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Coastal Clarion - Newsletter
Vol.6, Issue 1 · Spring 2010
The year 2009 will go down in history as the worst on record for the coastal forest products industry. Demand was weak across all markets from higher value specialty papers and cedar prod ucts to structural lumber, logs and pulp and paper commodities. This weak demand, combined with accompanying low prices in all key market segments, made profitability illusionary. For Coast Forest member companies these conditions manifested themselves in year over year production drops of over 30 per cent for logging, lumber and pulp and paper segments. Even more staggering is a comparison with 2004. In 2009 logging production was just one-third of the 2004 harvest and lumber production mirrored this trend at 42 per cent of 2004 production.
The coastal forest sector rolled up its sleeves recognizing that survival meant running at operating rates significantly below capacity to maintain supply-demand balance in fragile markets. The best returns on capital were not to be achieved by running capacity flat out for markets that didn’t exist, but rather companies adapted to run production schedules that protected price, controlled costs and hopefully, returned some margin. Price and supply side discipline became more important than volume.
Achieving cost reductions in an environment of reduced capacity is crucial to success. The industry continued to drive operational efficiencies, reduce overheads and manage fixed costs. In this context, the wide array of hosting conditions – the HST, reasonable municipal tax rates, WorkSafeBC rates, labour productivity and flexibility, and streamlined regulatory regimes - are all critical issues for the economic and financial health of the sector, now and in the future. The Ministry of Forests and Range’s “business response”, culminating in the first re-mandating and restructuring of the ministry since 1982, is necessary and applauded.
In the post-recession era financing has become a struggle. Industry risk is higher than average and our weak credit rating globally results in a narrowing of the lender’s landscape in forest products. Asset-based financing has decreased, and pricing and fees have increased. We need to ensure our borrowing base is protected and government policies, like the Woodworkers Lien proposal, must not negatively impact our finances.
At times the outlook seems so bleak, questions emerge, “Is it worth it; Is there a future for the coast?” The unequivocal answer is: Yes. Our people, expertise, forests and manufacturing sector produce environmentally friendly, carbon capturing, high value forest products. We provide significant economic and social benefits to the coastal economy and social fabric. In Olympic fashion we should celebrate our industry as being among the world’s best and take action to Own the Wood Podium.
SUPPORT CREDIBLE CERTIFICATION STANDARDS
The Sustainable Forestry Initiative has launched an online petition urging the United States Green Building Council to once and for all recognize all forest certification standards used in North America, including SFI, American Tree Farm System (ATFS), Canadian Standards Association (CSA), and the Programme for the Endorsement of Forest Certification (PEFC).
For the sake of our forests, our communities, the tens of thousands of family foresters who make their livelihoods from forestry and the future of green building across North America and globally, it is time for USGBC to do the right thing and recognize all credible forest certification standards.
Signing the petition is quick and easy.
Photos: Ministry of Forests and Range
B.C. wood shared the spotlight with the world’s best athletes at the 2010 Winter Olympics and Paralympics thanks to 23 stunning podiums built from timber donated by forestry companies, communities, woodlots and first nations across the province. Built from 18 different wood types and harvested from a specific area or community, the wood podiums highlighted the importance of forestry in B.C.
The rough lumber was converted to panels at Metro Vancouver’s Bayview Millworks. The panels were cut into complex shapes using sophisticated computer-controlled machinery at UBC’s Centre for Advanced Wood Processing. Then each podium was assembled from more than 200 wooden pieces at RONA’s Vancouver 2010 Fabrication Shop, a community-based training centre that teaches carpentry skills to new Canadians and at-risk youth.
INVESTMENT Government funding, provided through Forestry Innovation Investment Ltd. (FII) and Natural Resources Canada’s Canada Wood Export Program (CWEP), continues to deliver huge value in markets around the world. As with any investment, it can take time for activities in one year to translate into results in subsequent years. However, some recent examples from Japan demonstrate the long-term impact of provincial, federal and industry investment in growing international markets.
In 2008, FII and CWEP partnered in the shake table test of a 3-storey post and beam house built of Canada Tsuga, a test that demonstrated the structural performance of Canada Tsuga in withstanding forces equal to 200 per cent of those experienced during the Kobe earthquake of 1995. As a result, government officials, architects, builders and other industry influencers in Japan are increasingly convinced of the structural performance advantages of Canada Tsuga. The “proof” that a post and beam home constructed of Canada Tsuga could withstand extreme earthquake conditions could not have been provided without the efforts of these two government funding agencies.
