Coming soon to a mill near you…

Paper Excellence closure leaves one newsprint mill in B.C. — Crofton

Newsprint demand has plummeted 75 per cent in North America since its peak in the late 1990s

 The timing of Paper Excellence’s permanent closure two weeks ago of its Howe Sound newsprint mill, which put 169 workers off the job, was expedited by B.C.’s drought. 

The timing of Paper Excellence’s permanent closure two weeks ago of its Howe Sound newsprint mill, which put 169 workers off the job, was expedited by B.C.’s drought. But the closure came as no surprise to industry observers.

Newsprint demand, following readers’ shift to digital applications on laptops, tablets and phones, has plummeted globally.

In North America, demand is down 75 per cent since its peak in the 1990s, says Martine Hamel, vice-president and chief operation officer of the Pulp and Paper Products Council.

The council — which has offices in Montreal, Beijing and Brussels — tracks newsprint and other pulp and paper products closely.

“The numbers are quite dramatic actually,” said Hamel. “It’s really across both Canada and the U.S.”

Newsprint demand has been falling nine to 10 per cent for years, and so far has shown no sign of slowing. “In the last few years, it has actually accelerated somewhat,” noted Hamel.

Paul Quinn, a forest industry analyst with RBC Capital Markets, said Paper Excellence likely looked at the long-term demand prospects for newsprint, and also considered its high fibre costs on the coast, and decided it was not a good, long-term venture.

According to a recent RBC report, prices have dropped steadily in the past two years.

“Newsprint is more than a little bit of a disaster right across North America,” said Quinn. “The problem is on the production side. If demand is going down, you have to shut down that much capacity just to match it, and that hasn’t happened. Something had to give, something had to go down. It’s just a question of which mill.”

Other newsprint mills have closed in B.C. in the past decade.

In 2008, AbitibiBowater shuttered a newsprint mill in Mackenzie in north-central B.C., and Catalyst closed its Elk Falls newsprint mill in Campbell River on Vancouver Island.

Catalyst continues to produce newsprint at its Crofton mill near Duncan, but it is the only remaining newsprint producer in the province.

In Canada, both Resolute and Kruger closed newsprint machines in Ontario and Quebec in 2014 and 2015.

Paper Excellence spokeswoman Jessica Ko said the newsprint mill closure at Howe Sound Pulp and Paper in Port Mellon on the Sunshine Coast was “imminent” due to declining markets, but the drought sped up the process. The company was also trying to protect its pulp and power business at Howe Sound.

“Newsprint consumption has historically been a cyclical business. The evolution of electronic media has impacted the demand for newsprint and shown that even in the best periods, the high points do not create positive returns,” Ko, a lawyer for Paper Excellence, said in an email.

The company was selling the majority of its newsprint into North America and Asia, and a little into South America, she said.

Paper Excellence is owned by the Widjaja family, which owns global conglomerate Sinar Mas Group. Among Sinar Mas’ holding is Asia Pulp and Paper, one of the largest pulp and paper producers in the world.

Paper Excellence bought its first pulp mill in Saskatchewan in 2007 and now owns seven mills in Canada, two in France, and one in Germany.

Paper Excellence’s core business is shipping pulp to Asia.

Unifor, the union representing workers at the Howe Sound plant, said it was not entirely shocked the mill was shut down, but added that it is disappointing.

“There was some indication they were going to get out of the paper business at some point in time,” said Scott Doherty, assistant to the president of Unifor.

He said he expects the newsprint machine will be removed from the mill and shipped elsewhere, where it will be used to produce some kind of paper product.

“They are not telling us what it is, but they clearly have a plan for the machine,” said Doherty.

The paper sector is not completely gloomy, as areas such as tissue are growing, noted Hamel, the official with the Pulp and Paper Products Council.

Kruger Products operates a tissue mill in New Westminster, producing for brand names such as Purex and Scotties.

Catalyst also produces several other paper products, including at Port Alberni and Powell River on Vancouver Island.

  And then there’s this:

Increasing Frequency of Closures and Layoffs in Pulp Mills


They called it ‘Black Tuesday’ for Vancouver Island mill workers when Catalyst Paper announced the layoff of 227 employees between its Crofton and Elk Falls mills, but the event was soon overshadowed by worse news for about 800 workers at the Pope & Talbot Harmac and Mackenzie mills, when the company’s bankruptcy and the mill’s clo­sures were announced. (Graph: BC Pulp & Paper Layoffs.Adapted from information supplied by Canadian Forest Service, Natural Resources Canada.)

In fact, the ever-increasing frequency of closures, layoffs and production curtailments announcements has reached a dizzying pace in recent weeks and months. Sales, mergers and acquisitions further serve to contribute to the kaleidoscopic landscape of the forestry business in BC.

