Much-Needed Dialogue to Move BC’s Forest Sector Forward

By Kelly McCloskey, Editor
The Tree Frog Forestry News
January 13, 2022
Category: Opinion / EdiTOADial
Region: Canada, Canada West

Kelly McCloskey

Spurred by recent and significant policy directions and actions by government, the Truck Loggers Association is hosting a series of panels to initiate meaningful collaboration and clarity on the “real impacts of these decisions and the best options to move forward that will actually work,” said Bob Brash, Executive Director of the TLA. Introduced by TLA President Bill Nelson and moderated by Brash, the first session focused on BC’s markets and investment climate. Russ Taylor, of Russ Taylor Global, opened with an overview of market trends. Points of note include:

  • Global demand is still strong, so import/exports move to the high-priced markets
  • Escalating US home prices plus higher mortgage rates will impact housing affordability
  • US demand for building materials remains stable to strong with low inventories
  • US transportation and supply chain issues are delaying deliveries to job sites
  • Omicron could impact availability of workers and disrupt production flows
  • European imports required as North America will struggle to produce enough lumber to meet demand
  • Very favourable prices are expected in 2022 (forecast at $700 /Mbf) and into 2023

Speaking to several of the government’s policy changes, Taylor emphasized the circular nature of the sector and thus the need for a healthy primary logging and lumber industry to provide lumber inputs to value-added businesses, particularly old-growth lumber.  Based on his observations over three decades of similar government efforts, Taylor believes the value-added strategy is flawed. “The risks are particularly high for start-ups and under-capitalized firms and the old-growth reductions will mean there is less of the most important fibre to work with and more competition for what’s left.”

Next up was RBC analyst Paul Quinn, who titled his talk, BC – What Went Wrong and What Needs to Happen Now. As for what went wrong, Quinn says it’s “those policy changes that add even more costs to BC’s new status as North America’s high cost producer”. In effect, Quinn described the government’s efforts to modernize the forest sector as “the problem”, the specifics of which include:

  • Understating the job costs of the proposed changes several fold
  • Increasing regulations which in turn increase costs
  • Reducing the size and scale of industry and the associated loss of scale efficiencies
  • Thinking provincially not globally or even North American or Canada-wide 

“Capital and investment are risk adverse and money flows away from uncertainty or it requires a premium return to offset the increased risk”, according to Quinn. “Unfortunately, the BC industry is producing below average returns while demonstrating a high and rising risk profile. BC has moved from the lowest cost jurisdiction in North America in 2010 to the highest cost in 2021, and recent policy changes will exacerbate the situation. Simply put, BC is becoming uninvestable”.

With respect to what needs to happen now, Quinn suggests:

  • Invest in forest planning capacity for both the ministry and First Nations (limit delays due to change in forest management control)
  • Deal with these changes in a timely and fair matter (delaying compensation doesn’t provide certainty)
  • Compensate companies for tenure reductions fairly (moving away from market rates harms government’s reputation)
  • Move quickly to full revenue sharing with First Nations (avoid double taxation and enables First Nation growth)

Read More