A supply chain backlog and rail car shortage will continue to trouble the Taylor mill through summer and likely into the fall.
Canfor says the pulp mill's curtailment will "continue for an extended period of time," after cutting production in February due to transportation shortages and as finished inventories reached capacity.
Workers and local officials were told Friday, and Canfor says about 80 employees are affected. A small crew of 20 is being kept "to facilitate shipments as we receive rail cars," the company says.
"The global supply chain crisis is continuing to significantly impact rail traffic to our Taylor facility, and we have only been able to ship a limited amount of product," the company said in a statement to Alaska Highway News. "Unfortunately, we expect the supply chain backlog will persist through the summer and likely into the fall."
The mill was curtailed for a "minimum" six weeks in February, with another six-week extension announced at the end of March. The mill was also curtailed in December because of shipping interruptions brought on by severe flooding in the Lower Mainland last November.
"Taylor Pulp has been dealing with ongoing transportation challenges that have significantly impacted the facility's ability to ship product," said Canfor CEO Don Kayne in a statement Feb. 16.
Just over a month later, on March 29, Canfor Pulp's Operations VP Kevin Anderson stated, "Unfortunately, the ongoing rail transportation situation has not improved, and we have no choice but to extend the current production curtailment."
MLA Dan Davies called the news a “gut punch to the region.”
With mill workers losing jobs, spin-off impacts will be felt across the forest sector, he said, “which is already on eggshells with recent government policies."
Davies says many businesses in the North Peace are facing a shortage of rail cars. He says CN has agreed to meet with him and stakeholders, “to see if there is something salvageable here with this issue.”
“You just have to drive by the OSB mill [in Fort St. John] to see the issues they’re having. We’re continuing to hear from farmers about the challenges they’re having, and, generally, the commitment to our communities, including Fort Nelson, to make sure that rail line is maintained,” Davies said.
“I’m hopeful there is some resolve sooner than later, but a lot of things need to come together in hurry,” Davies said.
The Taylor mill produces bleached chemi-thermo mechanical pulp, with an annual production capacity of 230,000 tonnes. The curtailments have already slashed production by at least 50,000 tonnes.
Canfor has previously said it's facing increased costs due to constrained fibre supply in the region, as well as a weak long-term outlook for BCTMP markets.
In its quarterly report released May 3, the company said it shipped 176,000 tonnes of pulp in the first quarter of this year, down 34% from 265,000 tonnes in the first quarter of 2021.
"Global pulp markets tightened significantly during the first quarter of 2022, principally driven by the ongoing global transportation challenges and combined with unplanned pulp supply disruptions, largely due to labour disruptions in Europe and logistic constraints in BC," the company said in its report.
Though pulp prices have risen considerably since the end of last year, Canfor's report notes "global softwood pulp producer inventories at the end of February 2022 were at 45 days supply, up two days from December 2021, well above the balanced range and largely reflecting the aforementioned supply chain constraints," the company said.
"Market conditions are generally considered balanced when inventories are in the 28-36 days of supply range."
And improved prices notwithstanding, the company says its pulp sales in the first quarter of this year "were broadly in line with the previous quarter, primarily due to a significant delay in shipments (versus orders) driven by both the ongoing global container shortages and transportation challenges in BC."
“It’s unfortunate that the global supply chain challenges have finally come to roost in Taylor, but I don’t feel you can necessarily point to rail car supply," said Taylor Mayor Rob Fraser. "We have had some issues with respect to service in the past but we’re doing what we can to work with CN to mitigate that.”
That said, Fraser added, “I’m not too worried about the future of this mill."
"We will work closely with Canfor and any employees that need assistance to see what we can do to help them out," said Fraser.
“My understanding is that until the supply issues hit, that this mill was doing well, that there was profits being made, and the most recent work (upgrades) done at the mill have made it more efficient. I don’t have any reason to believe anything has changed based on the conversations I’ve had with management at the mill."
— with files from Dave Lueneberg
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