The Canadian woods industry has been slammed over the past decade and its collapse has negatively impacted the industrial insulation industry. The demise focuses around the collapse in market conditions, supply irregularities, the global financial crisis, and misguided government intervention.

American protectionist actions have historically limited the exposure of Canadian-produced softwood lumber into their markets. U.S. producers from the southern pine forests have never had sufficient production to satisfy American building booms, but it’s still advantageous for them to have an elevated and protected market price. There has always been a protectionist attitude, but now with the downturn in U.S. housing there is a new microscope on all Canadian softwood lumber exports.

With little input from the industry, the Canadian government entered into a losing arrangement with the Americans in 2006, tyeing the hands of major Canadian softwood producers. This is one of the most significant and enduring trade disputes in modern history and the latest agreement was the worst deal ever made, ensuring economic burdens would always be borne by Canada. While billions of aid dollars are flowing into other manufacturing industries, the Canadian government cannot comfortably assist members of the woods industry for fear of financial reprisals from the Americans.

The spin off of this Softwood Agreement presents a terrible catch-22 that broadly impacts insulation contractors, distributors, and manufacturers in formerly lucrative pulp mill operations. Sawmills are shutting down, eliminating a major source of wood fibre required for the production of pulp. Pulp mills have a voracious appetite for “mountains of chips” at advantageous prices and local availability. Another trend lowering the demand for pulp is the increased use of other news sources such as the Internet. These developments

and increased competition from low-cost South American facilities mean pulp mills are closing at an alarming rate. Over the past two years, 200 Canadian mills have closed, 50,000 jobs have been lost, and pulp and paper producers are running at about 50 percent capacity. This strongly affects our industry and any involved in mill maintenance, co-gens, other new build projects.

Most pulp mills in Canada are U.S.-owned with operationsin both countries. A recent loophole in an American energy allows U.S. pulp producers to qualify for a 50-centa-gallon rebate through a long-time practice of mixing a bit of diesel into their black liquor, a carbon-rich byproduct that they burn to create energy. This practice sees hundreds of millions of dollars a week handed to U.S. pulp companies, reducing costs by about $200 a tonne, turning unprofitable mills into the world’s lowest-cost producers overnight. The U.S.-owned operations are naturally shutting down Canadian subsidiaries and investing heavily into U.S. facilities. This energy rebate loophole is expected to be closed by the U.S. Congress, but the damage has already been done and there will be heavy opposition from U.S. mill constituencies to keep the rebate in place.

At time of writing the Canadian government has finally recognized the issue and is offering counter incentive grants to Canadian mills for green projects like energy production. This is possibly “too little and too late” and it opens the floodgates for counter reprisals from the U. S. industry. Forests are still being harvested, but without a market for lumber these valuable raw logs are sold to offshore markets at distressed commodity prices, resulting in further job losses in Canadian mills. Lack of profit means a lack of maintenance and capital improvements and further backstepping in global competition.

Government meddling in industries often has a way of backfiring. Left to natural market checks and balances the outcome may not have been any better, but at least the industry would have been in control of its own destiny. The current situation is a mess and the trickle down affects all of us right down to the supply and installation of mechanical insulation.