As governments look to kick-start economies stalled by pandemic restrictions, natural resource sectors say they are in a good position to put British Columbians to work. BC’s forestry sector could be one of them, especially given a recent spike in softwood lumber prices, but the industry is being crippled by disproportionately high operating costs – something the provincial government could address but appears unwilling to do, says Susan Yurkovich, CEO of the Council of Forest Industries (COFI). Source: Prince George Citizen
“This is a sector that actually can get people back to work sooner,” Ms Yurkovich said. “We’ve been operating during the pandemic with safe work practices, and we can deliver a tonne to the economy.”
But starting last year, a wave of sawmill closures and curtailments took place in BC and now pulp mills and other secondary industries are poised to fall like dominoes.
Six sawmills permanently closed in 2019, and several more took extended curtailments. And, as predicted, pulp mills are starting to go down, too, because they rely on sawmills for wood waste.
“It’s a huge blow to our community,” said Mackenzie Mayor Joan Atkinson. “There are about 250 well-paying jobs.”
The Mackenzie pulp mill closure isn’t permanent, but it is indefinite. It follows, and is linked to, the indefinite closure of a Canfor sawmill in Mackenzie, which employed 220 people and supplied the Paper Excellence pulp mill with wood waste.
Conifex Timber also closed a Mackenzie sawmill last year, but it just recently restarted.
A map of North American sawmill closures and curtailments from 2019 shows that British Columbia has experienced a disproportionately high number of closures and curtailments compared with other states and provinces.
BC’s annual allowable cut has declined due to a mountain pine beetle epidemic, forest fires and increased conservation that has prohibited logging in large areas of timber. But it’s not just a shrinking timber supply that is behind the recent closures and curtailments.
Companies also face high operating costs due to high stumpage rates and red tape.
North American lumber prices have soared 75% in recent weeks. Many sawmills in North America were idled due to the pandemic and when the demand for lumber started picking up, there was a shortage of inventory. That drove prices up from about US$300 per thousand board feet to US$500. Whether it is a temporary spike remains to be seen.
The higher prices will benefit the mills still operating in BC, but it probably won’t bring back mills that were indefinitely shut down.
“If we don’t address our fundamental issues of cost, then we will continue to be the jurisdiction that takes a disproportionate amount of downtime, which doesn’t allow us to get people back to work,” Ms Yurkovich said. “We have an interest in getting our cost structure right. The government has an interest in getting the cost structure right.”
When responding recently to the closure of the Paper Excellence pulp mill in Mackenzie, Premier John Horgan said the industry is “in transition.”
That “transition” includes a transition of investment capital to other countries by companies that were founded in BC. The recently announced planned acquisition of three sawmills in Sweden by a Canfor subsidiary is just the latest example of BC forestry giants voting with their feet.
The industry has been calling for a reform to the formula for calculating stumpage rates, but the BC government worries that changing the formula will only give the US softwood lumber lobby more ammunition to claim harm and push for more antidumping duties on BC lumber exports.
But as Mr Taylor pointed out, other provinces have managed to structure their stumpage rates so that mills can keep operating, while BC mills have shut down.
