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Coastal Clarion - Newsletter
Vol.6, Issue 2 · Summer 2010
Winston Churchill made many wise statements in his lifetime, but among his most memorable is: "Courage is what it takes to stand up and speak. Courage is also what it takes to sit down and listen."
As Coast Forest and its members come out the other side of 2009, which will no doubt go down in history as the worst year on record for the coastal forest industry, together we face the challenges that lie ahead. These challenges, as Catalyst’s Lyn Brown points out in our member’s guest column, “are shared by all”. With this in mind, I am spending the summer visiting our coastal communities, talking to mayors and council members, at times standing up and speaking and at times sitting down and listening.
Companies, communities, government leaders, first nations, contractors and virtually the whole coast forest region are working to reinvent forestry on the coast. And what’s more, with scarce resources and cost reductions affecting everything we do, a communications challenge is created as we work to manage the effective flow of information between the coastal forest industry and communities.
Beginning with my visits to Duncan and Port Alberni, I intend to continue sharing information with community leaders up and down the coast throughout the summer. For the first time, in July I had the distinct pleasure of meeting with Mayor Diane Watts of Surrey, a meeting which I felt was long overdue because Surrey is a manufacturing hub of coastal forest products and its waterway, the mighty Fraser River, transports and stores millions of dollars of log inventory each year.
At these meetings I will continue to emphasize that the coastal forest industry’s recovery is fragile and there is a real danger of losing markets and jobs to other jurisdictions if we do not find ways to increase productivity and innovation. As communities and the industry look at new opportunities, I am happy to share market outlooks, cost structures and business metrics to assist with the formation of sound business cases and plans for growth.
Coast Forest is committed to sharing information about market demand, innovation, research and development and productivity to help communities plan economic development in their areas and build a healthy industry.
We must continue to articulate the future of the coastal forest industry together with a realistic approach that recognizes the current state of the industry and charts a plan for moving forward with realistic solutions. For the coastal forest industry to be successful we need to share information, listen to one another and work together.
Photo: Catalyst Paper
By Lyn Brown, VP Corporate Relations & Social Responsibility Catalyst Paper Corporation
There are numerous factors that shape the operation of any paper mill on the coast of British Columbia. Some are unique to individual mills, some are shared by all.
For a mill to compete and survive in the new post-recession economy, these common factors must include an affordable fibre supply that enables dependable operation, taxation rates that support competitive ability, and labour rates that reflect the competitive reality of the new marketplace. (Continued)
MEMBER COMPANY CATALYST PAPER CORPORATION
Photos: Catalyst Paper
GUEST COLUMN (CONT’D) It is fair to say that changes have been difficult to make on all three fronts, and labour has been most reluctant to accept the new post-recession reality.
Catalyst Paper, like many other companies, has focused relentlessly on cost reduction to achieve the competitive footing necessary to adjust to both cyclical and structural changes in our industry. We reduced overhead and staff. We implemented a salary freeze three years ago, reduced vacation time and modified benefit plans. No budget item has been too small to be examined in making us more competitive.
Catalyst Paper, like many other companies, has focused relentlessly on cost reduction to achieve the competitive footing necessary to adjust to both cyclical and structural changes in our industry.
Concerning fibre supply, we are encouraging — and working with — other coastal pulp and paper producers and B.C.’s government leaders to see action that creates conditions for a renewed and competitive coastal sawmill sector.
Concerning municipal taxes, we are working with our host communities, and the provincial government, to ensure fair taxation of Class 4 industrial property. Catalyst and the City of Powell River have reached an agreement that achieves the twin objectives of reducing the Class 4 property tax rate paid by the company’s Powell River mill while assisting the City in reducing its capital expenditures significantly for future municipal service infrastructure. And we are keen to see the results of the B.C. government’s major industrial property assessment and taxation review. When the Business Council of British Columbia refers to municipal taxation as B.C.’s “municipal taxation crisis,” and says it will “press for an overhaul of B.C.'s broken business property tax regime,” we all know the review must produce game-changing recommendations in order for the B.C. industry to compete in a highly competitive, cost-conscious, global economy. Status quo equates to failure and cannot be an option.
