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Coastal Clarion - Newsletter
Vol.7, Issue 3 · Fall 2011
In 2001 the forest industry and the provincial government had the foresight to embark upon a path of market diversification that paid dividends through the US sub-prime mortgage crisis and subsequent 2008 global meltdown. We were joined by the federal government in a true partnership that worked tirelessly to open up new offshore markets for BC’s forest products.
Success was achieved by taking a focussed and coordinated approach combined with a strong and durable presence in targeted markets. China is a stellar example, with strong leadership provided by the premier, federal and provincial ministers and industry CEOs. Their direction was simple: To work together cohesively with a clear, coordinated strategic plan and to stay the course, tweaking the plan as new information evolved and experience was gained. Having an ongoing strong presence in offshore markets cannot be overstated because growth we have achieved is directly attributable to physically being there to take advantage of emerging opportunities as they arise.
The return on investment is impressive. We diversified away from the US, rebalancing supply and demand dynamics. Today, the US represents less than 50 per cent of the volume and value of lumber shipments. We have seen triple digit growth in China and repatriation of market share in key markets like Japan. Over 25 mills have restarted across the province, including three mills on the coast, plus extra shifts, which provide family supporting jobs in the woodlands and mills and economic activity in our communities.
Without this partnership and funding each party brings, we would not have weathered the global financial tsunami. But there is more to be done as we work with our offshore customers to strengthen their capacity to build with wood cost effectively and with confidence while realizing the benefits of the world’s most energy efficient and sustainable building material.
The transformation has just begun as we transition to new markets and new products to compliment and augment traditional products and markets. The BC forest industry can be a global leader in the bio-economy era leading in key areas of green and energy efficient building materials and systems, sustainable forest management, carbon management and biomass-based products. We have three strategic areas of growth: offshore markets for wood products; non-residential and commercial building markets; and the bio-economy including bio fuels, bio-products like nano-crystalline cellulose, lignum, smart papers, green building products and forest management expertise.
Diversification requires stable hosting conditions and continued partnership with governments. With these factors in place to attract necessary investment we will be able to realize future opportunities which will provide jobs, community based economic development and increased government revenues.
CHINA SUCCESS CREATES JOBS
For more than a decade Canada’s forest products sector has been implementing a multi-faceted strategy to diversify its forest products and offshore markets in countries like Japan and China. Today, China is not only the world’s fastest growing economy, but thanks in a large part to these strategic efforts it is also BC’s fastest growing market for wood products.
Government funding, provided through Natural Resources Canada and Forestry Innovation Investment Inc., for market diversification and promotion programs in partnership with industry funding has been one of the principal factors in moving China from BC’s 12th to its 2nd largest export market, by volume, after the United States. And for the first time ever trade figures for May 2011 show the value of softwood lumber exported to China has now surpassed the US. (Continued on page 2)
CHINA SUCCESS CREATES JOBS
FUNDING FACTS Partnerships between NRC’s Canada Wood Export Program, FII and the forest industry provide funding and expertise for forest products market diversification in offshore markets like China, Japan, South Korea, Taiwan, Vietnam, the UK, continental Europe and Australia. Activities conducted include:
- Influencing the development of wood-favourable building regulations, including building codes and standards and addressing non-tariff trade barriers restricting access for Canadian wood products
- Constructing demonstration projects to showcase Canadian wood and its seismic, environmental, strength and aesthetic attributes in structural, finishing and landscaping applications
- Providing training, technology transfer and quality assurance services to develop wood building capacity among architects, designers, builders and inspectors and
- Undertaking promotion efforts through trade shows, seminars and liaison with potential customers.
"These government and industry partnerships create focused and coordinated activities in new and developing markets so forest products companies are strategically positioned to take advantage of opportunities when they arise," explains Rick Jeffery, President & CEO of Coast Forest Products Association. "Ongoing government support is crucial to continue the momentum and realize maximum benefits of these transformative programs."
Continued funding of these programs will support Canada’s global reputation as the world’s leading producer of top-quality, sustainably harvested forest products, and continue market diversification efforts of benefit to forest communities and forest workers not only in BC but across all of Canada.
FUNDING IMPACTS “The importance of these federally funded programs to our forest industry and our ability to create jobs cannot be understated,” emphasises Jeffery.
"There is a direct link between the growth of Asia Pacific markets for forest products and British Columbia's economy and job prospects."
Never has this link been more evident than in communities like Ladysmith where the once shuttered Western Forest Products mill is now running a second line and Surrey where the J.S. Jones small log mill is running two shifts to keep up with China’s feverish demand for coastal hemlock products.
The Teal-Jones Group is quick to credit the government’s efforts for opening up offshore markets to the company.
"Now the focus much more is offshore," explains Hanif Karmally, Chief Financial Officer of Teal-Jones. "We’re selling in China, we’re selling in Japan, we’re selling in Thailand, in Korea, Taiwan, Hong Kong, and all the Pacific Rim countries."
According to Karmally, the forest sector’s combined market diversification efforts have resulted in a dramatic change in the last four years, marking an incredible transition for lumber products exports from the North American market to offshore markets.
"Previously, the 70/30 rule applied," contends Karmally. "Geographically, the focus was on the United States and Canada with 70 per cent of Teal-Jones’s products going to North America and 30 per cent going offshore. Now flip that around. The reverse is true."
THE TEAL-JONES EMPIRE Teal-Jones is the largest privately held forest products company on the West Coast. The company owns and manages renewable timber resources, sustainable logging operations, a specialty saw and planer mill and state-ofthe- art manufacturing plants that support a global sales and supply network with gross annual sales of $170 million.
