Tuesday, May 15, 2012

THE CORNER BROOK DILEMMA

If a paper mill with all of the shipping and power advantages of Corner Brook can not make a go of it, than nothing can.

Much of the companies energy needs are self-supplied through hydro-electric plants in Deer Lake (129MW) and Watson's Brook in Corner Brook. An additional 7-10 MW is provided via a co-generation turbine that burns 713 tonnes a day of biomass .

Kruger is a family owned, private company. Kruger Inc. is the largest, privately owned forest products company in Canada.The latest ask from the company on reducing payouts for pensions is an indication of how troubled the Corner Brook operation is.

 Founded in 1904, Kruger Inc. is a major producer of publication papers, tissue, lumber and other wood products, corrugated cartons from recycled fibers, green and renewable energy and wines and spirits. The Company is also a leader in paper and paperboard recycling in North America. Kruger operates facilities in Quebec, Ontario, British Columbia, Newfoundland and Labrador, and the United States.

The company has been trying to get the price of production down. It increased the amount of electricity it can produce by moving into co-generation, mechanical harvesting lowered the cost of cutting wood, they closed two machines that were costing too much to operate, they have gotten loans from the unfunded pension fun, the staff have taken wage roll-backs and the province has poured millions into the mill but it is never enough.

This is a company that is teetering on closing down it's Corner Brook Operation. It appears the latest do-or-die offer is a form of suicide-by-union. The company does not want to be seen as the bad guy, so it wants the union to pull the trigger.

The reality is that the company has requested and requested. The union, with the closure of the mill hoovering over them, has conceded and conceded. The company wants more each time without really providing workers with a road map to the future.Perhaps, the ongoing volatility in the world economy, the expense of producing in Corner Brook, the lower demand for paper and new, cheaper sources of fiber prevents Kruger from being able to forecast anything. At this point it is all about surviving. Long term strategic planning is a luxury.

Over the years, I have seen a number of commercial ventures close their doors, blaming union intransigence. The ask is often higher than union members are willing to accept.

A decade ago, when a Liberal government privatized the Stephenville Airport the operators were stuck with deals negotiated for airport employees in Vancouver, Montreal, Halifax and Toronto. It as impossible for a small independent airport that was trying to survive by refueling international jets to offer that level of compensation and benefits. The union, fearful that any concessions made in Stephenville might trickle into other airports, they wanted the membership to hold the line. That line was a sure path to bankruptcy and job losses, yet solidarity was the paramount issue for the union.

The employees of  Corner Brook Pulp & Paper are confronted with a vexing dilemma, a slow death by a hundred cuts, or to throw their hands up in the air and say enough is enough, let the company do the inevitable! Unless of course there is a future?

It would be interesting to know if the provincial government feels there is a future for Pulp & Paper production in this province. The issue in Corner Brook is not unlike the closure of the Burin Secondary processing plant in the fact that both are examples of failed secondary processing of renewable natural resources.

If Kruger pulls the plug, will the demolition teams arrive, like they did in Stephenville, to level the site before another company can entertain utilizing the plant?

The mill employs roughly 500 people. Quebec based Kruger Inc.purchased the mill from Bowaters in 1984. The mill began operations in 1925 as the Newfoundland and Labrador Power and Paper Company. Paper mills in Stephenville and Grand-Falls have been closed in recent years.

These are Darwinist days in the paper making world, not unlike fishery. Those who can operate and make money will survive. Those that failed to invest in new technologies to get the cost of production down will fail. 

It must be hotter in the board room than the boiler room at Corner Brook Pulp and Paper these days.

1 comment:

Cyril Rogers said...

Well, Peter, it could be another case where expropriation is being contemplated....or have we learned a lesson on that one?

It has been painfully obvious for some time now that the Corner Brook mill was having difficulty and it was just a matter of time before something drastic happened. If it does close, one would hope that we, the people, are not stuck with a costly clean-up.

It is also obvious that we need to rethink our resource strategies and determine whether or not there are other viable options. Primary resources are still needed but how to exploit to our benefit, and in a competitive manner, is the vexing question. Old school thinking won't cut it.

As a side note, if this mill closes, there will be a lot of additional power for the island part of the province. Will it be enough to replace Holyrood? Probably not entirely but more efficient use of the island grid, and a few other tweaks, would certainly delay for decades any need for additional power. I think we need to be very careful on plowing ahead with MF, as it is already on very questionable ground.