March April, 2004





Canadian Agreement Will Affect Northwest Timber — But How?

Carolyn Steinhoff Smith

When the price of toilet paper goes up to a dollar a roll, people will start asking questions about this agreement," said Jeff Wirkkale, Owner and President of Hardwood Industries, an Oregon wholesaler and distributor of hardwood lumber and related products and services. The hardwood of Hardwood Industries comes from Canada, and Wirkkale said everything that happens to timber in Canada affects the United States, including the Northwest. "It’s inevitable that the more restrictions there are on supplies, the more prices will go up," he said. Wirkkale was talking about an agreement called the Boreal Forest Conservation Framework. "The boreal forest is the largest intact forest in the world," said Frank Mendizabal, spokesperson for Weyerhaeuser.

He said a coalition of First Nations (Native people of Canada), conservationists, and energy and forestry companies offered a plan to conserve at least 50 percent of Canada’s boreal forests. "The agreement would prevent logging . . . on about half of Canada’s 1.3 billion acre boreal forest, while imposing limits on cutting the rest," Clifford Kraus reported in the New York Times.

In December, the forestry companies who signed —Alberta-Pacific, Tembec and Domtar—are Canadian. Even though Weyerhaeuser wasn’t invited to be part of the coalition, called the Canadian Boreal Initiative, Mendizabal said his company plans to meet with them, to discuss terms for participation in its provisions. "Weyerhaeuser favors the objectives of the Framework, of conservation and a common vision for boreal forest stakeholders," he said. "Weyerhaeuser wants to be seen as being in the vanguard of good forestry, " Joe Scott, international director at the Northwest Ecosystem Alliance told Bradley Meacham of the Seattle Times. "I don’t see how it could not affect them." Meacham writes frequently about the timber industry. "The Boreal Framework will definitely help large timber companies," Meacham said. "If timber supply is limited, it allows large companies who harvest the wood to charge more."

Meacham did report that Weyerhaeuser is currently paying down a debt incurred from the purchase of Willamette Industries, and that the company is benefiting from a record number of housing starts this year. It would stand to reason that, should it happen that the Canadian Boreal Framework contributes to a rise in timber prices, Weyerhaeuser might benefit—though no one can predict with any certainty what influence one factor among many will have on timber markets. "You can’t divorce the effects of other complex factors—like the current tariff dispute and its resolution—from the effects of the Boreal Framework," said Butch Bernhardt, Director of Information Services at the Western Wood Products Association, an association of softwood lumber manufacturers.

Bernhardt points out that the timber market is expanding and changing rapidly. Latin America, Japan and Europe have entered the arena, he said, and are selling wood in the United States, and that affects prices. "And what about steel, concrete and plastic?" he asked. "If there’s a reduction in timber supplies, these industries could fill in the gap. The market is unpredictable." Bernhardt pointed out that the U.S. saw a market reduction from 24 billion to 15 billion board feet between 1987 and 1995, and yet has seen a record high wood consumption in the last ten years, driven in large part by housing start increases. "These are just some of the factors that affect prices," Bernhardt said. "If the Framework does impact timber in the Northwest, we can’t predict how it will," said Mendizabal. "I can say it will give Weyerhaeuser a greater degree of certainty.

An agreement that puts fixed rules in place will allow us to make long-term planning decisions. Timber is a long-term business," he said. "It takes 60 years to grow the trees. If we can build an infrastructure we can count on not to change from year to year, we’ll get a better long-term return on our investments." Bernhardt of the Western Wood Products Association said the forest industry can count on one thing—the market will adjust to fluctuations. Canada currently supplies 37 percent of U.S. timber.

If changes in the tariff agreement currently working their way through negotiations go into force, they could limit Canada’s share of the U.S. market to 31.5 percent. "That’s 2 to 3 billion board feet that are out of the market," said Bernhardt. "You can safely say that will have an impact." But no one can predict how the Oregon coastal mills will react. They may make up the gap to stabilize prices. Or other countries could import more wood. "People in the forest industry in the Northwest should be aware that this agreement has taken place," Bernhardt said. If demands for wood drops, if new housing starts drop because of rising interest rates for example, demand will diminish. But right now demands are high. "The impacts will take place, there’s no doubt," Bernhardt asserted. "But we don‘t have a crystal ball. Only time will tell exactly what those will be."


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