A new bar for what it takes to be successful in the new economy is being set and the future is being shaped by swift and adaptive agents of change whether we like it or not.
The post-recession economy demands a new thriftiness and flexibility from every employee. Wages and benefits honestly bargained only a few short years, or even months ago, are simply uncompetitive in the new world. Yet, when changes to wages and benefits or to work practices are proposed to enable survival of operations and the jobs that workers and communities rely upon, some people are quick to label the efforts as an attack on the union and workers. That’s just not true. It simply acknowledges what it takes to compete in a global marketplace where others are shedding costs to keep local operations running and attract new investment.
Businesses are being invited to abandon their existing B.C. communities and set up shop outside British Columbia, even outside Canada. Catalyst has declined recent unsolicited offers, but we also know that to be sustainable, the forest products and paper manufacturing industry in B.C.’s coastal communities needs to keep pace with the realities of national and international competition.
For our company to survive, we have to fight for share in traditional markets and for entry to new markets. We need to be profitable and innovative and to act like a start-up company every day. Survival in this new economic world is about everyone — company, employees, union, community — working equally well together to keep existing employers and jobs in place, and to attract and create new ones.
A SHADOW OF ITS FORMER SELF B.C.’s coastal forest industry has had a long, and for the most part, successful history. Our coastal forests and forest-related activities have contributed significantly to the economic and social development of many coastal communities and indeed the rest of the province.
However, for almost a decade now the coastal forest sector has been in a serious crisis with numerous mills closed and job losses in the thousands. A number of factors, both domestic and international, have impacted the coast’s competitive position. Many of these, including increased cost structure from government regulations, significant reduction in the timber land base and changing market demands, have been addressed in previous editions of this newsletter.
IMPACT ON AAC The significant impact of forest policies and land use decisions on the coastal allowable annual cut and harvest levels has not been covered though. In 1990 the coast’s AAC was 24.5 million cubic metres, decreasing to 19.5 million cubic metres in 2000. In that 10 year period harvest levels with a few exceptions, generally fluctuated between 85 and 95 per cent of the AAC. Downward pressure on the accessible forest land base and increased delivered log costs combined to reduce the AAC to about 18 million cubic metres in 2009 and the coast harvest to a historic low of 8.5 million cubic metres.
Downward pressure on the accessible forest land base and increased delivered log costs combined to reduce the AAC to about 18 million cubic metres in 2009 and the coast harvest to a historic low of 8.5 million cubic metres.
While the annual volume of timber harvested has declined, the profile of the harvest has also changed. In the mid ’90s about 5 per cent of the harvest was from second-growth stands. The volume of second-growth harvest has increased to about 30 per cent today and will continue to increase in the next decade as more second-growth stands come on stream. Over the long term the percentage of second- and old-growth harvest will fluctuate and balance out to meet the product demands of the marketplace.
The volume of second-growth harvest has increased to about 30 per cent today and will continue to increase in the next decade as more second-growth stands come on stream.
It is hoped that improving market conditions combined with government and industry initiatives focusing new products on new markets, and continued efforts to bring delivered log costs down to competitive levels will turn harvest levels around and see them increasing to between 14 and 15 million cubic metres by 2015. Unfortunately, there continue to be pressures on the forest land base. More protected areas, more constraining forest practice and land use policies, smaller area based tenures and such combined, will likely reduce the AAC to about 16 million cubic metres by 2015. (Continued)
Coast Forest’s Rick Jeffery made his second stop on the association’s coastal mayors and council tour in Port Alberni, B.C.’s oldest forestry community, on June 21. Jeffery met with Port Alberni Mayor Ken McRae, Alberni-Qualicum MLA Gillian Trumper, Port Alberni City Council and representatives from economic development and Wood Tech 21. One of B.C.’s major forestry communities, Wood Tech 21 is a local forest industry action group formed to support forest industry activity in Port Alberni.
