Coast Forest has been in extensive dialogue across multiple levels of the Provincial government on ways and means for government to adapt its operations to reflect the ongoing persistence of poor markets led by the U.S., the credit crisis and the rapid plunge into global recession. It is this change that can provide the greatest benefit to the survival of the forest industry.

Two things are apparent from the dialogue. We the industry have done a poor job of explaining our business to government. Without a good understanding of the functioning of our business, government policymakers often deliver poor outcomes with unintended financial, operational and employment consequences. Secondly, government’s Treasury-board-style economic analysis is predicated on impacts to direct Crown revenue and employment. Full accounting of the impacts across the forestry supply chain is absent.

This global financial meltdown has created great uncertainty in forest products prices and market demand. For example, the cedar market which was supporting the coastal industry has collapsed and the industry is trying to shift into meager hem-fir markets in the process leaving entire sales programs on the shelf. This unpredictable new reality means companies have to be able to turn on a dime in order to survive.

To borrow from one of Alex Spanos’s favourite sayings, cash is king! The tight credit climate means sales revenue is increasingly the only source of funding for operations and capital expenditures. All segments of the business now have to be balanced against available cash flow.

This has significant impacts on normal activities - engineering, road, log and lumber inventories - that account for hundreds of millions of dollars across the coast and must now be supported by cash flow. It has manifested itself in significant reductions in inventories and the corresponding curtailment of operations, badly impairing the industry’s ability to respond quickly to market changes or opportunities. Cash flow restrictions negatively affect every area of the business from utilizing effective resource management systems to attrition of employees and contractors, creating a downward spiral on communities. Everyone suffers. All remaining resources are stretched beyond the maximum.

In this demanding climate we believe senior policy regulators must ask themselves three questions before taking action: 1) Is this action absolutely necessary or required? 2) Is this proposed course of action appropriate? 3) Can it be implemented in a cost efficient and effective manner?

In closing, may we work smarter, be wiser and continue to work together cooperatively in the New Year.

TRADE MISSIONDelegates from six B.C. lumber companies, including Rick Jeffery, Coast Forest Products CEO and Chair of the Canada Wood Group, took part in a six-day trade mission in November to China to assess opportunities and promote greater use of wood products in China’s major building markets. The successful mission reaped orders for 83 million board feet of wood. Western Forest Products is credited with securing one-third of the orders, which includes 7.6 million board feet to be delivered this year and a further 24.4 million board feet to come from its Cowichan Bay sawmill in 2009.

During the mission, the delegates met with major Chinese customers, saw the scope and extent of opportunities to increase wood use in China, and participated in the announcement of a landscape demonstration project in Quindao.

“It’s essential we have these opportunities to showcase the durability, suitability and beauty of B.C. wood products directly to Chinese customers,” says Jeffery. “Once they see our product, and understand the benefits and superior quality of our forest products our market share begins to increase. We have to remember it was only a few decades ago that B.C. built a market for its products in Japan. One day, in the future China will follow.”

REBUILDING COMMUNITIESThe Canada Wood Group, working in partnership with Forestry Innovation Investment and the Canada Wood Export Program, is helping to rebuild the communities destroyed by the devastating May 2008 earthquake in China. As part of the earthquake recovery, industry representatives and government officials visited the Beichuan Leigu Town Elderly Care Centre Project which includes two buildings for administrative and care facilities, and two to three multi-storey residential buildings for up to 200 seniors left homeless by the earthquake. These buildings will use about 610,000 board feet of B.C. coastal wood and feature traditional Qiang Minority design elements.

The early design for the Mianyang Rehabilitation Centre and School for the Disabled Project includes a multi-storey dormitory, three classrooms, a cafeteria, and a building for staff and administration. These six buildings will use about 745,000 board feet of B.C. wood.

The Canada Wood College, Sichuan Campus, is a vocational school that will transfer skills and technology, and provide the most effective wood-frame building training in China for these projects. A partnership involving the Sichuan College of Architectural Technology and Canada Wood Group, a non-profit group of industry associations, the college opened a Shanghai Campus in February 2008.

“In order to supply lumber to this market, there have to be people who know how to use it properly, including how to use British Columbia’s range of tree species and wood products in construction applications,” said Fred Spoke, CWG China Director. “Canada Wood College is an important piece of the larger strategy to develop the Chinese market.”

