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Lumber sector still mired in deep slump.

Lumber sector still mired in deep slump

The lumber industry in Northern Ontario is mired in a slump, and there are few signs that the sector is ready to break out of it.

"Lumber is bad and it's going to be bad through 1991," predicted I.D. (Joe) Bird, president of the Ontario Forest Industries Association.

Bird explained that the industry has been hit hard by the provincial decline in housing starts and by the 15-per-cent tax on lumber exported to the United States. The lumber sector is being "decimated," he said.

When the housing market in southern Ontario was thriving, it was an outlet for lumber that would normally have gone to the U.S., he explained.

"It is very tough sledding," Bird commented in a telephone interview from Toronto.

Ontario lumber producers have been particularly hard hit by the export tax, he noted.

Bird said his association is working to have the tax changed.

He is encouraged by the fact that Premier Bob Rae has become involved in the issue and has contacted Prime Minister Brian Mulroney on the matter.

In addition, while British Columbia, Quebec and Atlantic Canada lumber producers have access to year-round shipping, the Ontario industry is limited to a short shipping season. Bird said this drawback limits the ability of Ontario producers to compete in global markets.


Cochrane-Superior MP Reginald Belair said the export tax is having a "tremendously devastating" impact on Ontario lumber producers.

Belair noted that in 1986 88 per cent of Ontario's lumber production went to the U.S., but exports to the U.S. have now plunged to three per cent.

The industry has lost a total of $84 million since 1986, he continued.

The trouble in the lumber sector has meant that seven mills in Northern Ontario have closed completely, and only the stronger ones have survived, Bird said.

"Right now, the whole industry is operating at half capacity - at least the ones (mills) that are still open."

As for jobs, Belair said 3,000 have been lost in the sector.

The MP explained that between 1987 and the spring of 1990 the lumber sector was being supported by the booming southern Ontario housing market, instead of the U.S. market.

However, the southern Ontario market has dried up.

Belair is hopeful that there will be a change in the export tax, pointing to the initiative by Premier Rae.

The MP suspects that before the spring the federal government will present a proposal to the Americans to gradually eliminate the 15-per-cent surtax on Ontario lumber.

Belair explained that there is a clause in the memorandum of understanding with the U.S. that any major changes would lead to a renegotiation of the agreement.

He noted that since 1986 the value of the Canadian dollar has risen from about 81 cents to its current level of between 87 and 88 cents U.S., making it more expensive to buy Canadian lumber in the U.S.

Tom Inglis, director of planning and development for several northwestern Ontario mills in the Buchanan Forest Products Ltd. group, said prospects for the lumber sector are not very bright.

"This is the worst I've seen the industry," he said. "The 15-percent export tax is just killing us."

The current downturn is worse than the downturn of 1982, he said, noting that the strength of the Canadian dollar is making it harder to export to the U.S.

However, he hopes things will start to pick up by spring.

Inglis noted that overseas markets offer little hope, since foreign economies are not booming either.

Another negative factor identified by Inglis is that British Columbia lumber producers have been dumping products into southern Ontario and the U.S. Midwest.

The dumping began when Canadian railways started offering reductions in charges for freight shipped to southern Ontario in response to deregulation of the transportation sector.

Buchanan's mills currently ship five loads of lumber per month to the U.S. Midwest, compared to 20 to 30 loads of lumber per day in 1987.

At Atikokan Forest Products about 285 workers were on indefinite layoff as of late January, including 125 from the mill and 160 from the woodlands operation.

Inglis said the "only salvation" for the mill is lumber sales to the United Kingdom. However, the mill must be modernized in order to export lumber to that country.

Buchanan is working on funding arrangements for the modernization, and Inglis is hopeful the work will be completed by mid-May.

At Great West Timber Ltd. in Thunder Bay, 540 workers are on layoff until markets improve.

And at Thunder Bay's Northern Wood Preservers Inc., Inglis noted that 120 workers had been recalled in late January, leaving 620 on layoff.

One specialty lumber company, Northern Pressure Treated Wood Ltd. of Kirkland Lake, is doing well despite the general slump.

Company vice-president Mike McCollough said business is not bad because the mill has diversified into specialty lumber, which includes pressure treated utility poles, mining timbers, guard rail posts and bridge timbers.
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Publication:Northern Ontario Business
Date:Mar 1, 1991
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