Sault Ste. Marie hardwood producer Boniferro Mill Works resumed full production in late May after cash flow problems and weak markets forced management into a three-week shutdown.
With slumping U. S. demand for maple and birch lumber and inventory building up, the sawmill shutdown in late April laying off 41 of its 48 workers.
Repairs also had to be made to Boniferro's rail siding after it was shut down by Canadian National Railway during a national safety blitz.
"It's good, but it's not great," says company president Jim Boniferro of the May 22 resumption of activity at the former Domtar facility. "This is as ugly as it's been in a long time. It's a tough market out there."
Boniferro says his company is weathering the forest industry's "perfect storm" exacerbated by a strengthening Canadian dollar, slow U.S. housing starts, and various wood supply and manufacturing challenges. But he maintains the single biggest issue remains being "over-charged" on provincial government residual value charges.
The residual value charge is attached to stumpage fees in Ontario's Crown Timber Pricing System.
Boniferro maintains his mill has been "penalized" and "improperly assessed" during its first four years of operation.
In that time span, the company claims to have paid more than $1.1 million in residual value charges out of their total stumpage of $2.3 million.
Boniferro says the fees paid depleted his company of working capital that he would rather invest into equipment and production line upgrades.
"As a small mill, what we've been unable to get across to the Ministry is that's been crippling to us for four years. It's taken away all the money from us in a tough market. You need your war chest full to get over this hump."
He remains mystified by how the Ministry of Natural Resources (MNR) makes the calculation, but he remains confident in Minister David Ramsay's assurance that the system will be investigated.
An MNR spokesperson told Northern Ontario Business that residual charges, like all stumpage fees, are reflective of the price of various forest products.
The spokesperson said there's no flaw in their formula for residual charges, adding the main issue has been getting reliable production figures from hardwood mill operators. The government has hired KPMG to review the stumpage fee system.
Boniferro doesn't buy it, calling the comments "extremely inaccurate" and "insensitive."
"I've told the Ministry that it's insulting to the workers here and to us as a company."
Boniferro says every operating Ontario sawmill must submit a detailed annual report listing their costs, capital improvements, sale prices and consumption of all Crown and private wood, as a condition of their licence renewal.
Based on those submitted figures, the MNR does its value calculation and makes monthly adjustments.
"They have that data, they've chosen not to use that data."
Boniferro says there's been some wide variances in value charges ranging from a September 2004 high of $14.55 per cubic metre to just six cents in June 2007. "I'm not a statistician, but I think it's impossible.
"Obviously there's something terribly wrong with it. I have confidence that the Minister will keep that commitment to us and fix it."
Boniferro says his company doesn't meet the criteria for any of Queen's Park $1 billion forestry aid package since they have no private leverage money to invest in capital upgrades and banks are reluctant to lend money to forestry companies.
The company is a 50/50 partnership with Fox Lumber Sales of Montana, their exclusive sales agent in the U.S.
Their lumber is used for bowling pins, basketball courts, guitars, counter tops and especially household furnishings.
The decline in the U.S. housing market trickles down to hardwood mills, says Boniferro. "If you don't build homes you don't put in hardwood floors and kitchen cabinets. But sometimes there's a relief, if you're not building homes, you're renovating and buying new furniture."
Their customers are also facing stiff competition from imports of Chinese wood products being used for secondary manufacturing, particularly among high-end furniture makers.
During their three-week shutdown, the City of Sault Ste. Marie quickly pitched in with a $60,000 interest-free loan to help hire a railway contractor to repair Boniferro's rail siding and the mill was shipping out their finished lumber inventory within two weeks.
"It sped up our return to work by almost a month."
Their siding is also used as a reload centre by Algoma Steel, Anthony-Domtar Engineered Products and multiple Sault companies.
