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  If one had to provide a theme to describe the British Columbia forest industry in 2004 it surely would have to be "Consolidation". As Russ Taylor's recent "Wood Markets" Report shows, we have gone from about 20 large sized companies in the 1990's to 11 with perhaps an even smaller number on the horizon with Riverside in play. Elsewhere companies like Dunkley are expanding and many are investing in new capital and equipment to improve recovery factors. This trend is, of course, driven by four major factors: The need to respond with lower costs in the face of illegal duties imposed by the Department of Commerce on softwood lumber exports to the U.S. A recognition by B.C. firms of the need to be evermore cost-competitive in today's global forest economy. Increased cash and borrowing capacity fueled by ongoing high product prices. New market based provincial forest policies that provide a supportive framework for a more cost-efficient and competitive industry. It should be recognized that this recent wave of consolidation also amounts to massive investments in British Columbia by our major forest companies and should be considered a vote of confidence in our province's future economy. The sense is that the provincial government has gone a long way to creating a business climate that encourages investment. One only has to look at housing starts and growth in retail sales to see evidence of a very positive mood shift within the province. With the government having now turned the corner to fiscal stability with a balanced budget and growing revenues the positive mood is likely to continue into the new year.  John Allan |
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Chief Forester Larry Pedersen has announced that
the total allowable annual cut (AAC) for the three north-central B.C.
timber supply areas most affected by the mountain pine beetle epidemic
will increase by 4.9 million cubic metres, or 27 per cent, to 23.4 million
cubic metres and COFI's Mountain Pine Beetle Task Force site:
www.mountainpinebeetle.com
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 In late July West Fraser Timber announced that it had signed an agreement to acquire Weldwood from International Paper for $1.26 billion in cash. Once completed, this transaction will make West Fraser Timber the 3rd largest lumber producer in North America. West Fraser will acquire:
West Fraser has about 4000 employees and Weldwood employs more than 3000 people. Hank Ketcham, West Fraser's Chairman, President and CEO said " Geographically, culturally and strategically, Weldwood is an excellent fit for West Fraser. This transaction is all about continuing to execute the same strategy that has made West Fraser one of the performance leaders in the North American forest products industry. We expect the combined company will look a great deal like West Fraser does today, but with increased scale, enhanced geographic diversity and greater product integration." He also noted that he was proud to bring a great Canadian company back home and would continue to be active and committed participants in the communities in which West Fraser and Weldwood operate. The transaction is expected to close in the fall of 2004. This announcement continues the consolidation that is underway in the BC forest industry. |
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 Skills shortages are a top-of-mind issue for a growing number of industries in B.C., and there's a broad consensus that we need to expand and improve industry training options and outcomes. So how will this be achieved? Who will lead the process? And what are the implications for employers and apprentices already in the system? The answers to those questions have become much clearer since the Industry Training Authority (ITA) became operational earlier this year. The ITA, a provincial government agency, now has responsibility for the governance and development of B.C.'s industry training system. And it is already working to bring about concrete improvements. The ITA is industry driven, and employer and learner satisfaction levels will be among its key benchmarks. The ITA provides information and services province-wide through a contract with Service B.C. - Government Agents. Compulsory trade designations and prescribed apprentice-to-journeyperson ratios have been eliminated. Such changes will go hand-in-hand with a stronger focus on training outcomes and other quality and safety-assurance measures. The ITA has also begun to work with industry groups on the review of proposals for new training programs, and recently approved B.C.'s first new industry-led training program. The Residential Construction Framing Technician program was developed by the Canadian Home Builders' Association - B.C., and is expected to be broadly rolled out this fall. The ITA expects to maintain a fast pace of developments in the months ahead. At www.itabc.ca you can sign up for an e-newsletter, in which the ITA will provide updates on new developments of particular interest to employers and industry. On the industry side of the training picture, COFI participates in the Heavy Industry Training Advisory committee (HITAC) which is dedicated to leading the transformation of BC's industrial training system. For more information about HITAC go to: www.hitac.ca. |
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Citizen staff The B.C. forest sector has developed greater resilience than ever before, which has helped it face off against the punishing U.S. softwood lumber tariffs and rapid increases in the value of the Canadian dollar, according to the president of the B.C. Council of Forest Industries. The tariffs will total about $4 billion Cdn by the end of the year, $2 billion of which has come from B.C., probably 85 per cent of those from Interior lumber producers, John Allan said Thursday prior to giving the keynote speech to COFI's annual community dinner in Prince George. The B.C. industry also took a $450-million hit to its bottom line in 2003 from an increase in the loonie compared to the U.S. dollar, he noted. "I think we're a very resilient, competitive, healthy industry like we've never been before," said Allan, who also heads up the softwood trade file as president of the B.C. Lumber Trade Council. "We're probably among the world's most competitive lumber manufacturers." Even in the face of the tariffs and increased value of the Canadian dollar, B.C. forest products companies, particularly those with Interior operations, have posted strong profits this year. Canfor and West Fraser Timber have combined profits of $270 million in the first six months of this year. Allan said the forest companies' resilience has been helped by the B.C. government's sweeping forest policy changes introduced 18 months ago, which have given more flexibility for companies to merge and increase cost competitiveness. The Liberals changes removed provincial government approval for transfer of timber harvesting rights, allowed those rights to be divided, loosened up requirements for certain amounts of timber to be logged each year and allowed companies to close sawmills