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Mill production soaring

Logging contractors and log-haulers are being told that forest companies can’t afford to pay them rates that are sufficient

Central Interior Logging Association

B.C. forest companies led the way in increased production over the 12 months up to May 2013.

B.C. wood products sales rose from $1.4 billion to $7.5 billion from the same period one year earlier. The sector accounts for 22.9 per cent of all manufacturing in this province, Statistics Canada reports.

Canada-wide, wood products manufacturers recorded a 19.7 per cent jump in production in that period. The forestry sector had the largest dollar gain and the biggest percentage gain in production by industry. Other manufacturers saw a decline of 1.1 per cent over the same period.

The rebound in the U.S. housing market is the driving force behind the increase in production. Lumber and treated wood exports to the U.S. Increased 36.9 per cent year-over-year, up $1.2 billion from the previous year.

And profits rising

It shows, too. Canfor’s second-quarter results for 2013, show a net income attributable to shareholders of $110.3 million, or $0.77 per share. These results compare to first quarter of 2013 results of $61.9 million, or $0.43 per share. The company reported operating income of $128.2 million for the second quarter of 2013, compared to operating income of $100 million for the first quarter.

Mill efficiency key push

Spurred on by rising lumber prices and growing demand, forest companies across B.C. are revving up their efforts to improve efficiencies and expand sawmill capacity. Here’s a sample of what’s going on:

Tolko will make significant capital investments at its Soda Creek and Lakeview divisions, including reconstructing the Lakeview sawmill to include new optimization, trimming, sorting, and stacking equipment, and modernizing its Soda Creek planer with the latest technology in lumber grading, trimming, and packaging. The Soda Creek upgrades are to be done by December, with the Lakeview expansion to be complete by next April.

Downie Timber is set for the upswing in demand too, having installed several new machines in its Revelstoke sawmill in the past few years. Upgrades include a high-speed stacker, a grade scanner, and a big-log head-rig to increase efficiency and capacity.

What does all this mean for loggers?

Logging contractors and log-haulers are in an unusual position, aware that forest companies are chalking up higher profits and ramping up for more production, knowing that there’s a growing need for their services, and yet being told that forest companies can’t afford to pay them rates that are sufficient to cover their costs and provide even a modest profit.

The reasons for forest companies balking at logging and trucking rate increases seem endless, and run from “the market is still unsteady” and “stumpage is rising” to just plain “we can’t afford it.”

 

It’s hard to believe these companies can afford major upgrades and mill expansions, have the money to court prospective customers both here and abroad, and pay healthy dividends to their shareholders – but somehow choose not to invest and strengthen the weakest link in their supply chain – the loggers and truckers who harvest and haul the logs those mills need.