Ouch, that hurts

N.B. pulp mill reopens amid pressure from loonie and world markets

The huge A.V. Nackawic pulp mill in New Brunswick has officially reopened, but mill owners say they may need more government help to cope with the rising Canadian dollar.

The mill closed suddenly in September 2004 when the former owners declared bankruptcy.It reopened in January of this year with a reduced workforce of 280 employees under the ownership of the Aditya Birla Group and Tembec Inc. (TSX:TBC).

Shailendra Jain of Aditya Birla says the Canadian dollar has increased by 11 per cent since the decision to buy the mill, while costs have remained the same.

He says unless government can provide help such as more wood allocation, or lower wood prices, export profits will be cut by close to $8 million per year.

Tory Premier Bernard Lord says government has already provided loans, and reduced wood prices by 25 per cent this year, but is discussing other requests from the company.

You’ll recall that the concessions already made to the firm will likely cost the government millions. Now they may want millions more. They are expecting profits to be cut by $8 million per year? That’s $28,571.43 per employee per year. No government in their right mind would subsidize this company by this amount on top of the millions already invested.

9 thoughts on “Ouch, that hurts

  1. If they do decide to subsidize it to death, they should go ahead and put two wings on both sides of the pulp mill and call it Air Canada…I mean Air New Brunswick.

  2. No, but what they probably will do is increase the allowable cut, since environmentalism is about as ubuiquitous as the NDP. Letting them cut more, of course has the unpleasant side effect of putting all the small woodlot owners out of business.

    Actually, since many cutters are private this will have the effect that they will simply leave the industry, or at least stop selling to mills. Many private cutters are finding customers via the web and shipping to places like New Zealand. It’s quite amazing how bad the media is, since there is almost literally a war in the woods with private cutters, natives, small saw operators and large corporations. Yet you’d swear it was just business as usual by the press.

  3. Here’s a thought… Take the money you would give to subsidize the Mill and give the community a seed program. Try diversification. I would rather see an investment in the people of NB rather than going to a large corporation.

    If you keep trying to fit the sqare peg in the round hole your just going to get the same result.

  4. Wasn’t the Molson deal in Moncton in the 8 Million range with only 20 jobs?

  5. Yeah, but beer is a better investement then a mill within a volatile marketplace.

    If you personally had $8 million to invest, would you:

    a) Choose an investement that will consistently earn you revenue(Tax) for the next 30 years and help diversify your economy.


    b) Invest in high risk that may may never give you a return based on market factors(exchange rate) that you will never be able to control.

    NB needs to get away from forestry and fishing if it hopes to survive the next 100 years.

  6. Keep in mind, there’s a many a business in NB that operates primarily on government contracts-that’s also a form of subsidy, especially if you’ve ever seen what some of those contracts are for!

    But this is a good example of how our current political system fails us. There is no inherent reason Molson needs to be in Moncton. So why not diversify and since you’re paying for it, put it in Nackawic-even if it costs a bit more.

    I don’t see why it would, there is more access to water in Nackawic, its closer to the shipping routes where they would receive their barley and hops, and its closer to their main shipping route south, namely the I-95 in Woodstock.

    Moncton has no history in brewing, and housing is probably far cheaper in Nackawic. Again, this is what a central government is supposed to do. When it doesn’t do that, you get people demanding separation, and a different form of federation like the US or Switzerland, where places at least have a fighting chance.

    It’s pretty well known that cities where the Premier is from tend to do pretty well-this isn’t economics-its politics.

  7. It comes down to one thing.. Water! Moncton has the highest water quality in Atlantic Canada and that is key.

    Also, Moncton pursued Molson. I’m not sure how hard Enterprise Fundy lobbied Molson.

  8. That’s garbage, the city doesn’t put up subsidies, that’s what the province does. The city isn’t offering them millions to set up there.

    That’s interesting about the water, however, Moncton benefits (for now) by being one of the few places to put their trust in a public-private-partnership for water. That’s a big risk, however, its something that industry LOVES, so there’s no surprise at how much press it got, as well as the fact that politicians go out of their way to reward such behaviour.

    What is also interesting is that while other municipalities have used the same technology, no others have copied the private-public aspect.

    This, again, shows just how a politically and economically secure area benefits and why it takes so much energy to grow other areas. Moncton will of course always win out on just about any investment vehicle, which is why you need a government to ‘spread it around’. Moncton benefitted from provincial and federal money before, but doesn’t seem to show any interest whatsoever in helping any other areas.

    So again, its hard for NB’ers to argue against the federal government simply doing the same thing that New Brunswick is doing.

  9. RUBBISH! Moncton should suffer because it aggresively pursues opportunities based on their strenghts. It is proven that Moncton has the best water quality in NB if not Atlantic Canada. And kudos to Moncton for promoting it.

    The best way for rural NB to expand and prosper is to begin with small business. Once you have that support base it is easier to get the Molsons.

    Here’s the challenge for you: Why would a profitable company, like Molson, setup shop in Nackawick? What acompetitive advantage would it give the company?

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