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New report sees B.C. mill closures from pine beetle

The B.C. forest industry is facing significant sawmill closures in the interior of the province over the next eight years and reductions in the annual timber cut, according to a new report from Vancouver consulting firm International WOOD MARKETS.

The report, which the consultants at International WOOD MARKETS authored together with Jim Girvan, principal of Management Decision and Technology Ltd., and Murray Hall of Murray Hall Consulting, offers an objective view on the mountain pine beetle and the long term effects the ongoing beetle epidemic may have on the forest industry in the Interior of British Columbia. It also looks at the downstream impacts it could have on North American lumber and panel markets.

The BC INTERIOR: Mountain Pine Beetle Attack report addresses the potential outcomes from what the consultants term an "unprecedented" supply shock--the most pressing since the 1990s' Spotted Owl crisis.

The report says that key to the forecast is the recognition that as the beetle runs its course there will be two distinct impacts: there will be fewer and fewer sawlogs available to support regional sawmills and plywood plants; and Annual Allowable Cuts will need to be reduced as the killed and harvested timber regenerates, to form the next crop of trees.

Based on the report's assumption, log shortages may trigger the permanent closure of 16 sawmills and/or plywood production facilities within the B.C. Interior by 2018 (with even more to follow), according to the report.

Major shortfalls in sawdust and shavings are expected to occur within the B.C. Interior as sawmills rationalize in the face of declining sawlog availability.

The report says the outlook for the Crown and private timber AAC and sawlogs shows the following trends:

  • The total AAC is estimated to have peaked in 2007 at near 69 million cubic metres and is expected to remain relatively unchanged until about 2014 when a slow decline to about 60 million cubic metres in 2018 is expected.
  • The coniferous sawlog harvest declined from 2005 to 2008 (and further declined in 2009) as the U.S. market demand plummeted.
  • The potential coniferous sawlog availability, based on the B.C. Fibre Model, is expected to be almost 60 million cubic metres between 2009 and 2011 before timber quality issues lower the availability of economic mountain pine beetle timber. The report noted that the actual demand for timber will be well below the potential availability due to weak lumber and panel markets in the U.S.

Sawlog demand fell steadily from 2005 to 2008 as a result of lumber market forces negatively impacting B.C. Interior sawmill operating rates, together with some permanent sawmill closures.

The medium-term demand for sawlogs is expected to peak about 2013 and then fall coincident with the declining sawlog supply as the beetle progresses and sawmills are forecast to close in those regions impacted by the beetle.

The report forecasts the actual demand for timber will be well below the potential availability due to the slow recovery in the lumber and panel markets in the U.S. through 2013 and then from the log quality issues from the mountain pine beetle.

The report says it is clear that the lumber supply dynamics will be changing in B.C over the next few years as the mountain pine beetle timber salvage and lumber production peaks.

This will result in much lower levels of lumber production from B.C. as the economics of converting beetle-killed pine trees wanes.

From a peak lumber production of 15 billion board feet in 2005, B.C. Interior lumber production was below nine billion board feet in 2009, representing the bottom of the demand cycle. Based on increasing demand, lumber output is expected to peak about 2013--based on a strong U.S. housing market.

After 2013, a steady decline in production is forecast as poor economics of processing mountain pine beetle lumber will start to occur.

When incorporated with timber supply and lumber production reductions in Quebec and Ontario, there will be a noticeable reduction in the Canadian lumber supply base relative to the existing structure of the North American industry.

The full report is available from International WOOD MARKETS Group Inc., Canada's largest wood products consulting firm. Phone: 604-801-5996. E-mail: info@woodmarkets.com
Website: www.woodmarkets.com

 

Untitled Document

March/April 2010

On the Cover:

Things are getting more active in millyards across the country, as lumber prices reach levels not seen in years. But harvesting the wood to get it to the sawmills--especially if it is beetle-affected timber in British Columbia--can be a challenge in itself. But it's a challenge that Westpine Contractors takes on with great skill, and the right iron. See story beginning on page 12. (Cover photo of Caterpillar 980F wheel loader in Tolko Industries' Heffley Creek sawmill by Paul MacDonald).

Spotlight

Wood pellet production in Ontario
is expected to boom with the province announcing the elimination of coal-fired power plants and a move to using wood pellets as a fuel source.

Part of the chip supply chain

Chipping the timber hit by the mountain pine beetle brings challenges, but Rivercity Fibre has figured it out and is now an important part of the chip supply chain for the Domtar pulp mill in Kamloops, B.C.

Working efficiently in bug wood

Using a variety of equipment, contractor Kelly King of Westpine Contractors has become very adept at harvesting and building road in the typically small diameter, super-dry beetle-killed wood that is only too common in the B.C. Interior these days.

Improving workflows with GIS web technology

Ontario's Algonquin Forestry Authority has a well-established GIS system, but adding ESRI's ArcGIS Server web technology is allowing it to improve workflows.

Canada's Top Lumber Producers--
Better times ahead?

Lumber companies went through some extremely tough times in 2009, but rising lumber prices this year could signal better times ahead.

Tech Update -- Forwarders

Read all about the newest forwarder features and technology in this month's Tech Update.

The Last Word

The clock is ticking on what should be done in the devastating aftermath of the mountain pine beetle epidemic in the British Columbia Interior.