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New markets bolster forest industry

 Dr. Roslyn Kunin  
 Image: Troy Media
 
Oct. 7, 2010 – It used to be so easy. All you had to do was look at housing start numbers for the United States. That determined the health of the forest industry in British Columbia and, to a large extent, the state of the whole B.C. economy.


October 6, 2010
By Dr. Roslyn Kunin BC business columnist | Troy Media

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 Dr. Roslyn Kunin  
 Image: Troy Media  

Oct. 7,
2010 – It used to be so easy. All you had to do was look at housing start
numbers for the United States. That determined the health of the forest
industry in British Columbia and, to a large extent, the state of the whole
B.C. economy. This was when the woods sector had one dominant market, U.S.
homebuilders, and one prominent product, dimension lumber. And it was the
dominant player in B.C.’s economy.

The wood sector has changed now, and not for the better. On September 14, Business In
Vancouver
published a list of the 100 fastest growing companies in B.C. There was not one
forest company on the list. And we can’t use the excuse that we don’t expect
companies, especially larger ones in an established sector, to be growing
quickly. There were many mining companies on the list, not all of them small.

U.S.
housing market in a shambles

In fact,
the only thing that has been working for the forest industry is Murphy’s famous
law: if anything can go wrong, it will. The American housing market has been
knocked down and shows no signs of getting up. The Canadian dollar is strong,
especially versus the U.S. dollar. The mountain pine beetle has devastated huge
swathes of forests in the province, and this summer’s forest fires laid waste
to even more timber land.

However,
when I stated talking to leaders in the wood sector in the interior of Northern
B.C., I heard optimism and enthusiasm, primarily because of the many positive
changes that are now occurring in what has long been a rather hide-bound
industry.

One big
change has been in the location of customers and potential customers. It is not
just the United States any more. When I tried to contact Ken Shields, CEO of
Conifex, he could not get right back to me because he was out courting new
customers for his forest products business—in Russia and China. David Lehane,
vice-president at West Fraser Mills, notes that his firm has long relied on the
U.S. market and, to a lesser extent, Japan, but now sees strong growth in
China. Finding new customers will not only help the B.C. woods companies get
through the slow times in the United States. It will also leave B.C. and Canada
in a much stronger bargaining position when the U.S. market revives.

Even
bigger than the diversification of customers is the changing mix of products
coming out of the B.C. woods. Older companies like West Fraser Mills are still
concentrating on dimension lumber and other building products, but many of the
up and coming firms like Conifex are finding newer and greener ways to get
value out of the B.C. woods.

Janine
North, CEO of the Northern Development Initiative Trust, paints a very
different picture of what is now happening in B.C.’s north woods. She sees the
forests moving away from producing building products for export towards
producing energy and sources of energy, much of which can be put to good use
right here in B.C. This is going beyond the fairly well established use of hog
fuel to generate heat in traditional wood processing operations.

North
sees pellets, hog fuel, and other forms of biomass becoming the feedstock to
generate both heat and power at the community level using new technology that
is efficient, effective, and simple to operate. The latter is important because
North foresees many small, isolated towns and villages in B.C. moving away from
diesel-generated power to local forest-based biomass to provide the community
with heat and electricity. With highly skilled labour in short supply in such
communities, the power generation system would need to be easy to operate and
maintain.

Organizations
from BC Hydro to First Nations start-ups and many companies in between are now
looking at how to use technology to get much more value than just logs or
lumber out of B.C.’s forests and advance both economically and environmentally
at the same time. To continue to move ahead, the forest industry in B.C. needs
capital and labour. Many firms, both old and new, are now making the
investments needed to install today’s technology and be efficient and
competitive in new and old markets. This is not cheap. The latest technology
update at West Fraser Mills cost $125 million.

Labour shortage

On the
labour side, employers wonder whether growth in the sector will be limited by a
lack of suitable workers. They note the downward trend in the numbers of young
workers entering training programs for the woods industries and how close many
existing employees are to retirement age. Instead of talking about layoffs and
downsizing, they list recalls and upgrades that will need workers. Of course,
these workers will need up-to-date skills.

Government
always plays a role in the forest industry, especially in B.C., where so much
of the resource is on Crown land. David Lehane pointed out that B.C.’s forest
industry needs a major change of attitude for the future. We need to stop
thinking of it as generating limitless resources that we can just gather, but
rather as a garden that we must cultivate to yield on-going output over the
long term. Government’s role is to generate tenure and other policies that
would support this new approach.

Dr.
Roslyn Kunin is director of the British Columbia office of the Canada West
Foundation.


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