Natural Resources Committee on Nov. 6th, 2025

[Luc Thériault]

Currently, the biggest problem is that demand is low in the American market. However, a few percentage points could certainly have an effect. In a market based on supply and demand, it usually doesn’t take a 20% change to create movement. Every little bit counts. If we are able to redirect a few percentage points of what is sent to the United States to other products or other countries, I think it will certainly have an effect.

[The Chair, Liberal, Terry Duguid]

Thank you.

Mr. Simard, you have the floor for six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much, Mr. Chair.

Several witnesses have told us that we are experiencing a perfect storm in the forestry sector. As Mr. Thériault just said, construction in the United States is at an all-time low due to high interest rates. Even though it is a natural market for us, given the countervailing duties and customs duties that add to the picture, we can see that the situation is difficult. Mr. Dunn demonstrated this well in his opening presentation when he spoke of a sense of urgency. Everyone can agree on that.

I am telling you this because, in my opinion, we need to distinguish between a government bailout, which I believe is necessary, and the transformation that the industry must undergo. If we want to transform the industry in 10 or 15 years and develop new markets, there must still be players in the field. Unfortunately, if the current situation continues, we will lose players, and it will be difficult to transform the industry, since those people will no longer be there.

On this subject, Mr. Dunn and Mr. Krips, I will not ask you any direct questions, but I will ask the clerk to send you a document outlining the proposal currently circulating in Quebec concerning the prospective repurchase of customs duties. I would like you to provide a response to the committee, because it will be important for us in the context of our report.

Mr. Thériault, I will focus on you instead. I would like you to explain to the committee the dynamics specific to the forestry sector. Domtar is a major player, but behind you there are small forestry entrepreneurs who do the work in the forest. We know that the forestry sector is a chain. If one link in the chain is cut, the whole chain stops working, unfortunately. I would like you to explain this dynamic to us, so that we can fully understand the central importance of the forestry sector to many communities, as well as what the current challenges may mean for the entire chain.

[Luc Thériault]

It's a very integrated industry. Just two days ago, I was at the Gaston‑Ouellet forestry camp in northern Côte-Nord to meet with forestry contractors. Everything starts with the forest and the construction of roads by forestry contractors. These are often small family businesses involving a handful of people and passed on from parent to child. However, they have to take out millions of dollars in loans. We need these companies to harvest wood, which is then processed in sawmills and paper mills to make by-products such as paper. The wood is also used to produce energy in power plants. It quite quickly becomes clear just how integrated everything is.

There are 300 villages that depend on the economic activity generated by the forestry sector. It isn't just sawmills and paper mills. There are also all the small entrepreneurs who do business with other companies to buy parts or carry out repairs. Some examples were mentioned earlier. Mr. Dunn talked about a village in Ontario that has been greatly affected. I think it's important to keep those things in mind.

It has taken decades to build the forest industry in its current form. We're only as strong as our weakest link. Tomorrow morning, if there were no more forestry entrepreneurs or people to carry out those activities, I could try as much as I like to keep the sawmills and paper mills running, but it wouldn't work. It's crucial to take care of everyone in the chain.

[Mario Simard, Bloc, Jonquière, QC]

I also understand that the slowdown in activities at your facilities has a direct impact on these people.

[Luc Thériault]

Absolutely.

[Mario Simard, Bloc, Jonquière, QC]

Mr. Miville, in your opening remarks, you said that forest owners are collateral victims. Countervailing duties apply to you too, because it's thought that governments subsidize wood harvesting in public forests. You have to pay those duties, then, even though you own private forests. I imagine that's a difficult situation for many of your members.

I believe I've already spoken with people from your association about the tax arrangements that the government could put in place. Private producers harvest wood maybe once every 25 years. They then end up with a huge income that they can't tax over time. I'd like to hear you talk about what the government could do in that regard.

[Vincent Miville]

It should be noted that it's ultimately our clients, the forestry industry, who pay the lumber taxes. However, it's no secret that this reduces the money supply for the entire sector. We heard Mr. Thériault talk about forestry contractors, such as truckers, people who provide services, as well as forest owners, who sell the wood. It's clear that this has an impact on all those people.

Allow me to explain one of the problems faced by private forest owners. Because of the mechanization of activities, they now harvest once every seven, eight, nine or ten years. Moving all the machinery takes an enormous amount of time and money. Forest owners don't live solely off the income from the harvest, which takes place once every nine years. It's a second income on top of their main income. However, in harvest years, they have a very high marginal tax rate because they have a high income that year, but the way the Canadian tax system works doesn't allow them to spread that income over time.