Government funding, provided through Forestry Innovation Investment Ltd. (FII) and Natural Resources Canada’s Canada Wood Export Program (CWEP), continues to deliver huge value in markets around the world.
INCREASED USE OF CANADA TSUGA Results of the test have been seen throughout Japan. One area that highlights this is Kanazawa in Ishikawa Prefecture, a city of approximately 458,000 people located 370 kilometres from Tokyo. Until recently, this region of Japan had used only modest volumes of Hem-Fir (N). However, impressed with the structural performance of Canada Tsuga in the shake table test, one of the region’s largest builders has adopted Canada Tsuga E12-F330 and laminated Canada Tsuga beams in 450 high-end post and beam houses to be built each year.
As a result of the 2008 shake table test, Canada Tsuga staff in Japan was able to demonstrate both structural performance improvements and cost savings to New House Kogyo by using Canada Tsuga E120 and E120-F330 on a house project that was experiencing design versus structural requirement difficulties. The company was particularly interested in using kiln dried and laminated Canada Tsuga components in an area of Japan that had not typically been heavy users of Hem-Fir (N), so one of the key obstacles was to match builder interest with a steady source of supply and distribution. In cooperation with Western Forest Products, Canada Tsuga staff engaged Yoshikawaki Co. Ltd., a large wholesale distribution firm, to become a Canada Tsuga associate member and carry Hem-Fir (N) structural products. Subsequently, Canada Tsuga has gained steady market share in the region. None of this could have happened without provincial and federal support for the shake table test, and the ongoing Canada Tsuga presence on the ground in Japan.
NON-RESIDENTIAL APPLICATIONS GROWING Getting a start in Kanazawa’s residential construction sector wasn’t the end of the success in this region, but rather the beginning. Recently, Canada Tsuga has expanded into non-residential applications as well in a medical clinic that was originally planned to be built in reinforced concrete. The medical director was interested in building the clinic in wood to provide a warm and welcoming atmosphere, and the project was converted to Canada Tsuga when staff in Japan was able to provide technical support that overcame the challenges of achieving large open spans through the use of laminated Hem-Fir (N) beams.
Similar stories exist in cities and towns throughout Japan and China, as well, demonstrating the clear and enduring benefit of our government-industry market development partnership, and of FII and CWEP funding.
CHANGE OF OLYMPIC PROPORTIONS The Ministry of Forests and Range has initiated an Olympic-sized structural transformation, one like we’ve never seen at least in Coast Forest’s lifetime. However, this shouldn’t be a surprise. Coastal Crown harvest and direct stumpage revenues in 2009 were at an all time low, and many industry experts acknowledge that while some economic indicators are improving, harvest levels in 2010 will only slightly increase over last year.
“Coastal forest companies have faced a changed world in markets and competitors, requiring fundamental transformation within the industry,” says Coast Forest’s Rick Jeffery. “Most analysts believe the worst is over, but all indicate it is unlikely demand will return to pre-financial crisis levels. Industry and government should expect a long road ahead with a slow, bumpy recovery.”
Government has made some recent changes to policy, but most of the “quick win” changes have been “tweaking around the edges”. While it clearly recognizes the need for “big picture” change, it is also necessary for government staff and industry to be given direction on its new focus. This focus, in part, is to provide superior service to resource stakeholders and to support competitive business conditions.
NEW DIVISIONS Two new divisions have been created within the ministry: Competitiveness and Innovation, headed up by new Assistant Deputy Minister Kathy Chopik; and Resource Management Coordination, led by Executive Director Jim Gowriluk. These divisions will enable a more aggressive approach to implement a number of Working Roundtable on Forestry priorities.
Two of these priorities were “creating a globally competitive, market-based operating climate” and “acknowledging and supporting the government-industry Operational Issues Forum (OIF) process”. The OIF process, initiated by the ministry, provides an opportunity for industry and government to find ways to reduce the cost of fibre inputs and to bring a collective focus on continuous improvements to industry competitiveness.
The provincial OIF developed a number of joint industry-government recommendations identifying opportunities to change policies and regulations to enable the industry to be more competitive while still respecting the ministry’s overall mandate. These recommendations, if implemented, could provide solutions-oriented efficiencies for both government and industry. Unfortunately, ministry action on the recommendations has been idled as senior managers were sidetracked with restructuring, and staff will likely continue to adjust to these changes for a period of time. For the ministry to be successful, the leaders in the organization must minimize the time it takes to shift responsibilities and deliver on sustaining competitive business conditions.
