North Vancouver’s Fibreco gambles $100 million on agri-products initiative

Fibreco CEO Kerry Lige’s company is turning to the export of specialty grains as the global market for its traditional mainstay commodity, wood chips, declines |  Chung Chow

Fibreco Export Inc. is sinking $100 million into a project that will substitute specialty grains for wood fibre on its global exports menu. 

The North Shore-based and B.C.-owned company operates one of the world’s largest wood biomass terminals, but increased export complexities and decreased demand have eroded the appeal of wood chips, its former bread-and-butter export that had sustained the company for 40 years. 

Fibreco dropped that part of its export business in March 2017 in large part because the wood chip business today, according to Fibreco CEO Kerry Lige, “is a dying industry.”

The specialty grain business, however, is not.

Companies like Quebec’s Ray-Mont Logistics have expanded recently in B.C. to service growing global demand for Canadian lentils, dried peas and other pulse crops.

But Fibreco has not abandoned wood fibre entirely.

It continues to sell wood chips for pulp, but to domestic markets only. Fibreco is also big on wood pellets.

It expanded into wood pellets about 13 years ago to supplement its wood chip business.

It exports pellets primarily to Europe, Japan and the U.K., where they are commingled with coal to lower the carbon footprint of energy generation.

In previous eras, the sawdust they’re made from would have been left on the ground in harvested forests or burned as wood waste.

So Lige sees pellets as a good-news environmental story.

Pellets are also a good-news business story for Fibreco, which handles about one million tonnes per year from B.C. manufacturers like Pinnacle Renewable Energy (TSX:PL) and Pacific BioEnergy Corp.

But B.C.’s wood fibre story has some unhappy chapters ahead. Pine beetles and wildfires have taken their toll on the province’s forests.

Pine beetles initially created a wood fibre glut as logging companies raced to harvest trees killed by the infestation while the wood still had commercial value.

However, that B.C. beetle-kill boom is all but over, and the province now faces a long-term wood fibre shortage.

And that is a concern for any company that deals in B.C. forest products.

“It will affect us for sure,” Lige said. “The fibre basket holistically is a concern for the province.… A shrinking fibre basket affects both the sawmills and ultimately the fibre for wood pellets.”

Owners of B.C. mills are already looking to other regions for fibre, and companies like Fibreco are looking to other sources of revenue.

For Lige, who has worked at a wide range of port and shipping-related companies, diversification is fundamental to survival.

That was especially true when he joined Fibreco five years ago. The future of the wood chip export business was bleak, but other export opportunities were not. 

For example, Canada’s grain producers, facing increased export bottlenecks, needed options to get their crops to market.

That opened a window of opportunity for Fibreco.

Lige said the company’s subsequent request for proposals to add grain-handling capabilities to its North Shore operation drew a “tremendous response.” 

The company has since signed a long-term export contract with Regina-based AGT Food and Ingredients (TSX:AGT), and Fibreco’s main shareholders have committed $100 million to provide the infrastructure needed to receive specialty grains transported via railcars from the Prairies and load them into bulk freighters to be shipped to AGT customers around the world.  

The project, which is scheduled for completion by early August, will allow Fibreco to handle long unit grain trains. Because they’re made up of railcars that all carry the same product, unit trains don’t have to make mid-trip stops to offload railcars carrying other products. 

Their efficiencies, Lige said, will allow the North Vancouver terminal to handle about two million tonnes of agri-products annually.

That in turn will help AGT service what it sees as a rapidly expanding global market for specialty grains. 

In a recent AGT financial filing, management of what is one of the world’s largest suppliers of value-added pulses and food ingredients pointed to rising incomes and growing populations in emerging markets as key factors supporting its belief that “the opportunity in food [is] an irreversible trend.”

It also noted that “pulse and vegetable protein consumption and demand for protein sources that use water efficiently will increase as the world’s population grows in the next 40 years.” 

But AGT’s management cautioned that production in competing regions such as India, Kazakhstan, Russia and Ukraine has created a global pulse market glut.

Lige said his company’s agri-products enterprise will help get more Canadian food products to world markets.

But he conceded that geopolitical issues underscored by U.S.-China trade and tariffs conflicts raise risks for exporters.

“It affects all of us as Canadians, and that is the big concern I have. What does the market look like in the future? It’s a bigger issue for all of us and one that we have to keep our eye on.” •