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Investing Ideas The Most Depressed Industry In North America
Investing Ideas The Most Depressed Industry In North America 
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| The Most Depressed Industry In North America |
| Wednesday, 03 October 2007 | ||||||||||
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We've written at length about the natural resources boom taking place in western Canada. By now, you're familiar with the Athabasca oil sands, the coal mines in Elk Valley, the gold and silver deposits in the Yukon, the bull market in corn and wheat from the prairies, and the natural gas rush in Alberta... But there's one Canadian natural resource that no one wants. And it's arguably the most important product to many of the small towns in Canada's interior... towns like Mackenzie. I'm talking about forest products. I think the Canadian forest products industry may be the most depressed industry in the whole of North America right now. The exact figures are hard to find, but from my research this weekend, I'd estimate forest companies across Canada have closed almost 100 sawmills, pulp mills, and paper mills over the past five years. These shutdowns have eliminated more than 20,000 Canadian jobs.Here is a list of reasons for this misery: 1. The Internet. Demand for paper for newspaper and telephone-directory production is falling off a cliff as users turn to the Internet for news and information. North American consumption of newsprint has fallen 60% since the late 1980s, per unit of real GDP. 2. The U.S. housing slump. Construction of new houses has slowed dramatically and so has demand for lumber. Lumber prices are close to their lowest levels of the last 15 years. 3. Mills use enormous quantities of energy. Energy prices are rising fast. 4. Canadian forestry companies export – on average – 85% of their products to U.S. and Asia. The Canadian dollar's bull market (it has increased 60% against the U.S. dollar in the last five years) has undermined revenues. One medium–sized paper company I looked at loses $200,000 in profits for every penny the Canadian "loonie" moves toward the U.S. dollar. The soft-lumber trade dispute with the U.S. government has made the situation worse.5. Unions on strike. Many mill workers in British Columbia are members of the United Steelworkers Union. The union has been on strike for two months. This has virtually shuttered the entire coastal logging and paper industry for the past two months. Many companies may not survive.
6. Pests. According to the Canadian Ministry of Forests, the mountain pine beetle will kill more than 75% of B.C.'s marketable pine forests in the next eight years. If trends don't change, the beetle will cripple B.C.'s timber industry in the long term. Good investing, Tom Source Excerpted from : Daily Wealth News Letter
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