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Ramping up export sales

Relatively newly-sprung from major forest company Canfor, BC’s Springer Creek Forest Products is utilizing its “Kootenay Mix” woodbasket to develop a number of new initiatives to ramp up the mill’s overseas sales.  

By Paul MacDonald   

When North American softwood lumber prices decline, Canadian sawmills can encounter a double whammy: not only are they getting less in the market for the lumber they produce, but they also face—under the new Softwood Lumber Agreement (SLA) with the US—export taxes to even get their product south of the border.                                   

“The industry is looking at some pretty tight markets in the year ahead,” says Ralph Tomlin, general manager of Springer Creek Forest Products of Slocan, BC.                                   

The logs Springer Creek works with are high quality, and have the potential to yield high value wood products over and above conventional CLS dimension grades.  

“With lower lumber prices, the export taxes and the surge mechanism under the SLA that increases the tax further, the amount of taxes gets very close to one quarter of the selling price for lumber.” But Springer Creek Forest Products is now working to make the Softwood Lumber Agreement and its punishing conditions less of a factor for the company, as they ramp up overseas sales.                                   

Springer Creek is an interesting story in itself. The company’s single mill is in the midst of the Southern Purcell Mountain Range in southeastern BC, and sits on the southern shore of Slocan Lake. It is one of a handful of independent mills operating in this region, but at several points it was part of two large forest companies, Canfor and Slocan Forest Products.                                   

It was one of the first mills in the Slocan Forest Products group, a company that forest industry entrepreneur Ike Barber built from scratch into one of the leading lumber producers in Canada, over a period of 25 years.                                   

After attempting, and failing, to take over the Slocan Group in 1995, lumber giant Canfor was eventually successful, and bought Slocan in 2004. The purchase of the Slocan Group fit well with Canfor’s primary mission of being a powerhouse in SPF dimensional lumber production. “The sawmill in Slocan did not fit that mold, though,” explains Tomlin. “After the merger, we were the only mill within Canfor with cedar, the only mill with hemlock and one of a few mills with fir.” With its species and size matrix, the mill was the proverbial round peg in Canfor’s square hole of commodity dimension lumber. “Canfor is a good company and they are very good at producing commodity lumber, but it really wasn’t a good fit with the wood diversity with the ‘Kootenay Mix’ of timber we have,” says Tomlin. The Slocan mill was also some distance away from other Canfor operations, limiting the synergies that might come from a shared woodbasket or other facilities.                                   

Their “Kootenay Mix” wood basket is a wet belt combination of SPF ( 0 per cent), fir/larch ( 0 per cent), hemlock (27 per cent), western red cedar (10 per cent) and white pine ( per cent). The logs are high quality and have the potential to yield high value wood products over and above conventional CLS dimension grades.                                   

Springer Creek is working specifically to move away from commodity products and into more specialty products, which offer better returns— and also matches their wood supply.

Springer Creek Forest Products came into being in early 2005, when local individuals and companies decided to buy the mill from Canfor. Among the owners are Sunshine Logging, the principal logging contractor for the mill, and Brisco Wood Preservers, which has wood preserving operations in the region. In addition to seeing the mill itself as a good business opportunity, Brisco, which treats both pine and cedar poles, also viewed it as a way of securing a steady source of supply for its operations. For Sunshine Logging, it was an opportunity to secure their own business future. For Tomlin, who has been at the mill since 1986, and the mill’s 170 employees, it was an opportunity to venture into new markets, and to develop products for those new markets.                                   

When Springer Creek Forest Products was set up, it faced the daunting challenge of almost immediately going into a tough lumber market. “The market turned down almost immediately after we took over,” says Tomlin. “Things became challenging very quickly because it wasn’t like we had cash reserves, from when markets were better, to fall back on.” These tough market conditions provided further incentive to diversify into markets outside the US. “Since then, we’ve ventured into a lot of different product items and lines that we haven’t done before at the mill. Or if we had tried them before and they didn’t work, we’re taking different approaches.”                                   

They are working to specifically move away from commodity products and into more specialty products, which offer better returns, and also match their wood supply.                                    Illustrating their market diversification, the mill made its first shipment into the Philippines in the last half of 2006, and they now have product going into Taiwan and South Korea. But the real success has been Japan.                                   

“We’re now shipping 0 to 5 per cent of our product overseas, and we’re looking to increase that further with the programs we are looking to get off the ground,” says Tomlin.                                   

There’s a very straightforward strategy at work here: the more they can develop overseas markets, the more diversified their sales. Instead of being joined at the hip exclusively to the US market—the situation of many commodity SPF producers—they would have their lumber eggs in more baskets, so to speak.                                   

“That’s where our future is going to be,” notes Tomlin. “Anything we can do to keep our mill net up and keep the mill independent of what goes on in the dimension lumber market, the better off we’ll be.                                   

