By IAN ROSS
It’s been no picnic in 2007 for makers of forest products in Sault Ste. Marie.
For St. Marys Paper, last summer’s euphoria of securing private financing to save the 100-year-old mill was tempered by mechanical fits at the re-start and the cost of having to buy their way back into the tough glossy paper market.
However, the reborn super calendar paper maker was running at full capacity this fall with an order book that’s filling up “almost too rapidly,” says company president Gord Acton.
The once-bankrupt producer resumed production in early July with the phased start-up of the first of three paper machines.
September was the first month all three were going full-out.
During one record-setting week in October, 85 truck-loads of glossy paper headed across the International Bridge to customers in the U.S.
A two-month shutdown earlier this year during bankruptcy proceedings and the ownership change played havoc with production soon after start-up.
The lack of humidity in the mill affected control systems, plugged up filters and sprays, and cost managers a few days of production.
By mid-October, tonnages were working toward their targeted 655 tonne-per-day capacity.
Acton, a Sault lawyer who became head of the local ownership group in June, says the 320-employee company had to buy its way back into the market, selling paper at low prices with small tonnage orders and at varied weights in order to win back the good graces of customers.
He anticipated at larger than forecasted loss this year, but expects the mill to become profitable in 2008.
“It cost us more than we anticipated, but we’re seeing our prices rise and market increases in price for our product.”
Slowly, St. Marys is earning customers back including a few they haven’t seen in years, partly because of the mill’s "green" designation as being North America’s only FSC (Forest Stewardship Council)-certified super-calender mill.
Since almost all of their customers are in the U.S., Acton says the company is aiming to pick up the highest yield orders to weather the pressures of the strong Canadian dollar.
“We can make money at $1.05,” says Acton. “We think we have the cost, price and tonnage per day structure that can withstand this dollar.”
As well as exploring for opportunities in Canada, St. Marys is dabbling in overseas markets for the first time, shipping their first trial container-load to Italy and another roll to Budapest.
To survive into this next century, St. Marys will need to generate its own power.
Officials are also vigorously pursuing a co-gen project to supply steam for their processing needs either through a partnership with Algoma Steel or as a stand-alone 38-megawatt project.
Queen’s Park has a $6 million grant available along with an additional $17 million loan guarantee, once the design plans are finalized.
Across town, hardwood sawmill owner Jim Boniferro was enduring tough times under market conditions he characterized as “as bad as I’ve seen it in 25 years.”
“The Canadian dollar at par makes it difficult, but those are challenges that we as an industry have to meet day in and day out,” says the president of Boniferro Mill Works.
The resurrection of the former Domtar mill in 2003 was a feel-good story for the Sault, but the hard realities of the crisis in the forestry industry have crept in.
“It’s a day-to-day operation. People say there’s a crisis in the forestry industry, but I don’t think they realize how bad it really is.”
The hard maple and birch lumber mill ships product to the U.S. for use in gymnasium floors, squash courts, to furniture makers and for low-end products such as bowling pins, pallets and push brooms.
Rethinking his product mix is something he does every day. But there’s no financial wiggle room to buy new equipment to make dramatic changes to get into high-end flooring.
“That’s not an option for us.”
Instead they’re producing rail ties and making minor production modifications for their flooring customers to make a heavier five-quarter board.
This fall, Boniferro was taking the Ontario government to court over a stumpage fee called the residual value charge and the method by which it is assessed.
He contends Queen’s Park and the Ministry of Natural Resources has been overcharging him and wants the $2.7 million paid in fees to be refunded.
Boniferro says the money would have been better spent re-invested back into operations.
“It’s handcuffed us in our ability to invest in capital in the mill” and look for growth into value-added products and processes. “It’s tough to weather the storm with those funds tied up.”
His mill was shut down briefly for three weeks last spring because of weak markets and cash flow problems.
Flakeboard plant manager Mike Rosso says his 125-employee fibreboard mill is in the same fix as the others.
“We’re struggling with soft markets, the U.S. housing and sub-prime mortgage situation. The entire U.S. composite panel market is slow.”
For the first time in its 11-year history, the Sault plant reduced its operating schedule from a seven-day weekly operation to five and six days.
“We’ve not been running at full capacity since July.”
There were some layoffs of their probationary workers because of market conditions.
The prices for glue have risen dramatically this year because of the explosion in the cost of methanol. Methanol is the main ingredient in glue.
Rosso says price increases are in the range of 25 per cent.
But their lamination line added in 2005 has been a salvation.
“It’s very safe to say we’ve very fortunate that the lamination facility came to the Sault because that value-added business has helped us soften some of this ugliness.”
