Slow downs and mill closures

[SwampDonkey]

Government isn't wise about where they put their money. Never have been. As far as I can see, attracting foreign investment has been the riskiest business because our governments end up providing more in aid packages and concessions than the companies ever brought to the scene. The thing with government is there is this non ending flow of tax money and they spend it knowing the well will never go dry. Some investments pay off in the short term, but most fail in the long haul. It's all about the numbers.

[farmerdoug]

Anyone that thinks that the government can buy jobs for their area are mistaken.  Because when the incentive runs out they go to the next offer.  It is just a drain on the tax base in the long run.  It does make a few rich people though. :

Farmerdoug

[Ron Wenrich]

I saw an interesting perspective about job creation in our local newspaper.  Government goes out and creates jobs by pumping money into a certain sector of the economy.  In order to do that, they have to implement some sort of bureacracy for oversight.  After the jobs have been placed, the bureacracy remains, and that drives taxes higher.  The only jobs that the government has been successful in creating are government jobs, not private sector jobs.  Makes sense to me.

[SwampDonkey]

Yup perfect.  ;D ;)

[SwampDonkey]

Well this morning UPM Kymmene of Finland announced this morning that their operations in Mirimachi City will be closed permanently. They had been closed since August. So that means there will be a few more Maritimers in Alberta. 

[slidecreekdan]

Yes, Things are bad here in Oregon

[Tom]

I'm wondering if some of these closing might be a blessing. It's getting foreign company's off of our soil.  Perhaps an enterprising American or Canadian will take the opportunity to pick up the slack and start his own entrepreneurial successes.

[SwampDonkey]

J D Irving has the only NB grown pulp mill and it also has sawmills along with some other NB based companies. Irving has never closed any of it's core pulp, tissue or saw mills. They have closed a couple sawmills that they bought up in the short term. Irving is a lot more diversified than others because it also owns highway transportation, ocean shipping, rail and petroleum among 300 or so companies. Ya gotta love them, but those that have had to deal with them also hate them.   They have no shareholders to answer to. :D ;)

[Ron Wenrich]

Actually, the cheap dollar and our trade imbalance is what puts the foreigners on our shores.  Remember when we had a really bad trade imbalance with Japan and our dollar was cheap vs the yen?  They went out and bought Columbia Pictures, Rockefeller Square, and bunches of other things.  It was all sold when their economy went south.

Right now, there is a lotta bucks sitting offshore looking for places to buy.  Our properties are at bargain prices.

[Rocky_Ranger]

I don't want to be one to "preach to the choir" here, but the more I learn about real opportunities to maintain healthy forests, protect endangered species, or treat hazardous fuels – the more I feel we need to spread the message on the way we do that is through logging.  Seems life is just a big, long process of trying to make things better; and since I've learned a lot in my 50 years but hope to work 'til the day I meet my Maker, I'm going to continue to pas on the word.  Age just seems to sharpen the dialog.

We, as a Nation, can't pay to do these things, we need industry to provide the mechanism to create the need for the products we can maintain in perpetuity.  I get so (DanG) aggravated when I see mill closings; or foreign investments ruling the marketplace.  Yep, I'm a Gub'ment forester and we have caused a whole mess of issues in the past, but that don't mean we cave into the interests counter to our professions.  I try and spread the word anywhere I can, but have to also watch what I say or I'll be selling siding for a living.  I really hope biomass will turn out to be the buzz for the next few years – God knows we need something. 

I've got some friends (?) in the environmental arena and they are taking a wait and see look on things.  What have they got to lose, we're basically shut down now except here in the South, and chasing mortality in the Rockies.  The Pacific Northwest and the "Northwest Forest Plan" ain't gonna happen, too much pressures against it.  All I know to do is continue to crow like a rooster and hope my alligator mouth is not supported by only a hummingbird ass......... :D

[Ron Wenrich]

One of our lumber buyers have shut down one of their plants.  They have 2.  They used to buy about 25 million bf/year.  Also, the large mill in the area is now on layoff. 

I heard of a pellet producer that can't get enough sawdust to make pellets.  There could be other factors effecting that market.  Farmers still use a lot of dust for bedding, and may have to pay a higher price.  With grain prices up, they're in a better position.

[boboak]

Things have slowed down a lot around here.  Lumber shipments are off over 20% from where they were at this time last year. 
All this really means is that we're returning to a more realistic level of construction and lumber usage.
The big building boom out here is over.  It's dead and gone and we may never see the like of it again.
The last six   or seven years lulled many people in this industry into a false sense of security and prosperity.  It couldn't last and it didn't.  Back to reality...like it or not.
The only logging we're doing right now is bug-kill and burn-salvage.  I don't look for that to change any time soon.

[sawguy21]

http://www.canada.com/vancouversun/news/story.html?id=3a4d4a8b-b58c-4e79-99eb-74435ecc867f&k=36464
This should be good news for the communities involved.

[SwampDonkey]

Well it looks like the largest paper maker in the world is going down, Abitibi-Bowater holds 16,000 jobs in the sling. The analysts say it don't look like they can be salvaged with $1.4 billion debt. The company had consolidated with Bowater Inc. of South Carolina and acquired more debt.


