I
Good god this is ugly,
FTI if you are in the industry.
10,000 forestry jobs gone in past year
Sawmills are shutting down across the province -- some sporadically, some for good. The situation isn't likely to improve any time soon
Gordon Hamilton
Vancouver Sun
Saturday, March 01, 2008
Almost 10,000 British Columbia forest sector workers are out of jobs as sawmills respond to the collapse lumber demand in the U.S. by cutting production and sending people home.
From Fort Nelson to Vancouver Island, mills are closing their doors, cutting back on shifts, operating sporadically or implementing job-sharing to get their costs down. A Vancouver Sun survey of companies that have announced layoffs since January 2007 shows 34 mills are down either permanently or indefinitely. Twenty-three have curtailed shifts or introduced job-sharing. The cost in jobs lost, both permanent and temporary, has climbed to 9,597.
The shutdowns are often sporadic, with mills re-evaluating start-up week-by-week. But most companies say they see nothing on the horizon to encourage them to restart.
Where shutdowns are long-term, such as the northern town of Mackenzie, where two sawmills and a related paper mill went down, workers are looking for direction, said Mayor Stephanie Killam. The jobless face tough choices: Either leave for Alberta or retrain for other sectors, which often means leaving the community.
Bill Derbyshire, president of the Williams Lake local of the United Steelworkers union, said because many of the shutdowns are intermittent, it's difficult for workers to decide to quit to enroll in retraining programs.
He expects workers will face periods of layoff into 2010.
"I think we are just seeing the tip of the iceberg right now," he said. "Companies can only be cost-effective so much. When you get to the point when the market is flooded with wood and it's not selling, you've got to do something."
Nobody is making money on commodity lumber right now, said Canfor Corp. president Jim Shepard.
"There's no doubt about it; when you've got an entire industry losing money -- and I mean hundreds of millions of dollars -- this is a critical situation," Shepard said in a conference call this week with financial analysts.
The industry is in the depths of what could be a two- to three-year downturn and the cash bleeding can only go on for so long. Some companies, like Pope & Talbot, which operated four sawmills and two pulp mills in B.C., have already gone broke. Others, like Canfor, are shedding workers by closing mills and cancelling shifts in a bid to preserve what cash they have during the lumber meltdown, the worst anyone in the industry can recall. Lumber prices collapsed in late 2006 and got worse throughout 2007.
The downturn began in late 2006 when U.S. housing starts, which had peaked at 2.1 million a year in the summer months, began to falter. Lumber prices tumbled in response as producers, who had ramped up production to meet the record demand, continued to pump unwanted wood into a shrinking market.
But problems deepened in 2007 when subprime mortgages -- loans given to buyers who would not qualify under traditional banking practices -- came up for renewal. Those buyers were stretched to the limit and many defaulted on their mortgages. The extent of the damage done to the U.S. housing market -- and the length of time it would take to recover -- became more evident. Mills in B.C. began cutting production.
By January this year, housing starts had dropped to one million and lumber demand in the U.S. had shrunk by 13 billion board feet, the equivalent of removing a year and a half of B.C.'s total U.S. sales from the U.S. market.
And the housing statistics industry executives monitor every day show no indication that this is the bottom. The most recent numbers from the U.S. show January new-home sales down 34 per cent year over year and down 2.8 per cent over December. Prices are down 15 per cent and new home inventories are up 10 per cent over December.
"We are bringing our costs down but the problem is the market is dropping faster than our ability to get our costs down," said Canfor's Shepard, explaining how Canfor lost $199 million in 2007. "This is a situation that I have never witnessed before and in speaking with my colleagues in the industry it's nothing they have witnessed either. We are dealing with a tsunami here."
Canfor alone has shed almost 1,000 jobs in the last year.
Most CEOs are expecting markets to remain depressed until mid- to late 2009. By then, the B.C. forest industry will be in the hands of fewer players, with the small, independent sawmills being devoured by larger, integrated companies, further concentrating the ownership of sawmills and timber tenures in fewer hands.
"Only those with very deep pockets can survive a significant downturn of two years or longer in duration," said John Elmsley, president of Prince George lumber company Winton Global, which is currently shut down.
He said large integrated companies are the ones most likely to survive. They are the ones likely to buy up the capacity and timber tenures of companies that can't withstand a two-year downturn, he said.
"It should come as no surprise to the people of B.C., but that is going to change the face of the industry in B.C. through rationalization. We will likely see larger integrated companies, less local ownership and less local autonomy."
