Misplaced calm in B.C.’s forest industry?

By Jim Stirling

An aura of calm envelops British Columbia’s interior forest industry as the winter log harvesting season approaches.

It seems misplaced. There is no lack of concerns. It is true the region is well accustomed to riding the peaks and valleys of an export-reliant forest sector. And perhaps that apparent calmness is attributable to familiarity: several of the issues confronting the industry represent the usual suspects.

For example, friction remains with the United States’ insistence on imposing duties on Canadian softwood imports into the U.S. Regulatory agencies routinely rule in Canada’s favour but in the meantime the duties are an additional financial imposition.

As of this writing, the B.C. government has been mute in releasing details of promised changes to forest policy in the province, which could influence everything from forest land use and tenure reform to stumpage rates. The government’s inertia leaves the forest industry in limbo and inhibits its planning.

An additional concern this time around is the COVID-19 pandemic. It refuses to abate. The disease is demonstrating a stubborn resilience by sprouting ever more virulent strains and capitalizing on vaccination rate discrepancies, especially those between rich and poor countries. The reaction to COVID-19 in B.C. has been more of the lurching knee-jerk variety than a coordinated and controlled response.

The disease has infiltrated all facets of the economy. Links in international supply chains have become unreliable or are missing altogether. Markets are understandably skittish but the volatility being demonstrated on a regular basis is unprecedented.

Just take a look at recent commodity lumber prices in the U.S. for an example. From an all time, and astounding, high of U.S. $1,706 per thousand board feet in May to below U.S. $500 board feet before the end of August. As for the anticipated lumber price in the first and second quarters of 2022, just pick a number. The futures market predicts a steady upward lumber price trend into the U.S. $760 range by Q2 of 2022. The planned U.S. investment in infrastructure represents one positive indicator. It is reasonable to assume that building materials including lumber will benefit.

But the dramatic decline in lumber prices coupled with the B.C. Interior’s status as a high cost lumber producing region has already re-introduced a familiar foe.

Conifex Timber was among the first regional lumber producers to announce a production curtailment beginning with two weeks at its Mackenzie sawmill in north central B.C. “A combination of record high delivered wood costs and the unprecedented collapse in lumber prices has necessitated a temporary curtailment for two weeks,” announced Ken Shields, Conifex’s CEO. “We regret the impact this may have on our employees, their families and the community.”

Canfor Corp., took a different tack to address similar problems. “Due to challenging market conditions, we are implementing reduced operating schedules at our B.C. sawmills that will remain in place until demand and pricing meaningfully improve,” explained Stephen Mackie, Canfor’s vice-president, North America, in a statement. “We recognize the impacts that volatile lumber markets have on our employees, contractors and communities and we will make efforts to mitigate the negative effects.”

Interfor cited log supply issues and wildfires as contributors to a 50 million board feet production decrease during August 2021. The company also predicted continuing disruptions in production through at least the third quarter.

“The wildfires in the B.C. Interior and the related provincial state of emergency and government-mandated curtailments of all forest harvesting activities are expected to have a significant impact on Interfor’s operations in the next several weeks or more,” warned Andrew Horahan, senior vice-president of western operations. “This is an active situation and we are closely monitoring the implications for our operations.”

Production curtailments—be they attributable to gyrating lumber markets or wildfires—have become operational realities in B.C. Record-setting high temperatures in June had the population fearing the worst and a repeat of the 2017 and 2018 wildfire seasons. So far, that hasn’t happened.

To September 7, 2021 the BC Wildfire Service listed 1579 fires since April 1, with 211 wildfires burning and 25 of them rated as active. The area lost to wildfires in B.C. was 866,828 hectares.

For Interfor, the forest fires affecting their operations commandeered the attentions of 250 Interfor staff, their contractors and 90 pieces of contractor-owned heavy equipment to assist the BC Wildfire Service.

All the latest changes and challenges facing the B.C. Interior forest industry come as the sector is attempting to rationalize its operations in the post-lodgepole pine beetle epidemic era. It’s very much a work in progress. Sawmill owners know what they would like to do to fully prepare their production facilities for a new set of operating conditions. Implementing them is an exercise in economics. A competitive price structure is first needed to support capital investment. And it is capital investment that’s required to retool sawmills to fit a different type of feedstock.

A similar situation faces the logging contractors. The mills will be directing them to harvest different wood types under changed operating circumstances.

Maybe that apparent calmness within the B.C. interior forest industry is actually a quiet desperation.