The BC pulp mill industry is heavily dependent on the sawmills of the province to provide fibre from the wood waste of their processes, and therefore, are as sensitive to the lumber markets as they are to the pulp markets when fibre supplies run short. Between the US economic downturn, with its related housing market collapse, and the devalua­tion of the US dollar, lumber export markets have crashed and sawmills have been closing all over the province.

The most recent examples are the TimberWest sawmill at Campbell River, and the Western Forest Products flag­ship Ladysmith sawmill, the main suppliers of fibre for the Campbell River Elk Falls mill and the Crofton mill respec­tively. Announcement has been made for both of their clo­sures, and laying off close to 300 workers. The layoffs at the pulp mills followed close behind.

Some argue that, economic climate notwithstanding, the real culprit is BC government forestry policies that have given the green light to raw log exports and sacrificed the ‘value added’ sectors of the BC industry. Pulp markets are reportedly strong enough to support the business, the prob­lem being that the fibre shortage from the closing sawmills has seriously impacted the availability of materials and escalated the price of inputs, making BC pulp producers uncompetitive in global markets. Recently, the Vancouver Sun reported that the Catalyst Crofton mill was actually buying sawdust from US mills that was derived from Cana­dian raw log exports.

The logging sector has not, however, been immune to cutbacks either in BC, as demonstrated by Western Forest Products idling large parts of its logging operations on the coast this spring to bring their production in line with the sawmill demand, affecting about 800 workers. Clearly, raw log export volumes are insufficient to justify all the allow­able logging operations.

According to the Industry Canada website, the total number of employees for the Pulp, Paper and Paperboard Mills industry group decreased from 68,438 workers in 1994 to 53,704 workers in 2003 – a loss of 14,734 jobs (or 22%). Figures from the Canadian Forest Service show a decrease of 16, 755 jobs in the pulp and paper sector in just the next 5 years between 2003 and 2007 – over double the rate of job loss. 2008 is shaping up to follow the trend.

The same Canadian Forest Service reports named 40 sawmills that have closed across BC since January, 2003. On top of that there are another 21 instances of partial shut-downs and shift reductions. In the same period (January, 2003 – April, 2008) only 3 pulp mills faced full closure with another 8 announce­ments of shift reductions and partial shut-downs. With sawmill closures accelerating at this rate, pulp mills have little choice but to follow on their heels however, amply demon­strated by the recent closures and cut-backs in the six weeks since the report release. 2008 has already surpassed any previous year in layoffs in British Columbia pulp and paper mills, and it is not yet halfway through the year.

Adapted from information supplied by Canadian Forest Service,
Natural Resources Canada and news reports on job losses

No one denies the severe impact that these job losses have on local economies, especially considering the semi-rural nature of many mill locations, making entire commu­nities dependent on one mill for local economic generation. There has been a recent trend to shift municipal tax base away from the corporate sector, but still the tax base of mill-towns is sent into shock when the mill is suddenly gone. Harmac accounted for 72% of the industrial tax base of the Nanaimo region with their $3.5 million tax bill.

Recent calls for provincial government assistance for the industry have mostly met with stony silence, perhaps due to the fact that BC, by most accounts, seems to be doing just fine despite the forest industry’s claims of its keystone position in the provincial economy. Statistics Canada reports BC unemployment for April 2008 at 4.3%, consid­erably below the national average of 6.1% and nowhere near past national highs of 11-13%.

It will be up to the communities to cope, adapt and replace the mills with something else that can replace at least some of the tax revenue and local economic multiplier effects to keep other businesses going in the small commu­nities. The decline of the pulp mill industry in BC, although painful for many, represents a unique opportunity for com­munities, and the province, to re-invent itself. Examples around the province include shifting the local economy to everything from eco-tourism and the arts, to the Gold River example of morphing the pulp mill into a waste incinera­tor.

Local politicians in Gold River are ecstatic that their tax-base and employment will be re-instated by the facility, but the health impacts of living near waste incinerators are well documented. The trade-off, while looking attractive in the short term appears to ignore the new and increased level of toxic load that the facility will bring to the community.

While the provincial government may be powerless to change macro-economic effects like the housing market of the United States, they are not powerless to help shape the local economic alternatives. Dealing with the toxic legacy of closed mills is not straightforward or cheap and it will be up to the Ministry of Environment to ensure that someone is taking responsibility for the legacy landfills full of toxic waste and all of the other pollution sources on a mill site.

The province can help best by helping to develop sus­tainable alternatives for local economies, providing bridg­ing mechanisms and re-training for workers and fully participating in the transformation from mill towns to communities geared to the opportunities of the future. The government role is not to prop up a failing industry, but to support the communities and the workers who are facing traumatic times as they make this transition.



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