Forestry ponders whether energy surcharges will stick

MONTREAL — Forestry giant Tembec Inc. has announced a second hefty fuel surcharge this month; and the industry is closely watching the reaction of its customer base.

Rather than hike product prices, Quebec-based Tembec Inc. is implementing an unspecified charge to all resin and lignosulfonate products in response to the surging cost of energy, chemicals and transportation.

"This surcharge is directly related to the recent significant increases imposed on our operations by our suppliers, most notably in the areas of energy and purchased chemicals," said Randy Fournier, senior VP of the Chemical Products Group. "There is no responsible alternative but to pass these increases along the supply chain."

The size of the surcharge will be based on the product segment and specific product formulation. It will be adjusted as energy and chemical prices change.

Forestry companies are charging delivery fees for partial truckloads

 Earlier this month, Tembec slapped an energy surcharge of US$100 a tonne for all customers of its specialty dissolving pulp business. That surcharge will be implemented before Oct. 1.

Forestry companies traditionally charge for the delivered cost of their product and usually raise the prices on a monthly, quarterly of semi-annual basis depending on market conditions.

Speaking to Canadian Press, rival companies weren’t sure if surcharges would catch on in the forestry industry like they have in other industries like transportation.

"Our distribution business is looking at will it stick," said Domtar Inc. spokesman Michel Rathier "Are there formulas out there which will permit us to better alleviate the inflationary pressures we are going through right now?"

Earlier this month, reports CP, Domtar instituted new delivery charges for partial truckloads of product in response to higher transportation costs.

BMO Capital Markets analyst Stephen Atkinson said Tembec’s surcharge attempts to explain the cause of the higher costs, but ultimately amounts to the same result as a general price hike.