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Thursday, June 14, 2007

Paper industry faces Steelworker summer strike

Pulp mills along the British Columbia coast are bracing for potential shutdowns as faltering labour talks threaten to put more than 7,000 loggers, sawmillers and wood manufacturers behind picket lines.

"It feels like a long one - if they go out, it will be out all summer," said Salman Partners forestry analyst Paul Quinn. "If I was betting, I'd be 70% strike, 30% not strike."

Their United Steelworkers contract expires tonight at midnight. Talks between the United Steelworkers and Forest Industrial Relations, which represents 31 companies, broke down on Monday.

The union said yesterday it has made "limited progress" in its parallel negotiations with International Forest Products Ltd. and Island Timberlands LP.

Talks with a third company, TimberWest Forest Corp., have been stalled by a labour relations board complaint.

But as positions on both sides harden, the stage is being set for a bitter and protracted strike that, along with temporarily shuttering the $2-billion coast forestry industry, could drive other wood-dependent companies out of business, observers said yesterday.

The union said it will not strike if it continues to see bargaining progress, but an industry source said it is virtually guaranteed.

"They're going to go. The question is, do they go on Monday [the first possible day to strike after the contract expires] or do they go on July 2, because July 2 allows them to collect their statutory holiday," he said.

"It's summer and we've been working the boys pretty hard so they're probably going to go, 'Oh, I can play baseball, go camping, go fishing.'

" So if they go out on the second they're not going to be in much of a rush to come back until Labour Day."

That looming possibility has struck fear in coastal pulp mills dependent on logs and chips from Steelworkers members.

On the northern tip of Vancouver Island, half of Neucel Specialty Cellulose's supply comes from Steelworker-controlled operations. The mill, which opened only a year ago and employs 330 people, has managed to bulk up to a month's worth of inventory.

But trucking in extra material from other suppliers will cost a premium of 20% to 40%, cash the already money-losing mill can't afford, said Brian Brown, the company's vice-president in charge of fibre.

"That cost is such that it's impossible to keep the mill going," he said. "And if we have a long shutdown, the mill may not be deemed to be viable and that might mean the loss of all those jobs. So we're not real enthusiastic about the whole thing."

The dispute is rooted in an arbitrated settlement that was handed down by a B.C. government mediator when coastal forest workers last went on strike in 2003. It included a provision allowing companies to adjust shifts for workers - on to weekends or four-day, 10-hour workweeks, for example - in the interest of making the struggling industry more cost-efficient.

FIR spokesman Ron Shewchuk said rolling back that provision - especially in a time when the Canadian dollar, U.S. housing market and softwood lumber agreement have all worsened profitability in the woods - is "just not acceptable to us."

But the Steelworkers has argued that the shift-changing throws workers' lives into upheaval and is determined to "make a dent in" the 2003 agreement. It also disputes the industry argument that times are tough, although Coast Forest Products Association president Rick Jeffery said his members have lost money for the last two years.

The industry source said the situation has grown so dire that companies may actually welcome a strike.

"The companies are probably more inclined to wait things out than they normally are because their fixed-cost losses won't be much different than their operating losses, given the state of the dollar," he said.

All of which is not good news for the pulp mills. Catalyst Paper Corp., which runs several pulp mills that use Steelworkers-supplied material, is down to a few weeks. The situation is equally grim at Howe Sound Pulp and Paper LP in Port Mellon, B.C.

"If there is a work stoppage we're looking at weeks rather than months," said spokesman Al Strang.