Wood Tech 21 is working with industry to implement a nine-point vision for a new integrated forest-industrial complex based at the Catalyst Paper mill site and utilizing the Alberni Valley's abundant hemlock resources. Jeffery was able to share the coastal forest industry’s challenges and forecasts, market outlook, and research and product development information in an effort to assist the community with its forestry related economic development planning.
The association’s visit helped increase Port Alberni’s awareness about applicable research on hemlock underway at the University of BC, through FPInnovations, and about the growing Chinese market. (Continued)
Photo: Catalyst Paper
BUSINESS ASSOCIATIONS CHALLENGE HST Coast Forest Products Association, along with five other B.C. business associations, has launched a legal challenge against Vander Zalm’s anti-HST petition. The challenge is meant to ensure a stable business climate in British Columbia.
“We need certainty,” said Coast Forest’s Rick Jeffery, in an article published on the front page of The Vancouver Sun on June 30.
Coast Forest, COFI, the Mining Association of B.C., the Independent Contractors and Businesses Association, the B.C. Chamber of Commerce and the Western Convenience Stores Association have gone to the Supreme Court because the associations believe the anti-HST petition does not satisfy legal requirements and should never have been approved by B.C.’s chief electoral officer.
In addition, in an open letter, a group of 30 business groups called on B.C.’s MLAs to demonstrate political and policy leadership by supporting the job-creating benefits of the harmonized sales tax.
“It boils down to this. The elimination of the PST improves the bottom line for B.C. businesses. Stronger businesses grow and hire people,” said John Winter, Chair of the Smart Tax Alliance. “The HST is a better tool to create jobs and protect job security than the status quo on the PST. For that reason the HST is worth it.”
Harmonization is expected to create 113,000 jobs and lead to $11.5 billion in capital investment by 2020. Healthier businesses and more working British Columbians translate into a wider and stronger tax base to support our valued social services.
“The message we want to leave with our elected representatives is that sales tax harmonization is critical to strengthening the provincial economy and creating jobs,” adds Winter. “It’s in everyone’s interest to support it.”
(CONT’D FROM IMPACT ON AAC) While many are questioning if the coastal industry is viable, Coast Forest believes that the current challenges facing the industry are not insurmountable and, in fact, there are some bright spots ahead. The ability to harvest both second and old growth volumes provides the industry more opportunities than limitations. There will likely be more demand for coastal volumes domestically and abroad as the B.C. Interior harvest is reduced from Mountain Pine Beetle impacts. Cedar specialty and semi-commodity products will continue to be profitable and if investment returns to the coast, specialty products and markets could lead to specialty sawmills, as well as high-volume sawmills to process small diameter second-growth logs.
The future of the coastal forest industry is up to government, licensees, labour and communities. Government must follow through on delivering substantive policy changes to support competitive business conditions and security of access to a stable timber resource. Industry must get better at using innovative practices and new technology (new investment) to improve productivity. Labour costs need to be aligned closer to the global average and communities need to ensure municipal tax rates are in line with competing jurisdictions. It is likely that a collective success will only be an outcome if all parties increase their efforts to improve upon their respective key ingredients.
(CONT’D FROM COMMON GROUND) “Port Alberni is one and a half days closer to China than anywhere else in the province,” says Mayor Ken McRae. The community has had a number of visits from representatives from several Chinese companies interested in Port Alberni’s hemlock resource. Hemlock makes up 67 per cent of the area’s timber supply.
McRae has seen forestry decline over the past 20 years in Port Alberni with the loss of 6,000 high paying forestry jobs there. He says it’s nice to have a spectrum of businesses in the community offering jobs at all income levels, but “you need good industrial jobs that are high paying. People want forestry in this community.”
2010 SFI Annual Conference The Power of Partnerships
September 21-23, 2010
Renaissance Vancouver Hotel Harbourside
For information call: 202.596.3458
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.