Study pushes B.C. forest sector toward new path

Industry report stresses moving up value-added chain, more export diversification

Council of Forest Industries president and CEO Susan Yurkovich: “we’re now moving back into high-quality fibre, and we have an incentive to get more out of it because the cost is also higher” | BIV files

Despite a tumultuous 2019 that saw the B.C. forestry sector become one of the province’s most embattled industries, there is a possible light at the end of the tunnel if companies embrace a new business model with emphasis on high-value products.

That is among the messages delivered by the Council of Forest Industries (COFI) in a report called Smart Future: A Path Forward for B.C.’s Forest Products Industry, published this month. The report comes as a wave of shutdowns and operational reductions – as many as 38 of them resulting in layoffs and curtailments – has hit the sector since May, causing more than 1,000 people to lose their jobs.

Companies have blamed the job losses on factors ranging from a shrinking wood supply (due to mountain pine beetle infestation, fires and a general loss of working forest land base) to intense competition from countries like Chile and Russia.

“We are in a transition,” said COFI president and CEO Susan Yurkovich. “Mills have been curtailing operations … so we are going through this difficult period. But we’ve been hearing from folks about how to get through these challenges, and what I think is it’s really important to work to support workers and communities as we transition…. But we also need to set ourselves up for the future, and there is a bright path if we make some choices now.”

That, Yurkovich said, is where the Smart Future report comes in. The document lists six main points for provincial and federal governments to consider:  transition to a sustainable new business model; protecting the remaining land where wood can be harvested; flexible regulation that safeguards the environment without discouraging investment; increased partnerships with Indigenous communities;  “doubling down” on diversifying international markets for B.C. wood products; and wider use of the industry’s knowledge with green buildings using wood.

One of the overarching themes of the report is the B.C. forestry sector’s need to move up the value chain in its products. Companies say that as harvests decrease and complications in government regulations multiply, B.C. has become a high-cost producer, forcing small and large operators to cut jobs in the face of mounting operational losses.

Industry leaders fear that as harvests shrink, the cost of producing lumber and wood products is unlikely to drop back down to levels seen a decade ago. According to the report, the annual allowable cut will fall from 70 million cubic metres in 2007 to half that amount by 2030.

“What we need to remember is, for about the last 15 years or more, we’ve been dealing … with mountain pine beetle-impacted wood,” Yurkovich said. “So over the years, as the quality of the fibre degrades, we did what we should have done by taking out as much of it as possible while it still had value…. So B.C.’s industry developed markets for low-grade wood that was suited to the fibre we were getting. That’s changed now; we’re now moving back into high-quality fibre, and we have an incentive to get more out of it because the cost is also higher.”

Canfor Corp. (TSX:CFP) president and CEO Don Kayne said that while the cost of wood stemming from an inconsistent supply of fibre is undoubtedly a major issue for the industry, the fact that B.C. wood fibre is returning to high-quality status presents companies with a way forward in turning the sector around.

That means the B.C. forestry sector should place greater emphasis on value-added products that can fetch greater profits, like dimension lumber, pulp and paper, pressure-treated components, laminated timber and fibreboards.

“What’s really encouraging about the whole value-added area is that, first of all, we have an increasing opportunity … as we get higher-quality logs that will allow us to take advantage of some markets,” Kayne said. “The applications for solid-wood use is increasing. There is a lot of talk about mid-rises and taller buildings; it’s not a dream or demonstration projects. These are projects that are actually happening around the world, led by Europe but moving into North America.”