Queens County mill owners battling market storm

Last week, two of the major mill operators were at the Mersey Tobeatic Research Institute in Kempt, explaining to a packed house what was going wrong and what was likely to happen next. The two were Blair Douglas, of N. F. Douglas Lumber in Caledonia, and Richard Freeman, of the Harry Freeman and Son mill in Greenfield.

While many Canadian sawmills have closed down, both the Douglas and Freeman mills are still in operation, developing ways to ride out the difficulties. Both are family-owned and community-minded, working to find products and markets, the objective being to maintain the mills until the factors contributing to the decline have reversed.

Douglas and Freeman were at the MTRI as a part of its regular lecture series, which often focuses on scientific research but also has as part of its mandate the study of economic, historical and cultural factors affecting the region.

First to speak was Blair Douglas, whose comments form the basis of this column. Richard Freeman's remarks will be covered next week.

Douglas pointed out that traditionally sawmills in eastern Canada have used the United States as their main market. That market has changed dramatically. Because of loan problems, the US has seen a tightening up of credit, and there are a lot of unsold houses on the market, meaning there is less demand for Canadian lumber.

He told the group that big mills in British Columbia, in order to save on costs by efficiencies of scale, were actually producing more lumber now, so that as demand is going down in the US, more Canadian lumber is on the market. At the same time, the pinewood beetle is affecting forests out west, forcing mills to harvest trees quickly, flooding the market even more.

Blair said the other big problem has to do with the softwood lumber dispute with the United States. He said Canada had gotten into a bitter battle with the US, which asserted that Canadian lumber is subsidized. He pointed out the US claim was not against eastern Canada, but rather against all other parts of the country. Even so, he said, we were caught in it, since it created market upheavals.

Blair said that in eastern Canada, private woodlands make up about 75 per cent of the forests, while it is reversed in the west. That means that in the west lumber producers were able to keep the cost of raw materials down, which was not the case in eastern Canada.

He also made the point that while he had not traditionally been in the US market himself, any barrier to trade affected the marketplace. For example, he said, if he were shipping pine lumber to the United Kingdom, and Quebec couldn't get its lumber into the United States, its producers would shift and send their lumber to the UK.

In terms of current trends, Blair said the housing market in the US remains weak, with over 10 months supply of unsold houses, and things didn't look good for the rest of the year. He said that 2008 would be at best a start at recovery in the marketplace, and that it would be 2009 before there would be any meaningful bounce in the economy.

Complicating all of this is the high value of the Canadian dollar and a big difference in what people are using for building, he said. Boards made of pressed sawdust are being used, and cheap South American radiata pine is also being used, even though it is not good for outdoor use. An additional problem is a changing geography for manufacturing, where wood furniture which used to be made in North America is now being made in places like China (the factory in Cornwallis producing for IKEA has been closed and a new IKEA plant opened in China).

Blair said that, as to the future, he had questions rather than answers. He asked what effect higher energy costs would have on rural forest-based companies, suggesting that there may be other ways to use the forest, in terms of biomass and biofuels. He also said sawmills may have to become part of building chains, so that they are a part of someone else's production – though that posed difficulties too.

For the present, Douglas Lumber has reduced its workforce and reduced production. It is producing for orders now, looking for niche markets for its lumber, and working to be versatile in the kinds of wood it is producing. It has reduced costs by putting in wood waste burners instead of using oil energy.

Douglas Lumber is selling pretty much all over the world, Blair said. The company is staying close to its customers and is willing to provide what they want.

Next week: Richard Freeman on the mill in Greenfield.

- Tom Sheppard can be reached at twsheppard@gmail.com