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MB Looks Beyond BC

Summary: A new MDF plant at Pembroke, Ontario - an MB joint venture - continues the company's strategy of diversifying outside of BC and into new product lines.

By Tony Kryzanowski
Copyright 1996. Contact publisher for permission to use.

As North American timber resources diminish, companies like MacMillan Bloedel now realize that it is dangerous to have all your eggs in one basket. Their corporate strategy over the past five years mimics their competitors, who have all launched aggressive campaigns to diversify beyond British Columbia into non-staple commodities such as engineered wood products.

MacMillan Bloedel has become involved in more than 15 joint ventures to diversify its wood products package. Half of its asset base is now outside BC. Here are a few other examples of diver-sification beyond BC, and of outside lumber and plywood manufacture. West Fraser Timber Co. recently purchased the combined sawmill and medium-density fibre-board (MDF) plant near Whitecourt , Alberta from Alberta Energy Company. Ainsworth Lumber recently constructed an oriented strandboard (OSB) plant in 100 Mile House, BC, and a world-class OSB plant in Grande Prairie, Alberta.

Georgia Pacific recently partnered with New Brunswick ’s Flakeboard to manufacture MDF using the world’s largest continuous press in Sault Ste. Marie, Ontario. Following that same pattern, MacMillan Bloedel has partnered with an Ottawa Valley sawmill consortium called FIDEV to manufacture MDF in a state-of-the-art facility in Pembroke, Ontario, 160 km northwest of Ottawa. It will begin production this December. They also operate a new OSB plant with partner H.J. Forest in Wawa, Ontario, and are building another MDF plant in Pennsylvania.

Is there a trend here? The most telling story is MacMillian Bloedel’s current annual allowable cut in BC. It has dropped from 7.4 million cubic metres in 1992 to 6.6 million cubic metres in 1996 — a 12 per-cent reduction. A recent Southam newspaper report focussing on trends among BC forest com-panies noted that MacMillan Bloedel sees a future when governments allocate smaller timber licenses. “Where MacMillian Bloedel is heading, as well as a lot of the industry, is into the composite woods,” says Pembroke MDF plant production manager Dan Cote. “It’s a bit more economical.

The size of logs is getting smaller and smaller, so they have taken a really aggressive approach to composite woods and engineered wood products.” That might explain their desire for joint-ventures with smaller operators, while focusing on wood product marketing. “ Through MacMillian Bloedel’s distribution, they sell particle board, OSB, lumber and other wood products,” says Cote, “but they have not been able to supply MDF.

I think there is a desire to include that as a product as well.” The MacMillian Bloedel facility in Pembroke is the company’s only Canadian MDF plant. But even as the facility prepares to enter the market, it faces stiff competiti on from a new Georgia Pacific/Flakeboard plant in Sault Ste. Marie with a six-month head start. They acknowledge that MDF prices have dropped because of increased supply and flat demand. MDF prices tumbled about 16 per cent in 1995, after a period of strong market demand.

It was then that MacMillian Bloedel and partners agreed to build the plant. But theirs is a long-term strategy, in a market that tends to swing less dramatically than the volatile lumber market. “Our plan is to make the highest quality MDF in North America, possibly in the world, or at least try to be in the top five,” says Cote.

“We have the raw materials, we have the equipment, and now what we need are the people.” Manufacturers rate MDF on how well it can be machined and how well it holds paint. For example, an MDF sheet with a high-density face and high-density core is greatly valued, as it reacts well to machining and can eliminate several steps in the expensive and labour-inte nsive secondary manufacturing process. An MDF sheet with a high-density face and lower-density core works best as overlay. In terms of plant personnel, the Pembroke MDF plant has an excellent start.

Both Cote and plant manager Randy Johnson directed operations at West Fraser ’s MDF facilities in Whitecourt, Alberta. That facility was a top MDF producer, and MacMillan Bloedel hopes to duplicate that result in Pembroke. They have started by taking a different approach to plant management, moving away from the hierarchical top-down approach.

They call it “participative management,” encouraging a team approach to decision making and providing innovative solutions, as well as sharing in the financial reward as they meet or exceed product and sales targets. There will be many opportunities to pro-vide new product ideas. Plant managers estimate they are capable of producing about 3,000 different products.

In addition to MDF manufacture, the plant has a molding blank program to suit the individual needs of molding manufacturers and the shelving market. What attracted MacMillian Bloedel to Pembroke was a low-cost fibre supply and excellent proximity to central and eastern North American markets. MDF’s main consumers are furniture cabinet and mold-ing plants. They have no plans to market their product offshore.

The area where the plant is located has a long history of logging and lumber manufacture. However, there was no market for by-products such as wood chips and saw-dust — the prime ingredients in MDF man-ufacture.

“This is a unique area of Ontario where there is an awful lot of sawmill residuals, but not necessarily a lot of competition from pulp mills,” says Cote. “We’re right in the middle of a pretty good fibre basket.” MacMillian Bloedel spent a number of years investigating the right opportunity to move into the MDF market.

When they finally did, it was in a big way. They launched construction of their Pembroke and Pennsylvania facilities simultaneously because both plants will use different raw materials. They are about the same size.

The FIDEV consortium also realized a business opportunity. They will supply about 70 per cent of the plant's wood chip and sawdust needs, with the rest supplied by other sources. The plant will use all softwood residuals derived from pine, with about a 50/50 wood chips-to-sawdust mix, and will consume 350,000 m 3 of wood residuals annually.

While sawmill shavings are another likely wood - residual source, local sawmills also sell this fibre to animal bedding manufacturers . It will cost the partners about $130 million to build the MDF plant, which started construction in July, 1995. MacMillian Bloedel owns an 83 per-cent share.

Once operational, they will produce about 130 million square feet of MDF, based on 3/4'' thickness. They will operate 24 hours a day, seven days a week, rotating 88 full-time employees. As part of the plant's management plan, employees will have a s ay in the final shift rotation.

Current thinking is for a 12-hour shift. A Kusters continuous press gives them the option of producing MDF between 3 mm and 32 mm thickness, ranging from 6' to 18' long, and a width of between 8' and 10'. As wood chips and sawdust enter the plant, they will first encounter a 66'' refining system provided by Kvaerner Hymac. Then the refined fibre dries in MEC dryers.

Next down the manufacturing process is the forming line, with equipment provided by Schenck. The press is a Kusters contin-uous press, and the finishing line equipment is supplied by Globe. They also provide the sawing and handling equipment. Included in the finishing line is a Stanneman eight-head sander.

One of the major economies realized by engineered wood plants is the ability to manage the manufacturing process electronically. The Pembroke MDF plant will use an operator-interface system called Wonderware, provided by Allan Bradley. Pembroke MDF will be customer driven, rather than geared toward mass production.

"We won't manufacture to inventory," says Cote. That's where the molding blank pro-gram and the plant's flexibility come into play. Given this objective, it takes an expe-rienced management team to maintain production efficiency. Cote adds that it was the fibre supply, not any particular incentive provided by the Ontario gove rnment, that attracted MacMillian Bloedel to Pembroke.

Ontario is no different from other parts of the country where fibre resources are stretched. Coming up with that additional 30 per cent wood residuals needed by the plant, especially in light of the competition they face from Sault Ste. Marie and pulp mills, won't be easy. Other than their molding blank program, the partnership has no current plans to produce value-added products in Pembroke ; however, they are positioned to make a move into value-added, should there be a market.

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