From the Vancouver Sun – May 17, 2011
by Gordon Hamilton
METRO VANCOUVER – When Port Alberni Mayor Ken McRae sees a freighter leaving his coastal sawmilling town loaded with wood, the pride he once felt has turned to a deep concern for the future of the British Columbia coastal forest industry.
Once those ships were loaded with lumber. Now, half the cargo is logs.
Log exports have exploded in B.C. in the last few months, largely to feed China’s voracious appetite for fibre. McRae is not opposed to exports; they have a place in a healthy industry, he said. But he fears China’s appetite for B.C. logs is going to cut into manufacturing here.
“China, Korea and Japan are paying more for logs than most of our sawmillers can afford. It’s a huge issue that’s going to come back to bite us,” he said in an interview.
McRae is not the only one who sees a structural change taking place in the global forest industry with huge implications for B.C. China is switching from relying on the vast forests of the Russian Far East, where log exports are now restricted, to the countries of the Pacific Rim, said Gerry Van Leeuwen, vice-president of the research firm International Wood Markets. And B.C., which still accounts for a small piece of China’s log import pie, is China’s fastest growing source of fibre in a string of countries around the Pacific.
For the first three months of 2011, B.C. coast loggers harvested 3.5 million cubic metres of logs. Almost 40 per cent of those logs, 1.3 million cubic metres, were exported, a 300-per-cent increase over the same period of 2009.
Forests, Lands and Natural Resource Operations Minister Steve Thomson said in an interview that he’s conducting a review of log exports to make sure there is a balance between logs being exported and the domestic demand from local sawmills.
“We are looking at the numbers and talking to companies. I am not saying it is out of balance; all I am saying is it is important to have the appropriate balance.”
The scope of the changes underway hit Van Leeuwen on an April trip to China when he saw 80 small sawmills in the port city of Qingdao. Six months ago, there wasn’t a single mill there, he said.
Port cities like Qingdao are all attracting sawmills that previously were in the Russian border region. Each mill consists of a head rig for slicing logs one board at a time and a band saw for making a finished board. Lumber is all cut and stacked by hand, a labour-intensive process that can’t match the volume of a B.C. mill. But China has thousands of these mills.
Fuelling China’s appetite for Pacific Rim wood, said Van Leeuwen, is an ambitious plan to build 35 million low-cost homes over the next five years to accommodate the inflow of peasants into urban areas. The homes are all concrete, but it takes lumber to make the concrete forms and scaffolding.
It’s also used to make strapping to attach wallboard to the concrete walls. Further, the doors and mouldings are made of wood that has been remanufactured into strips from imported two-by-fours and laminated.
China’s home-building policy has put B.C. loggers to work, but at Surrey-based Teal Jones, the only coastal company to have built a new mill in the last decade, vice-president Hanif Karmally said the mill is constantly short of logs because so many are now destined for export.
The Teal Jones mill is running two shifts with some interruptions. Karmally said it could easily run three shifts full time if it had more wood. China is a major market for lumber from the mill yet the Chinese are buying saw logs here at prices that Teal Jones cannot match and stay competitive.
Here’s the price breakdown: A log that sells on the domestic market for $50 would typically fetch $85 on the export market. The province levies a $15 fee in lieu of selling it locally, leaving the exporter with a $20 premium, 40 per cent above the domestic price. On the north and central coast, licensees are permitted to export 30 per cent of their annual allowable cut.
Logs from private lands can be exported once they pass a surplus test, which involves advertising them for sale. Sawmillers like Teal Jones can offer to buy them at the domestic price, blocking the exporter, but the seller is not obliged to sell them. Sawmillers use their ability to block with discretion as they often rely on the seller for their own supply of logs as well.
Lee Doney, vice-chairman of Western Forest Products, said the ability to make that extra margin on export logs not only keeps loggers working, but makes it economic to log all the grades of timber in a stand, providing more fibre overall, leaving less waste in the bush and keeping more people working.
He said Western’s mills are mostly operating full time. Log shortages, he said, are more the result of decisions to keep inventories low and an abnormally heavy snowpack that’s keeping loggers out of higher elevations.
For B.C. loggers, emerging from a four-year-long depression that cut their sector down to half its size, China is a lifeline, said Dave Lewis, executive director of the B.C. Truck Loggers Association.
For the last two years, only half the allowable annual cut — the amount of timber that can be sustainably harvested — has been logged on the coast.
“Half our timber was sitting out there because the mills couldn’t afford to pay what it cost to bring it out. The reality is, there’s lots of wood. But there’s no U.S. lumber market so [sawmills] can’t afford to pay what it costs to bring the wood out.”