Thoughts and Facts related to the Impact of the Forced Closure of NP

The following are a series of facts, general thoughts and predictions in relation to the December 20, 2019 announcement by Premier McNeil regarding the Boat Harbour Act and subsequent closure of NP.

The analysis suggests a very severe impact reflecting a 50% reduction of the total harvest in Nova Scotia. The social and economic impact of eliminating 50% of the harvest is huge – based on the Gardner Pinfold study of 2016 – this would be in the order of $500 million per year in lost GDP. Direct job losses in the order of 600 in harvesting, trucking and roads only.

The facts are based on the circumstances of the day and will change as the supply chain continues to adjust now and following ‘road closure’; the assumptions & analysis are in relation to mill wood flows, markets for pulpwood and softwood chips, access to fiber on private land, and the contractor infrastructure.

(January 2020)

Immediate situation - For the next 4 to 6 weeks:

  • At the time of the NP closure announcement, sawlog inventories at the major sawmills were moderate to high. ➢ The major sawmills are still operating, having made short term arrangements to place chips and hogfuel.
  • Most Northern Pulp harvesting, and trucking contractors are still working, having been hired short term by other forest companies to feed sawmills until road closure.
  • Most other central and western harvesting contractors are working at reduced revenues due to no or limited outlet for softwood pulpwood.
  • PHP is honouring existing volume agreements for round pulpwood but have introduced tight pulp quotas; are taking chips as noted above.
  • GNT in Sheet Harbour is not taking hardwood deliveries – lack of consistent hardwood supply and awaiting markets
  • Prices paid for all sawlogs and studwood have dropped $15 to $20 per tonne delivered (16 to 20% drop). This is likely to continue as mill yards fill up.
  • Private land stumpage for sawables has dropped an average of 20 to 25% - about $8 to $10 per tonne. These will continue to drop.
  • Private land stumpage for pulpwood for Colchester county and west are effectively $0, a drop of $10 per tonne.
  • The combined impact on lots designated for regeneration felling (CC) is a 40% reduction in value to the landowner.
  • The combined impact on lots designated for partial felling (CT) is a 65% reduction in value to the land owner, in addition the increased cost to cut and leave 75% of the thinned volume on the ground would make the harvest cost uneconomical – it is no longer feasible to do commercial thinning with no outlet for pulpwood.

After Road Closure

The immediate impact appears to be less than expected – the sawmills, harvesting and trucking contractors are in survival mode, operating at reduced revenues and competing for sawlogs without generating pulpwood. Reality will sink in over the remainder of the year and perhaps longer.

When NSP stops taking biomass at the winter levels at Port Hawkesbury and Liverpool, the impact on sawmills will begin to hit hard. Even with Irving and PHP taking in some of the sawmill chips that wentto NP, there will be no home for about 300,000 tonnes of chips annually which equates to over 800,000 tonnes of sawlogs and studwood – one half of the sawables harvest in 2018 (Registry of Buyers).


      • So, with no new markets, or means of reducing pulpwood production the predicted change in harvest will be a reduction of 50% of the 2018 total harvest in NS.
      • This shortfall will be primarily in Western and Central NS
      • The social and economic impact of eliminating 50% of the harvest is huge – based on the Gardner Pinfold study of 2016 – this would be in the order of $500 million per year in lost GDP.

Direct job losses in the order of 600 in harvesting, trucking and roads only. Any mill closures will be in addition to these numbers 

Supporting Evidence:

Western Nova Scotia

      • A review by Freeman Lumber and Westfor on the harvest level in western NS (total 950,000 tonnes) shows that 65% of this volume will be shut down by road closure, due to no outlet for pulpwood, sawmill chips and hogfuel.
      • This impact in people and economic terms is huge – 90 harvest and trucking contractors, with over 400 operators and drivers impacted and 400 pieces of equipment idled.
      • The remaining 300,000 tonnes will also be affected, but they did not have detailed knowledge of the suppliers and the buyers of that wood.

Central & Eastern Mainland

      • A survey by GNT (operating in central and Eastern mainland) of their harvesting contractors indicates that of 8 contractors they expect 3 to be operating at a reduced level, 2 to leave the province and 3 to be out of business or significantly reduced operating level after the end of road closure.
      • Of their trucking contractors, currently 14 contractors with 37 employees, 4 contractors expect to be out of business, and 4 will seek out work outside the province. The remainder will attempt to stay, working at reduced levels.

Availability of Fiber – Stumpage Impact

As noted above, stumpage values have plummeted – as of January 2, 2020 prices for saw material has dropped in the order of $16 to $20 per tonne.

There is a significant risk to wood supply, even with a reduced overall harvest. Many landowners will not accept this kind of loss and won’t offer lots for harvest – whether good forest management or not.

Impact on Forest Roads Contractors

Removal of 1,600,000 tonnes of harvest will equate to 100 machines idled for the 5-month construction season. Extend the transition funding to include Forest Roads Contractors.

Summary

In summary, it is critical to find ways to reduce production of pulpwood, and to identify the markets that the Premier alluded to on Dec 20 for chips and hogfuel. What is the government’s vision for the forestry sector in 2020 and beyond? In the meantime, the economic pain will hit sawmills, contractors and their employees; starting as soon as the first of March for some. Support for these businesses are a must to save the forest industry in Central and Western NS - A Forestry Contractors Financing Program, just announced by the government will provide eligible contractors access to a line of credit which will become repayable loans after one year; without a mid to long-term outlook, contractors with existing payments may decide not to increase their debt load by participating in the program. The program does nothing to put money in the hands of the contractors, especially for those who may not have work after road closure.

Pulpwood (consider for Crown Land):

- Focus on stands that generate at least 60% sawables, based on past wood specifications

- Leave all volume under 10 cm in the forest, when there is no market for low grade

- For stems over 10 cm, increase the allowable rot that is to be left in the forest

- Target thinning at the end of the “window” – e.g. late entry rather than early entry

New Markets for Low-grade:

- Identify the pulpwood markets the Premier alluded to on Dec 20

- Extend the operating season of existing NSP biomass plants to year round

- Explore the transition of other coal and oil fired plants to biomass based (eg.Trenton)

- GNT has presented a proposal which would allow Government to take a proactive role in the continued
movement of pulpwood, which we strongly endorse

- Explore biomass heating for all major government buildings

Cost reduction:

- Accelerate the opening of all provincial roads to B route status

- Introduce Corridor trucking both within NS and to consuming mills in NB to permit larger loads for long distance moving of fiber - wood, chips, hogfuel.

- Revisit silviculture funding to allow for lower productivity in thinning and partial harvests with only sawables removal.

- Revisit Crown stumpage, to be reduced in line with private stumpage

Respectfully Submitted:

Bruce Chisholm
Rod Badcock
Peter Robichaud


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