Domtar closing four mills, laying off 950 workers Eastern Canada's forestry industry already hit hard

CNS Lynn Moore and Philip Authier MONTREAL-- Domtar Inc. yesterday delivered the third body blow to Eastern Canada's forestry industry this month, announcing the indefinite closure of four sawmills and about 950 job cuts, mostly in Quebec.

Three of the soon-to-be-idled sawmills are in the Abitibi region, which is already reeling from job losses in the forestry sector, while the fourth is in Nairn Centre, Ont.

Domtar, which this spring warned that Canada had lost its competitive edge in the forestry industry, blamed rising production costs and eroding demand for the shutdowns. The dramatic drop in U.S. residential housing starts has walloped all Canadian lumber producers.

"Substantially higher procurement and processing costs for sawlogs have impacted the competitive position of our sawmills in recent years... (and) the slowdown in demand has exerted considerable downward pressure on selling prices of wood products in recent months," Domtar executive vice-president Richard Garneau said in a statement.

The Quebec government expects the crisis rocking the forestry industry to last another 18 to 24 months and lead to further sawmill closures and job losses, Economic Development Minister Raymond Bachand said yesterday.

The government has been wrestling with a rescue plan for the industry for months and now is prepared to pour still more money into efforts to help the workers, towns and mills caught in the crossfire of a collapsed U.S. housing market and dropping Canadian dollar, he said.

"We know there is a crisis in the forestry industry," Bachand said. "We have seen the temporary closings of plants come one after another. Yet it's clear the forestry industry will remain an economic motor and will come out of this period in 18 to 24 months stronger than it is today.

"The crisis will not be settled in the next few weeks. It's clear we have a period of uncertainty before us." In Quebec City, Guy Chevrette, president of the Quebec Forestry Industry Council and former Parti Quebecois minister, said the industry is going through "the worst structural crisis of its history." Chevrette chided the Charest government for not anticipating the gravity of the crisis and said the government's previous response, offering the industry loans to restructure, did not meet the industry's needs.

The mill shutdowns will cut Domtar's production capacity by about 400 million board feet of lumber or about 36 per cent of total annual lumber capacity, Domtar spokesman Christian Tardif said.

October has been brutal for Quebec forestry workers. Temporary sawmill shutdowns, and the corresponding loss of jobs in woodlands operations, have translated into almost 2,000 people being thrown out of work.

-- CanWest News Service