an examination of the factors that led to the provincial wood supply competitive process and tenure...
TRANSCRIPT
AN EXAMINATION OF THE FACTORS THAT LED TO THE
PROVINCIAL WOOD SUPPLY COMPETITIVE PROCESS
AND
TENURE AND PRICING REFORM
How did we get here?
HISTORY
1993-1998 Lumber, veneer and oriented strand board are all
strong Pulp and paper are volatile in the marketplace and
mergers are rampant Sawmill and pulp mill business alignments are critical
Hardwood markets exist for lumber, pulp and paper, veneer, chipboard and OSB
ALL WOOD SUPPLIES ARE BEING TESTEDCalled it the War in the Woods
HISTORY
1998 ENGO’s are pressuring
the Conservation government for more parks and protected areas Wabakimi Provincial
Park Expansion Lands for Life
Forest sector fears the campaign will threaten current utilization levels
PAINFUL HISTORY
2000-2004Lumber, veneer, chipboard, OSB are all
experiencing steady declinesEnergy and fuel prices continue to riseDelivered wood costs become more of an issue
Past pressures on supplies limit the availability and options for inexpensive fibre
Softwood lumber trade dispute and countervailing duties
Waiting for your neighbour to fold Closer, cheaper wood
EVEN MORE PAINFUL HISTORY
2005 Banks limit financing Markets crash in
lumber, veneer, chipboard and OSB
U.S. softwood lumber quota and tariffs
New mill closure each month
Government agrees to form a Minister’s Council on Forest Sector Competitiveness
Norampac Inc.Red Rock
POSITIVE HISTORY
Minister’s Council was comprised of forest industry, government, ENGO, First Nation and municipal representatives
Provincial Roads Funding Program $75 million per year fund established in an effort to
reduce delivered wood costs
Forest Sector Competitiveness Secretariat Prosperity Fund and Loan Guarantee Program
Energy subsidies for pulp and paper mills Allow companies to convert to co-generation and get
off of the grid
LITTLE MORE HISTORY
Pulp prices suddenly improve Fourth quartile mills
all around the world start to close
World pulp supplies are shrinking
Northwest remains alive with the four
biggest pulp producers operating
Domtar Inc.Dryden
GREEN ASSISTANCE
Green Energy and Green Economy Act and Feed-in Tariff Program Pulp mills can produce their own power and sell the
excess Opportunity to sell green and buy brown
Healthy pulp mills also need to realign hardwood supplies (or any underutilized species) to meet their cogeneration needs
FIT + Black Liquor subsidies + high energy prices =
Fast movement off of the grid
GREEN ASSISTANCE CONTINUED
OPG announces plans to moves towards green energy production at their coal-fired generating stations Proposal requires wood supply Atikokan is in the lead with other plants to follow
Helps meet political platform commitment to eliminate coal utilization
OPG releases a Request for Expression of Interest to purchase wood pellets (FOB) Solicited hundreds of proposals to supply OPG at
various plants across Ontario
WOOD SUPPLY IMPLICATIONS
Reduction in lumber, veneer, chipboard and OSB manufacturing caused a surplus of available wood supply An opportunity for right wood to right mill realignments
Many closed mills maintained the authority to harvest (or not harvest) wood supplies Healthy pulp mills needed to realign their wood supplies Capture the opportunity to lower costs and remain
viable in the long term
IMPLICATIONS OF HOARDING WOOD
IMPLICATIONS OF HOARDING WOOD
WHY DID WE NEED A WSC?
1. Government needs to meet commitment to clean fuels
2. OPG now needs wood supplies and majority of wood is encumbered by current SFL-holders
3. Pulp mills need to realign their wood supplies to pacify nervous investors and reduce wood costs into the future
4. Government needs to invigorate new businesses and maintain competitive facilities
5. Revenue associated with forest industry contributions to provincial coffers are at a historical low
6. Provide hope of a new industry in Ontario and demonstrate that the Province is open for business
7. Explore and attract new technologies for the utilization of Ontario’s wood supply
WHY DID WE NEED TENURE REFORM?
1. Forest sector is inundated with bankruptcies or CCAA protection
2. Bankruptcies resulted in SFLs being returned to Crown
3. Some companies closed their mills but maintained enough money to manage the SFL
4. Unencumber wood supplies to attract new technologies
5. Current tenure system allows companies to hoard wood in anticipation of market recovery
6. Need a system that encourages the sale of all available Crown timber
7. US lumber lobbyists continually suggest that the current pricing system in Ontario subsidizes sawmill operations
THANK YOU
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