FTI if you are in the industry.
10,000 forestry jobs gone in past year
Sawmills are shutting down across the province -- some sporadically, some for good. The situation isn't likely to improve any time soon
Gordon Hamilton
Vancouver Sun
Saturday, March 01, 2008
Almost 10,000 British Columbia forest sector workers are out of jobs as sawmills respond to the collapse lumber demand in the U.S. by cutting production and sending people home.
From Fort Nelson to Vancouver Island, mills are closing their doors, cutting back on shifts, operating sporadically or implementing job-sharing to get their costs down. A Vancouver Sun survey of companies that have announced layoffs since January 2007 shows 34 mills are down either permanently or indefinitely. Twenty-three have curtailed shifts or introduced job-sharing. The cost in jobs lost, both permanent and temporary, has climbed to 9,597.
The shutdowns are often sporadic, with mills re-evaluating start-up week-by-week. But most companies say they see nothing on the horizon to encourage them to restart.
Where shutdowns are long-term, such as the northern town of Mackenzie, where two sawmills and a related paper mill went down, workers are looking for direction, said Mayor Stephanie Killam. The jobless face tough choices: Either leave for Alberta or retrain for other sectors, which often means leaving the community.
Bill Derbyshire, president of the Williams Lake local of the United Steelworkers union, said because many of the shutdowns are intermittent, it's difficult for workers to decide to quit to enroll in retraining programs.
He expects workers will face periods of layoff into 2010.
"I think we are just seeing the tip of the iceberg right now," he said. "Companies can only be cost-effective so much. When you get to the point when the market is flooded with wood and it's not selling, you've got to do something."
Nobody is making money on commodity lumber right now, said Canfor Corp. president Jim Shepard.
"There's no doubt about it; when you've got an entire industry losing money -- and I mean hundreds of millions of dollars -- this is a critical situation," Shepard said in a conference call this week with financial analysts.
The industry is in the depths of what could be a two- to three-year downturn and the cash bleeding can only go on for so long. Some companies, like Pope & Talbot, which operated four sawmills and two pulp mills in B.C., have already gone broke. Others, like Canfor, are shedding workers by closing mills and cancelling shifts in a bid to preserve what cash they have during the lumber meltdown, the worst anyone in the industry can recall. Lumber prices collapsed in late 2006 and got worse throughout 2007.
The downturn began in late 2006 when U.S. housing starts, which had peaked at 2.1 million a year in the summer months, began to falter. Lumber prices tumbled in response as producers, who had ramped up production to meet the record demand, continued to pump unwanted wood into a shrinking market.
But problems deepened in 2007 when subprime mortgages -- loans given to buyers who would not qualify under traditional banking practices -- came up for renewal. Those buyers were stretched to the limit and many defaulted on their mortgages. The extent of the damage done to the U.S. housing market -- and the length of time it would take to recover -- became more evident. Mills in B.C. began cutting production.
By January this year, housing starts had dropped to one million and lumber demand in the U.S. had shrunk by 13 billion board feet, the equivalent of removing a year and a half of B.C.'s total U.S. sales from the U.S. market.
And the housing statistics industry executives monitor every day show no indication that this is the bottom. The most recent numbers from the U.S. show January new-home sales down 34 per cent year over year and down 2.8 per cent over December. Prices are down 15 per cent and new home inventories are up 10 per cent over December.
"We are bringing our costs down but the problem is the market is dropping faster than our ability to get our costs down," said Canfor's Shepard, explaining how Canfor lost $199 million in 2007. "This is a situation that I have never witnessed before and in speaking with my colleagues in the industry it's nothing they have witnessed either. We are dealing with a tsunami here."
Canfor alone has shed almost 1,000 jobs in the last year.
Most CEOs are expecting markets to remain depressed until mid- to late 2009. By then, the B.C. forest industry will be in the hands of fewer players, with the small, independent sawmills being devoured by larger, integrated companies, further concentrating the ownership of sawmills and timber tenures in fewer hands.
"Only those with very deep pockets can survive a significant downturn of two years or longer in duration," said John Elmsley, president of Prince George lumber company Winton Global, which is currently shut down.
He said large integrated companies are the ones most likely to survive. They are the ones likely to buy up the capacity and timber tenures of companies that can't withstand a two-year downturn, he said.
"It should come as no surprise to the people of B.C., but that is going to change the face of the industry in B.C. through rationalization. We will likely see larger integrated companies, less local ownership and less local autonomy."
