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Coastal Clarion - Newsletter
Vol.8, Issue 1 · Spring 2012
The facts about log exports are mired in exaggerated political rhetoric that confuses British Columbians and creates sides at a time when we should be working together to sustain jobs and successfully compete in a fiercely competitive global marketplace. The truth is if people want to keep working in the coastal forest industry and have companies continue to re-invest and retool mills and operations across the coast, so our products meet customer demand in over two dozen countries around the world, then log exports are an integral part of our mix of forest products.
As Interfor’s Otto Schulte is quick to point out in this issue of The Coastal Clarion, “There are a lot of logs and lumber in this world, and they are a very mobile product. If we can’t compete, we haven’t a snowball’s chance of succeeding.” Forests Minister Steve Thomson knows this and has had to explain in the legislature some tough decisions he’s had to make in the wake of his log export review. “The log export policy is a policy that provides for jobs in British Columbia … it’s very clear that these log exports are a necessary part of the overall equation.”
Log exports rise and fall with markets. Most recently, they’ve had a significant impact on B.C.’s economy. China’s demand for logs and lumber products has played a large role in pulling the industry out of the 2008 global financial crisis and is helping to maintain and create logging jobs and the restarting of three mills on the coast. Log exports aren’t about one market segment—logs—versus another market segment—lumber—but rather about ensuring we have a diversified mix of products, ranging from logs to specialty papers being shipped to diverse markets around the world. This is the strategy B.C. forest companies pursue to keep our operations running and our people at work.
The facts speak for themselves. Since 2009 the allowable annual cut has grown from 11.2 to 18.8 million cubic metres and in that timeframe we’ve harvested an additional 8 million cubic metres. In this same time period log exports have increased by 3.6 million cubic metres. This has resulted in over 4 million cubic metres more logs feeding our local mills and putting loggers, saw millers, longshoremen and other industry suppliers to work in communities all along the coast.
However, log exports remain a complicated issue that has great sensitivities attached to it, but in the scheme of things, it’s important to remember that our forest companies sell logs, we sell lumber and we sell pulp and paper. It is a business worth $12 billion, and logs account for only about five per cent of that value; 95 per cent is realized through lumber and pulp and paper production.
For our industry to survive and be sustainable in this intensely competitive world, we need to continue to focus on improving and diversifying our products and building our markets internationally and domestically, because the more demand we create for our lumber and pulp and paper products, the more lumber and pulp and paper we’re going to make here. So let’s get rid of the rhetoric and join together in this important pursuit.
timber export advisory committee
The controversy over log exports has Coast Forest Products coming out in favour of policy changes to streamline the Timber Export Advisory Committee’s process for determining fair market value for logs and to the committee’s structure so that it would become an unbiased and independent advisory body.
In its review of log exports, the ministry has consulted far and wide: communities, First Nations, industry – small industry, big industry – loggers and manufacturers. The forest industry has been invited to engage in the dialogue around potential changes and Coast Forest has made recommendations that would improve the process TEAC currently uses to determine fair market value for logs and how the surplus test works. (Continued on page 3)
INTERFOR’S OTTO SCHULTE
An Engaging and Entertaining Interview with Interfor’s Otto Schulte, Vice President, Coastal Operations
|Q.||How long have you been with Interfor? Can you give us a brief summary of your career path?|
Well, not really, it just seems that way. Actually I first started with Interfor in 1979 when it was called Whonnock Industries. At that time I worked, lived and raised our family in logging camps. I left Interfor in 1988 to go find my own path in life. The first stop was at the failing Westar Timber, based in Revelstoke. Wrong path. One year later, just before the Titanic sunk, I was offered a grand opportunity to join G&F Logging Company, based out of Hope, B.C. to try on contract logging for a living. The AAC on the coast was dropping like a rock at that time so when an opportunity arose to join Pacific Forest Products Ltd. in 1994 I got back into the mainstream as a divisional manager based in Gold River. In 1997 Doman purchased the Crown assets of Pacific. Then in 1998, like a salmon, I returned to where I started. Yes, back to Interfor. This could be my 33rd year with Interfor, but I wasn’t patient enough to stick it out. So much for the gold watch! And just for the record, after 19 moves during our first 12 years of being married my wife will never let me move again!
|Q.||There’s been a change at Interfor that has to do with your new position as vice president, coastal operations. Previously, you were vice president of woodlands. Is this promotion a bit like living on the dark side?|
If I knew my boss wouldn’t read my answer, I might actually answer that question!
I used to think sawmillers were a bunch of complainers. You know, if wood was meant to be lumber, then why is a tree round? But what I have found on the dark side is that you don’t get wet in a sawmill, which is kind of nice. Having said that, I’ve also found that logging is much more forgiving and I now have an appreciation for my new friends over on the dark side.
The main event is that we have regionalized our coastal operations and I’ve been fortunate to be selected to lead this group. It’s not about what’s best for our woodlands or mills, but rather what’s best for our company that matters most. Now there is no dark side or light side, because it is one region with one focus.
|Q.||Can you tell us about some of the initiatives Interfor is working on?|
If I knew the competition wasn’t reading this I would answer the question! But seriously, one of our main initiatives continues to be on improvement in workplace safety. I know we have made significant safety improvements over the past five to 10 years as an industry, but the safety record is still unacceptable. This is something all companies need to continue to focus on in a collaborative fashion through the BC Forest Safety Council.