Its operations span the coast in a dozen communities from the lower Fraser Valley to northern, central and southern Vancouver Island to the Queen Charlotte Islands and include the interior of BC. The company also operates a mill in Sumas, Washington.
Currently employing a thousand people, Teal-Jones’s Surrey operations alone provide jobs to 500 people. The largest solid wood products site on the coast of BC, the
compound covers 30 acres, nestled away against the sloping banks of the Fraser River just north of Highway 1 off the 176th Street exit.
Many of those jobs are in the company’s J.S. Jones small log mill which was built in 2003. One of the only small log mills on the coast, this Teal-Jones jewel is the company’s mainstay for China’s rapid construction. Currently, 40 per cent of the company’s whitewood production is going to China, supplying lumber for concrete forms in five provinces within the country.
SHOWCASING MODERN WOOD-FRAME CONSTRUCTION Since 2001 when FII built the first large-scale demonstration of Canadian-style wood construction in Shanghai, China, the project’s success has led to a number of other demonstration projects being built in China, South Korea and North America to showcase wood products and building systems.
Designed to meet stringent environmental and seismic standards, demonstration projects are used to introduce, analyze and prove the benefits and performance of wood building systems in everything from wood-truss roofing and structural wood floor systems to wood landscaping materials for gardens and parks.
These market diversification efforts have proven so successful because they are defined by a long-term vision carried out with the proper combination of industry know-how and essential government relations. Teal-Jones knows this firsthand.
While attending the opening of the Dream Home site in Shanghai, Teal-Jones owner Dick Jones noticed the roofing system had been installed incorrectly. Burch recalls, “He came home, gathered up the materials and men, and returned to re-roof the project. But it was August – and man was it hot on that roof.”
To his merit Jones believed in the project’s returns and knows that with an abundance of high-quality structural building materials, BC is a leader in the development of modern wood-frame construction technology in the world. Projects such as these demonstrate a building solution that is energy-efficient, environmentally friendly and seismically stable.
Current market expansion projects in China also include the Tianjin TEDA Apartments, Hebei Building Research Centre, and the Sanlin Affordable Housing among others. All this made possible through combined federal and provincial funding of these strategic forest sector programs.
AN EYE TO THE FUTURE WITH A FOOT IN THE FORESTS As the forest sector has learned the hard way, it’s critically important not to be solely dependent on one trading partner.
BC Premier Christy Clark recently announced plans not only to travel to China this November, but India as well in a bid to boost trade and jobs at home. The coastal forest industry is not only watching but many companies and associations are planning to accompany Clark on the mission.
The provincial government is keenly focused on creating and protecting jobs in BC following the latest economic downturn that is affecting the US and Europe. Partnerships like those created in the forest sector will be important to the success of the provincial government’s jobs plan. (Continued on page 4)
CHINA SUCCESS CREATES JOBS
HST DEFEAT On August 26 the results of the HST Referendum were announced by Premier Christy Clark. With a return to the PST/GST taxation system, the imperative for industry and government to work together to implement a successful economic development and marketing strategy becomes even more important for the coastal forest industry to prosper and provide family supporting jobs.
“The people have spoken,” says Coast Forest’s Rick Jeffery. Going forward, the BC coastal forest industry has set its sights for the future on working closely with the provincial government to focus on an agenda that drives competitiveness, innovation, investment and jobs.
“The coastal forest industry is positioned to take advantage of growing export markets in Asia and in other regions, which ultimately create and sustain jobs for forest workers locally,” says Jeffery. “With a return to the PST/GST tax regime it is important that we work with government to provide increased opportunity for investment and innovation in the development of new products and markets, which leverage our competitiveness in markets around the world.”
The forest industry and the Province have been working together since 2001 to diversify the market for BC forest products by expanding into China and other regions. These efforts have proven successful with the value of softwood lumber exported to China in May for the first time surpassing exports to the US. In addition, the use of wood in non-residential applications has increased in structures like the Richmond Olympic Oval and the Vancouver Convention Centre.
With the US housing market continuing to struggle, the Canadian dollar remaining strong and the recent continued turbulence in financial markets, the importance of market diversification into the Asia Pacific and South Pacific for British Columbia's forest industry, economy and jobs remains tantamount.
“The coastal forest industry cannot afford to lose ground,” adds Jeffery. “As a key economic driver of the provincial economy, the provincial government needs to remain focused on working with the industry on programs, regulatory changes and policies that increase competitiveness, economic activity and trade opportunities for forest products companies in offshore markets and North America.”
Over the next two years while the Province reverts to the PST/GST taxation system, the coastal industry is committed to working with the provincial government on issues, strategies and actions to create more opportunities and trade for British Columbia forest companies.
(CONT’D FROM PAGE 3 ) AN EYE TO THE FUTURE WITH A FOOT IN THE FORESTS “The Asia-Pacific gateway trade is central to the plan. We have to focus BC like a laser beam on the Asia Pacific because that’s where the future is,” Clark said at a recent news conference.
Coast Forest’s Rick Jeffery fully supports these efforts. “The coastal forest industry knows international market diversification is central to continued forest sector prosperity. India is another long-term market, with its own share of challenges for the industry that must be pursued.”
CHINA SUCCESS CREATES JOBS
Photo: Western Forest Products
Coast Forest represents forest and paper companies in coastal British Columbia engaged in the harvesting and manufacturing of primary and added value forest products, and pulp and paper products. Together, these companies manufacture 95% of the lumber produced on the coast, 70% of the pulp and paper production and are responsible for 70% of the total harvest. The Association works to ensure that the five coastal species and their product lines have fair access to the global marketplace. Committed to providing leadership to create a thriving forest industry, Coast Forest facilitates cooperation between stakeholders and government on behalf of its member companies.