Thank you very much, Mr. Chairman.
First of all, I would like to thank you for inviting the Quebec Forest Industry Council, or CIFQ, to appear before the committee. I would also like to extend the apologies of our CEO, Mr. Guy Chevrette, who had a prior commitment and asked me to replace him.
I'm sure you can understand that the CIFQ is not appearing this afternoon to discuss a particular case. We are here to talk about the situation of the forest industry as a whole.
Our industry has, for some years, been going through a cyclical crisis which, in the softwood lumber industry, is the result of a decline in housing development—primarily in the United States—and, in the pulp and paper industry, is associated with a considerable drop in the consumption of a number of paper products, especially in the wake of the exponential development of electronic media. The Quebec forest industry is also experiencing a major structural crisis, as the cost of fibre in Quebec is the highest in North America because of its quality, and wood chips are generally the most expensive in the world.
The pulp and paper industry is in the midst of a monumental crisis because of a radical drop in the consumption of newsprint, as well as printing and writing papers. It is especially in Canada and Quebec that the consequences are being felt. Six or seven plants that produced these kinds of paper have already shut down, and I'm sure you know that newsprint production is still far too high in relation to North American and European demand. If that trend continues, the plants will continue to shut down in Quebec. That conclusion seems inevitable because of the cost structure, the distance to markets, a high exchange rate and less and less competitive labour and power costs. We have no doubt that you are all aware of the situation in the pulp and paper industry as regards newsprint. Consequently, we are sure you are not surprised to see plants shutting down.
It is no surprise that industry consolidation is occurring, because leaders of each of the political parties, at both the federal and provincial levels, asked that the industry restructure, and restructuring involves consolidation in particular. It is not only that, but it does mean consolidation. So, the Canadian and Quebec industry begun to restructure and company consolidation is not over yet.
As you know, the industry is having trouble coping with this consolidation, because this cyclical and structural crisis is now occurring in the midst of a significant financial crisis. The reconversion of existing plants to other market niches presents major technological and financial challenges. At the same time, banks and financial institutions are refusing to refinance struggling forestry companies. As for governments, they refuse to offer loan guarantees to companies at a commercial rate, which would nevertheless be perfectly legal, based on the legal opinions we have received. I'm sure you know that in Quebec, Mr. Guy Chevrette has made this request on many occasions in recent years.
We know for a fact, because we have been working on this for several months now, that a return to sustainable profitability for our industry requires innovation, but that money is lacking. In that regard, several weeks ago the federal government announced the introduction of a $100-million program over four years to fund innovative projects. We said that this was a step in the right direction, but that it was not enough, because $100 million for all of Canada means $25 million per year. We know full well that a single innovative project may require investments of some $200 million for a single plant and the program requires that the company invest 50% of that amount. However, the necessary cash is not available.
I'm sure you can easily understand the problems we are facing. Yes, there is a need to diversify; yes, there is a need to innovate. But, as I'm sure you understand, without a large scale program, the process will be very slow, even though a number of projects are already on the table. We are aware that the industry will never be the same again. We are also aware of the different avenues to be explored. There is no doubt in our mind that you are also aware that we need substantial assistance to bring all of this to fruition.
Without government aid, some development and innovation projects that companies are bringing forward will likely see the light of day, but not at the same speed as the speeches; rather, at the speed associated with financial availability.
The industry will never again be what it was. If the future seems promising in the mid and long term, restructuring our industry will, unfortunately, involve consolidation in the short term.
Thank you.