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June 2006 - The
Logging and Sawmilling Journal
Ontario government addresses forest industry’s competitiveness
By Jamie Lim
Earlier this year, the government of Ontario clearly signaled that the necessary policy and investments will be put in place to ensure the forest industry continues to provide jobs, and contributes to the province’s economic and social prosperity.
It’s an understatement, but the industry is encouraged by the government’s moves. The industry spoke, and the McGuinty government has listened. Both the Premier of Ontario and the Minister of Natural Resources have acted to address longstanding competitiveness issues that have contributed to a grim and lengthy list of mill closures in Ontario.
As a result of the government’s moves, Ontario is now a more competitive jurisdiction for the forest industry and will see a material reduction in delivered wood costs leading toward $5 a cubic metre. It may not sound like much, but delivered wood costs—the price to get a log from the forest to the mill— have dropped from $55 to $50 per cubic metre, helping Ontario get closer to a world average of $35 per cubic metre.
The changes were spurred in part by a government report warning of an escalating crisis in the forest industry if action was not taken, finding as many as twelve mills were in peril of closure—the direct result of operating in one of the highest cost jurisdictions in the world.
Part of a three-pronged approach, the government heeded a key recommendation from the report—the Minister’s Council Report on Forest Sector Competitiveness—to re-assume the cost of construction and maintenance of permanent primary forest roads and 50 per cent of the cost of secondary roads.
These costs were downloaded on to industry in the early and mid-1990s. The government’s commitment of approximately $75 million for roads will address long-term costs.
Further, the government undertook a one-time refund adjustment on timber pricing that rebated about $70 million to the industry by the end of this past March.
And, recognizing the need to encourage use of underutilized tree species and, at the same time, help the embattled veneer sector regain a competitive foothold, the provincial government has approved a three-year, $3 million program focusing on poplar and white birch.
The Ontario forest industry really considers the changes to be the equivalent of a home run. The government has made a very pragmatic and important decision that will have huge returns for the people of this province in terms of jobs, the generation of wealth and tax contributions that annually exceed $1 billion.
Ontario’s Forest Coalition (OFC) as a whole deserves a great deal of credit for putting pressure on the government. The OFC is a partnership between industry, municipal organizations and aboriginal economic development funds that joined together with a common purpose of promoting and enhancing the Ontario forestry sector’s ability to continue to create jobs and economic prosperity. What the coalition has been able to achieve is nothing short of unprecedented, considering that it brought such a wide variety of groups together. The coalition took a fair, fact-based, and, at times, tenacious, approach, that stressed partnership with all orders of government.
The measures the government has announced will have positive effects on not just Northern Ontario communities like Thunder Bay and Kenora, but communities throughout the entire province.
Based on 1996 census data, 285 communities in Ontario are somewhat forest dependent, while 70 of those are moderate to highly dependent. Close to half of these 285 communities are located in the central and southern parts of the province. These numbers underline the importance of the forestry industry, and that it benefits towns and cities throughout Ontario—not just Northern Ontario.
The numbers also illustrate the importance of the Ontario government’s role in forest management. The total area of Ontario is approximately 106.8 million hectares, or more than one million square kilometres, and of that, 69.1 million hectares, or about 65 per cent of the total area, is forested land. The province of Ontario owns some 88 per cent of that land.
With this announcement, the McGuinty government has sent an important signal to the corporate boardrooms that Ontario intends to be a competitive jurisdiction in which forestry can operate.
In the larger picture, the government has helped ensure a future for a forest industry which is second only to automotive in terms of contributions to the provincial balance of trade. While the industry is currently working on stabilizing its situation—beset by a rising Canadian dollar and, up until the new softwood deal, American tariffs on Canadian lumber—the government has made tremendous moves to address what had become an uncompetitive business climate for the forestry industry inOntario.
Jamie Lim is president of the Ontario Forest Industries Association (OFIA). The OFIA is the voice of 30 member companies responsible for the stewardship of 85 per cent of the fibre on Ontario’s Crown lands.