People in Mackenzie are smiling a lot more these days.
The town, located at the end of a two-lane highway 963 kilometres north of Vancouver, is humming with activity now that two of its sawmills and one pulp mill are back online.
It’s a rare bright spot amid the cloud of gloom draped over B.C.’s most historic industry, but Mackenzie’s success isn’t entirely the result of U.S. housing starts and higher lumber prices.
What it’s really about, said Forests, Mines and Lands Minister Pat Bell, is teamwork.
“It was a marriage made in heaven,” Bell recently told Business in Vancouver.
So what caused Mackenzie, which until recently was a virtual ghost town, to resurrect its forestry industry while mills across the province continue to struggle?
Steve Kozuki, general manager of Mackenzie Fibre Management Corp., explained.
A few years ago, the U.S. housing collapse slammed the B.C. forest industry. Pulp and sawmills across the province shut down or curtailed production.
In Mackenzie, Pope & Talbot slid into receivership and shut its pulp mill. Approximately 200 jobs were lost.
The collapse of forestry giant AbitibiBowater also shut two sawmills in Mackenzie, and then Vancouver-based Canfor Corp. (TSX:CTL) shuttered its sawmill there.
That meant several hundred more workers were out of jobs, and the town of 4,500 was on life support.
To add salt to the wound, explained Kozuki, Pope & Talbot’s receiver allowed Canfor to buy out its obligation to supply chips to the pulp mill.
Good news for Canfor, but bad news for Mackenzie Pulp.
“That left the pulp mill in an un-salable position because it didn’t have the secure chip supply,” Kozuki said.
The only way to secure the chip supply for the mill was through a competitive bidding process for a nearby forestry tenure.
According to Kozuki, that complicated things, because the receiver couldn’t bid on the tenure that it needed to make the mill more attractive to buyers, and buyers were unlikely to bid on the tenure without an operating asset attached to it.
“The amount of uncertainty at that time was just incredible,” he said. “There wouldn’t have been anyone who would have bid in a speculative way hoping to increase the value of the pulp mill. Most people would have written it off.”
But the town’s survival depended on the mills, and if the pulp mill could get back online it would bolster the economics for the town’s sawmills that would then be able to sell their leftover chips to the pulp mill.
That’s when the town’s mayor and council, business leaders, union leaders and First Nations, in a rare example of co-operation, came together to find a solution.
The answer lay in the tenure’s bidding process.
Bell said that under the existing legislative mandate, a direct award of tenure is available only to local governments or First Nations.
That allowed the government to bypass the competitive bidding process and award the tenure licence to the nearby McLeod Lake Indian Band.
In exchange for some financial compensation, the band assigned the tenure rights to Mackenzie Fibre.
It was also agreed that the band’s forestry company, Duz Cho Logging Ltd., would harvest the trees from the tenure, which created jobs for First Nations as well.
“What that allowed us to do then was to use this licence and harvest timber and … thereby, albeit in a more indirect manner, we’re able to recreate some measure of fibre security, raw material supply for the pulp mill,” Kozuki said.
In other words, Mackenzie Pulp became a salable asset.
In April, Paper Excellence B.V., a subsidiary of Asian forestry giant Sinar Mas, bought the mill for $20 million.
In August, 220 workers returned to Mackenzie Pulp.
Meanwhile, lumber prices have recovered somewhat from recessionary lows.
In May 2009, Canfor restarted operations at its Mackenzie sawmill thanks to the company’s focus on value-added products.
Canfor has since added a second shift of workers at the sawmill.
Three weeks ago, Vancouver-based Conifex Timber Inc. (TSX-V:CFF) started production at one of the two sawmills it bought from AbitibiBowater.
Bell said the restarts have also created a lot of indirect logging, trucking and silviculture jobs.
“You’re probably talking about 1,500 to 2,000 people going back to work as a result of the revitalized forest industry in Mackenzie,” Bell said.
It’s also had an effect on the local real estate market.
Lynda Moreland, a realtor with Royal LePage Mackenzie, said real estate activity plummeted 17% to 40% during the downturn, but this year it’s up 12% to 15%.
“We’re on the road to recovery,” Moreland said.
Bell, who’s also the MLA for Prince George-Mackenzie, said he would have excused the community had it blamed him for all its troubles.
But it didn’t.
“What made it work was everyone was on the same page,” Bell said. “No one was blaming each other or pointing fingers. It was really a case of everyone working together to find a solution to the problems.”
$364 January 2006, four-year high
$134 January 2009, four-year low
$274 November 5, 2010
- price per thousand board feet of spruce-pine-fir two-by-four
1,500 – 2,000 estimated number of direct and indirect jobs that will be created after two sawmills and a pulp mill reopened in Mackenzie
4,500 approximate population of Mackenzie, Statistics Canada census 2006
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