Announcing two Timber Exchange webinars and the United Bankers’ “Forest Industry Green Growth” Fund webinar

1. WEBINAR: Global Trade Implications from Russia-Ukraine War: Russ Taylor, RUSS TAYLOR GLOBAL Wednesday May 11 at 16:00 CET (10:00 EDT; 07:00 PDT); Relay link to follow.

Organized by Centersource Technologies & Timber Exchange; Moderated by Amir Rashad, CEO

Addressing some of the key issues for Russia, Europe and key importing/exporting countries. Includes new information from the Wood From Finland Conference in Helsinki that Russ Taylor attended and presented at – 400 attendees from 27 countries.

REGISTER AT: https://us06web.zoom.us/webinar/register/4416517524542/WN_rgEPwg4XTG2XlXAifBR4vQ

2. WEBINAR: Sawmilling in New Zealand: David Turner, Sequal Lumber.

Organized by Centersource Technologies & Timber Exchange and featuring David Turner, CEO of Sequal Lumber, New Zealand.

Here is the REPLAY LINK: https://us06web.zoom.us/rec/play/_2wP9LmStJm2EiILsCKwSngk7mfq89mNCQQCcsEiFtL_4fNM5066gbQwav27YCaAxFxLCTxZzcxPeK-g.Ot0iOoeB2m–L4_3

3. Introducing United Bankers’ “Forest Industry Green Growth” Fund

WEBINAR: Tuesday 10th May 2022 at 14.00–16.15 EEST (07:00 EDT; 04:00 PDT) Replay option available.

Register here by Monday May 9: https://www.anpdm.com/public/event/RegistrationForm/43435C447748475A477140

United Bankers, Helsinki, is launching a private growth equity fund investing in companies which are leading innovation in the forest and bio-based industries. Particularly, it is aiming to benefit from the ongoing transition towards fossil-free industry solutions and also in digitalisation and more efficient use of natural resources. United Bankers is providing a free webinar on May 10^th for investors and interested parties to consider forest and bio-based industries as part of the solution to mitigate the global environmental risks.

Russ Taylor is a member of the Advisory Board (since 2021) and has been assisting the team to consider suitable investment opportunities in wood processing as well as other operations.

This unique fund, which is the first to focus on forest industry processing and technology, has a targeted fund size of EUR 300 million and it is focused on European, particularly Nordic, companies. The target return is a net IRR of 15%, with investment in a combination of growth equity investments, project co-investments and in selected cases buyout investments.

As well as offering strong expected returns, it also gives the opportunity for large investors to learn more about innovations in the Nordic and European forest products sector, and the opportunity to co-invest alongside the Fund in specific companies of interest.

 

Register here by Monday May 9: https://www.anpdm.com/public/event/RegistrationForm/43435C447748475A477140

 

 

Mark your calendars! Timber Exchange is providing more strategic webinars that address the ongoing volatility in global markets and trade:

1. April 13: Analysis and Outlook for the European Market, Gerd Ebner, Holz Kurier & Timber-Online

REPLAY: https://us06web.zoom.us/webinar/register/7116501489961/WN_LbLI5o6CRpuTGa7vq9BApQ

2. April 20 – 16:00 CET; 10:00 EDT, 07:00 PDT: US Housing Market Outlook, Ivy Zelman, Zelman Associates.

Registration Link: https://us06web.zoom.us/webinar/register/7416501490293/WN_3mxyFqqlRtKEPdSfbodrIQ

3. May 4: New Zealand Perspectives, David Turner, Sequal Lumber

Registration Link: TBA

4. May 11: Implications of the Russia-Ukraine War on Global Log & Lumber Markets & Trade Flows, Russ Taylor, RUSS TAYLOR GLOBAL

Registration Link: TBA

Note: An announcement will also be made about a strategic report that will is scheduled for release in early June.

5. May 18: TBA

For more details about Timber Exchange, please visit: https://www.timber.exchange/

For RUSS TAYLOR GLOBAL, please visit: https://www.russtaylorglobal.com

If you do not want any further emails, please respond to russtaylor@russtaylorglobal.com and put REMOVE in the Subject Line.

