Improving global markets for B.C. wood have the coastal forest industry working at capacity and the Island’s largest timber producer posting record results.
After more than a decade of struggling, the industry finally appears to be on more stable ground — a trend that’s expected to continue, according to the head of the Coast Forest Products Association.
“The fact of the matter is we are now having trouble finding contractors and workers,” said association president Rick Jeffery, noting that over the last decade, many forest workers left for work in the oilfields as the coastal forest industry struggled with a strong loonie, poor global markets and fallout from the softwood lumber dispute with the U.S.
“We are now working at the highest level we have in five years. Everything is up and running. Some [mills] are running in two shifts and some in three.”
Though the future looks bright, the industry’s recovery remains fragile, warned Bob Matters, Wood Council chairman for the United Steelworkers, which represents industry workers in both the Interior and coast regions.
“We’re still in survival mode and so we’re certainly doing what we can to ensure this fragile recovery holds,” he said, adding the unions and forest producers, who have waged bitter bargaining wars in the past, have been working together in recent years.
One major stumbling block that both sides need to deal with is a shortage of workers because of an aging workforce and an exodus over the last 10 years, he said.
“It’s a big problem. We’re bargaining with the Interior producers as we speak and will be bargaining with coastal employers next year and it’s fair to say the employers understand there is an HR issue in terms of recruitment,” he said. “Given the state of the industry, they understand they will have to buck up.”
Matters said attracting workers — young workers especially — requires improved wage and benefit packages as well as proof there is a future in forestry.
It’s a far cry from just two years ago, when the coastal industry was working at roughly 60 per cent capacity and workers were waiting on the sidelines.
Jeffery said an improving U.S. homebuilding industry that uses the coast’s western red cedar, a spike in Japanese lumber demand and a steady Chinese market have combined to get the coastal industry humming.
“The China business has been fairly steady — six or seven years ago, we were shipping one per cent. Now we’re shipping 25 per cent of total coastal wood exports to China,” he said.
The uptick in Japan stems in part from a tax that applies to homes and is expected to rise next year, he said. “So people are buying and building and hoping to sell houses before it goes up.”
U.S. demand is also up, he said.
According to B.C. Stats, there was a 35 per cent improvement in total solid wood exports over the first quarter of this year, compared with 2012, with more than $2.54 billion in wood leaving the province in the first four months.
Seattle-based forest industry consultants Wood Resources International noted China’s hunger for wood — most of which comes from Canadian and U.S. producers — has returned after declining significantly in 2012. That country’s demand increased more than 10 per cent in the first quarter of 2013.
Jeffery said he expects that demand to continue, for the coast to continue to work at capacity through this year and to see continued capital investment from coastal producers.
“We’re seeing [investment] being done in bits and pieces from the small guys all the way to Western [Forest Products],” he said.
Western, the coast’s largest producer with more than 3,000 employees, has committed $200 million over three years to a capital plan to help ensure long-term success.
Of that money, $75 million is to be spent on its 10 operations (eight sawmills and two remanufacturing plants), with the remaining $125 million targeted to improve mills.
The company, which now boasts zero net debt, has a balance sheet that suggests it’s just the start.
Western reported $22.8 million in earnings in the first quarter of 2013, a massive increase from the $1.7 million earned in the first quarter of 2012 and well ahead of the $14.3 million in net income reported in the previous quarter.
CEO Don Demens called it the best quarter in company history, crediting improved log and lumber markets.
Jeffery said the provincial election results will also help sustain recovery in the woods.
“[The Liberal win] was incredibly valuable for us, because we now have policy stability, as much as you can have policy stability from a government,” he said.
“That stability and certainty is very important in terms of investment.”