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April 1997 - Past Issue

Prospering In The Pacific Rim

"Five years ahead" of Alberta competitors in developing Asian markets, Sundance Forest Industries expands with a new $10-million reman plant.

By Tony Kryzanowski
Copyright 1997. Contact publisher for permission to use.

A Chinese-owned sawmill with a Swedish design, located in Edson, Alberta, originally intended to produce metric lumber for the UK market, now selling reman products to the Pacific Rim - now that's something you don't run across every day.

Sundance Forest Industries' brief six-year history may read like a traveller's passport, and its seems the journey was worthwhile. They are now able to invest another $10 million for their own reman plant, eliminating the middle man and thus realizing better financial return on their investment. They say locating in Alberta over BC will fatten their wallets even more.

April A quick study of the Sundance sawmill shows immediately that there is nothing run-of-the-mill about it. Sundance is owned two-thirds by CITEC Canada Ltd, which is a Chinese investment company located in Beijing, and one-third by Winstyle Forest Resources located in Hong Kong.

The sawmill concept started with a small Edson land holder who held a considerable timber quota. In 1990, he and a group of partners that included CITEC and Winstyle built the sawmill with the intent of selling metric lumber to the UK. That market collapsed shortly after the sawmill began production, so the company changed its focus to the Pacific Rim and North America. Also during that time, most of partners dropped out, except for CITEC and Winstyle.

The road to their current success has not been easy, according to Sundance Forest Industries general manager Wayne Hemsley, who joined the company in 1991. "It's been quite a challenge going from rags to riches almost literally," says Hemsley.

How times change. In the early 1990s, dimensional lumber sawmills hauled in huge profits selling to the US market, while Sundance Forest Industries struggled. Now Sundance has a more secure future, while many other sawmills are trying to change focus, due to new softwood export quotas to the United States.

Sundance has also earned a more secure wood supply, as the government of Alberta recently entered into a Forest Management Agreement (FMA) with the company. This represents a conversion from the company's volume-based timber quotas, although it will not mean more quota. The company takes on forest management duties and in exchange receives a long-term timber supply commitment.

"We're easily five years ahead of anybody else trying to do the same thing," says Hemsley, referring to their success in the Pacific Rim market. "We have a very good customer base in Japan, and we've done the research and the development in our products."

The sawmill's annual production is about 160,000 m3, manufacturing metric size lumber from exclusively lodgepole pine. Their timber quotas consist of about 90 per cent lodgepole pine, and they trade the remaining 10 per cent spruce.

As a further demonstration of its unique qualities, the mill's breakdown equipment was supplied and installed by Sweden's Soderhamn, featuring a number of Vislanda edger and chipping disk components.

"We're probably the only true sweep sawing sawmill in Western Canada," says Hemsley. He adds that it should come as no surprise as the sweep sawing technique was perfected in Sweden, with a main contributor being Vislanda.

The lumber they produce comes in four different thicknesses: 25mm, 30mm, 40mm and 63mm, and in 10 different widths, ranging from 75mm to 150mm.

April Their lumber is dried differently from standard dimensional lumber to prepare it for remanufacture. Prior to the construction of their own remanufacturing facility, Sundance's lumber was sent either to reman plants in the US or to the BC Coast. About 60 per cent of their product went to the Pacific Rim, with 40 per cent to North America. Although they have a decided advantage over other lumber producers looking to the Pacific Rim, the US softwood lumber dispute has had a double-edged impact on Sundance.

Now with new softwood import quotas to the US and by operating their own reman plant, they will change their market thrust to the US. They will now send remanufactured wood products directly to the US market. That could have an impact on the company's marketing strategy to the Pacific Rim, as Hemsley explains.

"One of the things we have found over the years is the fact that we have to have a good North American market in order to make our offshore marketing work," he says. However, it now makes no sense to send plain lumber to American reman plants.

"There is no sense sending down product to American competitors of ours to Japan, and using our quota to do it," says Hemsley. Sundance Forest Industries has received a very small US softwood lumber quota, and Hemsley says they feel unduly penalized.

"It's ironic that we're one of the companies that really didn't have anything to do with creating the problem," he says, "and yet we are being heavily penalized because of it. The softwood situation kind of verifies our original idea of trying to develop other markets."

Sundance Forest Industries operates its reman operation under the separate name SunPlus. Hemsley says it was their plan all along to build a reman plant, once they put the sawmill on the right track. Construction began in June, 1996, and production started in October. They have installed a Gracon optimizing chopsaw line and a Western Pneumatic finger-jointing line. They will have two Weinig moulder lines. Both will be operational by late spring. They also have plans to install a new resaw line this summer.

Their products find all sorts of uses in traditional post and beam homes or in pre-fabricated homes. Because they produce specialty products, they fill customer orders rather than stockpile. A high percentage of their finger-jointed wood will find uses in window frames and door frames, according to SunPlus Specialty Products Manager Ian Tarves. Home manufacturers appreciate the superior quality offered by remanufactured wood, such as strength and a tendency not to warp.

Hemsley says their philosophy of meeting customers' demands begins right at the logging stage.

"Our philosophy is that specialized production starts in the bush," he says, "and we follow that through our entire manufacturing process. Getting into the export market requires a whole revamping of your dimensional mentality. We don't run as fast as a dimension sawmill. Our emphasis is not on high-volume production, but on high-quality production. It takes a totally different mindset to do that, and it has worked out very well for us."

SunPlus purchases finger-joint blocks and low-grade lumber that Sundance has stockpiled for the past year. In future, they expect to have to purchase fibre on the open market to keep SunPlus adequately supplied.

At first glance, it seems it would have made more economic sense to locate the reman plant on the BC Coast to save on transportation costs. But Hemsley says the more they investigated that option, the more it made sense to build near their fibre supply in Edson.

Transportation costs were an initial consideration, he says. The Coast also offered a skilled work force familiar with reman plants.

"We also thought there might be some opportunity with some of the Category Two timber in BC," Hemsley adds. But in the final analysis, it was no contest.

"We looked at the political climate in British Columbia, and the labour climate in British Columbia, and the fact that our sawmill was operating very well here," says Hemsley. "We decided that staying in Alberta was by far a better alternative."

In fact, Sundance controller Mike Dion estimates that even with increased shipping costs to the Coast, the company will keep at least 25 per cent more after-tax dollars from their SunPlus operations by locating in Edson.

"Certainly, we have a much higher transportation situation here and it's a little more difficult for us to get containers than probably on the Coast," says Hemsley. "But I have no doubt that it will pay off. Right now the way the forest industry is operating in BC, I can't imagine risking $10 million in that province to build a facility. To me it just doesn't make any sense."

He has plenty of experience with BC forestry woes, having worked in that province for 20 years.

BC's loss has certainly been Edson's gain, as total Sundance Forest Industries operations provide 195 direct jobs and 90 jobs for contract loggers.

"We have what I consider to be the best work force that I have ever worked with," says Hemsley. "The last five years have been quite a bit different, and very enjoyable in many ways."


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