Biding time in Kenora; Tough market conditions keep mill closed.

• Author: Ross, Ian
• Position: DRYDEN/KENORA

Despite his idyllic mill location over-looking the wind-swept pine islands of Lake of the Woods, Rod McKay is on the desolate front lines of Northern Ontario's battered forestry industry.

[ILLUSTRATION OMITTED]

In June, the 11-year manager of Kenora Forest Products was one of three employees left on the mill property moving out the last of the lumber inventory.

His mill is one of three shut down in Kenora in the last two years, yet he believes the industry still has "a great future."

"We've got a great resource of wood here and a good workforce."

The slumping U.S. housing market and low demand for stud lumber caused the Winnipeg parent company, Prendiville Industries, which bought the Kenora mill in 1994, to indefinitely shut it down in February and lay off 105 employees.

Before dropping one of three shifts last fall, the mill produced 74-million board feet a year on a single line, making two-by-fours, two-by-sixes and a number of one-inch products.

About 30 per cent of production heads to other Prendiville plants to be made into lattices and pre-assembled fencing. The balance goes into the North American housing market. It's a head office decision when the mill will restart, but McKay believes it will eventually be within the next year.

"We're just waiting for the market to turn," says McKay.

He points to the Kenora mill's central-Canada location, ideally positioned to feed the U.S. Midwest markets as far south as Texas.

Minneapolis is eight hours away by truck and there's a CP Rail spur line running into the property with equipment capable of loading five rail cars a day.

McKay says there's definitely a future for small and medium-sized producers like his. They can be more nimble and react to market conditions quicker with more innovative products. In the past, low grade wood that would have made into chips at blow-out prices is now converted into profitable fencing products.

Down the road, McKay envisions the mill making a greater array of value-added products. The company has engineering drawings for a $30 million expansion.

The mill expansion proposal would enable them to process smaller diametre logs, create about 50 new mill jobs making a wider range of dimensional products, machine stress rated (MSR) lumber, and boost production to more than 190 million board feet. But that's been on hold for...