Weather has played a prominent role. An unusually slow start to the harvesting season because of high winter snow packs caused coastal log production to ramp up in late spring only to be curtailed through July and August by the heat. Harvesting operations only fully resumed recently.

Weather factors were accompanied by tight log inventory management in Q1 and Q2 as the market driven consolidation of Western Forest Products, Cascadia and Englewood came to a close and the affects of poor wood products markets in 2005 worked their way out of the system.

Some people believe consolidation is the primary reason for the tight log supply on the coast, but the facts don't support this argument. In 1996 Coast Forest membership accounted for 87 per cent of the Crown allowable annual cut (AAC). In 2006, 10 years later, following the implementation of the Forestry Revitalization Plan, Coast Forest member companies' portion has fallen to 60 per cent of the cut. The new market-based system means that major licensees are net buyers of wood and now compete in the marketplace for a large part of their fibre supply.

Others point to B.C. Timber Sales (BCTS) as the causal factor, but the data indicates BCTS is selling its AAC. However, there's still work to be done to ensure government policy and practices result in the timely harvest of market-driven timber sales.

Improvement is also needed in getting First Nations and Community Forest volumes into the market. Of 7.4 million cubic metres allocated to First Nations, only 1.4 million cubic metres (19 per cent) have executed licences. Only two of 12 community licences have been issued. These volumes are missing from the market to the detriment of First Nations, communities and the log market. Together, we have to work to find ways to resolve this challenge.

The changing face of the coastal forest industry is driven by external end markets, and requires that we adapt our business models, forge new business relationships and invest in competitiveness. What is not needed is government social engineering to direct the functioning and structure of the market. To become world competitive we need to allow market forces to drive change – this would be a bold departure from our historic approach.

NEW HEMLOCK PRODUCTJapanese certification of a new hemlock grade was announced at a ceremony in Tokyo at the Canadian Embassy from a joint research initiative between the B.C. and federal governments, Coast Forest Products Association and the University of B.C. on September 14. The new E120-F330 grade marks an important step in regaining ground in the Japanese lumber market.

Hemlock accounts for 60 per cent of the coastal forest industry's fibre supply and Japan is the coastal forest industry's number one customer for the species. B.C.'s share of that market declined over 50 per cent from 1994 to 2004, mostly due to Japan’s changing regulatory environment, a shift in buyers' preferences and imports of laminates from Scandinavia, China and Russia.

The collapse of the hemlock market in Japan led to the decline of the coastal forest industry. "Now the industry is betting that its rebirth as a component in modern housing designs will be a prime factor in the coast's recovery," writes Hamilton.

"Our new hemlock product is a key step for the coastal forest industry to increase our competitiveness and market share in Japan," says Rick Jeffery, President of Coast Forest Products Association, "We are the first producers to have a kiln-dried solid wood product that is superior in strength to our competitors' laminates. The new product meets the unique needs of the Japanese home building industry and has the potential to double our market share there."

B.C.'s new hemlock product is the result of a $2 million product development program, and is not only stronger but also more economical than laminates. The kiln-dried hemlock grade was developed at UBC and is part of an ongoing cooperative effort between industry and the Government of Canada and the Province of B.C. to develop new market opportunities for the coastal forest industry.

"This government is committed to revitalizing the coastal forest industry," says Forests and Range Minister Rich Coleman. "That's why we are working with our partners, like Coast Forest, to develop innovative new products that will attract new customers in traditional markets like Japan."

With a strength rating higher than laminates or Douglas fir, it's expected that the use of the new hemlock product will increase in roofing and post applications for Japanese housing where traditional post and beam construction is still very popular.

COAST MARKET PRICINGThe Ministry of Forests and Range has commenced a review and update of the current Coast Market Pricing System (MPS), with an ambitious targeted implementation date of February 1, 2007 for a revised MPS equation. Through the Coast Steering Committee and related committees, Coast Forest is committed to working with the ministry to achieve its target objective and to ensure that MPS is based on improved market evidence from B.C. Timber Sale (BCTS) auctions.

BCTS provides opportunities for bidders to purchase timber in an open and competitive auction process. Simplistically, for anyone bidding on a timber sale, market value is established directly: the high bid wins the right to harvest the timber. For tenure licensees harvesting under cutting permits, the determination of market value is indirect - stumpage is calculated from the MPS equation that is derived from the BCTS auction data. As such, Coast Forest and its member companies have a keen interest in ensuring that the MPS equation is based on credible data and an open and competitive auction process.

