BUSINESS

Canada's wood sector on the rise but new jobs won't offset big losses in downturn

07/08/2015 06:04 EDT | Updated 07/08/2016 05:59 EDT
MONTREAL - Canada's wood products sector is expected to enjoy a recovery through the rest of the decade but the turnaround won't replace all of the of the more than 50,000 jobs lost since the downturn, industry observers said Wednesday

The recovery in U.S. housing construction and a weaker loonie is driving much of the improvement and should offset a cooling Canadian housing market and the possibility of softer demand from China, according to a study published by the Conference Board of Canada.

Unifor, the union that represents forestry workers, agrees that the trends are positive, but says policies allowing unprocessed logs to be exported are hurting job creation.

Union official Scott Doherty said only about 10,000 of the up to 50,000 jobs that disappeared following the 2008 financial crisis have returned.

"For the most part, the work is going to the mills that still survived and are now just able to make a profit, but it's not like there's new mills shooting up all over the place in the country," he said in an interview.

Offsetting any job gains is the expected closure of more sawmills in the B.C Interior where the mountain pine beetle has ravaged more than half of the province's forests and annual harvest allowances have been reduced.

Cam McAlpine of B.C.'s Council of Forest Industries doesn't see the province adding many new jobs in the next five to 10 years.

"We've already done most of the rationalizations that we need to do but I don't think that we're finished yet," he said, adding that innovation and technology will also curtail employment gains.

Jobs have also shifted to the United States as Canadian lumber companies acquired sawmills in the U.S. South to take advantage of plentiful, low-cost fibre. The move is also a hedge against uncertainty about the Canada-U.S. softwood lumber agreement that is set to expire in October.

The Forest Products Association of Canada says the national industry is aiming to hire 60,000 people, including more women, aboriginals and new Canadians by the end of the decade. But some 40,000 positions will be to replace retiring workers, with only 20,000 jobs being added.

Meanwhile, the Conference Board said industry revenues should reach $27 billion this year and continue to grow through 2019 to almost $32 billion.

Higher costs should cause pre-tax profits to fall 0.2 per cent to $1.4 billion in 2015, before rising over the next four years to reach nearly $2 billion, according to the Ottawa-based think-tank.

That's a big turnaround from 2007 to 2009 when the industry endured annual financial losses approaching $1 billion and the elimination of thousands of jobs.

Paul Quinn of RBC Capital Markets foresees strong growth ahead but says a big dip in lumber prices so far this year and the resulting imposition of softwood lumber duties is punishing Canadian producers.

The Conference Board expects U.S. housing starts will reach 1.3 million in 2015 and 1.6 million next year. But Quinn is less bullish, saying he doesn't see the U.S. market reaching the higher level until 2017 or 2018.

"I think 2016 will be a decent year and 2017/2018 should be just terrific, barring we don't have a recession between now and then and it's not looking so good in China and parts of Europe," he said from Vancouver.

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