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Shake/Shingle Sector Facing Tough Times

Although market demand remains strong, BC shake and shingle producers face a serious raw material crunch that is pushing prices through the roof.

By Reg Barclay
Copyright 1997. Contact publisher for permission to use.

Shake and shingle manufacturing has been around a long time in the Pacific Northwest, and producers have certainly seen their share of ups and downs. But the industry is changing dramatically - the past few years have seen many mills shut down and others in steadily declining production.

That's the picture painted by Jack Davidson, manager of both the BC Shake & Shingle Association, headquartered in Ruskin in BC's Fraser Valley, and the Cedar Shake and Shingle Bureau, with an office in Bellevue, Washington.

The reason for producer's woes isn't complicated: declining cedar log supply. Until recently, this has been felt more severely by mills in Washington and Oregon. As a result, mills in those two states now account for only about 15 per cent of the product produced in the Pacific Northwest, down from about 60 per cent a few years ago.

The figures Davidson provides on what has been happening in the region as a whole are startling. Since 1994, 93 of 204 mills have closed in Washington, Oregon and BC. These closures represent a loss of about 1,500 jobs from a peak workforce of 3,500. At its height in 1988, production in the US and BC combined was six million squares. This declined to just 2.5 million squares in 1995.

"This is frustrating for the industry," says Linda Herington, operations manager for the Bureau in Bellevue. "Shipments are down while the market is crying for the product."

Says Davidson: "The problem is that nobody logs for shingles and shakes. The industry fibre is basically salvage, using what cedar sawmills cannot handle. Therefore, fibre availability is directly related to the cedar log cut, which in turn is related to the overall log harvest."

Reduced log availability and higher logging costs, all a by-product of recent forestry regulations, have resulted in skyrocketing prices for raw material. Davidson points out that the shingle cedar log price index has risen from $86 to $200 per cubic metre in just four years. Fortunately, scarce supply and strong demand in the US mean that price increases have been possible.

However, the fallout from higher prices, according to Herington, is that instead of shakes and shingles being widely used in residential construction, use has narrowed to niche markets such as more expensive homes and commercial construction where shakes and shingles enhance architectural design.

Despite those higher prices, mill margins are contantly being squeezed. The result - cutting back elsewhere - has included pressure to reduce money spent in areas such as promotion. That is worrisome, but as Herington notes, "with less money to spend on promotion, we are learning to do things smarter. To cut costs, the staff at Bellevue have been downsized from 12 to seven people. The Bureau also does more on its own now, in areas such as producing marketing publications, instead of contracting out. "The bottom line is more careful planning with a focus on the main chance, which means fewer programs but choosing those with the best return."

Traditionally the Bureau has ignored the border and has embraced mills in BC, despite the fact that Washington and Oregon production was originally much larger than BC. The main reason for a joint Association is that the US market is of common interest to both, as it is the major market for BC mills as well. Today, the production situation is reversed, and BC mills represent 85 per cent of the total region. Another factor is that mills on both sides of the border are on a level playing field, as BC exports of shakes and shingles to the US are duty- and quota-free. A tariff of 35 per cent was imposed in 1988, but that has been reduced to zero now.

According to Herington, the Bureau has three important roles. First of all, supporting the viability of the wood shake and shingle industry; promoting the use of shakes and shingles and providing technical advice through five field representatives covering the market; and lobbying for building code acceptance.

Meanwhile, from Ruskin, the BC Association has an important role in communicating with various government agencies. Offshore promotion, in the form of publishing technical information and trade shows, is also vitally important to BC mills, says Davidson.

The Council of Forest Industries formerly handled overseas promotion for the BC Association, with government financial assistance. That has changed now, and the BC shake and shingle membership finances all promotion activity. Three former COFI field representatives in Europe work for the Association on a part-time basis.

As for the manufacturing process, the industry is responding to higher costs by installing more modern equipment and automating where possible. However, production remains a largely manual or "hands-on" process, where grade recovery is the primary focus.

Davidson says, "we have recommended a new program to members from the International Conference of Building Officials (ICBO). It is a US-based system, similar to ISO, with a focus on quality control. All aspects of the mill operation are included in its application, from the mill infeed to the final packing, and all production personnel are rigorously trained in the systems method. About 40 per cent of Bureau members have adopted the new system, which is being well received by buyers, particularly in the US market, where quality is becoming very important. Mills have been skeptical, but they are finding that savings offset costs of implementation."

The product is also changing. Treated shingles are increasing in demand, such as Certi-Guard and Certi-Last, a fire retardant and a preservative treatment. This reflects users who are more demanding and aware, and who are forcing building codes to change. More shingles than shakes are produced now. Shakes were 70 per cent of production, but now represent about 40 per cent.

With this new supply source, Westmount expects to expand sales to the US market. At the moment, supply of raw material is difficult. Cheslakee is breaking in the mill with salvage red and yellow cedar, which contains a surprisingly good recovery of quality shakes and shingles.

Clefstad is as concerned as anyboby in the sector about the rapid increase in fibre costs. "Nevertheless", he says, "the red and yellow cedar shakes and shingles produced on the West Coast are tops in quality and there is strong demand worldwide because of their beauty and longevity in use. A shrinking fibre supply means that only the efficient and well financed operators will survive."

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