Sun Wave plans for Watson Island could be affected by Terrace Lumber closing

Last week it seemed that the pulp world was bouncing back, a story from the Vancouver Sun had the pulp and paper industry looking forward to the immediate future, with higher prices and better profits forecast for the short term. A situation that one would have though would bode well for a start up of the dormant Watson Island pulp mill.

However, optimism it seems isn’t the case locally, in a front page story in today’s Daily News; the word out of Terrace about the closure in June of the Terrace Lumber Company is causing some serious ripples in Prince Rupert. The prospect of the sawmill remaining shut down is putting the restart plans for Watson Island into question as the owners from Sun Wave ponder the logistics of running a pulp mill without a stable and reliable supply of timber for the operation.

With the latest rescue plan, hopes that Sun Wave would purchase the saw mill seemingly being dashed, the owners in Terrace have gone a long way from the optimism at the time of the re-opening, to the state of closure that the mill sits under today.

The owners have now begun the lobbying for governmental relief to make the cost of running a sawmill more manageable in the Northwest. Without that relief from the government, some suggest that there is some serious doubt as to the viability of running the sawmill, a situation that could have a domino effect felt all the way to Prince Rupert.

The entire story is provided below.


SHUTDOWN MAY HURT MILL CLOSER TO HOME
By Leanne Ritchie
The Daily News
Tuesday, August 8, 2006
Page One

Any closure of the Terrace Lumber Company could potentially be a problem for restart plans of Sun Wave Forest Products’ Watson Island pulp mill, said Bill Belsey of Points North Consulting.

Belsey, who has been hired by Sun Wave to oversee the day-to-day operations of the mill while Sun Wave seeks start up financing, explained that the Terrace sawmill and its associated forest licence were taken into account by Sun Wave in its fibre supply plan.

“The sources of fibre that can be found in the area are generally decadent,” said Belsey, pointing to the high content of pulp in the timber profile.

“Historically, you need both a sawmill and pulp mill to make both industries feasible. When you lose one, it makes the difficult to run the other.”

The Terrace Lumber Company sawmill and Sun Wave ‘s Watson Island pulp mill have historically been owned by the same company – Skeena Cellulose up until 2001, and following that New Skeena Forest Products, although the company was never able to find start-up financing and went bankrupt.

Since then, the assets have been split apart, with the pulp mill and Carnaby land and forest licence purchased by Sun Wave Forest Products earlier this year, the Terrace – based sawmill purchased by a group of Terrace based business people back with a loan from the City of Terrace in the summer of 2005, and Tree Farm Licence one, the largest fibre holding of the company, sold to Coast Tsmishian, a company owned by the Lax Kw’alaams band, also in the summer of 2005.

However, in June, the Terrace Lumber Company closed down because of low lumber prices, the high Canadian dollar, the cost of the softwood lumber tariffs and the high cost of operating in the region.

They are hoping to find and investor to provide them with the equity to hold on until lumber markets improve and they can restart operations.

The mill in Terrace was employing 70 directly, not including contractors working in the woods.

“It (the potential closure) could have an impact on the pulp mill because part of our fibre supply took account of the sawmill and forest licence. How we overcome that would depend on if someone buys it and restarts it or whether other sources of fibre can be found in the general area,” he said. Sun Wave was approached to buy the sawmill, however those talks have not gone anywhere.

In an interview with the Daily News, John Ryan, chair of the TLC board of directors, said that the high cost of logging in the Northwest is definitely part of the problem.

Members of the forest industry have been pushing for the province to declare a special economic zone, which would allow the province to lower the cost of logs purchased by companies and deal with the geographical challenges facing forestry companies.

A lengthy list of reports stretching back to the 1980’s have recommended the province address the higher costs of logging in the Northwest.

“It’s something we have been pushing for some time. A lot of our pricing is done based on a market that’s not reflective of the area’s profile and then there’s the added cost to get the fibre to market,’ said Belsey.

And the low stumpage around the pine beetle killed wood is also affecting the area, he added.

Ryan noted the province has given areas affected by the pine beetle a special economic zone, but has yet to make that move in the Northwest.

“A special economic zone would be a huge benefit to the entire region,” said Belsey.