Good times for northern Ontario's forest industry, but a new mill wants to avoid the 'boom-bust cycle'
Erik White | CBC News | Posted: May 9, 2023 9:50 PM | Last Updated: May 10, 2023
Recent union contracts for northern Ontario forest workers seeing 23-36 per cent pay hikes
LP Building Solutions, one of the world's largest producers of oriented strand board, is buying an old strand board plant near the northern Ontario town of Wawa.
But the U.S. company wants to make something else there out of wood chips and resin.
"Prices are very volatile. It's traded like a commodity like oil or natural gas or gold," Aaron Howald, LP's vice-president of investor relations and business development, said of the market for strand band, which is sometimes called particle board or wafer board.
"The easy way to think about that is that we're pushing all of our products up the spectrum of value."
But now LP plans to make wood-based siding at its Wawa plant, part of a general shift the company is making away from the "boom-and-bust cycle" that's tied to the housing market.
Howald says the renovate and repair market that siding fits into is "quite a bit more stable" and "growing much more quickly," while providing an environmental alternative to vinyl and plastic siding.
"Because it's made out of sustainably-harvested renewable wood, it's actually carbon negative. It looks great and you can feel good about having it on your house," he said.
There's no timeline on when the Wawa plant will be up and running, but LP figures it will create around 200 jobs in the area.
This is the latest plan for a plant that's gone up and down with the market since it opened in 1995 to make oriented strand board.
After some tough early years, it closed in 2008. The Wawa mill was reopened in 2013 as a plant for manufacturing wood pellets, but that only lasted four years.
After another eight years sitting idle, it was bought by Quebec firm Forex last spring, aiming to once again produce oriented strand board, and securing a $15 million grant from the provincial government to do so.
But those plans also came apart, setting up the sale to LP.
John Duncanson, an industry analyst and the executive vice-president of Corton Capital, says the last few years have been a good example of the peaks and valleys of the wood business, with prices going through the roof during the COVID-19 pandemic, only to come crashing back down.
"The lumber side of the business had a very good couple of years, it's been hurting in the last year with all the interest rate gyrations," he said.
"The industry is pretty close to running at break even right now."
But Duncanson says if the economy goes into recession, as many are predicting, things could slow down even further along with the housing market.
After a couple of good years for northern Ontario's forest industry, now the paycheques for workers are about to get a lot thicker.
Unifor has been negotiating close to a dozen collective agreements at mills across the region over the last year.
Northern area director Stephen Boon, who represents some 5,000 forest workers in the north, says most new contracts are built around wage increases between 23 and 36 per cent.
"Those increases are not out of whack with reality. The industry has done very well. There [were] record profits a year ago. The industry hasn't seen profits like that in decades," he said.
"The other reality right now is wages have gone up, job market has tightened. So companies have come to the table and said, 'We understand we have to do good contracts to recruit and retain people in the industry.'"