HIGH LUMBER PRICES don’t help with many industry issues

Lumber prices may be headed to higher levels again, but that does not deal with many of the issues currently facing the B.C. forest industry, from severe weather through to shortage of skilled labour.

By Jim Stirling

Everything used to be more predictable. The health of the British Columbia forest industry, for instance, hinged significantly on the new housing starts forecasts in the United States.

Now, in 2022, it seems that the B.C. forest industry is being simultaneously assailed on a diversity of fronts. In the process, prosperity and plenty have been replaced by struggles and shortages. The industry’s operating environment has become ever more complex.

Most of the major influencing factors involved are not made in B.C. Global weather changes associated with a warming climate are at the root of many of them.

The mountain pine beetle epidemic in the B.C. Interior started gathering momentum in the late-1980s and early-1990s, coinciding with a trend of warmer winters which was destined to continue. The vast tracts of even-aged pine stands across the Interior—the result of efficient fire fighting—gave the endemic beetle populations all the impetus required to become epidemic.

By 2012, Resources Canada estimated more than 18 million hectares of forest land was impacted by the beetle epidemic, with the loss of a staggering 723 million cubic metres of merchantable pine. In 2022, the impact is reflected in shrinking allowable annual cuts across Interior Timber Supply Areas and higher wood costs.

Sawmills have been forced to close or curtail production. The process is continuing. Canfor Corp announced earlier this year that it was permanently reducing the lumber production of its Plateau Sawmill, west of Vanderhoof, in central B.C. The company is lopping off about 150 million board feet of annual lumber capacity, which will result in the loss of 70 mill jobs.

“As the allowable annual cut has been decreased in the region, it is necessary to re-size the facility to align with the sustainable fibre supply,” explained Don Kayne, Canfor’s president, when announcing the Plateau decision.

But it’s the sawmill workers, regional loggers and the Vanderhoof economy which are taking the hit from Canfor’s production curtailment decision. The company overall, however, is doing rather better, to say the least. Though lumber prices have since come off their heady levels, Canfor reported its lumber and pulp products recorded $1.5 billion in net income in 2021.

It’s not just the primary forest industry producers in the B.C. Interior which are suffering the beetle/climate kickbacks. Pacific Bioenergy has closed its wood pellet manufacturing plant in Prince George after 28 years of operation. The decision means the loss of 55 direct jobs.

“Our whole business was built on not wasting fibre,” recounted John Stirling, PacBio’s CEO during a recent interview. “Don’t burn sawmill residuals, don’t burn forestry slash—of which there are millions of tons in the province but it is expensive to get to and we don’t get a lot of help getting there. So that has been the tough uphill battle that we’ve had, and it is going to continue.”

Forest fires have always been a fact of log harvesting life in B.C. But the changing climate has created a more unpredictable and formidable foe. The problems are compounded when, as often happens, smaller fire outbreaks combine to create mega blazes, which are indiscriminate of the tree species or age structures of the forest in their path. Standing dead pine beetle trees compound the problems and the dangers to life, forest land and infrastructure from mega fires.

Back in the day, there wasn’t much talk or concerns related to ‘supply chains’. Not so today. Now, supply chain issues are creating shortages and price increases for the forest industry on a day to day basis. Supply chain issues have a variety of causes. But intense changes in regional climate patterns around the world are again major factors.

The flooding in B.C.’s Fraser River valley in 2021 created transportation bottlenecks and disruptions to the flow of goods and services, including forest products and supplies, to the rest of the province. The unprovoked Russian invasion of Ukraine has impacted the cost of goods from oil to wheat. The war has placed additional strains on supply chains already severely compromised by the COVID-19 pandemic.

The B.C. forest industry’s relationship with climate changes coincides with another international phenomenon. The population in most rich countries is ageing. Post World War II baby boomers have attained or are approaching retirement age. The result today is a shortage of skilled workers throughout the forest industry.

“We lost more than a month of our chip production program this past fall (2021) because of a shortage of chip truck drivers and now it’s logging truck drivers,” reported Roger Keery, CEO of Skeena Sawmills, which operates a sawmill in Terrace, B.C. and a sister company, Skeena BioEnergy, a wood pellet manufacturer. “This has caused ongoing difficulties in meeting our log production budget,” he commented in a recent interview.

Every mill manager in the B.C. Interior has similar frustrations. The shortages of qualified people may affect different facets of a sawmill flow in different ways but the negative impacts on operating schedules are the same.

The B.C. government is the steward of the province’s publicly owned forests. Proposed changes to forest land access has caused another cloud of uncertainty surrounding the industry’s fibre availability situation. For example, the government has imposed a moratorium on harvesting an estimated 2.6 million hectares of B.C.’s old growth forest lands. The province is also mulling a scheme that could redistribute timber cutting rights from the largest forest companies to smaller operators and First Nations.

Ironically, it is partnerships with First Nations which are in some areas providing light in the gloomy overall outlook. More First Nations have acquired tenure on parts of their traditional territories and are entering agreements with local forest companies.

In July 2020, Skeena Sawmills entered just such a partnership. The Kitselas First Nation and the Kitsumkalum Band, through wholly owned subsidiaries, signed fibre supply agreements with Skeena Sawmills. The three-year deals call for the respective First Nations to harvest and each deliver to Skeena Sawmills about 45,000 cubic metres annually. There’s an option in the agreements to extend them for two more years after 2023. The deal has worked out well for the signatories, according to reports. The fibre supply agreements fit well with the First Nations’ aspirations for more economic development and training for band membership while Skeena gains a welcome additional fibre source when wood supply is at a premium and market demand for
product is robust.