With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/1296256
products industry. As prices tumbled in 2019, six sawmills closed and many others cut shifts. Thousands of Brit- ish Columbians lost their jobs. Related employees—mechanics, contractors, pro- fessionals and others who work with forest companies—felt the slowdown, too. The bad news in 2019 added to a drawn- out slide. Despite a few boom years, 19 mills have closed across the province since 2010. Then COVID-19 hit, reducing lumber demand by more than 40 percent in April due to a pause in U.S. house construction, a key demand variable for B.C. sawmills. Lum- ber prices fell below break-even for many players. Many of the big sawmills curtailed operations and cut more shifts. At the same time, though, private and independent companies like Skeena are quietly humming along, reinvesting and adding shifts. San Group has added more than 100 jobs to its Port Alberni produc- tion and fired up a new mill this spring. In Castlegar, Kalesnikoff Lumber Co. just invested $35 million. Prince George–based Brink Group plans to double production at all three of its northern B.C. wood products plants in the next five years. Carrier Lumber in Prince George is going flat out. Portland- headquartered Hampton Lumber plans to build a new mill in Fort St. James. Two value-added niches are doing even better. The market for wood pellets, burned as a renewable, low-emission fuel for elec- tricity, is growing. And forecasts suggest that B.C. businesses producing things like engineered wood products, cabinetry and prefabricated houses will keep expand- ing, from revenue of more than $4.4 billion today to $6.4 billion by 2030, according to a Natural Resources Canada study. This contrast is evidence of an industry in transition. No fewer than four groups have devised strategies for how the B.C. forest industry can move forward from this depression. No one doubts it will boom back—eventually. In the meantime, the com- panies that are succeeding, during what many consider to be the worst bust ever, may hold lessons for and insight into the future of the forest and wood in B.C. Stumped—for now Every company in the forest industry faces the same storm-force winds that are shut- ting mills across the province. FEA Canada's Taylor calls B.C. the highest-cost player in the logging business. Besides steep labour costs, producers must contend with a heavier tax burden and more environmen- tal regulation than rival jurisdictions. Then there's the uncertainty around the soft- wood lumber agreement with the U.S. B.C. companies paid millions in extra import duties before a court decision in February reduced the rates charged from an average of more than 20 percent to about 8 percent. Then in August, a World Trade Organization panel ruled that the U.S. government shouldn't have imposed those duties in 2017. When lumber prices were strong, the province's high-tech mills could compete, but wood is a global commodity. Thanks to falling demand in the U.S. and China and cheap supply from Europe, lumber prices tanked in 2018, plunging from $700 per 1,000 board feet to less than $300. At the same time, the slow-moving disaster of the mountain pine beetle epidemic and several big forest fire seasons reduced the number of trees available to cut. Add stricter wild- life habitat protection and First Nations land claims, and the supply of logs shrank. Demand drives the complex way the province sells wood, with companies and individuals paying stumpage fees to cut logs on Crown land. The province also rations how much wood is harvested through annual allowable cut quotas. Both pro- cesses take months to adjust to changes in the market. With supply down, mills had to outbid each other to find the logs to stay open. So at the same time as costs were climbing, operators were paying more for logs but getting less for their lumber. That matters for the entire province. When forestry suffers in B.C., it's not just the mill towns that feel it. Directly and indirectly, the sector employs more than 100,000 people, according to the Council of Forest Industries. Meanwhile, wood- related products make up 30 percent of all exports. As of last December, the value and SEPTEMBER/OCTOBER 2020 BCBUSINESS 27 SOURCES: COUNCIL OF FOREST INDUSTRIES, PWC CANADA Forestry by the Numbers 140 B.C. COMMUNITIES DEPEND ON FORESTRY 22% of the province's forest industry jobs are in the Cariboo, the biggest lumber-producing region In the Cariboo, the Northeast and the North Coast/Nechako, forestry accounts for 1 IN 5 JOBS Forestry jobs in the Lower Mainland/ Southwest make up 45% of the industry's $12.9-billion contribution to provincial GDP Indigenous people hold 1 in 11 forestry jobs in B.C., the highest participation rate for any resource sector During the ongoing crisis for the industry, there have been 100+ curtailments at B.C. forestry operations