Forestry in crisis--forestry's deeply rooted challenges.

• Author: Stewart, Nick
• Position: NEWSMAKERS of the YEAR

While stories of closures continue, many companies are examining ways to reinvent themselves to be part of the new forestry sector.

"There seems to be a feeling in the sector that it will recover, but the challenge is how to keep going while waiting for that to happen," Bob Rosehart, Northwestern Ontario Economic Facilitator, says.

In March, Domtar Inc. merged with Weyerhaeuser Company's fine paper business. Abitibi-Consolidated and Bowater joined to create its own Quebec-based, single-entity firm. Seth Kursman, spokesperson for the newly merged AbitibiBowater, says this kind of approach is key to finding ways of streamlining and eliminating operational redundancies.

Through the merger, the two companies are able to achieve $250 million in economic efficiencies, making the firm much more competitive in a time of incredibly challenging market conditions.

"We certainly believe that, as AbitibiBowater, we're going to be financially stronger than either company would have been independently."

Russ York, CFO of Buchanan Forest Products, says this approach may not necessarily be the right solution for everyone, and that bigger is not always better. Infrastructure investments to help modernize aging facilities are a key component to both survival and success, he says. This is an area many firms have been woefully lacking. The problem lies not with the motivation, but with the lack of confidence from financial institutions for big capital projects.

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"As you get under pressure, nobody will lend you any money," York says. "Even though it'd be a good news story, they say, 'That's three years from now, you won't make it.'"

York argues that a regional energy pricing policy would be little more than a "Band-Aid approach," and would offer little in terms of long-term stability as prices continue to climb.

Rather than rely on the government for this kind of solution, the pursuit of energy self-sufficiency is a more appropriate response, he says.

This is why Buchanan Forest Products is looking to spend $45 million on a steam boiler at its Terrace Bay facility, allowing it to use wood waste, rather than depend on a fluctuating pricing grid. Similarly, AbitibiBowater is installing a $84.3 million biomass boiler at its Fort Frances mill to help make the facility 86 per cent energy self-sufficient.

Andrew Casey...