More pain and loss coming as Atlantic forestry sector adjusts: report

According to a study released Tuesday by the Atlantic Provinces Economic Council, the industry in the four Atlantic provinces is going through a major transformation as it adjusts to weak markets, tough global competition and rising energy costs.

Elizabeth Beale, president of APEC, an independent think-tank that studies economic issues in the region, said the industry will never return to the way it was in Atlantic Canada. However, it can remain viable if there are more value added products and it becomes more competitive, she added.

Beale said more than 7,000 forestry jobs in the region have disappeared over the past three years - a 20 per cent loss.

She said the decline has yet to bottom out, so there will be more losses. And she doesn't expect those jobs to come back.

"The employment footprint of the industry is going to be radically different," Beale said at a news conference in Fredericton, where the APEC report was released.

"It's one of the big social issues facing Atlantic Canada. Forestry was an employer with high wages and sustained work in many of our rural communities. With the loss of that base, there's nothing coming to replace it."

She said recent mill closures show the industry is still transforming.

New Brunswick-based J.D. Irving Ltd. recently announced the closure of two lumber mills, one in Prince Edward Island and the other in northern Maine.

The problems in the Atlantic provinces are shared in other parts of Canada where the industry has been hit hard by lower lumber prices from the collapse in U.S. housing starts, the high Canadian dollar, the devastation caused to trees by the mountain pine beetle in British Columbia, and declining North America newspaper consumption.

But Beale said problems are magnified in Atlantic Canada, where energy and transportation costs are soaring.

She said poor rail service in the region will become more of an issue in the future, as will rising power costs if provincial governments cannot bring them under control.

"Unless we successfully deal with this in a 10-, 15-or 20-year horizon in Atlantic Canada, we could price ourselves out of the market compared to other jurisidictions with access to more competitive energy costs," Beale warned.

"If our costs of production are too high, we will lose the firms we have. It has to be addressed."

Mary Keith of J.D. Irving Ltd. agreed that energy prices are eating into forestry's bottom line in the region.

"It is a big part of the cost equation," she said.

Despite the challenges, Beale said forestry is not a sunset industry in Atlantic Canada, as some have suggested.

Mark Arseneau, president of the New Brunswick Forest Products Association, said there's a "new wave" coming in Atlantic forestry in the form of biomass and biofuels, such as wood pellets.

"As they come on line, there will be the emergence of a new wave of forestry that's not only related to the commodities - the two-by-fours and the studs - but also focusing on new technologies and innovative stuff, like biofuels," he said.

The APEC report recommends the establishment of an Atlantic task force under the leadership of the forest industry and provincial governments to help direct the industry into the future.

It also calls for an Atlantic value-added wood initiative to help smaller firms move up the value chain.

"Both the forest industry and its government partners need to focus on the long term," said Beale.