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.
Immediate situation - For the next 4 to 6 weeks:
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).
Direct job losses in the order of 600 in harvesting, trucking and roads only. Any mill closures will be in addition to these numbers
Western Nova Scotia
Central & Eastern Mainland
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.
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):
New Markets for Low-grade: