Thank you.
I'm actually just going to start off here by adding to some of Marta's comments, which we full-heartedly agree with.
On June 20, 2007, Hank Ketcham, chair of the forest products industry competitiveness task force, wrote a report and noted that the task force was formed by a group of leading industry executives in partnership with senior federal policy-makers with an objective to identify means of accelerating renewal and innovation in Canada's forest sector and key actions required by industry and government to realize needed change.
It was noted that the challenges facing the industry were structural in nature, and that if left unaddressed they would lead to a trajectory of continued decline for the sector. Here we are in April 2008, and truer words could not have been spoken.
Of the four major elements detailed, one of the primary ones noted by the task force was that the failure of Canada's rail transport policy to provide a competitive check on the market power of the railways cost Canada's forest industry $280 million, as Marta noted. This equates to approximately 15% of the industry's total freight bill.
It was also noted that while the ability of the railways to extract monopoly rents from shippers substantially undermines the competitiveness of the Canadian forest products industry as a whole, this situation is particularly damaging to the cost competitiveness of those production facilities operating in the most northerly and remote communities. And that would surely include some of the facilities we are discussing with you today.
We fully agree with the task force's findings and believe that the government allowing this corporate concentration is a major factor allowing this to happen.
We believe that 15%-plus additional freight charge is not only decimating Canadian industry, but that it is only being accomplished through an artificial limiting of supply and that this surely goes against the Combines Act, which was replaced with the Competition Act in July 1986, designed to prohibit monopolies, misleading advertising, bid rigging, price fixing, and other means of limiting competition.
I'm not sure if everyone got a copy of my March 3 letter to CP Rail. I hope you have, but here are a few additional critical issues we in this industry are facing today.
First, in light of the significantly reduced demand on virtually all railcars in the forest industry--and that involves lumber, pulp, paper, OSB, plywood, etc.--every single sector is currently facing rail rate increases. This is only being accomplished by putting cars into storage and not renewing leases, thereby artificially limiting supply so that they can drive rates in this monopoly system. To us, this not only makes us non-competitive, but makes it impossible to sell to and service customers when these tactics are employed.
Secondly, our pulp mill, a recent restart, is producing approximately 120 cars of product weekly. We have a hard cap and cannot even order more than 70 cars per week, as CP, which is the line into the mill, cannot supply, and we do not have the ability to bring in other cars to the mill. In effect, we will eventually face running the mill to approximately two-thirds of its capacity, which would skyrocket overall costs and therefore force us to shut down all operations once again for good.
Third, we have been told by our rail account representative that any reduction in rail in any rate at all is not an option, regardless of market conditions. We believe in a free market. Rates should be determined by supply and demand. This is not the case here.
We also wish to take this opportunity to lend our support to not only our industry but to the Canadian farming industry, which just last Tuesday asked the Canadian federal government for a full review of what it costs the railways to transport grains. They noted that “currently farmers are being victimized and are being gouged through the freight rates that are being charged to export the grain”, since most farmers are forced to use either the CN or CP line, creating a virtual monopoly on rail transportation.
Earlier this year the Canadian Transportation Agency ordered changes to revenue caps that could save prairie farmers as much as $72 million annually in freight costs. We in the forest products industry are asking for the same intervention to save us from the inevitable path of curtailment and closure these monopoly practices have set us on.
Thank you.