September 2005 - The Logging and Sawmilling Journal
BC’s Haida Forest Products has worked hard to get established in the US markeplace and is working even harder to maintain that position, despite the punishing US duties on its high-value products.
By Paul MacDonald
These are challenging times for the added-value wood products industry in Canada, with the US countervail doing a punishing job of chipping away at company margins. This is especially true for British Columbia western red cedar producers, whose high-value products are caught in the crossfire in what is essentially a dispute centred on SPF dimensional lumber.
That said, much of this sector appears to be toughing it out, with the hope that a settlement will come sooner rather than later, and that the millions of dollars they have paid as result of the countervail will be returned.
“It’s been very tough with the countervail,” says Jim Gillis, president of Haida Forest Products, a value-added cedar operation in Burnaby, BC. With Haida’s average selling price of US $2,800 per thousand board feet, and a 20 per cent duty, it’s easy to do the math—high value products plus a high countervail equals high duties. In fact, Haida and other cedar producers are paying more in countervail duties alone on a thousand board feet than a Canadian dimensional producer receives for the thousand board feet of SPF itself.
“Especially in clears, it’s effectively knocked us out of the marketplace if we want to make a profit on those products,” Gillis explains. “But we’ve chosen to stay in some of the market areas to keep our name in there. Some other companies have said they aren’t going to be there in certain markets because they can’t make any money. But we want to maintain a presence because once you are gone, you are gone. It’s very hard to come back”
Although they are not making a profit on every product sold into the US, Haida has still been able to turn a profit overall, albeit a slim one in recent years. “Considering what we’ve had to go through, we’re very proud of that,” says Gillis.
Haida sells a limited amount of cedar products into the Japanese market, and is working to develop the Canadian market further. The Chinese market potential also looks attractive. But 75 per cent of Haida’s sales still go directly to the large American market. The company’s flagship product there is its distinctive western red cedar Haida Skirl siding.
The premise of value-added producers being subject to the countervail is bizarre in itself, says Gillis. “Even if there were subsidies on logs that might be transferred to the primary sawmills, when they sell the lumber to us for remanufacturing, it’s at the market price. We’re paying the same prices to the mill as reman operations in Washington or Oregon. There is no pass-through of any subsidy.” Added to that, they have to pay duty on the value of the finished product, rather than the raw material.
With more than 50 years in the forest
industry, it’s clear Haida Forest Products
has staying power. Initially starting as a
wholesale operation, it moved into production
At one time—when there was a tight custom cutting market due to hot Japanese markets—the company included a primary sawmilling operation, which fed the reman operation. The sawmill, starting at 40,000 board feet a shift, grew to the point where it was doing 280,000 board feet a shift.
In the late 1980s, there was a planned reorganization, and Haida Forest Products was spun off as a separately owned reman facility from Mill and Timber Products Ltd.
Gillis, whose father Bill was one of the founders of Mill and Timber Products, took over the reman operation, and the Haida Forest Products name was born.
“The logging and sawmill side of the industry is admittedly very interesting,” he says, “but there were a lot of pressures. And my love is really value-added manufacturing and marketing, and it was the same with my dad. At Haida, we really are market driven. If someone wants something, we want to make it for them.”
A focus for the company from the getgo has been on marketing, and the company was involved in branding its product with the distinctive Haida logo long before branding become an advertising buzzword. “We brand identified very early on with our Haida brand of skirled siding,” says Gills. “But everything is branded Haida.”
The company, competing with larger major cedar producers, has had to develop some distinguishing characteristics. A key part of this is the large variety of products it makes, more than 100 at last count. They range from clear S4S finish, tongue and groove paneling and siding to outdoor wood items such as posts, decking, poles and timbers. Then there are the one-offs, like the custom-made kiln dried shiplap recently produced for a high profile home show in Oregon. “Essentially, we’ve had to offer a broad range of products to survive,” says Gillis. Being a smaller company, they may be more nimble in the marketplace, but they still face many of the same operating costs as the big companies.
Their workforce, with average seniority of over 20 years, has played a strong role in the company’s success. The management team is lean, hands-on and knows added-value wood products and the equipment it takes to produce it. The company’s general manager, Robert Sandve, started out as a debarker operator in the sawmill, and sales manager Gary Arthur started in production and shipping with the company. “Our people have been with us for a long time and that brings lots of benefits,” says Gillis. “It also has a downside, in that we are all getting old together.”
