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Ladysmith sawmill closing, laying off 40
Apr 21, 2008BRITISH COLUMBIA - Western Forest Products says it is shutting down its Ladysmith sawmill indefinitely Friday, laying off 40 workers and curtailing a vital supply of wood chips to nearby pulp and paper mills.
The Ladysmith mill, once the flagship in the forest empire built by Herb Doman, had been operating only its small log line after shutting down its large log line - and the 100 people who ran it - last December.
The small log mill makes some lumber for the depressed U.S. market but is primarily chipping whole logs to supply coastal pulp and paper mills with fibre.
Western, which took over the operations of insolvent Doman Industries in a 2005 court-ordered restructuring, said the reason the mill is going down is weak market demand due to the U.S. housing slump.
"There's no question that the issues that's affecting us is the on-going problem in the U.S. housing market. It's just not recovering. We and a lot of other producers are in the same boat. We are curtailing operations to match supply with demand," said Duncan Kerr, Western's chief operating officer.
The closure is being termed indefinite.
Arnie Bercov, vice-president of Local 8 of the Pulp, Paper and Woodworkers of Canada, said a Western representative told employees of the closure April 18. The mill will not be re-opening this year and quite possibly, not next year either, he quoted management as saying.
"It's going to impact the town of Ladysmith. You can't replace those types of jobs in the community," Bercov said. "I think we are going to see serious, serious economic fall-out from the downturn of our forest industry. The loss of the Ladysmith mill is a double blow to the Island forest economy.
"When you're told you've only got a week to find another job, that shocks you."
But the loss of the chip supply is also distressing for the coastal pulp and paper industry, he said. As sawmills shut down, the pressure to find enough chips to keep pulp mills operating increases.
The loss of Western's chips is the second blow to the coastal pulp industry this year.
In February, TimberWest Forest announced it is shutting down its Elk Falls sawmill May 9.
Kerr said because of the complex nature of fibre supply agreements with pulp mills, the loss of the Ladysmith sawmill will not directly impact the pulp mill company that receives the chips, Catalyst Paper's Crofton operation.
Where the impact will be felt, he said, is that overall, there will be fewer chips produced on the Coast, unless other markets can be found for lumber that will keep other Western sawmills operating and producing chips.
Currently Western, the Coast's largest forest company, has only two of its six mills operating at full capacity. Investment analyst Kevin Mason, of Equity Research Associates, said the closure of the Western mill only adds to the problems pulp producers are facing.
He said enough wood chip capacity has been taken out of the B.C. Interior alone to meet the needs one 500,000 tonne-per-year pulp mill.
"The whole fibre situation is going to push pulp players out of business sooner or later," he said. Mason said the highest-cost pulp and paper producers - the B.C. Coast, the U.S. Pacific Northwest and Eastern Canada - are going to have to curtail. "We know it's going to happen. The question is who."
In its 2007 annual report, Catalyst Paper warns shareholders that "there is no assurance that the company will be able to access its wood fibre at the same levels achieved in the past; therefore costs may be negatively impacted."
The company's own sensitivity analysis shows that a five per cent increase in the cost of wood fibre knocks $10.8 million off Catalyst's earnings. Catalyst lost $31.6 million in 2007.
The Ladysmith mill, once the flagship in the forest empire built by Herb Doman, had been operating only its small log line after shutting down its large log line - and the 100 people who ran it - last December.
The small log mill makes some lumber for the depressed U.S. market but is primarily chipping whole logs to supply coastal pulp and paper mills with fibre.
Western, which took over the operations of insolvent Doman Industries in a 2005 court-ordered restructuring, said the reason the mill is going down is weak market demand due to the U.S. housing slump.
"There's no question that the issues that's affecting us is the on-going problem in the U.S. housing market. It's just not recovering. We and a lot of other producers are in the same boat. We are curtailing operations to match supply with demand," said Duncan Kerr, Western's chief operating officer.
The closure is being termed indefinite.
Arnie Bercov, vice-president of Local 8 of the Pulp, Paper and Woodworkers of Canada, said a Western representative told employees of the closure April 18. The mill will not be re-opening this year and quite possibly, not next year either, he quoted management as saying.
"It's going to impact the town of Ladysmith. You can't replace those types of jobs in the community," Bercov said. "I think we are going to see serious, serious economic fall-out from the downturn of our forest industry. The loss of the Ladysmith mill is a double blow to the Island forest economy.
"When you're told you've only got a week to find another job, that shocks you."
But the loss of the chip supply is also distressing for the coastal pulp and paper industry, he said. As sawmills shut down, the pressure to find enough chips to keep pulp mills operating increases.
The loss of Western's chips is the second blow to the coastal pulp industry this year.
In February, TimberWest Forest announced it is shutting down its Elk Falls sawmill May 9.
Kerr said because of the complex nature of fibre supply agreements with pulp mills, the loss of the Ladysmith sawmill will not directly impact the pulp mill company that receives the chips, Catalyst Paper's Crofton operation.
Where the impact will be felt, he said, is that overall, there will be fewer chips produced on the Coast, unless other markets can be found for lumber that will keep other Western sawmills operating and producing chips.
Currently Western, the Coast's largest forest company, has only two of its six mills operating at full capacity. Investment analyst Kevin Mason, of Equity Research Associates, said the closure of the Western mill only adds to the problems pulp producers are facing.
He said enough wood chip capacity has been taken out of the B.C. Interior alone to meet the needs one 500,000 tonne-per-year pulp mill.
"The whole fibre situation is going to push pulp players out of business sooner or later," he said. Mason said the highest-cost pulp and paper producers - the B.C. Coast, the U.S. Pacific Northwest and Eastern Canada - are going to have to curtail. "We know it's going to happen. The question is who."
In its 2007 annual report, Catalyst Paper warns shareholders that "there is no assurance that the company will be able to access its wood fibre at the same levels achieved in the past; therefore costs may be negatively impacted."
The company's own sensitivity analysis shows that a five per cent increase in the cost of wood fibre knocks $10.8 million off Catalyst's earnings. Catalyst lost $31.6 million in 2007.
