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Mill buoyed by new product development. (Forestry).

There is no doubt times are tough in the softwood lumber industry, profits have disappeared for now and companies must reduce costs and limit capital spending on their plants wherever possible. Developing new products and markets will be important to survival for companies who want to stay in business, says the manager of one northwestern Ontario mill.

Rod McKay, mill manager at Kenora Forest Products, says his company's exports to the United States are still on track,, but they are also trying to focus on the Canadian market and developing new products.

Kenora Forest Products has been exploring opportunities in value-added wood product development and in early November will begin producing wood fencing products in a new plant at the mill.

"We are trying to sell as much as we can in Canada," McKay says. "We are trying to find different value-added products, and we are starting up a fencing plant here in the mill next week."

The company is converting their operation, without making any capital investments, to introduce a new procedure to develop value-added products, he says.

Value-added products are exempt from countervailing and anti-dumping duties, therefore this is a viable option for many companies to explore, says McKay.

To add value, Kenora Forest Products takes a piece of commodity stud and slices it into three pieces with dog ears on one end and then assembles the pickets into an eight foot fencing panel.

McKay says that the mill is still operating three shifts a day, seven days a week and there have been no employee layoffs so far. They have had to be diligent with cost cutting and have identified many areas for more efficiency, allowing them to run the mm. smoother and faster, he adds.

The federal government recently announced their assistance program for the softwood lumber industry. They will provide $246.5 million for research, worker training programs and support for communities affected by the multibillion dollar trade dispute. But McKay argues the funds will do little to assist the forest industry in a time when the industry is struggling the most.

"I think what they did was like closing the barn door after the horses have left," McKay says. "This last (aid package) they talked about where they want to make sure people get employment insurance and those kind of benefits after the mills are closed doesn't show a lot of foresight. They should be doing something to help us now while we are still running, keeping everybody employed; that to me would be a smarter idea and a lot cheaper."

On the other hand McKay has praise for the strategy employed by the federal and provincial authorities to deal with the softwood dispute.

"I think they are doing a good job. I am pleased to see that we keep going as a united front for all of Canada, and not getting fractured into each province."

McKay is optimistic that an agreement can be reached with the industry's largest trading partner.

"I think it will get resolved and I think there will be some kind of minimal duty that will be good for both parties, and I'm predicting it will be all over and done with by March 2003."

His predictions are based on the fact that the U.S. mid-term elections will by then be over and it will be into the spring buying season.

McKay says they have been able to pass along the cost of the duty to consumers in the United States, but not all of it.

"What worries me is that once any product gets to a certain price, then people look for alternatives; I think we see that happening now."
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Author:Scarcello, Frank
Publication:Northern Ontario Business
Date:Nov 1, 2002
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