Under the challenge of US timber tariffs, the new coronavirus pandemic will undoubtedly worsen the Canadian forestry industry’s situation which urgently needs the support of government funds to survive.
The pandemic caused the forest industry to face a severe recession. Currently, the Canadian forest products giant Resolute Forest Products (RFP) has laid off more than 1,000 employees at its Quebec factory.
Karl Blackburn, senior director of public affairs and intergovernmental relations at RFP, explained: “Currently, there is a slight increase in the demand for the pulp market, especially the surge in the demand for toilet paper, but the commercial printing paper or other wood products market has been hit hard, and there is no improvement in the short term.
He continues: ” The company’s three factories in Ontario have not yet laid off staff, but closed the sawmill in Ignace, Northwestern in April 2019. Affected by the pandemic, they were unable to resume operations as planned this spring.”
In recent years, the Canadian timber industry has experienced ups and downs. Since 2018, the timber industry has been sluggish due to price drops. For all the Canadian timber industry, 2019 was an extremely difficult year, and all industry insiders expected the market to pick up in 2020. However, at the beginning of 2020, an increased demand had brought hope, but the pandemic struck the growth momentum. At present, only the government can help the forest products market return to the right track.
The Canadian Forest Products Association (FPAC) pointed out that due to the coronavirus outbreak, about 40 sawmills in Canada had to be temporarily closed, resulting in more than 5,000 people being unemployed, and the government announced that the subsidies provided could not meet the real needs of the forest industry.
FPAC Executive Director Derek Nieble recently said that although the Canadian government provides emergency salary subsidies to companies, it requires that only companies whose income drops by 30% year-on-year can get subsidies. Since the economic income of forestry industrial enterprises has been in a downturn as early as March 2019, it is impossible to imagine a further 30% reduction in income on this basis, so most companies cannot really meet the threshold for subsidy application.
In addition, in the wood industry, even if the product prices drop significantly, such as in March and April, the impact on corporate income will not be visible until 4 to 6 weeks. Therefore, judging the trend of the wood industry should be based on predictions, rather than using previous industry data as a reference.
He believes that the implementation of subsidies should strictly comply with the law, but may be more flexible in terms of procedures, such as a stepped approach to the proportion of subsidies, to provide 40% or 50% to companies that have reduced income by 10% or 15% % of salary subsidies, instead of requiring that companies that only reduce 30% of subsidies pay 75% of salary expenditures.
The next two quarters will be difficult. Many Canadian forestry companies need subsidy support far beyond what the Canadian Commercial Development Bank can provide for commercial credit projects. Whether the Canadian timber industry can recover from the pandemic will largely depend on whether the US economy can recover as soon as possible. Although the US market is very important for Canadian timber industry, in view of the fact that the US construction industry has not recovered, it should focus on solving the negative impact of the US-Canada timber tariffs. The government needs to take measures to provide cash support to forestry companies to increase their income before the crisis ends.
Gene Charles Charles Kason, a professor of industrial relations at Lawrence University, agrees that companies do not rely on financial assistance. However, “if the liquidity funds cannot be injected into the companies as soon as possible, the banks will not follow up. Especially for some companies at high risk levels, banks will only consider charging higher loan interest rates, but they may not be able to give enterprises more credit lines. Considering that wood is an environmentally friendly construction material, and it is used for medical masks, protective clothing and toilet paper demand for pulp is soaring, and the outlook for the wood industry is still relatively optimistic.” Derek also agreed with this, believing that all companies really need is some financial support to ensure the normal operation of the factory.
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