UPDATE: Timber Exchange’s webinar on the China Market was completed in the early hours of March 9 (for those in North America). This webinar recording is now accessible on Zoom:

LINK: 

https://us06web.zoom.us/rec/share/L0Lsk4gktIaGGASQHXwgmhhQropy-1FoYvEbDQMm2De_X5KpRBTNcnnrLllaaIE5.GcRwKSSrfW4JAe2Q?startTime=1646812859000

BONUS Webinar – from MaterialsXchange: 

Russ Taylor participated in MaterialsXchange’s “This Week in Lumber” on March 9 with hosts, Ashley Boeckholt, Matt Beymer, and Gregg Riley. Aside from developments in the US market, this week’s show took a global look at lumber and timber supply – especially from the potential impact of reduced exports of lumber from Russia, Belarus and Ukraine.

 

LINK: https://www.linkedin.com/feed/update/urn:li:activity:6907382475912527873  

Note: The program starts at 9 minutes and 30 seconds, and Russ comes on at 19:30

China Timber Market: Dynamics, Performance & Outlook

WHEN: Wednesday March 9, 2022 at 09:00 AM Central European Time

SORRY! Midnight: Pacific Standard Time (Vancouver)

SORRY! 03:00 AM: Eastern Standard Time (New York)

But OK for China (16:00) and Melbourne (19:00), and all of Europe and ME-NA

***The free webinar will be recorded and the recording made available after the event***

Webinar Registration: https://us06web.zoom.us/webinar/register/WN_J5oLj0uyTfKJ94MN6IkD4A

SPEAKERS:

  Anna Ni, Senior Advisor, Business Finland

  Cece Chen, Managing Director, Frendship Group, China

  Shen Wei, Deputy Secretary, CTWPDA, China

 CHINA TIMBER MARKET – Analysing Dynamics, Performance & Outlook

This free webinar aims to give a comprehensive overview of the current situation on the China timber market covering a variety of aspects. Our three guest experts will give their professional outlooks on how the Chinese market is connected to other global markets, the effects the Covid-19 pandemic on logistics and consumption, new technologies on the market, and much more.

Discussion to include:

• What are the top sectors consuming wood today in China?
• Is today’s consumption level normal compared to before the pandemic?
• Now when the price of timber is so volatile, how does it affect export business and volumes to China?
• Now when the price and supply of timber is so volatile, how does it affect business in the domestic market?
• China imports both logs and lumber. How do the two markets affect each other?
• How is the Russian log export ban affecting the market so far?
• What about the new quarantine restriction on imported pine wood? What is that and why was it implemented?
• Do you think the European or MENA markets will have an effect on the Chinese market? What global market indicators do Chinese companies track?
• To understand the Chinese market, foreigners often look at the inventory in Shanghai and CIF price of Russian timber: are those good indicators of market performance?
• How has the timber market been affected by logistics issues during the pandemic?
• How do you think the timber market consumption levels and prices will develop until summer?
• How does the Chinese timber market use technology?
• What technology and smart tools would you like to see to automate your work in import and export?               Followed by a Q&A session with the audience

Webinar Registration: https://us06web.zoom.us/webinar/register/WN_J5oLj0uyTfKJ94MN6IkD4A

***The free webinar will be recorded and the recording made available after the event*** See: Timber Exchange ( https://www.timber.exchange  ) and RTG ( https://www.russtaylorglobal.com  ) for details!

AND IN CASE YOU MISSED IT:

Episode 9: Sawmilling in North Sweden and Exporting Globally

Guest: Erik Eliasson (Sales Director, Norra Timber, Sweden)

Mr Erik Eliasson, Sales Director of Norra Timber, a highly reputed timber producer in Sweden, discusses the global timber market and how Norra Timber functions in detail.

Listen on Spotify

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For questions or more information, please contact Timber Exchange or: russtaylor@russtaylorglobal.com

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Note: Russ Taylor continues to publish insights, analysis and forecasts in various publications. The following was published on January 20, 2022, in Austria’s Timber-Online ( https://www.timber-online.net  – and contains a few updates). The article highlights the wild US lumber prices, some of the pending reductions in BC lumber production, and the increasing importance of European lumber imports into the US in 2021 and for 2022.

