The transition underway in Canadian forestry will result in a stronger and more resilient industry

By Tony Kryzanowski

Looking at the evolution of the Canadian forest industry over the past 15 years, one thing is clear—this is not your dad’s forest industry anymore.

The evidence is undeniable from a federal government state-of-the-industry report called, “Sawmill industry in Canada: 15 years in review”, that the forest sector has been engaged in a slow and steady transition over the past two decades. The industry is to the point now where there are fewer players, but greater manufacturing efficiency requiring fewer, more skilled employees.

Sawmills continue to evolve into lumber manufacturing factories requiring about half as many employees. And the size of today’s key industry players has created more resilience. The surviving companies are better able to withstand the inevitable massive peaks and valleys that are characteristic of the softwood lumber market. Generally, the drive toward greater efficiency is working.

According to the report, the sawmill and wood preservation industry employed an annual average of 32,124 workers in 2020. That was down 41 per cent, or about 22,330 fewer employees, compared to 2006. That reduction in human resources was most likely driven by a modernization shift that impacted infrastructure, equipment and production processes.

On the positive side, a job in the industry pays well. When comparing 2020 with 2006, the average Canadian weekly earnings for the sawmill and wood preservation industry increased 44.4 per cent to about $1241, compared with a 27.7 per cent increase seen for the manufacturing sector as a whole.

With so many risks that can influence the softwood lumber industry, such as pests, weather, interest rates, tariffs and duties, shortages of skilled labour and unpredictable transportation infrastructure, the number of smaller, independent softwood lumber producers is diminishing. The mantra today seems to be “get bigger or get out.” The only outlier to this argument are smaller operations that have chosen to diversify into value-added products like treated wood and mass timber, which makes them less dependent on the vagaries of the softwood lumber market, and thus more resilient through diversification.

The ongoing transition and consolidation taking place within the Canadian industry is obvious from the number of takeovers, closures and focus on geographic expansion. And as the industry is now dominated by a few big players, expect that most decisions on whether or not a sawmill survives will be driven by profitability and shareholder value. We’re witnessing it now with the number of small sawmills being closed in favor of bigger, high tech, centralized manufacturing centres, regardless of what the permanent closure of a sawmill might mean to the economy of a local community.

What’s obvious from the federal government report insofar as lumber production is concerned is that softwood is still king and the United States is still our biggest market—by a wide margin in both instances.

Softwood lumber represented 98 per cent of all lumber production in 2020, and 67 per cent of Canadian softwood lumber production was exported. Of that 67 per cent, 84 per cent was exported to the U.S. In other words, about half of all Canadian softwood lumber production is exported to the U.S.

British Columbia, Quebec and Alberta produced 81 per cent of Canada’s softwood lumber in 2020. Since 2006, Alberta gained eight percentage points of the Canadian market while British Columbia lost 13 percentage points. However, this has to be taken with a grain of salt because B.C. lumber production will bounce back and stabilize in time. The drop in market share can be attributed entirely to the impact of wildfires and the Mountain Pine Beetle epidemic. Once areas impacted are reforested and grow to merchantability, expect B.C. to experience a rebound.

What is a bit concerning is that the traditional share of U.S. imports of Canadian softwood lumber fell by 11 percentage points by 2020, lost mostly to the European Union. But that again was predictable, given the volume of merchantable wood fibre lost to pestilence and wildfire in Canada, and the subsequent drop in production.

What’s certain, based on the report’s findings, is that there will always be good demand for high quality Canadian softwood lumber. Corrections and transitions are often painful but necessary, and what’s happening in Canadian forestry right now was entirely predictable. However, that’s small comfort for a community or a line worker with a family and mortgage who has been laid off due to the closure of a sawmill. But perhaps there are other opportunities available. One that comes to mind is destination tourism.

Having traveled the world quite a lot lately, I’ve seen that people are clamoring for quality vacation experiences and opportunities to experience clean air, water, wildlife, biodiversity and a natural environment. Canada has those in abundance while they are diminishing elsewhere.

Maybe the best avenue for some of these smaller communities impacted by sawmill closures is certainly to work toward growing back the trees, but to keep them intact to attract busloads of tourists willing to pay plenty for this experience.