There aren't many people in Canada – if any – who understand the forest products business better than Frank Dottori.
Mr. Dottori founded a company that grew into a giant and has been a strong advocate of sustainable forestry. He retired from Tembec in 2005, but now, at age 75, he's involved in the resurrection of a closed Domtar Corp. mill in White River, Ont.
He spoke with The Globe and Mail's Greg Keen and David Parkinson about the decline in the industry and how innovation is essential.
Q: Does the data on the decline in the forest products industry in the past decade surprise you?
A: Certainly the lumber was a surprise and the housing crisis. I retired in 2005, sort of just before it hit the fan. But at the time I think it was evident newsprint was declining. I think our forecast was 30 per cent and it just kept right on going.
We used to sell to the New York Times and Chicago Tribune. The New York Times at the time had built a big new printing operation. We calculated that with the amount of money they invested, we could put a printer and have your newspapers ... printed in your house for the same cost of that installation, something like $400-million, $500-million. We could take all the subscribers and give them a computer and a printer and they could print whatever article they wanted right at home.
Q: What could pulp and paper makers have done to diversify?
A: All of us that were in the business moved up to calendered, super calendered, lightweight coated [paper] which was still a good market. The market at the time for printing and writing papers, as we called them, and glossy magazines – magazines were growing – we all moved into that market. But then out comes the electronic book.
Q: Is it possible to convert some of these closed paper mills to other uses?
The key is access, not to fibre, but to low-cost fibre. We forget that. There's lot of fibre. What's the quality of it?
In Ontario, there are so many issues with access to fibre that it's hard to attract business. You've got First Nations issues that no one wants to address, you've got lots of red tape, you've got environmental issues that have become more religion than fact – and I think I'm an environmentalist.
Q: You have reopened the closed Domtar mill in White River, Ont. What are you doing there?
A: White River is a sawmill and has an excellent wood supply. They still have an SFL [sustainable forestry licence], which governments in Ontario are trying to eliminate, but we still have one here for the next five years. That's a good security blanket because when you go [for] finance to a bank they're saying "what security do you have in your wood supply? We're not going to lend you $10-million, $15-million or $50-million unless you can say you've got a guaranteed wood supply."
Here we happen to have a secure wood supply. There was a community here. I've got the First Nations as part owners of the mill, because they played a key role in helping us get started and keeping the mill alive when it was down for seven years, and so did the community. Lumber won't go away. I think it's the best margin business in Canada.
Q: How will technology help secure a future for Canadian mills?
One of the key issues facing the lumber industry is, what do you do with the chips?
At one time when you made 1,000 feet of lumber you made 1.1 or 1.2 tons of chips. Today there are technologies out there that, for 1,000 feet of lumber, only produce half a ton of chips or even less. Some of the European mills are down to 0.3. So that's the kind of technologies that the sawmills have to [instal] in Canada if they want have a long-term future, because there's no growth future in Canada for pulp mills and these paper mills.
We've got to focus on research and development and coming out with new technologies to allow the Canadian mills – lumber mills, because I think lumber mills have a great future – to be able to run without needing pulp mills. So that's my focus and I think the industry is starting to focus on that as well. I'm not the only guy thinking that way.