Mailing address:
3536 - 106 Street
Edmonton, AB T6J 1A4
403-436-5652
FAX: 403-437-0719
October 05, 1991
Enclosed for your information is a copy of a newspaper article on
pulp mills in Canada. The article indicates the context in which
Daishowa and the Alberta Provincial Government will be trying to
keep Daishowa's Peace River bleached kraft pulp mill in
operation.
* * * * *
The Globe and Mail, Saturday, October 5, 1991
PULP MILL CLOSINGS COSTLY FOR QUEBECKERS
Province sank $350-million into modern but uneconomic
plants at Matane and Port Cartier
By Barrie McKenna
Quebec Bureau
MONTREAL -- The Quebec government is finding out first-hand the
devastating fallout caused by a pulp and paper slump.
The industry is not only one of the top employers in the
province, providing about 31,000 jobs for Quebeckers, the
provincial government is also a major owner and financier.
Two of the government's prized investments -- modern pulp mills
in Port Cartier and Matane -- recently shut their doors
indefinitely because of a dearth of orders and tumbling prices.
Quebec taxpayers will wind up sharing the bill for the closings
with shareholders of the companies affected. The twin closings
on opposite sides of the St. Lawrence River have also put nearly
900 plant employees and loggers out of work.
Analysts estimate that Quebec is now on the hook for up to $230-
million alone at an ultra-modern pulp mill in Matane, about 400
kilometres northeast of Quebec City.
"It's a white elephant on the St. Lawrence," said a Montreal-
based forest products analyst. "Quebec does not want to write
off $230-million so it is holding on to it for a couple of years
and hoping the market turns around. They are totally avoiding
the problem."
The $230-million represents Quebec's share of construction costs
and loan guarantees.
The mill's owners, Quebec City-based DONOHUE INC. and a Quebec
government agency , announced last week that the mill would be
moth-balled for at least a year, and maybe more.
The $290-million mill, which started operations less than a year
ago, had not even had its official opening. The mill makes
bleached chemical thermo-mechanical pulp for the printing and
tissue markets.
Donohue and its controlling shareholder, QUEBECOR INC. of
Montreal, will also take a hit, one analyst said. Donohue will
likely write down its investment in the mill by $20-million to
$30-million, he said. Quebecor's share of that writedown would
be $5-million to $6-million.
A company source said Donohue will probably take a writedown of
$15-million to $20-million, likely in the fourth quarter ending
Dec. 31. "The company is still hopeful that this investment can
still be profitable," the source said.
Donohue and Rexfor, a Quebec government forestry agency, agreed
last week to pay $10-million a year to preserve the plant's
equipment. At the same time, the Societe de developpment
industriellle du Quebec -- the government's lender of last resort
-- assumed $116-million in bank debt.
"We must protect the asset," Quebec Industry Minister Gerald
Tremblay said in a recent interview. "This is a plant at the
cutting edge of technology."
Yesterday there was more bad news for Donohue. The company said
it was shutting a 40,000-tonne-a-year newsprint machine at its
Claremont, Que., mill until the end of 1992 or until markets pick
up. The shutdown, slated for the end of the year, will mean the
layoff of 100 full-and part-time workers.
A spokesman for the mill's unionized employees accused Donohue of
shutting the machine to free up cash for the mothballing of the
Matane mill. Donohue spokeswoman Cecile Sanscartier denied the
allegation, saying the machine was old and underused.
At Port Cartier, on the north shore of the St. Lawrence, the
Quebec government has nothing to show for $120-million it pumped
into the plant, owned jointly by Rexfor and CASCADES INC. of
Kingsley Falls, Que. The mill makes fluff pulp for the tissue
market.
Analysts said both the Matane and Port Cartier pulp mills were
uneconomic from the start and built solely to provide jobs in
depressed regions.
But Mr. Tremblay said the recent shutdowns are just symptoms of a
massive industry restructuring under way. He and Quebec Forestry
Minister Albert Cote have called union leaders and the chief
executives of all major paper companies operating in the province
to a summit meeting later this month.
Mr. Tremblay said the aim of the meeting is to talk about the
industry's woes and find solutions. Both Mr. Tremblay and Mr.
Cote favour mergers.