As with product branding, the company was an advocate of employee empowerment long before it became a buzz term in business circles. “We have always had that,” explains Gillis. “Basically any employee on the floor can shut a machine down if he sees something he doesn’t like.” And that has paid off in terms of maintaining a high level of quality product.
The success of the company and its employees was recognized earlier this year with an Award of Excellence from the provincial government for Haida’s continued excellence in remanufacturing and marketing of western red cedar.
One change the company has made in recent years is in becoming more of a manufacturer/distributor for its cedar products. “At one time, a wholesaler would bring truckloads of our Haida Skirl in. But these days, it’s more a matter of them bringing in 5,000 board feet of Haida Skirl, two thousand feet of this and two thousand feet of that.” Previously, there were cedar specialists, wholesalers who only handled cedar. But now they are often selling competitive products, such as composite decking and vinyl siding.
“They handle everything, and that is their business, and we understand that. But in certain markets, we’ve chosen to deal directly with the retailers and that allows us to stay in the ball game.” Gillis emphasizes that they still deal with a number of regular wholesale stocking distributors in many areas.
Regardless of their approach, they work hard—with their own efforts and that of wholesalers and their customers— to try to get the message through to the consumer about the value of western red cedar. Haida itself does a large amount of promotion, especially of its Haida siding, through advertising campaigns, more so than many larger cedar producers. “We need to be able to promote the value of the product, and explain the reasons why cedar offers more value than other products.
“We take a chunk of our budget and put it into promoting our brand, which is something most remanufacturers wouldn’t do,” says Gillis. Their advertising goes into high-end shelter magazines, primarily in the US.
Their high profile product, Haida Skirl siding, is a sawn textured wavy edge siding. Kiln dried and produced from selected western red cedar, each piece is carefully inspected. Knots are permi-fused where necessary to provide a 100 tight knot grade.
Haida Skirl siding is individually machined to enhance its natural appearance. It is marketed as a complete exterior finish and also suited to compliment the rugged beauty of a cedar shake roof, or the natural appeal of stone or brick.
While the custom-made equipment in the mill that produces the Haida Skirl siding is older, it continues to turn out product day in, day out. At the front end of the production process, Haida has a 54- inch McDonough resaw, which was scheduled to be replaced with a new unit this year. They are also looking to upgrade further down the line, and are currently reviewing equipment for an optimizing saw set-up for their trim line.
They have a small Stenner resaw and two Weinig moulders, a Unimat 23E and a 30EL—which were supplied by local dealer Masse Sales. The moulders have done yeoman service for the company.The 23E is slated to be replaced this year.
“The plant is centred around a number of machine centres, which gives us flexibility to run what we need, rather than have to run everything,” explains Gillis. And their crew, with experience on all the equipment, can move to whatever machine centres need to be run.
On the drying side, they have one Nyle dehumidifier kiln and four Moore kilns, each with capacity of about 50,000 board feet. Out in the yard, they have two Linde H45D forklifts purchased from Williams Machinery that ably handle moving product around the five-acre site.
In terms of another site—that of the Internet—the company’s presence there (www.haidaforest.com) has proven to be rewarding, right across North America. A homeowner in Des Moines who is interested in finding out about the company’s Skirl siding, for example, can simply do a Google search for “wavy edged siding,” and the Haida website pops up. Inquiries from potential customers on where they can get the product in their area are answered promptly. “Not all of the inquiries turn out be sales, but most of them do because these are people who really want this product,” notes Gillis.
And Gillis is hoping that they can soon resume shipping that product countervail- free to the US. Should the dispute with the US be settled, and duties returned to Canadian forest companies, and to Haida, he says it might be wise for the industry to allocate a certain amount of the money to promote wood. It’s been said before, notes Gillis, but it bears repeating: The North American forest industry has been spending money fighting amongst themselves when the industry really should be fighting against competitive products.
“The wood industry really needs to get together and promote the industry, like other industries do. If some of the money from the countervailing duty has to stay in the US, why not create an advertising pool with that money to promote all wood products, both Canadian and American?
“The problem has always been where does the industry get the money? Well, the money is there now. Let’s use it.”
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