"MONTREAL, March 7,2009

The refinancing plan of approximately US$1.4 billion consists of:

    * US$200-300 million of new senior unsecured exchange notes of Abitibi- Consolidated Inc. due 2010,
    * US$400-500 million of new 364-day senior secured term loan of Abitibi-Consolidated Inc. secured by working capital and other assets,
    * Approximately US$400 million of new senior secured notes or a term loan due 2011 of Abitibi-Consolidated Inc. secured by fixed assets, and
    * US$200-300 million of new equity or equity-linked securities of AbitibiBowater Inc.

If Abitibi-Consolidated is unable to refinance or restructure its near-term debt maturities that are targeted by the refinancing plan described in this press release on or before their maturities, Abitibi-Consolidated would be in default under the indentures relating to those notes and may be compelled to seek bankruptcy protection under applicable law, which may negatively impact or disrupt the operations of AbitibiBowater and its other principal subsidiary, Bowater Incorporated."

http://www.abitibibowater.com/media/latest-news.aspx?id=636&detail=true&reqid=1116468

http://www.reuters.com/article/bondsNews/idUSN1060084020080310

[BCtimber]

Well I see this whole slow down as a blessing in disguise here in BC.  For years the govt has been pushing all the timber to the large companies and seem to be doing it at the expense of all the small outfits.  The pine trees here are all dead now because of the beetle kill and the majors are pulling out because they are not making as much money.  I think a shift to smaller mills and logging shows will be the end result here and that should be good for most everyone.  This push for big numbers,  big iron,  big production has not served us very well in my opinion and I look forward to a smaller and more sustainable industry.  Hopefully the govt will get on board with lower production of higher value products and will work with locals to rebuild the industry.

[Chico]

I agree BC. IMO we have always had  cycles where it builds up gluts everything then crashes though this one is much worse than others I have witnessed in my 40 yrs in mills. I think you're right about the opp. for small to mid sized outfits if they can position themselves correctly Here in the US you can bet we won't get a bailout or anything else. This market reminds of when they started tariffs on tropical hardwoods .Well the big guys found a way around it for a while by placing mills on ships so they could bring the logs out as raw prod(less taxes) then slab one slab (a semi finished prod) less taxes. Finally they closed most of the loopholes and some of the smaller mills were the ones that finally had the opp. to prosper .Then most countries placed such tariffs that it was more profitable to mill the logs in country .Once again the big companies  Ford, Chevy, Dodge, General Elec.  all had big mill in the tropics. But as things cycled out once again the smaller mills came back up. The small companies have always been the backbone of the timber ind. imo .It's just too many times they grow too large and start taking all breast leaving the backbone for the smaller cos and thus another cycle begins. I think this is also a reason why we still have forests in some areas it just wasn't sustainable enough for the big dogs but great for the smaller ones who just maintained their steady pace . Sorry for the book . I admire all you guys that plotting a course and hanging on .Hopefully you'll reap the rewards
Chico

[SwampDonkey]

I also notice that small mills have longer longevity. I think why many disappear is they sell out because no one in the family wants to take over the operation. Sure many were/are less efficient, but they don't have the costs either and probably no unions to support. The local mill here is still family owned and operated and keeps slicing off boards from timber while the larger mills next door have to shut down for months on end in this economic climate. And some larger mills around here that are big, but family owned, get major hand outs from government for upgrades. The small mills get told to close up or sell at the end of there life expectancy. So someone like Irving (family run company) buys them out to get the woodland that comes with the mill, then shut the old mill down. It may be that that small mill wants to continue, but they can't get the financing. Government and Banks always think big, big, big. Small business have always taken a major beating, you see it in taxes and financing.

[Ron Wenrich]

I asked the sawmill supplier the other month how many guys were still cutting.  He said quite a few of the small mills.  Then I asked how many of them didn't have a debt load, and he answered most of them.

I think you'll find that a lot of the big mills are leveraged with debt to the point they can't work without it.  Then, when things get shaky, its easier to shut the doors than to get further in the hole. 

[BCtimber]

We here in BC have a huge govt problem to deal with.  The big mills have timber quotas that they are now allowed to take anywhere to mill -  it used to be that timber logged in a community had to be milled there.  Now they can truck it hundreds of miles to other large central milling plants.  This has to change.  I think a system where everyone bids on all the timber would be better.  Our small companies are always having trouble with wood supply because it is all tied up.  Forestry salvage programs for small business are the joke of the industry here.  A big shake up is needed and I think is coming.

[Chico]

that what happens when govt money is involved deal they gain the control  it's a two headed snake like you said money feeds money leaving the little guys out
Chico

[thompsontimber]

As stated in the log market thread, additions to the mill closures include T&S in North Carolina and Georgia and A&L Lumber in North Carolina.

[Bill Johnson]

And yet another one in trouble.
 