Forest producers have annual expenses. Every year, they have to maintain the roads, tend to their plants and invest in their forests, for example. For several years now, we've been proposing a silvicultural savings and investment plan, which would enable forest owners to deposit the income from their wood harvests into a tax-deferred savings account and withdraw money from it when they have to make such expenditures. That would enable forestry producers to generate income and spend money in the same year and ultimately reduce the marginal tax rate.

That would encourage more forest owners to invest private capital in their forests. We would then be able to generate more wood products at a lower cost for the industry as a whole. The forestry industry could source wood from forests located near the mills.

[The Chair, Liberal, Terry Duguid]

Thank you.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much. I would like that information to be submitted to the committee in writing as well.

[The Chair, Liberal, Terry Duguid]

That brings our first round of questions to an end, colleagues.

Welcome, Mr. Lawrence and Mr. Dawson, to our committee today.

We're going to start with you, Mr. Malette, for five minutes.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Thank you.

Mr. Dunn, you represent the Ontario Forestry Industries Association. Of course, many of those sawmills are in communities I know well, such as Hearst, Chapleau, Kapuskasing, Cochrane and—I could go on—Elk Lake. How much money would you think this group from your association has in the Department of Commerce in the United States?

[Ian Dunn]

For the entire—

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

The entire...yes, from Ontario.

[Ian Dunn]

For the entire forestry industry, all the lumber producers in Ontario—and we represent all the primary manufacturers—it's about $1 billion.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

There have been discussions—in British Columbia, mostly, and in Quebec—of a special purpose vehicle whereby the government would buy back assets with those dollars. Has there been discussion with the Ontario sawmillers?

[Ian Dunn]

It's a very preliminary discussion. We work very closely, of course, with the Quebec association. We have members who operate in both Quebec and Ontario, so we're looking at all options, and this is one of them.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Thank you.

I have a question for Mr. Thorlakson. You are certainly one of a few rare companies that go back to the late 1940s under probably one management, and you've seen many trade wars. How would you say this one is affecting the producers in British Columbia, compared to others?

[Brad Thorlakson, Executive Chairman, Tolko Industries Ltd.]

I would say that what's different from previous disputes is that there's been a big strategic shift change in competitive access to U.S. markets. Right now, we're paying, as you know, 45% duties to access the European market, and the Scandinavians and the Europeans are entering that market with similar products at a 10% duty.

The fallacy of the Americans becoming self-sufficient quickly in lumber is challenging. It's not going to happen. I've calculated that they need to build 55 sawmills to replace the Canadian industry, and that's just not going to happen quickly. Also, our customers in America use different species and value our SPF from Canada.

I guess what's different is that Canada has had probably the least competitive access to U.S. markets and been one of their largest suppliers, and other parts of the world, I think, are displacing the Canadian industry. That's really a shame.

I guess what we look for in a durable solution with the federal government and between Canada and the U.S. is getting us access so that we can reinvest and grow our business. As you've said, our family has been through all five rounds of lumber disputes. I know it's hard, but all previous disputes were resolved through negotiation, and we expect our government, both the opposition and the sitting government, to find a durable solution for our industry.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Thank you.

On a level playing field, would you say the Scandinavian countries and the European countries could outperform us and sell into the United States on an equal basis?

[Brad Thorlakson]

I mean, they supply a different product. I think they have a high-quality product. They have very modern mills. I think they're supplying about.... When we went into this current dispute with the Americans, we were at about 32% market share. Canada is at around 24% right now, and the Europeans are shifting about 7% into the U.S. market. The total supply hasn't changed. We live in a global market, and products move around the globe quite effectively. We're faced with a situation now with just supplying about 7% of the market share, and that's creating quite a challenge.

I would say that the other issue we have is that we need to grow the market, and I think that's why a negotiated solution will allow us to expand the market for southern yellow pine and all species, which is a better outcome than ongoing litigation.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Thank you.

Mr. de Vries, how has this latest trade war affected private landowners?

[Andrew de Vries]

It's very difficult for private landowners if people have invested in a woodlot 30 years ago and are hoping to harvest in this last time frame. Obviously, that retirement money is not available for them at this time. Vincent spoke to that earlier as well.

This is a very difficult period for us, and we would like to be part of the solution.

[Gaétan Malette, Conservative, Kapuskasing—Timmins—Mushkegowuk, ON]

Thank you.

[The Chair, Liberal, Terry Duguid]

Thanks to both of you.

We'll go on to Mr. Danko for five minutes.