The Provincial Government has promoted the opportunities in wood industry value-added products for some time. Are there really new jobs and new businesses that can be developed from this sector? Timmins is a large producer of lumber, and has an oriented strand board plant. Iroquois Falls and Kapuskasing produce paper, and several other surrounding towns produce pulp, and lumber. Although the wood industry is a large employer, new jobs are difficult to obtain with the limited availability of wood resources and the amount of resources that are being pulled back for conservation. In addition, centralization and mechanization is allowing companies to do more with fewer people. This is not to say that lumber production will not continue to strive and employ many people, however, it is a commodity good, heavily influenced by world prices and, as we have seen lately, by duty rates charged by US and European countries. The lumber market is a slow growth market and when demand is low or slowed, or when Canada has difficulty competing, mills close, shifts are reduced, or eliminated.

The Provincial Government, through its Living Legacy Trust, engaged a Consultant from Europe to tell us about the opportunities that Ontario was missing out on, as a result of our inability to take advantage of value-added production. The Consultant identified that our existing producers should be taking the lead in value-added. Many of these producers are already doing some value-added but if it is not their core business, they are not interested. Many value-added goods need to be produced by smaller operations, at lower wage rates. But it is difficult for smaller operators to iron out deals for the wood fibre they need to get started. If you need shaving, sawdust, chips, or logs, the existing producers are unwilling to let go because they need these resources for cogeneration to reduce energy costs. There are some opportunities if value-added products can be produced from existing productions such as lumber, veneers, or waferboards. Examples of products on this value chain would include furniture, caskets, or prefabricated housing. However, we either have very few entrepreneurs, or too little skills in these areas because there are too few value-added producers in our region.

Value-added wood products are goods made of wood that are brought to the next level of transformation. There are basically three categories: a) pulp, b) goods made for the construction industry so that we can build with wood (Chapleau has had window, cedar shingle, and still has a log home manufacturers as examples), and c) goods made for indoors such as furniture and decorative items so that people can live with wood. Value-added products are often made by smaller entrepreneurs to fulfill smaller, niche markets. In the building products industry, all products shown from layer 2 and higher are considered value-added products. In addition, all of the products categorized under the ‘living with wood’ industry (furniture, mouldings, doors), are value-added.

Value-added producers often don’t have control over the wood resources (they must buy from an existing supplier); they do not have a high mark-up to meet the consumer’s budget needs; production volumes are low and therefore the cost per unit is higher. As a result, value-added producers have less control over the cost of resources and work with smaller margins. This means that they cannot afford to pay large wages, or encounter labour difficulties. The average salaries for value-added workers are in the $13-$15 range, in contrast with the higher wages of $22+ paid by most forestry and mining operations in Northern Ontario. As a result, many of the value-added jobs are sent to Southern Ontario, where there are more people willing to work at these wage rates. Large businesses such as Wal-Mart, Home Depot, and IKEA have pushed down a 25% reduction in costs to their supply chain over the last 10 years. Clearly, manufacturing operations have had to do more with less.

In Frivoli, Italy, there are 1400 family-owned operations creating 30% of the world market demand for wooden table legs. Denmark produces 60% of all world-wide turbines. Singapore produces 40% of all worldwide hard disk. These jobs are permanent and year-round. The Finish and Swedish strategy for value-added has helped to create more than 2000 wood-product companies. Their strategy included the development of a value-added wood program to double the current production; competence centre for developing the right skills; generating a wood culture to increase consumption; and they developed a “modern wood town concept” as a showcase. Whether Northeastern Ontario can participate or even lead the value-added movement will depend on local leadership, and the ability to put forward a workforce and entrepreneurs for value-added production.