The forest sector’s downturn and costly union contracts have B.C.’s tugboat and barge industry on course to sink or swim.
Four years ago, log hauling accounted for 85% to 90% of West Coast Tug and Barge’s business.
Last year, it hit a rock-bottom 5%.
Lukas Olsen, general manager of the Campbell River-based operation, said staying afloat means taking any work the company can get.
But another problem has emerged.
Many “mom and pop” tugboat operators have slashed their prices so low that established companies have trouble landing contracts worth their time.
“The forestry sector has been hit so hard that the people that have survived are shopping price to the point that there’s not much left on the table,” Olsen said. “So for guys that do upkeep their equipment and do invest in their business sometimes you have to turn the work away because it costs you more to go to work than it does to sit at the dock.”
2009 was one of the toughest years on record for West Coast, which has steamed up and down the coast since 1976.
Not only were sales down, but Olsen said the company also had an investment “sucked up” in a forestry company’s receivership.
Despite the doom and gloom, a rebound in lumber prices earlier this year and a campaign to diversify its customer base has kept West Coast alive.
Olsen said sales have increased 70% year-to-date, and he figures the forestry industry will account for 40% of this year’s sales.
The company is also moving bulk materials for the construction industry and has entered the sports fishing market.
Olsen believes that one of the reasons the firm has improved its sales is because it’s a non-union shop.
“The private outfits have the ability to control their labour, which gives them the ability to compete … to get the work.”
Guy Adams, owner of Marine Link Transportation Group Ltd. in Campbell River, said there’s nothing to be gained from being part of a union.
Not only do the private operators have a labour cost advantage, but changes in the forestry sector have also made it difficult for large fuel barge businesses to keep up.
Adams said that in better times the forestry sector established camps all along the coast that would last a year or more, but these days foresters spend three months or less in one location.
In turn, barges that once delivered fuel along linear routes from Vancouver to a single camp now make deliveries to multiple camps.
“What you’ve seen is ‘mom and pop’ achieve a larger share of the market than they have before because the purchaser out there doesn’t have the system in place to replace that big linear train that used to come out of Vancouver,” Adams said.
Worse yet, he said, the rise of the private tugboat business means there are more operators along the coast than ever.
“There’s hasn’t been anybody that’s fallen off,” Olsen added. “It’s … still a dog-eat-dog market, but there’s enough that all the dogs are eating.”
And things are just as tough along the Fraser River.
Erv Mihalicz, operations manager at Mission’s Catherwood Towing Ltd., said seven years ago the forestry sector accounted for 100% of the company’s sales.
“In ’09 it barely cracked 25%,” Mihalicz said, “and in ’10 I don’t know if it will make 25%.”
Fortunately, construction and barging contracts kept the company afloat.
The difficulties the industry is facing are apparent even in B.C. Supreme Court.
In the last two years, Jones Marine Services Ltd. in Chemainus has filed some 40 lawsuits against Surrey’s Teal Jones Forest Ltd. seeking payment for towing services.
When contacted about the suits, Teal Jones said it wasn’t aware any existed. Court records show the suits have not proceeded beyond a notice of claim, and a source said they might be an attempt to ensure bills are paid on time.
At least one Fraser River tugboat operator told Business in Vancouver it has considered doing away with its union.
“Unfortunately, the higher cost structure for us makes it hard to compete and expand,” a spokesman said, providing his comments on a condition of anonymity.
Washington Marine Group, which is one of the largest tugboat operators in the province, announced plans in September to build four new tugs. Group CEO Jonathan Whitworth said they’re being built to handle increased tanker traffic at the port. He added that the company remains committed to its unions.
Catherwood is also a union shop, and Mihalicz said that helps the company land jobs it wouldn’t otherwise have access to. Still, B.C.’s tugboat business is a long way from its pre-recession boom.
Said Mihalicz: “It would be nice to see the sun shine again.”