International Trade Committee on March 28th, 2022

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

My second question, then, would be this: If the Canadian government were to hypothetically abandon its effort to fight for industry and capitulate to the United States' unjust and unfair applications of these duty rates, how would these duty rates affect Canadian exporters of softwood lumber products to the United States, as well as their workers and the relevant communities?

[Rémi Lalonde]

What it would do is add cash costs to an operating sawmill. In a high-price environment, that may not be so apparent, but the reality is that for producers like Resolute and other sawmillers, your cash costs are effectively going up by the duty rate. That means that if and when lumber prices come down, your marginal cost of production is higher, which is going to force the more marginal players to close production capacity or decide to finance losses or finance duty deposits.

From our perspective, that adds pressure to Canadian producers.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Specifically on the labour.... Again, you know my background. I'm the Parliamentary Secretary to the Minister of Labour. With the forest industry in general, like other industries, there were issues with labour and skilled labour related to COVID-19, and even before COVID-19.

What exactly are the impacts, and what are you doing to try to address that?

[Rémi Lalonde]

What I'd say is that when the markets are volatile and producers have to adjust production capacity, if they choose to remove a shift, we're all facing a situation where there's a shortage for skilled labour. If we have to reduce our production capacity and we unfortunately have to let some folks go, it's going to be very hard to convince them to come back. It adds a lot of volatility in the consistency of our production operations.

In northwestern Ontario, the economic impact on.... Resolute is an integrated company. Pulp, paper and lumber are worth several hundred million dollars, between chips, power, investments and taxes, so it is a very significant economic impact.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

That's extremely significant.

In your relations with the indigenous communities in Canada and northern Ontario, I've seen some of the work that's being done. I feel that there are these continued operations to work with indigenous communities, as well as with the community colleges that serve the forest industry. If you want to speak a bit to that, and if I have time, you may.

[The Chair, Liberal, Judy Sgro]

You have 12 seconds.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

I have 12 seconds. We can talk about that off-line, maybe.

[The Chair, Liberal, Judy Sgro]

Maybe Mr. Lalonde can give a very brief comment.

[Rémi Lalonde]

We take it very seriously, and we try to develop economic partnerships. There are plenty of good stories in northwestern Ontario. I'd be happy to share them with you off-line.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thank you.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We're on to Mr. Savard-Tremblay for six minutes, please.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

I would like to thank all my colleagues and our esteemed witnesses for being here, for their time and their testimony.

Mr. Lalonde, your company is the main victim of these new tariffs, which could be described as punitive.

According to your financial statements, overall, how much money, as a percentage, did you spend on additional customs duties?

Where would that money have been invested otherwise? Would you have invested it in your facilities?

Can you give us a concrete idea of the consequences for your company?

[Rémi Lalonde]

It has cost us $430 million U.S. over the last five years, since the conflict started again. That means there are investments that we haven't been able to make. Last year was still a good year, given the lumber prices we enjoyed. We have been able to reduce our debt.

As for your question on how we would invest this money, I would remind you that there is still a deficit of about $1 billion in our pension plans. The financial health of the company is excellent, but it is a deficit that we will have to make up over time. There are investments we would like to make in our facilities as well. Our facilities are disproportionate in Canada, and particularly in Quebec. These are capital expenditures. It is a lot of money.

As a company, we are trying to drive our growth and transformation. We have taken significant steps in the last 18 months, but we have other projects and other goals that we would like to achieve.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Could you tell us about the current projects?

We heard about the mill in Kénogami, for example, and about cellulose fibre. So there are projects under way to make your company more dynamic and turn it toward the future.

[Rémi Lalonde]

That's exactly it.

I visited the Kénogami mill a few months ago, and I can say that its cellulose fibre project is innovative and encouraging. Such a project makes it possible to make investments to sustain a paper mill. It isn't always easy, and any efforts that can be made are welcome.

Last year, we announced major investments in our sawmills, particularly in Abitibi‑Témiscamingue. We announced an investment of $25 million in the Senneterre sawmill to support its competitiveness. These are initiatives we are taking to help our company transform and grow.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

We are here to study the issue. So, feel free to make suggestions, since we're the politicians in this country.

Do you think there is enough investment in wood processing?

[Rémi Lalonde]

The government provides good support in this regard, even though more can still be done.

My message to the government is to continue the dialogue with the U.S. administration to settle the dispute, to continue the work that has been undertaken to resolve the disputes and to work with the Canadian industry to ensure a good exchange of information so that we can be consistent in the positions we take.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

To what extent is the low demand for paper a problem?

[Rémi Lalonde]

This is a major challenge that we have been facing over the last decade or so. Unfortunately, during the pandemic, we had to reduce our production capacity, particularly in our newsprint mills in Amos and Baie‑Comeau, because the demand for paper dropped by 30%. We've had to adjust our production accordingly. That's a challenge we're facing.

We're trying to make our mills as competitive as possible so that we can operate them as long as possible. Since the demand for paper is declining, we favour investments that make us as competitive as possible in order to have a better chance of continuing for as long as possible.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Long before the Ukrainian conflict, the price of wood had already risen. The Ukrainian conflict could cause another rise. I imagine the punitive tariffs add another layer in a market where the price was already becoming increasingly problematic.

[Rémi Lalonde]

This is a factor that makes the cost structure more important to lumber producers. We also know that in recent years the cost of fibre has increased significantly in Canada. Producers are facing a significant increase in costs and this is having an impact.

I will say, though, that we're facing two other challenges.

First, in terms of logistics, supply chain issues, which I'm sure you've heard about, have a significant impact on the distribution of supply. It also creates price increases. Today, I would say that our lumber inventories are twice as high as we would like them to be. That's a lot of money, and that's a lot of FBMs, board feet, not going to market. There are buyers who [Technical difficulty—Editor] wooden planks, but we're just not able to distribute them all, and that has a big impact.

Second, I mentioned that from the beginning of the pandemic, there were cuts in production capacity as we anticipated a return to the 2008‑09 financial crisis. It took some time for that output gap to close, while demand remained strong. All of this drove up prices.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go to Mr. Masse for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair. My first question is for you. Do you remember Pierre Pettigrew?

[Rémi Lalonde]

Is that for me?

[Brian Masse, NDP, Windsor West, ON]

No. It's for Madam Chair.

Do you remember Pierre Pettigrew?