What Does It Take to Have A Plywood Plant In Prince George

Friday, May 30, 2008 03:46 AM

Will Canfor re build North Central Plywood? If you really think about it, they really don't have any reason to rebuild.

The Tackama plywood mill In Ft Nelson can handle most of the orders that were coming out of North Central Plywood. If they need to they can ramp up production.

By Canfor’s own admission North Central Plywood was only "borderline profitable". That should be a clear message that "unless we are offered something special which will change that bottom line, why build in Prince George?"

Canfor's Vice President of Manufacturing, Mark Feldinger says even if there was a decision tomorrow to re-build, it would take 18 months to bring a mill back on stream.

Oh really?

How is it we can build something of the calibre of the Charles Jago Northern Sport Centre in less than 18 months, but it would take a year and a half to build a new plywood mill? Especially on a site that already has the necessary services?

I don't suppose there is any coincidence that the housing market is expected to rebound in the U.S. in about 2 years, just about the time a new plywood mill would be coming on stream once you tack on the the Canfor predicted "months" to make a decision about that plant.

Tackama plywood in Fort Nelson was saved from being closed after the workers agreed to a wage roll back and the Province cut the stumpage rate in the region to allow Canfor to operate in a more profitable position.

So where does that leave us in the city of Prince George? Well the Mayor has already suggested that maybe the city can come up with a municipal tax reduction in order to have them re build.

Could this region seek other companies who may be interested in establishing here? Well we could ask, but remember it is Canfor and West Fraser who own the lion’s share of the forest license, and unless you have a willing partner to dance, you will be sitting this one out.

The plywood industry in Canada is not in the toilet, there has been all along a market for plywood, but Canfor's Feldinger says there are signs of a recession in the golden Triangle of Ontario and some parts of Quebec. Those are the primary markets for Canfor plywood.

Now if Canfor was insured, and they were, why wouldn’t they be biting at the bit to get going as quickly as possible? Perhaps sending the workers off to other plants while they re build? They may have business interruption insurance in which case they are being paid for any profit that they might lose.

So why aren’t they jumping at the chance to get going again? Let’s see, if the province offers concessions, the workers take a pay roll back, the city comes to the party with a major break in taxes, and then maybe we could see a deal come together.

Who loses? Well the workers do. Management is being kept on the payroll, the province loses the stumpage revenue and you and I as taxpayers dig into our pockets to make a "borderline profitable" company more profitable.

The other 3,000 workers whose jobs have bitten the dust in this area didn’t have the benefit of blaming the wind, earth and fire and they are just as laid off as those who say they have been subjected to these tragedies.

The flood and the fire are viewed as tragedies that have claimed hundreds of jobs, but one has to wonder, in these trying times for forestry, are the companies quietly breathing a sigh of relief? Nature has made a decision for them, and while the workers are the ones to suffer, you can't really blame mother nature or an accidental fire now can you?

I’m Meisner and that’s one man’s opinion.

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Posted on Friday, May 30, 2008 03:46 AM in Views by Ben Meisner

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Comments

Posted by: RUEZ on May 30 2008 4:41 AM

NCP won't be rebuilt. On the other hand comparing that to the sports center doesn't make sense. What special equipment did the sports center have that had to be custom built? Also NCP would probably be double or triple the size. Apples and oranges.

Posted by: red2b on May 30 2008 5:11 AM

The Sports Centre is a simple farm building with nothing that isn't off the shelf. 18 months to rebuild is not out of line.

Posted by: pisspulper on May 30 2008 7:50 AM

Some good points Ben. Unfortunately, timing is everything. With the US housing slump in full bore at the same time the CEP contract is being renegotiated, you could imagine what sort of concessions will be sought by the major players. Canfor being the target mill, will be evidence of Uncle Jimmie's union busting strategy. Of course JP is not solely held accountable, but has proven this as his tactic. Correct, NCP, if rebuilt will be under strict stipulations, and I will hazard a guess that it will be non-union. Now can't Jimmy turn around and be a Log vendor? Those of you who have lost your livelyhoods, my heart goes out to you. I also work in the forestry sector, all I hear is tick tock, tick tock, KABOOM!! Time to think of a new career.

Posted by: RUEZ on May 30 2008 8:10 AM

Why would it be non-union? I can't think of one major sawmill in Canada that is non-union. That's up to the employees, not the company.

