Foundering forest sector hit again with Abitibi layoffs Cuts 680 jobs as U.S. housing starts slow; high costs bring industry loss to 7,000

BERTRAND MAROTTE MONTREAL The bloodletting in Canada's beleaguered forest products sector continues as Abitibi-Consolidated Inc. prepares to indefinitely shut four Quebec sawmills and related operations, throwing close to 700 people out of work.

The job losses come on top of temporary sawmill shutdowns announced last week affecting almost 1,000 workers. The trend reflects the dismal state of the softwood lumber sector as companies struggle to cope with a dramatic drop in U.S. housing starts, falling prices, soaring raw material costs and the high Canadian dollar.

Montreal-based giant Abitibi said yesterday that the sawmill cuts starting next Monday will affect about 380 workers at four locations: Outardes on the North Shore (200 jobs); St-Thomas in the Saguenay-Lac-St-Jean region (100); St-Raymond in the Quebec City area (50); and Champneuf in Abitibi-Temiscaming (30).

Another 300 cutting and harvesting jobs on the North Shore will also be slashed for an indefinite period, the company said.

Abitibi cited statistics indicating that housing starts in the U.S. market have fallen by more than 26 per cent since the beginning of 2006.

The four sawmills being closed represent about 400 million board feet in annual lumber production, or about 20 per cent of the company's total annual output.

"The high cost of production, including the cost of fibre, combined with the deterioration of the market conditions for softwood, leave us no other alternative but to rationalize our production capacity," Yves Laflamme, first vice-president of Abitibi's forest and sawmill divisions, said in a statement.

The company warned that other forest activities elsewhere in the province could be temporarily closed depending on the duration of the sawmill shutdowns.

"This is a disaster that's unfolding," said veteran independent forest products consultant James Rowland.

"Waiting in the wings are other shutdowns," he said.

Abitibi shareholders, however, appeared to welcome the news.

Abitibi shares rose 13 cents -- or almost 5 per cent -- to $2.87 on the Toronto Stock Exchange yesterday.

Last week, Cascades Inc. announced the temporary shutdown of sawmill and related operations resulting in the loss of about 200 jobs, and Tembec Inc. said it is indefinitely closing three of its mills, cutting 435 jobs, while Weyerhaeuser Co. said it's shutting two mills in Saskatchewan, affecting about 300 employees.

The pressure is mounting on the Quebec government to step in with an emergency financial aid program, and speculation is growing that an announcement will be made within a week, a well-placed industry source said.

Quebec already announced a four-year package worth almost $1-billion in its budget unveiled in March, but it was criticized by industry players for relying too much on investments to be made by companies that don't have the financial means to embark on new capital spending projects.

With these new cuts, the total number of layoffs -- permanent and temporary -- from production shutdowns at sawmills and other forest products operations across Canada stands at more than 7,000 so far this year.

In Quebec, producers have been hit particularly hard by the provincial government's decision last year to slash logging activity by 20 per cent after a report slammed unsustainable forest industry practices.

The move has resulted in higher fibre costs to an industry already struggling with difficult conditions.

Other factors that have hurt Canadian companies are high energy prices in Ontario, shrinking demand for newsprint and fierce competition from low-cost producers in South America.

The forest sector directly employs about 360,000 people across Canada, with another 555,000 jobs indirectly linked to the industry.

***** Sawmill and woodlands cuts Abitibi-Consolidated Inc. is closing four of its Quebec sawmills, as well as cutting back its Quebec woodlands operations, to counter rising costs.

Champneuf Job cuts: 30 Stud mill: 70 million board feet (10') Planing mill: 70 million board feet Outardes Job cuts: 200 Random lengths mill: 200 million board feet Stud mill: 140 million board feet Planing mill: 130 million board feet North Shore woodlands Job cuts: 130 St.-Raymond Job cuts: 50 St.-Thomas Job cuts: 100 Stud mill: 106 million board feet Planing mill: 158 million board feet