Harmac is humming-despite recession

By Steve Weatherbe - Business Examiner - Vancouver Island
April 06, 2009

Each week brings news of another forest-sector company taking a hit. Ironically, one standout firm that seems in no danger looked like the sickest kid on the block not so long ago. By rights, the multimillion-dollar pulp machines at the former Harmac mill site outside Nanaimo should have been dismantled and shipped overseas after the firm was declared bankrupt.

Instead an unlikely consortia of forest companies, private businessmen, Harmac workers and management have restarted one of the firm's three lines and was prevented only by the world's worst recession in a quarter- century from starting up a second.

"It's just a matter of time," says Levi Sampson, spokesman for Nanaimo Wood Products. "So many mills got taken out of production that supply will have to get tight.We just need one more increase in the price of pulp."

The Harmac-NWP revival not only had to overcome a shutdown of production lasting several months; it has had to survive a severe price drop of $200 a tonne (in China, for example, pulp fell from $700 to $500 a tonne).

Happily, the Harmac mill never shut down its boilers completely: restarting pulp mills can cost millions of dollars and is one reason Sampson does not expect a resurgence in demand to bring shutdown plants back into production quickly.

Nanaimo Forest Products has been able to persevere because it has reduced production costs by $100 a tonne. Other B.C. pulp mills have closed down or curtailed operations because they are "overmanned," says Sampson.

In contrast, "We are very lean and mean,"says Sampson. Management and workers cooperated from the outset at reducing the labour cost of production and since then have made hundreds of suggestions for savings. "It's $500 here, $1000 there," says Sampson "It all adds up."

But the Nanaimo mill has another advantage: the quality of wood going in is high; as a result, the pulp makes for superior quality paper products. Despite several months down, the mill was able to re-sign contracts with its past customers. "We are able to sell everything we produce," says Sampson. That's not the problem; the problem is that prices are so low.

While Sampson is confident this too shall pass, the company still faces a problem he says is chronic for B.C. mills; borrowing for expansion. All mills carry the liability for the cleanup of their sites if and when they close down. All the mill operators in B.C. want the provincial government to guarantee their cleanups.

Nanaimo MLA Leonard Krog has argued in the provincial legislature that such a guarantee only makes sense because if a pulp or lumber company fails for lack of investment, the provincial government will have to move in anyway, "and the taxpayer will end up paying for it." At least if the government acts before the company fails, jobs are saved and taxes are collected.

Krog notes that the government has moved in to take over the pulp mill in Mackenzie, in his own riding, to protect the environment.

The New Democratic MLA notes that there are many within his own ranks who "would be happy to see the mill gone," because of pollutants it puts in the air and water.

"But I tell them, either we produce the pulp here in B.C. under very tough environmental standards or by default the work will go to the Third World, where the pollution will be much worse."

Another company doing well despite (and to some degree, because of) the recession is JSF Technologies of Victoria. A maker of crosswalk lights and traffic sign flashers, JSF has seen the demand from its largely American market boom in recent months. "Business in March is two-and-a-half times what it was in March of last year," says vice president Andrew Evans.

Evans says one reason is an ongoing U.S. federal program called Safe Walk to School, which provides cities with money for any project promoting children walking to school rather than being driven or bussed. "We asked our clients four months ago whether they expected to be giving us less business and they cited this program. They said, 'We may cancel a highway but we won't cancel any safety projects.'"

And now that the Obama administration's stimulus package has materialized, JTF's U.S. clients are expecting to be increasing their orders.

"They say there will be roads built and orders for anything to do with roads." Evans cites Clark County, Nevada, home to the state's casino industry and hard hit by the mortgage failures that set off the world's financial crisis. Despite all this,"They just ordered another 50 flashing light units for stop signs; they already had 330."

Two weeks ago JSF won its first bid under new U.S. stimulus legislation-for an unspecified number of crosswalk flashers for the state of Tennessee. BE