EARTHQUAKE RESISTANT SCHOOL“Construction has already begun on an earthquake resistant school using B.C. lumber that could soon be a model for institutions and residential buildings across China,” Forests and Range Minister Pat Bell announced when he visited the school’s construction site.

“The school will provide 540 students with a safe learning environment while making local officials, developers and builders aware of the merits of building with B.C. wood,” said Bell. (Continued on page 4)

INDUSTRY AND GOVERNMENT WORKING TOGETHERCoast Forest has dedicated significant resources in recent years to working on policy, regulatory and legislative changes to increase the competitiveness of B.C.’s coastal forest products industry. Particular effort has been spent ensuring the Ministry of Forests and Range thoroughly understands the current economic and marketplace conditions, and its own impact on forest sector competitiveness.

In November Forests Minister Pat Bell brought together ministry staff charged with regulating woodlands operations and industry responsible for implementing government policies and regulations at the ground level. For industry this was an opportunity to focus on how the Ministry could better deliver on its mandate to encourage a “vigorous, efficient and world competitive timber processing industry”.

Minister Bell highlighted the need for more effective delivery on the ground, noting that every dollar saved in policy saves a dollar at the operational level. Comparing the current industry crisis to a bus being stuck in the mud, he noted, both government and industry need the ability to react quickly and most importantly, (continued on page 4)

FOREST SAFETY COUNCIL STAFFThe end of 2008 will mark a new phase for the BC Forest Safety Council with the recent appointment of Bev Briscoe as its new full-time chairperson and the retirement of founding Council CEO Tanner Elton.

Briscoe is a chartered accountant by profession and has extensive senior experience in resource development, financial services, public sector and not-for-profit community organizations. In her career Briscoe was the owner of a transportation services company and held executive positions with Wajax Industries, Rivtow Group of Companies and The Jim Pattison Group. She replaces outgoing Council co-chairs, Lee Doney and Ron Gorman.

“Joining the BC Forest Safety Council gives me a great opportunity to be part of an industry that is facing significant challenges, but remains very important to the economy of B.C.,” says Briscoe. “Despite economic and other challenges, B.C.’s forest industry has made a lot of progress in getting behind safety. We still have a way to go, but the industry is transforming how safety is valued and practiced in B.C. As the Council’s new chair, I am proud to be joining this effort.”

In addition, the Council’s first CEO Tanner Elton will be moving on at the end of the year, and Coast Forest Products Association would like to thank him for his hard work and commitment to improving the industry’s safety record. Good luck Tanner!

INDUSTRY AND GOVERNMENT WORKING TOGETHER (CONT’D FROM PAGE 3)strong leadership is needed at all levels. Bell said, to move the bus and head it in the right direction “we cannot get in each other’s way. We have to work together for mutual success”. The Minister strongly encouraged his managers to make quick decisions and not to worry about making the odd mistake, emphasizing “it’s not about process, it’s about results”. In summary, Minister Bell compared the session outcomes to a “mission launched not accomplished,” suggesting the need for more immediate policy changes that provide for more effective and efficient delivery on the ground.

Coast Forest’s priority issues include the implementation of MPS 2009 effective January 15, 2009, J-grade pulp log pricing at $0.25 per cubic metre, and a risk based approach to compliance and enforcement. Furthermore, regulatory redundancies need to be eliminated and policies focused on process that produce no tangible results should be reassessed.

“Minister Bell is passionate about the forest resource and industry and is prepared to take on a bold leadership role,” says Coast Forest’s Rick Jeffery. “It’s our hope that collective follow-up actions will prove successful.”

EARTHQUAKE RESISTANT SCHOOL (CONT’D FROM PAGE 2)About 637,000 board feet of spruce-pine-fir, Western red cedar, and yellow cedar – including laminated veneer lumber, glulam, and oriented strandboard – will be used in the project. The foundation of the new school has already been poured, and construction is expected to be complete in spring 2009.

The rebuilding of the entire area is a centre of attention in the Chinese media and has served to promote the benefits of using advanced wood-frame technology and B.C. wood products.

The China earthquake reconstruction projects are funded by the $8-million Canada-B.C. Wenchuan Earthquake Reconstruction Project, created to provide wood-frame buildings and technical support to help rebuild areas of Sichuan Province, announced earlier this year.