“We can’t—and don’t want to be—competing against the big guys in commodity lumber. We have to make our own game. We have a wood basket here that provides us with some opportunities to make products different from commodity items so we are not turning out 2x4s or 2x6s all day long.” That wood basket is there, but getting the timber to produce lumber for these new markets has been a challenge,                                   

Tomlin admits. When the mill was still under Slocan Forest Products, it was hit with a clawback of 20 per cent of its timber tenure as a result of a provincial government policy to redistribute timber rights away from the major forest companies. That timber base was reduced further when Slocan re-distributed the overall reduction among various company operations. The end result was a total reduction in cut, from pre-200 levels, of 48 per cent. Of course, the owners of Springer Creek knew all this when purchasing the operation.                                   

“That has presented some challenges in keeping the mill wooded-up,” says Tomlin. “We are somewhat dependent on private wood and more importantly on the BC Timber Sales programs.”                                   

Currently, the BCTS programs offer limited help in terms of wood supply since they are focusing on mountain pine beetle salvage operations, and Springer Creek does not have a great deal of lodgepole pine in their operating area. Tomlin notes there is a lot of competition for timber in this area, with other independents in the region also hungry for wood. A local group is seeking a community forest licence, and Springer Creek has supported that proposal. If the group is successful in gaining a licence, the company hopes to access additional timber.                                   

The timber they are working with is an extremely good fit for their markets. “We’re very fortunate in that we have good quality timber, whether it’s the fir, hemlock, spruce or even cedar. It’s good wet belt wood, with little taper. We’ve got a lot of good second growth timber that yields a lot of high grade, and that’s what is helping us cater to some of the Japanese markets—they’re always looking for the best.”                                   

The mill produces a full range of dimension lumber from 2x to 2x12 in lengths from six feet to 20 feet. Also available are odd widths (eg 2x5 and 2x7 in lamstock) and one-foot multiples. High quality one-inch boards are produced in spruce and lodgepole pine. As well as the dimension grades, J-grade and select structural is produced in SPF and hemlock. Cedar is produced from 2x to 2x12 and, being good quality second growth, yields a high percentage of select tight knot type of material. The Douglas fir and larch are well suited to products such as lamstock due to the straight grained nature of the wood.                                   

Tomlin says one of the overall strengths of the mill is its ability to change species quickly and on short notice to respond to market demands.                                   

Starting the production process out at Springer Creek’s two-line operation are Nicholson A1 and A5 debarkers. The large log line features an eight-foot CAE head rig which takes logs 1 feet and larger, while smaller logs go to a chip ‘n saw set-up. The headrig is followed by a 12-inch Ukiah double arbour edger, while the smaller log line has an eightinch Ukiah double arbour edger. The mill has a Newnes fully optimized board edger, Newnes fully optimized trimmer, an LSI 40-bin sorter and Acme strapping system. Handling the chipping is an older 52-inch Precision unit. Other equipment includes Wagner moisture detectors and an Irvington trimmer/fence.                                   

There are four older kilns, each with a 250,000-board-feet capacity. A Konus energy system heats two of the kilns, with the other two direct-fired propane.                                   

Finishing the wood is an older Woods planer that Tomlin says does an excellent job. “The planer staff keeps it very well maintained, and we get a lot of positive comments back from customers on the dressing quality and overall appearance.” There are Japanese companies that specifically ask for Springer Creek lumber because of its quality, and its presentation, he says.                                   

There have been some capital improvements on the mill since Springer Creek took it over. They put a new infeed on the canter in 2006. “That was a good and needed project,” notes Tomlin.

Springer Creek is looking at a few small mill projects in the near term that will increase their production flexibility so they can better service the much-desired offshore markets.

Generally, the mill was in good shape when it was purchased from Canfor. “It was well maintained,” says Tomlin, who should know since he was at the mill for 20 years. “There is a mix of old and new technologies, but our lumber recoveries are pretty decent for the type of timber we’re in.”                                   

They have a very strong focus on preventative maintenance. “We keep at it pretty regularly, including a weekend maintenance shift. We don’t experience many major breakdowns, so we must be doing okay at maintenance.”                                   

They are looking at a few small mill projects in the near term that will increase their production flexibility, so they can better service the much-desired offshore markets. Tomlin says this involves modifications to existing equipment, rather than outright purchases of new equipment.                                   

Tomlin adds with the mill now being independent, they are free to make these types of decisions on their own, and it has also freed them up to explore new markets independent of the selling program of a larger parent company.                                   

“It’s really something we want to do, but it’s also something that we now have to do,” says Tomlin. “Slocan was an excellent company, and so was Canfor for the brief time we were part of that company. But it’s been a breath of fresh air dealing with an ownership group that is very close to the action, and decisions can be made very quickly.”                                   

Being on their own has sunk in pretty quickly in other ways. Before, if mill staff were looking for some assistance, they’d pick up the phone and call the head office in Vancouver or maybe another company operation                                   

“That’s gone,” says Tomlin. “We’re now it—we’re head office. We have to figure it out ourselves, whether it involves US Commerce Department issues or capital funding. We’re sorting it out right here. It was a learning curve, but we’ve managed to get through it pretty good.”