Dr. Roslyn Kunin, BC Business Columnist, Troy Media
It used to be so easy. All you had to do was look at housing start numbers for the US. That determined the health of the forest industry in British Columbia and, to a large extent, the state of the whole BC economy. This was when the woods sector had one dominant market, US home builders, and one prominent product, dimension lumber – of course in US dimensions. And it was the dominant player in BC’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 British Columbia. 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. buck. 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 BC, 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, VP at West Fraser Mills, notes that his firm has long relied on the US market and, to a lesser extent, Japan; but now sees strong growth in China. Finding new customers will not only help the BC woods companies get through the slow times in the States. It will also leave BC and Canada in a much stronger bargaining position when the US market turns up.
Even bigger than the diversification of customers is the changing mix of products coming out of the BC 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 BC woods.
Janine North, CEO of the Northern Development Initiative Trust, paints a very different picture of what is now happening in BC’s north woods. She sees the forests moving away from producing building products for export toward producing energy and sources of energy much of which can be put to good use right here in BC. 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 feed stock to generate both heat and power at a community level using new technology that is efficient, effective, green and simple to operate. The latter is important because North foresees many small, isolated towns and villages in British Columbia 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 Nation 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 BC’s forests and advance both economically and environmentally at the same time.
To continue to move ahead, the forest industry in BC 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 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 BC where so much of the resource is on crown land. David Lehane pointed out that the future of BC’s forest industry needs a major change of attitude. 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 BC office of the Canada West Foundation.
