Dec. 9, 12:20 EDT Gas bill for large users doubles, association says Costs force some operations to shut John Spears BUSINESS REPORTER Industrial gas users are on the hook to pay billions more this year because of the soaring price of natural gas.

Some are shutting down operations because of soaring costs, says Peter Fournier of the Industrial Gas Users Association in Ottawa. Big users are paying twice as much for natural gas this year as last, Fournier said in an interview.

Industrial users are paying about $6 per thousand cubic feet of gas this year - up from $2.50 to $3 a year ago, he said.

That's still less than the spot price, which hit $11.50 this week.

But Fournier said it means $5 billion a year or more in added costs for big industrial users such as chemical producers, electricity generators, pulp and paper firms and metal smelters.

Most big users are sheltered from the spikes on the spot market because they arrange long-term supply contracts in advance of the winter heating season, Fournier said.

Firms in his association probably have contracted 60 to 70 per cent of their needs for the winter, he said. So have utilities that serve homeowners, such as Consumers Gas.

But the prices are still hitting hard. One of his members, General Chemical in Amherstburg, Ont., has shut down most of its operations, he said.

``They're a U.S.-owned company. They'll just rely on U.S. facilities until the price gets back.''

He also predicted that large buildings such as schools, hospitals and offices might shut down unused wings this winter to save heating costs.

``In the short term, the impact isn't as bad as it could be. But as these one-year contracts come up for renewal and the price hasn't come back down, the outlook is grimmer.''

``The key factor that affects North American natural gas prices is the inventory, and in the United States, inventory levels are way below where they should be,'' Fournier said.

Normally, gas companies end winter with 10 or 15 per cent of storage capacity, he said.

``By the end of March, U.S. inventory levels could be zero. Then there's a cold snap, (and we'll be in deep doo-doo.''

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-- Martin Thompson (mthom1927@aol.com), December 09, 2000

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Runaway gas costs sound alarm bells in industry As fuel soars, corporate leaders warn of layoffs, shutdowns, losses, higher prices LILY NGUYEN

Friday, December 8, 2000

CALGARY -- Soaring natural gas prices have put a major squeeze on Canadian businesses, with corporate leaders warning of higher prices, plant shutdowns, layoffs and a tide of red ink to come.

The price of natural gas hit another high-water mark yesterday, soaring to a record $9.54 (U.S.) per million British thermal units on the New York Mercantile Exchange, before falling back to $8.37, off 11 cents. Natural gas prices were about $2 at the beginning of the year.

On the Alberta spot market, it sailed past the $11 (Canadian) per thousand cubic feet mark this week, about quadruple last year's average price.

Jayson Myers, chief economist of the Canadian Manufacturers and Exporters, said businesses all over Canada are feeling the impact, from small shops grappling with exploding heating bills to large corporations that rely on natural gas as their major feedstock.

"We're hearing a tremendous response from our members across the country," he said. "If you're looking at gas prices tripling or quadrupling and staying high, it's really going to put up the cost of doing business."

Mr. Myers, who warned of layoffs and business closings, said natural gas makes up 3 per cent of manufacturing costs in Canada and is used to supply 20 per cent of manufacturers' energy needs.

However, he added, those costs are borne disproportionately by specific industries, with chemical, pulp and paper and steel being the biggest users.

Gas makes up about 70 per cent of overall production cost for polyethylene, used to make products such as plastic wrap, at Nova Chemicals Corp., said Graeme Flint, vice-president at the Calgary- based company.

He said as a result of the climbing costs, Nova will increase prices on its polyethylene products by 10 to 15 per cent in January, and cut back output by up to 30 per cent as further production becomes unprofitable.

Even then, the company, which has operations throughout North America and in Europe, is going to feel the impact on the bottom line, he said. "We anticipate there will be a reduction in our overall profitability."

Other companies already have absorbed blows on their balance sheets and are preparing for further pain.

In its third quarter, Hamilton steel maker Stelco Inc. recorded a 40- per-cent increase for gas costs to $175-million from $125-million for all of 2000. The company posted an $8-million loss in the quarter.

Mark Steinman, the company's chief financial officer, said that with gas prices continuing to rise, he expected the company to record another jump in gas costs of roughly $50-million in 2001.

"Our planning assumptions are [that] we are going to see big increases," he said.

At pulp and paper producer Domtar Inc. of Montreal, spokesman William George said the unexpected rise in gas prices has basically wiped out the year's productivity gains. The company now will be lucky just to hold the line on costs.

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-- Martin Thompson (mthom1927@aol.com), December 09, 2000.