The success or failure of the U.S. plan to stabilize its bleeding financial sector is dependent on stemming the country’s depressed housing market. However, the plan will not alter the fundamentals of falling home prices, which have been at the root of the crisis that’s gripping the financial markets.

Why? Because while the plan should help keep credit from completely drying up, home prices are likely to continue to fall further below the 19 per cent year over year decline witnessed to date, due to the excess inventory of homes in the States. The economic predictions are the U.S. will avoid a deep recession, but unemployment will rise, markets will continue to be in turmoil and economic growth will grind to a halt with only a meager recovery projected for 2009.

Not often mentioned in this grim scenario is the impact the financial meltdown is having on pension plans, corporate America’s exposure to these liabilities and the subsequent blow to the economy. The domino effect of this financial crisis will see the rapidly growing economies of the Asia Pacific slowing in response to the U.S. crisis or in other words this slowdown is truly global in nature.

None of this is good news for B.C.’s struggling forest products sector. It means recovery for the industry is further off than we would like to admit. 2009 is shaping up to be one of the most brutal years in history with continued market driven production curtailments in the solid wood sector that will negatively affect the supply chain. Loggers will log less and the available economic fibre to the pulp and paper producers will be scarce, adding supply and cost pressures to a pulp and paper industry already facing falling demand and prices. The coastal forest industry is at its tipping point.

What can be done? The industry is doing its part by battening down the hatches, curtailing operations, cutting costs and shifting markets and product mixes to adjust to market realities. We need to continue our joint government-industry market development work that is supporting and facilitating this diversification. Coast Forest urges government to immediately implement the tangible and concrete regulatory changes we’ve recommended to provide short-term relief and avoid much bigger costs down the road. And finally we have presented the Working Roundtable on Forestry with 21 recommendations that should receive serious consideration to ensure our industry can take advantage of significant opportunities that will present themselves when markets eventually turn around. However, there is currently no end in sight to this upheaval and in the end it will only be the survivors that can capitalize on these opportunities.

SIMULATED EARTHQUAKE (CONT’D FROM PAGE 1)A video of the test showed the mayors how coastal hemlock used in traditional Japanese homes can withstand the strong seismic forces that levelled Kobe in 1995.

In Japan, the full sized three-story house, weighing 42-tonnes, was placed on one of the most powerful three-dimensional seismic shake table facilities in the world where it was subjected to a 20-second tremor that mimicked the force of the Kobe earthquake. The notorious Kobe quake measured 7.2 on the Richter scale, destroying one–third of the city’s buildings and killing 6,400 people.

The Kobe earthquake disaster raised the level of safety concerns for Japanese homeowners, causing consumers to link their desire for strong housing to high strength building materials.

Working together, Japan’s Building Research Institute, the Centre for Better Living and the Public Works Research Institute, UBC’s Department of Wood Science and the forest industry conducted the test to document how coastal hemlock structural products and Canadian engineered oriented strandboard perform in some of the most severe seismic forces ever recorded. The computer model, developed by UBC, is the first tool of its kind to define the structural performance of building systems based on the properties of housing components.

To the satisfaction of all, the traditional Post and Beam house, built entirely of B.C. wood, survived the test with flying colours. Not only was this unique test enormously successful but it illustrates how serious the Canadian and Japanese governments and industry are about building earthquake resistant housing. Since the Kobe quake, Japan changed its building codes, and through a six-year research program, worth $1.2 million, governments and industry have been working to develop stringent building standards and promote the superior performance and use of Canadian forest products in both residential and commercial applications in Japan.

Attending the shake table test, Coast Forest Products Association’s President and CEO Rick Jeffery said: “Seeing first-hand how traditional homes can withstand powerful earthquake forces is a truly astounding experience, and one that drives home the central importance of developing the research and knowledge base that helps to keep Japanese housing at the forefront of the world in safety and durability.”

Astonishingly, following the first successful test, the researchers grew bolder and performed a second test on the house at 150 per cent of the force that shook Kobe.
Bystanders stood back as the house swayed and groaned, but again it successfully withstood the seismic pressure without a crack or crumble. Once more, after much heated discussion, the researchers upped the ante to double the force of the Kobe quake. The house grumbled then roared, yet it defied even that supreme magnitude of force. Having faced down successive earthquake simulations, visual inspection revealed only minor damage on the first floor and virtually no damage on the second and third floors.

“It was almost beyond belief witnessing the house sway under that pressure and not fall over. The noise was deafening,” remarked Jeffery. “What a glowing testament to the dedicated Japanese and Canadian researchers leading this project.”

Minister of Forests and Range, the Honourable Pat Bell, believes the success of this test helps to secure the long-term future for the coastal forest industry in Japan. “Japan is B.C.’s largest offshore forest products market and technical work of this nature helps to supply our Japanese customers with confidence that our products contribute to stronger, safer and more seismically durable homes.”

UBC Professor Emeritus David Barrett, Department of Wood Science, notes that as wood use in Japan evolved more to dry products after Kobe, some misperceptions developed about the performance of hemlock. “It was very important that we develop a new marketing strategy and a new technical program to overcome those perceptions, and we have.” (Continued on page 4)

POLICY REVIEWRecently appointed Forests and Range Minister Pat Bell has expressed his belief that more opportunities exist to reduce industry costs through regulatory review.