More broadly from a business perspective I would say that we, as others, are rebuilding the coastal forest products businesses after the devastating years that followed the cost escalations in the mid-1990s, caused by Super Stumpage and the Forest Practices Code. Those truly were years that changed the course of our coastal forest sector forever, leading to disinvestment. Fortunately, we now have modernized forest policies and aggressive marketing initiatives with our provincial government, which have enabled us to get back on our feet. We are continuing to reposition ourselves in the market under the current realities of new opportunities in China, which is in stark contrast to the market share we lost on the coast over the past 15 years.
|Q.||What are the challenges you’re facing in this position?|
My single biggest challenge is being able to finish the day. Having to sleep seems to get in the way. But I think one of the main challenges is attracting new workers to our industry and losing the depth and experience as our seasoned workforce begins to ramp up (or down?) for retirement. We clearly have seen the exodus start to happen in the Forest Service. Just around the corner we will also see this happen in our woodlands and in our sawmills.
|Q.||Were there any surprises for you?|
I guess one surprise is recognizing firsthand how global we are. Hearing this is one thing, but seeing it is another. How many times have we had conversations with our stakeholders about having to be “globally competitive?” Well, I gotta tell ya’, there are a lot of logs and lumber in this world and they are a very mobile product. If we can’t compete, we haven’t a snowball’s chance of succeeding.
|Q.||What do you like best about your job? Least?|
The people I work with are the best part. The second best thing is being hewers of wood. I can’t imagine having more satisfaction working in any other business that I can think of (Well, being paid to be a race car driver would be a great job, but that’s another story!). Seriously, I truly believe that 100 years from now this world will be much more educated about and dependent on trees for sustainability. The part that I do not like is when people are hurt or killed on the job.
|Q.||Interfor is one of the Pacific Northwest’s largest producers of quality wood products. What are the company’s biggest strengths? Challenges?|
Our strength is in our people, geographic locations and in our product diversity. Our challenges centre around the issues resulting from this continuing US housing downturn. The events that happened in 2008 have already gone down in history as devastating—across the globe. But those of us who have survived have come out the back end stronger and better positioned for recovery.
|Q.||Where is Interfor’s focus? Are there any plans for the future you can share with us?|
Our focus is on improving our assets for improved market conditions, such as our current capital projects at our Kootenay mills. We don’t expect things to get better overnight, but over the next few years the US will begin to pull itself out of this sustained downturn.
As a forest products company working in British Columbia, the provincial government is a key partner because of our reliance on the Crown’s timber. We look forward to continuing to work with our government to improve our competitive position in the market.
|ED.||Thank you, Otto, and the best of luck to you!|
timber export advisory committee (Continued from page 1)
The forest industry has been invited to engage in the dialogue around potential changes and Coast Forest has made recommendations that would improve the process TEAC currently uses to determine fair market value for logs and how the surplus test works.
“There should be much clearer guidelines and criteria around how to determine the fair market value of logs and how TEAC evaluates the surplus so there’s no confusion in future,” says Coast Forest’s Rick Jeffery. “Secondly, the committee that provides advice to the minister is highly conflicted, consisting of people who are buying logs. We’ve suggested to the minister very clearly that we think TEAC members should be independent so that the minister gets good, unbiased advice that is not conflicted.”
Coast Forest recognizes there is a tacit understanding and recognition that getting clear rules around TEAC and the surplus test and getting an unbiased TEAC process are things that everybody can agree on and will improve the system.
COASTAL MARKETPLACE HIGHLIGHTS In February Coast Forest’s Rick Jeffery participated in the Western Silivicultural Contractors’ Association’s conference in Kamloops to address the opportunities and challenges currently facing the coastal forest industry. Following are some of the presentation highlights:
There is an increase of concentration on sustainability across the world. And we are known as world leaders in the sustainability and land use planning process. Second, you have to remember that population projections indicated to us we are going to have a planet that is going to be carrying 9 to 11 billion people and somehow, some way, we are going to have to shelter these people. And to the third point, green building, energy efficiency, carbon management, greenhouse gas—all those pressures clearly indicate to us that forest products are the products of choice when we’re trying to provide shelter for 11 billion people. And fourthly, we’re on the cusp of this transformation to the next generation of products however, there is also a recognition that that exciting opportunity is built on the tried and true products of the forest industry that exists here.
CHINA The current health of the B.C. forest industry is largely due to China. In 2011 B.C. sales to China surpassed $1 billion. “This month China became the largest consumer of lumber in the world. The staggering number to me is today they have a 100 million cubic metre a year timber supply deficit to meet their needs. That number will be 150 million by 2015, and is projected to go to over 200 million by 2020. They are short of wood. Thanks to the efforts of government and industry, we are now the largest supplier of lumber to China.
JAPAN Our third biggest market, Japan is also our second biggest market by value in B.C. And more importantly, for the coast it is our biggest market for post and beam components made out of hem-fir. It is also from an Interior context the home of where a lot high grade J grade goes for SPF manufacturers and that’s a very important part of their value proposition.
730,000 homes were wiped out by the tsunami, and hundreds of thousands more were damaged. But they’re having a very robust, social dialogue in Japan about where to rebuild and at the same time they seem to be replacing their prime ministers on a monthly basis.
INDIA This country’s population is 1.3 billion, just slightly less than 1.4 in China, however, unlike China that has a demographic similar to North America, India’s demographic is 60 per cent is under the age of 40 and 50 per cent is under the age of 25. India is a very young country. Their current fibre supply deficit on an annual basis is 80 million cubic metres a year, and there is no harvesting of forests in India. It is prohibited by law and enforced with some very stiff penalties.
The challenges are the same challenges we have building wood frame housing there—termites, rot, that type of stuff—plus just cultural challenges with softwoods. But I think if they’re going to build out of concrete and steel, our ability to get wood inside the building is probably a really good opportunity, especially as their hardwood supply declines.
Photo: Government of B.C.