Forest products firm goes into receivership;
Timmins Daily Press (ON)
Fri 20 Mar 2009
Page: A5
Section: News
Byline: THE CANADIAN PRESS;
Dateline: THUNDER BAY
Thunder Bay forestry company Buchanan Forest Products Ltd., has gone into receivership and almost all of its salaried employees, more than 40 people, have been let go.
The company, which runs the wood harvesting operations for the Buchanan Group of companies, laid off salaried staff at eight idled sawmills located across Northwestern Ontario, including managers and engineers.
Only general managers and one or two support staff remain at each site.
More than 1,000 workers have been laid off from the mills for at least a year, and for some almost three years.
Employees at three Buchanan mills were told last month the company does not have the money to pay severance and termination.
Buchanan vice-president Hartley Multimaki said a major creditor, the TD Bank, requested that Deloitte and Touche step up its role from company monitor to receiver, to protect the bank's investment.
TD is also the main creditor calling in its loan from Buchanan owned Terrace Bay Pulp, which filed for court protection last week.
Officials from Deloitte and Touche had promised to issue a statement on the situation Thursday afternoon, but then said that no information would be immediately forthcoming.
The layoffs came the same week as another Northwestern Ontario forestry company announced it will shut down.
About 240 employees were informed Tuesday that the owners of Marathon Pulp Inc. have decided to declare bankruptcy.
© 2009 Osprey Media Group Inc. All rights reserved.
Idnumber: 200903200019

[Ironman]

Unfortunately there are several major factors that are killing the lumber and pulp/paper industry right now and it appears that a recovery will be too late in coming to save any real number of them from being lost to bankruptcy.  Companies going into bankruptcy right now and hoping to save their mills and restructure, cannot give the court or creditors any real timetable on which they can repay their debts because the numbers are going from bad to worse.

We need several major factors to improve and up until last month I felt certain they were.  I am more doubtful now.

1. Consumer Spending (packaging, paper, cardboard boxes, grocery bags, all produced with paper and if nobody is buying than the mills just can't sell the pulp.
2  Housing Starts must come up dramatically and I mean soon or we will see a continued exodus of quality used sawmilling technology going overseas to third world countries on the cheap.  The banks foreclose on the sawmill equipment or the mill closes and sells the equipment online for pennies on the dollar.  This is very bad because these machines then are put into production in overseas markets and the result is increased competition by foreign producers.  The problem is that when the US market recovers these mills have to look at new equipment at top dollar to startup again because the lower priced used stuff has been sucked out of the market by overseas buyers.  The same exact scenario repeated itself for decades in the textile industry.  It got to where American firms could not make textiles here in the US and compete with overseas sweatshops in Asia and Mexico.
3  Jobless Claims need to be drastically reduced and the job market improve.  This gives consumers the confidence to get out and spend again.
4  Durable Goods Orders need to go up and in so doing fuel the industrial sector to manufacture a host of products again, all of which at some level require packaging, pallets, wood in the actual product or wood fiber at some level.

All four of these factors are looking very bad right now.  I think a recovery is not going to occur until 1st qtr of 2010.

Jesse



www.ironmart.com

[Ron Wenrich]

I believe I'm going to disagree with you, especially on point #2.  I don't see our sawmill technology being exported overseas.  Sorry, but they don't have any money, or natural resources, or a market.  Since our markets are down, they won't be selling to us.  Since we're not buying much of anything, they're not getting any cash from a favorable balance of trade.  More than likely, any foreclosed on mill equipment will just sit idle until markets improve or scrap metal prices increase.

The textile industry is not a good comparison.  Lots of that equipment was old, and the industry was labor intensive.  It also wasn't using the highest degree of technology, so going to a country with lower education levels was not a problem.  Markets were very strong for textile goods in the US.

Next to my home, I have a company that puts on bodies on the back of trucks.  I use that as a barometer to future economic activity.  When their business goes down, that means that their customers are anticipating less consumer activity.  These are mainly the large delivery trucks, and none of them are owned by this company.

In the last few months, Penske has dumped a lot of trucks into the yard.  Penske rents these trucks out for delivery.  There's at least 500 trucks in there.  Does Roger Penske know something about the trucking business's future?  Last year, there wasn't a Penske truck in sight.

There are other trucks in the lot, as well.  Its not brimming over, but its fuller than it was last year at this time.  Someone is preparing to do some trucking.

I don't think you're going to see our economy return to the old shop and charge method of consuming.  People have been burnt pretty bad, and they will have to unload a lot of debt before they turn over to spending again.  We have to work our inventories down so we can get our supply/demand situation in a better balance.  Unemployment is the last sector of the economy that will come out of the bottom. 

You can look at the statistics, but you have to remember that they are from last month.  You can't get current data.  And you should only listen to the media if you can verify what they say.  They editorialize way too much instead of reporting the facts.

[chevytaHOE5674]

I don't see our sawmill technology being exported overseas.

Within the last few weeks one local mill was boxed up and shipped across the ocean. And a month or so back a 1-2 from the region got put on a boat. They are buying the equiptment at pennies on the dollar, and making some use of it.

Also there have been entire mills getting auctioned off on eBay, and getting shipped away.