Against the WALL

Industry leaders gathered at a recent Alberta forest conference to talk about efforts to combat the imminent wall of wood expected from warmer, faster-growing climates.

By Tony Kryzanowski

Alberta forest companies heard at a recent industry conference that they should be looking to discuss and deal with the issues that stand in the way of being globally competitive. Companies should be seeking to strike strategic alliances, one government official said.

Most Canadian forestry companies have resigned themselves to the fact that the "wall of wood" from faster-growing southern US, Central American and South American plantations is coming.

The priority now is to prepare for the inevitable, and the tone coming from the recent Alberta Forest Industry Conference in Edmonton indicated a desire for more co-operation and strategic alliances as a defence against this imminent and strong market influence.

The conference, hosted annually by Price Waterhouse Coopers, featured a number of prominent forestry executives. Among them were; Ken Nichols vice-chairman and CEO of Champion International Corporation; Doug Wilkes, chief financial officer for Tolko Industries; Cathy Slater, vice-president for Weyerhaeuser Canada in Grande Prairie; Jim Shepard, president and CEO for Slocan Forest Products; Ike Barber, Slocan’s chairman and CEO; George Richards, chairman and CEO of Weldwood of Canada; and Russ Clinton, senior vice president for corporate development from West Fraser Timber.

Several of these industry leaders say that the first line of defence against this wall of wood is ensuring that Canadian sawmills manufacture products that make sense for the region.

Slocan’s Jim Shepard says he believes it is important that the industry learns from the mistakes of the past, and that it recognizes its strengths. In the latter area, he pointed specifically to aspen’s potential which, as a pulp, "is a wonderful printing fibre." He feels it will become more in demand. Aspen is a low-cost fibre that is easy to grow, and even has potential for the manufacture of engineered wood products.

George Richards from Weldwood Canada says companies should consider marketing engineered systems as opposed to raw commodities. This could potentially open more doors to Asian markets, and would act as an effective deterrent against the production quotas set by the Canada/US Softwood Lumber Agreement.

While everyone seemed aware that the arrival of the wall of wood is close at hand— and had plenty of good suggestions on how to remain competitive in this environment— what came across as most unnerving was the reminder of how little Canadian forestry companies and government are spending on research and development.

Tolko Industries CEO Doug Wilkes points out that research and development (R&D) spending among Canadian companies has dropped to the point that it is now one third of that spent in Scandinavia. He also notes that government spending in R&D has also diminished.

The government of Alberta has taken a small step towards improving on its research and development record, as a result of a recent reorganization of departments. Forestry has now gained a more prominent profile in the Alberta government.

Keynote speaker at this year’s conference was Alberta Premier Ralph Klein. He says that Alberta has moved responsibility for forestry out of the Department of Environmental Protection giving the industry more prominence as the Associate Ministry of Forestry. Further, responsibility for forestry development has also been removed from under the umbrella of Environmental Protection, into a new super ministry responsible for overall resource development.

Klein says he distanced forestry from Environmental Protection because the Alberta government came to realize that "you can’t be the developer and the protector", referring to that department’s role as environmental watchdog.

Recent announcements by Saskatchewan regarding the expansion of its forest industry and its strong representation at the Alberta Forestry Conference resulted in a thorough discussion of the need to reduce barriers and develop more strategic alliances. Saskatchewan’s enthusiasm towards the industry in itself represents the removal of one barrier to the evolution of a large and potentially influential forest industry lobby coming from western Canada.

The need for greater provincial co-operation was emphasized by Weyerhaeuser vice-president Cathy Slater, who recently transferred to Grande Prairie from Weyerhaeuser operations in Georgia. "We shouldn’t let borders be barriers," says Slater. That point was further reinforced by Les Cooke, strategic advisor to the Saskatchewan deputy minister for that government’s Environment and Resource Management Department. "We need to put a structure in place for strategic alliances to occur."

Cooke adds that the provincial governments must create an effective platform where they can discuss what issues stand in the way of the global competitiveness of forestry companies. He suggests more co-operation on research and development, consistency on environmental certification and a united approach to promoting renewable resources.

One message the industry sent loud and clear to government was its desire to obtain longer forest tenure on Crown-owned land. Because 80 per cent of Canadian forested land is Crown land, companies want to ensure that if they do the planting, they will have the opportunity to harvest the trees.

While there was a definite consensus among forestry leaders that longer tenure was at the top of most of their wish lists, there were mixed views as to the value of intensive forest management practices.

Ike Barber, CEO for Slocan Forest Products, says they must be very careful how they define intensive forest management. He says what is of greater importance is "solid, basic forestry" to ensure that each stand is managed to achieve its potential. With regard to more advanced methods— currently practiced extensively in such countries as New Zealand—Barber says companies need to be extremely careful that the amount of intensive management conducted on forested stands does not exceed the market value of the wood itself.

Barber adds there is "very little evidence" that intensive forest management practices are worth the investment in the long term. Russ Clinton, senior vice-president for West Fraser Timber, says discussing intensive forest management at this stage regarding Alberta forests and Crown land in other parts of Canada was a bit like putting the cart before the horse.

"We need longer tenure and an equity position in the crop," he says. "I think we need a system of crop equity before you can conduct intensive forest management."

While these issues were discussed thoroughly in general terms, Barber indicated that the most immediate challenge is the upcoming negotiations on a new Canada/US Softwood Lumber Agreement. Because the alternative to an agreement would be a countervail, the likelihood of a new agreement is considered a fait accompli. The aim of negotiators, however, should be to achieve as high a lumber export number as possible for Canada before tariffs kick in.

Prior to the start of those negotiations, West Fraser’s Clinton says it wouldn’t hurt to remind the federal government about the importance of the forest industry to Canada.