without losing timber rights. Allan said the strong market -- prices have been high for lumber, plywood and oriented strand board in 2004 -- has also been helpful to B.C. forest companies. "It's given them breathing room to do a lot of this planning, thinking and re-investment," said Allan. Since the beginning of 2004, the pace of company consolidation has been rapid. Canfor completed its $630-million friendly merger of Slocan in April. This summer, West Fraser announced its blockbuster $1.26-billion deal to take over Weldwood of Canada, and Tolko announced a hostile takeover bid of Riverside. Kelowna-based Riverside had earlier completed a purchase of Lignum. Forest companies have also been re-investing in their mills and consolidating production at bigger mills. Last year, Canfor closed two of its sawmills -- including Upper Fraser just east of Prince George -- increasing production at its P.G. Sawmill. It caused a loss of about 200 jobs. Canfor also invested $26 million to increase production at its Houston sawmill, 300 kilometres west of Prince George, creating the largest mill in the world. However, the workforce was decreased by about 10 per cent as a result. Allan said forest companies have little choice in the face of an increasingly globally competitive marketplace. "You've got this dilemma:," he said. "Do you not make those changes and die on the vine? Or do you make the bold change, recognizing their will be a little bit of pain with it, but you remain competitive?" It's one of the reasons the forest sector needs to focus more on increasing the value-added sector and market diversification, said Allan. The market diversification push is already happening with ventures into the Chinese market, but the answer to increasing value-added products has been elusive for decades, he acknowledged. Allan said he believed, however, the mountain pine beetle epidemic may provide the catalyst for more value-added production. The Ministry of Forests has asked for proposals for the use of beetle-killed timber that's surplus to the needs of the lumber sector. They received more than 60 ideas, ranging from burning wood to generate electricity, to log-home building and chipping timber to produce oriented strand board panels. Reprinted with permission from the Prince George Citizen |
Following a welcoming dinner hosted by Forest Minister Mike de Jong, COFI and the CFLA the delegation traveled to Whistler to view a variety of wood construction projects from condominiums to multi-million dollar homes. The group toured West Fraser’s MDF plant in Quesnel and enjoyed a community lunch sponsored by West Fraser. The delegation then visited Prince George and Canfor’s Rustad operation where they learned about environmental management systems, lumber grading and quality control, and the lumber manufacturing process. The visitors also attended a dinner with the Honourable Shirley Bond, the Mayor of Prince George and councilors, and forest industry representatives. It was then off to Vancouver Island where Weyerhaeuser hosted the group. The Chinese economy is rapidly expanding. With China’s recent amendments to their building codes that now allow for the use of wood frame construction techniques along with the Dream Home China project, there is much potential opportunity for our forest products to provide solutions for the Chinese people. For more information about the Dream Home China project visit: www.dreamhomechina.com |
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 1. International Trade Commission The NAFTA Panel on "Threat of Injury" in its Second Remand Decision on August 31, 2004, ruled that the case be "remanded to the Commission for the Commission to make a determination consistent with the decision of this Panel that the evidence on the record does not support a finding of threat of material injury and to make that determination within ten (10) days from the date of this Panel decision." In response, on Friday, September 12 the Commission complied with the NAFTA Panel ruling and filed a negative determination on threat of injury. The decision represents a significant victory for Canada and should result in revocation of the CVD/AD Orders, rescinding of the cash deposits and a refund of deposits to Canadian lumber exporters. However, it is expected that the decision of the Panel will go to an Extraordinary Challenge Committee. 2. AD/CVD Duties On July 30, 2004, the DOC released the preliminary CVD and AD rates for the first Administrative Review. The country wide subsidy rate was set at 7.82% while the AD "All Others" rate was set at 3.98%. Final rates will be set mid-December. 3. Refunds of Cash Deposits This will be the subject of a hearing later this month in the context of the NAFTA AD Panel. 4. Byrd Amendment On August 31, 2004, the WTO released the Arbitrator's Decision on the Byrd Amendment and retaliatory measures available to Canada and other countries since the U.S. had not complied with an earlier WTO Panel Decision that the Byrd Amendment was illegal. The Arbitrator ruled that 72% of any monies distributed under the Byrd Amendment could be offset by Canada through retaliatory measures. For more information please see the following websites: BC Lumber Trade Council: www.bclumbertrade.com Government of Canada: www.dfait-maeci.gc.ca/eicb/softwood/menu-en.asp Government of BC: www.for.gov.bc.ca/HET/softwood |
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 Canada Wood's new Director in China, John McDonald received an orientation to COFI in early September 2004 through visits to Kelowna and Prince George. While in Kelowna, McDonald was given a briefing on lumber grades and products as well as COFI's quality control activities. He was introduced a variety of product offerings through visits to Gorman Brothers operations in Westbank and Riverside Forest Products plywood and stud operations in Kelowna. Ross Gorman, Gorman Bros. and Morris Douglas Riverside were able to provide McDonald with an overview of their products and markets. In Prince George, McDonald received presentations on the COFI organization and an overview of forestry in British Columbia's interior from COFI staff. Then it was off to Canfor's Prince George Sawmills operations to learn about random length lumber production. Lakeland Mills Ltd. provided a tour of their stud mill facility. John E. McDonald has lived in Greater China and helped Canadian industry in this market for over 9 years. He has worked with the Canadian Federal and Provincial governments as a trade advisor, as well as a management consultant and business development professional to Fortune 500 and Canadian industrial clients; developing marketing strategies and sales channels throughout Mainland China and Taiwan. He speaks Mandarin fluently as well as holding a BA degree in Asian Studies from the University of Victoria and an MBA in Strategy and Finance from INSEAD in Paris, France. McDonald will coordinate the China activities of the Canada Wood Group. He will liaise with industry funding partners in the Federal and provincial governments on behalf of CWC from offices in Shanghai, China. |
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