Catalyst Paper plans to cut employee numbers at its two largest mills in British Columbia, Canada, as it tries to cope with rising input costs and a relentless fibre shortage made worse by recent sawmill closures.

At Elk Falls mill in Campbell River, reductions will affect approximately 145 hourly and staff employees as the #1 paper machine, which was curtailed last September, is indefinitely idled. At the Crofton mill in North Cowichan, approximately 82 positions will be reduced as the operation takes steps to bring its overall cost structure closer to best-quartile performance.

Richard Garneau, president and CEO: “The Elk Falls mill has been most affected by fibre and market dynamics to date. With the permanent closure of the TimberWest and other sawmills taking curtailment, the potential to restart #1 paper machine in the foreseeable future has disappeared. “We appreciate this is not welcome news for employees or the community, however, we need to make the best possible use of available fibre supply to support our most profitable business.”

Estimated costs of putting the measures in place is not expected to exceed $4 million and will likely be offset by manpower efficiency savings as the company continues to focus on achieving a best quartile labour cost benchmark of $80/t. “We have talked openly and often with employees about the pressures on the business, what it will take for Catalyst mills to be low-cost producers, and the steps the company must take to become profitable in a brutally competitive market,” Garneau said. “It is clear that cost improvements on all fronts will be needed in order to stabilise and strengthen the future of our operations.” Catalyst noted that the major industry tax rate paid by the company’s coastal mills is significantly greater than elsewhere in North America and remains a major hurdle to its competitiveness. “We appreciate the province has reduced the school tax component of our bill which will save us about $2 million over the next two years on a total 2007 property tax bill of $32 million. However, it will take a reduction ten times greater than that to bring our BC mills in line with the municipal property taxes paid by industry elsewhere in North America.”