Thank you for the opportunity to meet with you.
My name is Hugues Simon. I'm VP for value-added wood products with AbitibiBowater.
First, let me introduce the company. AbitibiBowater is the result of a merger between Abitibi-Consolidated and Bowater, which happened at the end of October 2007. We have 18,000 employees, and we produce $8 billion in revenues. We manage 53 million acres of forest land, mostly public land. We have 28 pulp and paper mills, and 35 wood product facilities, 28 of which are in Quebec. We're the eighth-largest forest product company in the world in terms of revenues and capital, and we're the largest producer of value-added wood products in Canada.
Let me start with the opportunities, because when there are challenges, there are also opportunities. We have a very high-quality fibre in Canada and in Quebec. It's something that will be a very good advantage for our industry in the future. It is not today, and we'll see why a bit later when we talk about the economics. But we're well known for the quality of our fibre. We have the proximity of the world's largest market, in the United States. We are shipping to other countries, but let's keep in mind that the United States is our biggest market. They are in a recession right now, but this market will come back.
We are a leader in forest certification. I will explain what I mean for people who are not as familiar as we are with certification. For example, AbitibiBowater has 95% of the forest that we manage under a third-party certification, which means we have an independent third party that comes and makes sure that what we do in the forest is done in such a way that the forest will regenerate and that it's done responsibly. Canada is a leader in that, and it's something we have to be proud of and it's something we have to tell the world.
In regard to the challenges for the Canadian industry, as you probably know, U.S. consumption of both paper—as Mr. Lazar mentioned—and lumber fell apart last year. We basically went from over two million units of housing being built in the United States to roughly a million today. This is significant, and you will probably see that when you see the results of the companies. This resulted in drops in prices, basically prices dropping more than 30%, while the Canadian currency was improving at the same time. So there was everything needed to produce a perfect storm: a stronger dollar, less demand, and lower prices. So it's no wonder the industry is in trouble and asking for help.
The last thing I will mention in the challenges for the whole country is the big increases in logistics costs. Of course, when we ship overseas, we're affected by the rising fuel prices. When we ship into the United States, having most of the wood operations and paper operations in remote areas, we depend on rail, and as you are aware, in most places, rail is a monopoly and a monopoly is never good for business. It means rising prices. In a market position such as today, when we're shutting down mills, when there is less demand and fewer shipments, prices shouldn't be going up, but they are. So this is a major problem and a monopoly that should be addressed.
As far as the province goes, I'm not going to repeat the things that Mr. Vincent said. As far as wood allocation is concerned, just to make it clear, wood allocation is attached to specific sawmills. For example, in many places—let's take the Lac-Saint-Jean region—we have many, many mills running two shifts or running one shift, because the wood is allocated to specific mills.
So the message there is the same as Mr. Lazar's. Let the industry consolidate. During times when the economy is weak, it's very important to let the strong ones become stronger and to let the weaker ones die. This is how you get a more productive and more efficient industry.
Yes, we do have the highest-cost fibre in the world. That has a big impact, knowing that fibre cost is by far the highest cost in the production of lumber and also a very major cost in the production of paper. The stumpage system is not adapted in the province of Quebec with the quality of the fibre. As Mr. Vincent said, if you buy a big log, the stumpage system charges the same as if you bought a very small one, but the value of that fibre is not the same. Other provinces have a different system that is more adapted, and it is something that will need to be adapted in the province of Quebec.
One of the questions was how do we help. As far as consumption is concerned, we're not asking anybody to help us with U.S. consumption, but to take a leadership role in Canada and to think long term. There are many ways to do that. We can promote wood. Wood is good, wood is renewable, and it is a green product to build with.
The government needs to preach by example. When a federal building is being built, wood is a good option. It's probably a cheaper option or the same cost, but it is a green option and a renewable product. We do not see this in Canada as much as we do in Europe, where some major buildings are made out of wood.
The government needs to continue to support associations. When we say we have to help to promote wood and forest products, we're not asking you to create new agencies. Agencies are in place and the existing agencies are working well. But they need to be helped more so that they can create more development and more access to new markets.
The government should facilitate forest certification for smaller players. We manage 53 million acres of forests, mostly in Canada. We are 95% certified by third-party associations. Smaller players cannot always afford to do that. One way for the government to help is to really take a leadership role in selling this model as a Canadian model, and to go to the world and say the forests in Canada are 100% certified by third parties, and to use that as a good selling tool. It is important that this be done and that it be done by using third-party agencies, not a monopoly. There are many certification agencies that exist, and it's very important that we keep more than one, because having competition in that world is just as important as having competition in logistics.
We're not going to ask you to change the monetary policy of the country. A dollar that is rising as fast as it has really does not give time to industries to adapt. If the economy had been great in the United States, the impact would not have been the same. Again, when you have lower demand, lower prices, and a stronger dollar, the perfect storm does it all.
Companies are losing millions of dollars, and we are restructuring. The message here again is let the companies restructure. It's healthy and it's going to create a better future.
As far as helping workers is concerned, Mr. Vincent mentioned that many mills are shutting down in Canada. It's important to help the workers. The lumber market is going to come back. The industry is going to consolidate and it will need a qualified workforce.
There are dangers when you consolidate and lay off thousands of people, knowing that most of the facilities in the wood product industry are remote from big cities. People move to Montreal, to Quebec, to Toronto, and to Ottawa. When we do have projects, it is already a challenge to find qualified workers in the regions. So having programs to continue to train people in the forest industry is a must. As Mr. Lazar said, we have a bright future, but let's make sure that we have a nice qualified workforce to help us.
One example of this is to facilitate the immigration of people to work in the forest industry here. It's the same as is being done in the farming industry, where people from Mexico come here to help in the summer season. Yes, companies are already looking at this, but if you ask for high school degrees in some regions, you won't get people with high school degrees. When you have to go with less educated people, you don't always find the same quality of workforce.
On the softwood lumber agreement, the agreement works. It seems odd to say that today, when prices have never been this low. However, let's not blame the softwood lumber agreement for the collapse in the U.S. market and the collapse in U.S. housing.
What is very important again is to take a leadership role and to think long term. There are a lot requests for the provinces with option B, the option whereby specific companies have quotas. Some companies are not able to ship all their quota volume right now because it is a collapsing market or it's a high-cost mill or for whatever reason.
Let's not try to protect specific companies, but let's try to protect the industry. Let's facilitate the ones that need more quotas to get more and let's let the ones that don't use them get less. Basically when this agreement was signed, the initial period was from 2001 to 2005; based on their history, they were given a quota, and going forward, a new calculation would be needed--for example, in Quebec we'll take the last three years. Let's stick to that, and let's make sure the stronger ones can become even stronger during bad times, because that's the only way we can get the industry to become more efficient and to survive in the long term.
To finish, I fully support what was said by FPAC and QFIC. It is an industry problem; it's not a company problem. This industry needs help, but the support and the leadership role has to be for the wood product business, not for specific companies; we have to let those companies restructure again, because that's the only way we'll get a strong forest product industry in Canada.
Thank you.