GOING FORWARD Jeffery says, “Industry will continue to engage government to ensure it supports the necessary strategic focus and maintains an overarching economic lens to its activities.”
To gauge success, the ministry and industry need to establish agreed upon performance measures and keep a “report card”. From an industry perspective these measures could include keeping track of 1) the number of OIF recommendations accepted and implemented, 2) sustained progress on additional OIF recommendations, 3) increased Crown harvest volumes and gross revenue, 4) increased level of investment in the industry, and 5) increased protection of forest land for timber production. In addition, 6) measuring the reduced time frame for permit approvals and 7) reduced number of authorizations across ministries, and finally, 8) the acceptance of needed policy and process changes across government agencies responsible for policy development which impact the forest sector would be useful.
“Both government and industry leadership will be essential to sustaining this transformational change and ensuring decision makers do not waver off the set path,” emphasizes Jeffery.
February 23, 2010 was Forestry Day, a focused effort to showcase British Columbia during the Olympics as the leading global supplier of innovative, climate-friendly wood products from sustainably managed forests.
Many events were held in downtown Vancouver to display British Columbia's products and practices to an international audience.
One of the highlights of Forestry Day was a spectacular demonstration of the aircraft B.C. uses to fight wildfires. Crowds along Coal Harbour saw the Martin Mars water bomber, Convair air tanker and bird-dogs, and initial attack crews rappelling from a helicopter.
Coast Forest Products’ Rick Jeffery took part in a news conference on behalf of the Canada Wood Group with other notable industry and government leaders at the Robson Media Centre. The media briefings focused on how the B.C. forest industry contributed innovative green building technology to the 2010 Olympic venues, how its environmentally friendly products are being marketed and applied in other parts of the world, especially in safe building systems, and how the forest industry is positively impacting climate change.
Photo: Ministry of Forests and Range
LEADING ON SAFETY At Western Forest Products safety means keeping its 2,000 coastal employees injury free on the job, whether they are working in the woods or in one of its sawmills or remanufacturing operations.
That’s why it’s as important now for Western Forest Products’ manufacturing operations to be Safe Certified as it was for its timberlands operations. In fact, safety is so important to this company that it was one of the first to volunteer to conduct a safety audit when the BC Forest Safety Council announced last fall that it would open access to the forest products manufacturing sector into its Safe Certified companies program.
“Our motivation to measure the safety management system at our mills was to learn how well we were doing in all the different areas, discover our key strengths and identify important areas for improvement,” explains Tony Sudar, Western’s General Manager of Manufacturing.
To arrive at those answers the company conducted the safety audit on three sawmills and a remanufacturing plant, representing a practical cross-section of its eight sawmills and four remanufacturing plants.
“The objective was to come away with a good sense of how our safety management process was performing across the business,” adds Sudar. “The audit generated valuable debate about the way we were doing things and we learned a lot.”
The manufacturing audit identified different areas of concern than the standard timberlands audit that was introduced to the industry in 2006 by the Council. In manufacturing, contractors are an issue, perhaps not to the same extent as in timberlands operations but they are used in repair, rebuild, install and demolition work.
Not long into the audit it became clear to Western that the company could make improvements by taking more control of the safety program at these operations to ensure the proper safety precautions were in place and regulations were being followed by small maintenance contractors, who didn’t have their own safety programs.
This focus on every area and aspect of safety is nothing new to Western Forest Products. “It’s been an integral part of the company’s culture since 2006 when the company was consolidated in a merger joining three separate organizations,” points out Terry Baker, Western’s Environment Health and Safety Advisor. And the results have been dramatic. Since 2006 the company’s overall medical incident rate has been cut in half.
“There’s been a significant improvement in our safety record,” says Baker. “But we are always striving to do better.”
According to Sudar and Baker, conducting the audit “sends a message to our employees and our contractors that safety is important.”
“It’s the way we run our business,” adds Sudar. “By being out on the floor, wearing the safety equipment, and not walking by anything that appears unsafe, it’s this type of detail that we go through at every level and the time we devote to safety that’s important. That’s how safety becomes engrained in our culture, and in the end, that’s how we prevent injuries.”
Of course, that’s the goal of any meaningful safety program although talking to the people at Western it’s evident the benefits are even more far-reaching. By examining all aspects of the business through a safety lens, nothing goes unnoticed.
“It’s no coincidence that a safe mill is an extremely efficient mill,” says Sudar.
Photo: Forestry Innovation Investment
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.