Posted by: southfortguy on May 30 2008 8:18 AM

Tax Breaks? Are you kidding me - its not like Canfor is a charitable organization - they are a multi-million dollar company. We need to let economics play out here - its the only way - if it wasnt profitable so be it - move on with life. This should be looked at as an opportunity for these workers - to maybe do something else, retire etc....not have their lives hinged to some company that only has their shareholders to answer to - not their employees.

Posted by: socredible on May 30 2008 8:23 AM

The design of a modern plywood plant, plus the tendering of equipment and building construction contracts, and the actual construction of the equipment needed could quite easily take 18 months.

I don't know whether it's the case with a large company like Canfor, but mill fire insurance policies available to smaller concerns generally stipulate that the asset insured be covered to the full REPLACEMENT value.

Which is often considerably more than the asset insured originally cost. They also stipulate that the mill BE REPLACED, and that there would be no payout unless it was. The idea being to prevent the insured from having what used to be called a "fortuitous fire" as a convenient way to exit an unprofitable business at the expense of the insurer.

It may be prudent to enquire into the exact stipulations attached to Canfor's coverage in this case before having our elected offcials tripping all over themselves offering Canfor numerous "incentives" to rebuild.

Posted by: bknt on May 30 2008 8:39 AM

NCP hourly employee's do not belong to the CEP Union.

The Ft. Nelson plywood plant has one major obstacle facing it that NCP does not, it is located right in the middle of a large oil & gas field. How can a Plywood plant compete with the oil & gas industry when it comes to finding and keeping skilled employee's/contractors?

I also agree with the other comments about re-building taking at least 18 months or more. I have personaly worked at NCP, and I can tell you that the majority of the plant is not just off the shelf sports equipment, it comes from places all over the world, and some is built to order. I thought 18 months was being quite optimistic to be honest.

Posted by: pisspulper on May 30 2008 9:18 AM

Posted by: RUEZ on May 30 2008 8:10 AM
Why would it be non-union? I can't think of one major sawmill in Canada that is non-union. That's up to the employees, not the company.

Are you sure who dictates whether a business is union or not?

Posted by: bknt on May 30 2008 8:39 AM
NCP hourly employee's do not belong to the CEP Union

This reference to the CEP union was a blanket statement. Merely idicating a point that with CEP under contract negotiation, during unfavorable market conditions,(albeit P&P is somewhat profitable at the moment)Oh NVM, you fill in the rest.

Posted by: herbster on May 30 2008 9:36 AM

I don't know why a plywood mill would take significantly longer to build than a sawmill- Weyerhaeuser's Ear Falls Ontario sawmill cost 65 million and took just six months to build. And it was 150km from the nearest rail line.

Posted by: Born in BC on May 30 2008 9:56 AM

Isnt the Rustads sawmill non-union? At least it used to be. Although there arent alot of Alberta sawmills I am sure that some of them are non-union as well.

Sure the employees decide if a shop is unionized, all that the company decides is whether or not there is a shop at all!

Posted by: Farnorth on May 30 2008 10:58 AM

Workers at Rustads have been proud members of the IWA/ Steelworkers for about 5 years now.
Canfor Mill in Grande Prairie, Alberta are members of the CEP Union.

Posted by: leoleo on May 30 2008 11:08 AM

most mills in Alberta are non union.

Posted by: Eagleone on May 30 2008 2:45 PM

Canfor Clear Lake sawmill is non union. I don't think the union situation or their wage compensation package will change at all for NCP. NCP belongs to the same union as the pulp mills and the pulp mills are making record profits right now, so I don't think Canfor wants any trouble with them.

As for rebuilding... a plywood plant that burned to the ground in the US a few years ago was rebuilt in 6-months so I don't see why this one could not be rebuilt in the same time frame from the point a decision is made.

The way I see it is the NSC was a finished building that takes time to build because of detail and craftsmanship. A plywood plant on the other hand is a simple slab of concrete with walls, a roof, throw in the equipment as it arrives and they're back in business.

Yes some equipment is special order, but it would not take 18 months for it to arrive... 6-months maybe at the most, and when equipment arrives there is nothing that would take a huge amount of time to install and a project like this is not done sequentially but rather simultaneous activities would be taking place with the only time frame that counts being the critical path method of activity completion.

The infrastructure is in place, the foundation is in place, the services are in place... how long does it take to put up some new walls, a roof, and then install the equipment as it arrives? Not 18 months IMO.

Posted by: socredible on May 30 2008 9:40 PM

The design of any new NCP mill would likely be considerably different from the mill as it previously existed.