MARKET PULP LOG PRICINGIn his president's message Rick Jeffery noted that coastal log supply, specifically log inventories, are tight for everyone. This includes the coastal pulp sector where the availability of pulp logs is an issue. The declining supply of pulp logs is not a short-term phenomenon; it has been a growing issue over the last couple of years. The problem of harvesting lower volumes of pulp was directly linked to low pulp values and high extraction costs. In 2005, and earlier this year, pulp log prices were languishing under $30 per cubic metre, and to compound the problem a large volume of pulp log grades were being charged stumpage rates significantly higher than the market was willing to pay.

Effective May 1, 2006, the Ministry of Forests and Range introduced changes to the pricing of several log grades. This includes hemlock and balsam U and X priced at $0.25 per cubic metre to be consistent with Y grade and to reflect the market value of pulp logs. Some have argued that the pricing change, in combination with the ministry's take or pay policy, will result in more volume being left in the woods. Coast Forest, however, suggests the change has helped to stimulate the harvest of more pulp logs, as it will provide a positive margin on a larger volume of these logs.

Feedback from member companies and logging contractors indicates pulp log utilization is increasing in areas where economic margin has been provided by the reduction in stumpage and the recent increase in pulp log prices. On Vancouver Island roadside accumulations left behind last year in one operation have been loaded out and sold to a local pulp buyer. This is a positive development.

Of course, it's still too early to tell if the overall increase in pulp log harvest will be dramatic, as the policy change was just introduced in May and logging operations are only now trying to kick into full throttle after a very hot summer. But the take home message is: Let's give the policy a chance to work, let's monitor the impact for at least a year and let's turn our mind to further improvements to encourage utilization, not changes to artificially stifle it.

This fall, the BC Forest Safety Council is set to launch its SAFE Companies Certification program. This means companies will be able to register into the SAFE Company program, book the services of a Council-approved Safety Auditor and have their operations audited. In addition, SAFE Certified companies will be eligible for partial rebates on their WCB assessments.

"This program distinguishes B.C. forestry employers who meet industry safety standards and demonstrate true leadership and commitment to building a culture where the health and safety of all workers is an overriding priority," says the Council's Tanner Elton. "And what everyone needs to know is that SAFE Companies status will now be a pre-qualification standard for companies to operate within the B.C. forest sector."

The Council recently called for volunteers to test the Small Employer Audit protocols for the SAFE Companies program. Coast Forest member Kim Allan and the District of Mission are volunteering to take part in this important Pilot Project.

As ABCFP President Bob Craven wrote for the Vancouver Sun’s National Forestry Week's Special Information Supplement, "The ultimate goal for all forest professionals is for each and every worker to come home safe." We couldn't agree more.

PETER N. AFFLECK MEMORIAL GRADUATE SCHOLARSHIPThe Peter N. Affleck Memorial Graduate Scholarship in Forest Policy has been established in memory of the Council of Forest Industry's Peter Affleck.

Peter Affleck was recognized across Canada as a dedicated, effective and highly respected advocate for the forest sector. It is now up to Peter's friends and colleagues to join with us in establishing the fund that will support the provision of annual scholarships to forestry students at UBC in his name.

Please consider making a contribution today as we must raise a minimum amount before the University can formally establish the scholarship. Contributions are tax deductible.

Cheques should be made out to:
UBC - Peter N. Affleck Scholarship Fund and mailed to:
Dan Worsley Associate Director Awards, Gifts and Estate Planning
The University of British Columbia
Suite 500 - 5950 University Boulevard
Vancouver, B.C. V6T 1Z3

Contributions will be gratefully received from corporations, associations, governments and individuals.

NOTICE TO EXPORTERSThis notice is now available at www.softwoodlumber.gc.ca. All exporters must be aware that, as of October 12, 2006, an export permit will be required for every softwood lumber shipment to the United States.

For questions regarding export permits or hard copies of the Notice:
Export and Import Controls Bureau
Hot Line 613-944-2168 or 1-877-808-8838

For questions regarding the Agreement:

Softwood Lumber Division (TNS)
Hot Line 613-944-2167