Ottawa ‘could rejuvenate’ forest industry
Committee report comes up with 23 recommendations
A House of Commons Standing Committee has recommended changes in federal policies affecting the forest industry that if accepted, could open the door to new investment, new opportunities in bioenergy and more consolidation, forest industry leaders said yesterday.
“It gets government’s role right. It doesn’t talk about bailouts or subsidies. It talks about a business climate that will invite investment,” said Avrim Lazar, president of the Forest Products Association of Canada.
The report by the standing committee on natural resources made 23 recommendations, including re-assessing the role of the federal Competition Bureau in mergers and acquisitions, and introducing tax changes to accelerate the capital cost allowance and make research tax credits refundable.
It also urges the federal government to expand initiatives on developing new markets to diversify away from dependence on the U.S.
Other recommendations include promoting opportunities in biorefineries and bioenergy and taking into account in new emissions regulations the reductions in greenhouse gas emissions the industry has achieved since 1990.
The pulp and paper industry in particular has made huge strides in reducing emissions and in developing co-generation projects that utilize wood waste.
Lazar saw the fact that the committee is questioning the Competition’s Bureau’s approach to mergers and acquisitions as encouraging a more robust and globally-competitive industry. He said the bureau has put a chill on mergers in the Canadian industry.
“If you can’t merge in Canada, you go elsewhere,” he said.
The Competition Bureau has forced British Columbia’s two leading forest companies to sell healthy assets as they have attempted to grow.
Both companies, West Fraser Timber and Canfor, have since expanded by purchasing mills in the U.S. In one instance, Canfor was forced to sell the thriving Fort St. James sawmill as part of its merger with Slocan Forest Products. The buyer was Pope & Talbot, which is now in receivership. The mill is shut down and was last offered for sale at onesixth of the value Canfor sold it for in 2005.
In the case of West Fraser, it was required to sell two mills in Burns Lake in its 2006 acquisition of International Paper’s B.C. assets despite opposition to the sale from the local community.
Both mills are now operating on curtailed shifts.
Lazar said by putting such conditions on mergers, the government is not saving jobs. Mills are still going to close, he said.
Investment analyst Kevin Mason noted that Canadian companies are selling into a global market but are smalltime players by global standards. “We have one of the largest forest resources in the world and yet we have no dominant companies that are global players,” he said “Within Canada, just merging two reasonably-sized firms still would not make a large global player and yet it generates a lot of difficulties on the competition side. It is a huge impediment to growth and one of the hurdles that has to be moved out of the way.”
Rick Jeffery, president of the Coast Forest Products Association, said the fact that the report was unanimous bodes well for the government implementing some or all of it. He said the industry particularly needs to diversify beyond the U.S. Federal support for marketing initiatives is an important part of that, he said.