the early 1980s, "we're always optimistic that things will get better."

To read more stories related to forestry in the North visit www.northernontariobusiness.com and click on the forestry section