Stumpage is the number one cost issue for coastal logging operations, eating away any profit margins coastal forest companies are able to realize through cost efficiency measures. Needless to say, with current cost structures and losses in the millions, coastal licensees, large and small, will have an uphill battle competing in global markets if these earnings continue to be stripped away.

Not surprisingly, under the current difficult market conditions, the Crown harvest volume was down 33 per cent for the first eight months of 2008. For the same period last year, the harvest was 9.5 million cubic metres compared to the current 7.2 million. However, despite the significantly lower harvest volume in 2008, the Province has collected $152 million in stumpage fees, almost identical to the $155 million collected for the same period in 2007.

Coast Forest Products is pressing for two market supported solutions: the inclusion of BC Timber Sales costs into the current market pricing system and the adjustment of stumpage for the pulp log component of Hembal J-grade volume to reflect market value.
“Combined, these important measures could assist in ensuring stumpage rates more accurately reflect market realities,” explains CEO Rick Jeffery.

Minister Bell’s four key objectives state that his ministry will work to get the most out of B.C. forests by growing the resource and maximizing value from our forests by using every part of the tree. Bell said he’ll also encourage using more wood in large commercial and institutional buildings and will continue to build a long-term relationship with China to capitalize on the immense potential for B.C. products in this rapidly growing market.

Coast Forest fully supports the joint marketing efforts of government and industry to develop markets in China and Japan but cautions that government must still do more to encourage the capital investment needed to regain B.C.’s market position in U.S. and Asian markets.

“Forestry is a capital intensive industry which means that government can set the stage to attract this much needed investment by implementing policies that create stability,” said Jeffery in his presentation to the Working Roundtable on Forestry.

The association’s recommendations to the Roundtable address investment, industry cost structure, carbon policies, markets, taxation and economic development.

Coast Forest believes its recommendations will have a tangible and significantly positive impact on the industry and will, over time, result in a more stable, sustainable and competitive industry.

COASTAL LOG DUMP NOTIFICATIONSBest management practices are now available describing the applicable site conditions and suitable procedures for Heli-Water Drop and Re-activated Log Dump activities for coastal B.C.

Developed jointly by the Department of Fisheries and Oceans, British Columbia Timber Sales and Coast Forest Products Association, these guidelines provide a framework to meet the objective of protecting fish and fish habitat from adverse impacts while streamlining the regulatory review process. (Continued on page 4)

BCTS ACHIEVES CERTIFICATIONAs part of the Ministry of Forests and Range’s commitment to improve safety for forest workers, BC Timber Sales has now achieved SAFE company certification from the BC Forest Safety Council.

BC Timber Sales was registered in the Safety Accord Forestry Enterprise (SAFE Companies) program of the B.C. Forest Safety Council in April 2007. Certification is issued only when independent auditors determine a company has effectively implemented a health and safety management system that meets the shared safety standard set by industry.

In addition to achieving certification itself, BCTS is also seeking to enhance safety in the forest sector by requiring firms bidding on BCTS fieldwork contracts (such as road building or reforestation) and those directing or employing workers on timber sale licences issued by BCTS to be SAFE Company certified after Dec. 31, 2008.

“The SAFE Companies program signals a transformative change in how our industry thinks about and manages safety,” said Tanner Elton, the council’s CEO. “The participation of Timber Sales is very important and demonstrates they are not only requiring this standard of others, they are applying it to themselves. That is real leadership.”

COMMUNITY SPIRIT LIVESA couple recently stranded with their dog on a logging road on northern Vancouver Island after a rock punctured their oil filter ended up having to camp on the side of the road overnight. Luckily, an Interfor crew on its way to work early the next morning stopped to help. The crew got in touch with Western Forest Products and the company sent a mechanic out to help. He replaced the filter, refilled their oil and got the couple safely on their way without accepting any money for his trouble.

Peter Lineen, Director of Safety at Western Forest Products, passed along this thank you letter from the couple to the employees and companies. George and Pat Rusinski wrote: “We want to thank Interfor and Western Forest Products, plus all the people who helped us in our dire situation… It has to be very rare to find two companies who work so closely together with policies that encourage helping the community. You have earned our respect and your employees have our gratitude!”

Interfor’s Otto Schulte had this to add: "The letter we received from George and Pat was a very kind acknowledgment. However, this sort of thing happens every day in the woods. It's not unusual. We are proud of our people and their inherent care for those around them, even those they don't know."

SIMULATED EARTHQUAKE (CONT’D FROM PAGE 2)Needless to say, coastal hemlock has proved itself to contain one of the most sought after characteristics in Japan: incredible strength and unmatched performance under earthquake conditions.

The governments of British Columbia and Canada, through Forestry Innovation Investment and the Canada Wood Export Program, provided significant financial support in the research leading up to this test while industry supplied hemlock, known as Canada Tsuga in Japan, and OSB materials.

The Japan earthquake video is posted on Coast Forest’s website at www.coastforest.org.

COASTAL LOG DUMP NOTIFICATIONS (CONT’D FROM PAGE 3)“The notification process allows for the use of professional and technical judgment to develop and utilize site specific practices to prevent or minimize impacts to fish and fish habitat,” says Warren Warttig, Planning Biologist, Interfor