Such a design wouldn't be completed overnight, nor, once it was completed, would it be likely that Canfor would choose to deal with only one vendor.

Likely tenders would be called for from several machinery manufacturers that are capable of supplying the needed equipment to the design specified.

If several companies were chosen to supply different components of the plant there would have to be some co-ordination between them all to ensure what's received is compatible with other vendor's products. This would all take time.

Even if one vendor was chosen to supply the majority of the components, most plywood machinery manufacturers have limited capacity to produce all those components simultaneously in their own facilities.

If they outsource some of the manufacturing, as would likely be the case, it still takes time to organize this with their subcontractors.

Once everything was organized, and the machinery on site it might not take any longer than 6 months to put it all together and throw a building up over it.
But I would think getting it to that point would easily burn up the other 12.

Of course, if they didn't have a large enough supply of peeler quality logs for an all new facility, they may opt to erect a lower capital cost plant using mostly used equipment, assuming the manufacture of plywood out of northern species is still profitable.

Even in that case, it's unlikely a new plant could be designed based on equipment available, the equipment purchased, reconditioned where necessary, and received on site, and then be erected into a new plant in anything near as short as six months.

Posted by: owl on May 31 2008 5:12 AM

To build or not to build?

If to build, what to build? ... and where to build???

The linked article will give some people a bit more insight into the fact that current market and other information is required to make such decisions.

http://www.forestnet.com/archives/Sept_96/cariboo.html

One of the interesting things to note is that Canfor will likely be looking for some expert help to make that decision ..... yes, they will likely be commissioning a marketing report and perhaps even a report which will review the current technology available. And here many may have been under the impression that reports are only prepared for governments and paid for by taxpayers.

These reports will be paid for by the customers who will be distributing the products where the consumer (taxpayers) will be paying for them. *S*

Posted by: owl on May 31 2008 5:14 AM

BTW, does anyone know how well the panel plant in Quesnel is doing with its Asian customers for the non-North American standard size boards?

Posted by: tinyapplecork on May 31 2008 6:54 AM

owl I understand your point but wouldn't a corporation such as Canfor already have this information at their fingertips. Surely the company is aware of the state of the art equipment, current conditions, and availability of resources? They already have an established customer base and a prudent company is always seeking to expand that market. So I think that if I were to venture a guess, and this is all it is at this point, it may well be a delay tactic. No one had the answers the night of the fire or the following days as the powers that be needed to meet and deal with this unforeseen circumstance.
If the insurance and all of the other business implications are dealt with in a timely fashion, then when the announcement I heard of rebuilding to begin in September on the radio, The Wolf, really is not unrealistic.
There was no rumor mill discussing the closing of NCP prior to the fire. I also did not catch wind of any possible downsizing of the plant. So rebuilding is more of a possibility I would think.
Any sound business person is going to seek the most cost effective method of doing this. Yes, they may wait. Definitely, a smart, savvy business will seek incentives from the municipal, provincial and federal governments whereever possible.
There have been comments in recent days that the product produced was highly coveted. So the major consideration/worry imo, would be the customers themselves and the delivery of the product. It sounds like Ft Nelson is capable of delivering it for the short term but not the long term without significant modification. (my understanding)

I am keeping my fingers crossed.

The argument by another poster about keeping a workforce there with competition from oil and gas...well, we have 260 plus laid off employees eager to go back to work ASAP :)

Posted by: socredible on May 31 2008 8:22 AM

I think Owl is quite right, it's not likely Canfor would have ALL the information needed "at the tip of their fingers."

There would be a great many considerations to be taken into account that couldn't be arrived at quickly, or even very easily, without compiling a great deal of information first.

What Canfor MAY have is a far better conception than anyone else would of just what all the factors they need to know really are before making any decision.

As for having "an established customer base", we ought to realize that it is a 'globalised world' we have now been committed to, and there is no such thing as an "established customer base" any more, anywhere.

We were told that the main market for NCP's product was in Canada, and not the US or overseas, which, I would think, would be a factor in favour of a decision to re-build.

But even so, those Canadian customers are going to be seeking, or offered, other sources of supply if there's demand for the product that Canfor can't deliver.

Posted by: lost it all on May 31 2008 8:32 AM

exactly Ben, Canfor will continue to pressure the government for yet more corporate welfare.

Posted by: dogs on May 31 2008 8:10 PM

I know of one major veneer plant on the Coast which is non-union, profit shares with management and is still operating at 100% capacity- It is the most modern mill on the Coast. Gee I wonder where it is.