Industry Experts Say More Mill Closings On The Way

By 250 News

Prince George, B.C. - Industry experts are saying that a lot of forestry companies are now looking at their bottom lines and their cash reserves and are saying it would be a good idea to simply shut down their forestry operations for a year or so rather than face bankruptcy.

Here is the way the scenario is being played out, if you are losing ½ million dollars a month, rather than continue you could save $6 million dollars a year and look for a new staff down the road to replenish your mill site.

Last week 2x4’s, the bench mark in the industry, were selling for $209 a thousand down from $250 in November.

According toindustry experts you need from $285 to $290 to break even signaling that there is a lot more bleeding to take place in the industry before the down turn is over.

Some mill operators are saying that the industry may never be the same.  In the US where most of our wood makes its way, the old adage that your home is your castle just isn’t ringing true.  We are seeing people in the US walking away from their homes while others see the value of their home drop by up to ½ , that doesn’t bode well for  a good future market for B.C. lumber products.

The $1 billion dollar Federal contribution to try and offset the hit the forest companies and forest related communities are taking, is also seen as really just one year of the Tariff taxes that have been collected. If you look at the 15% export tax to the USA you will quickly find that it adds up to about $1 billion a year. We are just getting back the money we put into it.

As for the talk of diversifying, industry experts are saying the politicians who are suggesting that we simply switch our markets to China, Taiwan and Korea are just looking at things through rose coloured glasses. "Someone suggested that we export flooring, doors, cabinet doors and other finishing products to China. They obvioulsy don’t read much" says one  lumber expert who points to this article ;

That says it all when it comes to Canada looking for new markets industry experts say. For example they site a company that formerly employed 120 people in Delta manufacturing picnic tables, patio furniture gazeboes etc for the outdoor market.

That company now employs 20 people who assemble these same products from China. It is far cheaper to import the product from China than to try and manufacture in Canada.

How long will this down turn last?  According to all of the industry executives we talked to,  they say mid 2009 is as soon as we can expect a mild turn around . That should come after the US election. In the meantime, companies will now examine whether it makes more sense to moth ball their operations until the markets pick up, rather than bleed red ink for another two years.

They all say the future in the forest industry is tenuous at best. "We are going to see a lot more shut downs, many permanent" they say.

As for the comments that Prince George’s economy is diversified and not affected by the lay offs in the forest industry , one local mill owner said, "They ought to talk to the retailers in this city and you will find that  with the majority of shops the Christmas sales were down sharply from 2006 , now what do you suppose caused that ?"   

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