Article by Russ Taylor, President, Russ Taylor Global | Originally Published 20.01.2022 by TIMBER-ONLINE.net

Up to the end of January, US lumber prices (using the benchmark 2×4 W-SPF #2&Better, Random Length, FOB BC Mill) have continuously increased since the low was reached in mid-November, 2021 of US$555/Mbf (€314/m3, net). In the middle of the week of January 17, W-SPF 2×4 cash lumber prices were at US$1,220/Mbf (€691/m3 – FOB mill) – this equates to an US East Coast price of US$1,340/Mbf (€759/m3).

Russ Taylor, President, Russ Taylor Global

US Lumber Future prices for March 2022 (a loose guide to price directions) have been fluctuating wildly and touched over US$1,300/Mbf (FOB BC Mill) last week (week of January 17) but drifted lower towards cash prices (before plunging to almost $900/Mbf on February 2). However, unlike the Futures Market, the cash market is expected to remain “more stable” over the next four to six weeks.

More spectacularly, Southern Yellow Pine (SYP) 2×4 lumber prices have already eclipsed their 2021 high and were trading during the week of January 24 at US$1,491/Mbf (US South-west, FOB Mill), or €845/m3. The SYP price peaked (for now, at least) at US$1,510/Mbf on January 28. An FOB mill normal price spread between SYP and W-SPF lumber is around US$50-80/Mbf (€37/m3). The current spread that week of US$271/Mbf (€154/m3) is huge and indicates that there could be substantially more upward movement in SPF prices to narrow the price gap with SYP lumber (or, alternatively, a downward correction in SYP prices).

And OSB prices continue to soar – in early February, prices were over US$1,000/Msf and still rising!

Clearly, there continue to be on-going events that are creating more volatile markets, as they did in 2021. It is much the same story, however, as transportation disruptions, severe weather changes, and COVID-19 are all key factors that continue to negatively impact supply chains in North America and around the world. With reductions in workforces through the production, logistic and distribution channels, inconsistent production coupled with late shipments and poor logistics are motivating buyers to increase orders, in some cases no matter what the price, so that they have enough stock for customers.

Other new factors include the December 2021 increase in the US import duty on Canadian lumber shipments – this increased from 9% to 17.91% from the mandatory annual review conducted by US Department of Commerce. This has caused more outrage by various consumer and industry associations, as already tight lumber availability from Canada coupled with higher prices are simply being passed on to consumers. This has a knock-on effect with builders and is also contributing to record levels of inflation in the US.

British Columbia has seen it fair share of wood products production and logistic disruptions since mid-November and more impacts to output are coming. First there were a series of “atmospheric rivers” – or intense wind and rainstorms – that hit parts of southern BC causing massive washouts of bridges and roads as well as severe flooding from rivers spilling their banks. This event shook US lumber markets and essentially kick-started the current lumber price rally.

Further reductions in the lumber supply BC could start to show up in first quarter from new provincial government policies being proposed that will reduce the timber harvest in BC. The government rammed through multiple reforms in the fall legislative sitting that will create permanent reductions in the timber supply. This includes a 7% reduction from old-growth forest set asides, transfers of forest tenures from companies to First Nations, and possibly to secondary wood manufacturers. As part of the old-growth timber deferral process, harvesting is being temporary halted by the government agency (BC Timber Sales) representing 20% of BC’s harvest and licensees may not be able to log on any old-growth stands in their forest licenses, including those that have existing permits. This will particularly impact the western red cedar business – both sawmills and secondary processors. In combination with caribou habitat protection, somewhere between 1 and 2 billion board feet (1.6 to 3.2 million m3) of production will be lost by 2030 from these new policies alone, and much of it sooner than this.

Why are European lumber exports to the US so important?

Simply put, the US and Canada cannot meet the net lumber demand required by the US in the short-term, so European imports are required. In analyzing the North America lumber market for the first 10 months of the year and extrapolating to the end of 2021, the sources of incremental volumes for the year in comparison to 2020 tell a critical story. Incremental volumes in 2021 from Europe will provide the second largest increase in US lumber supplies with a net increase of about 400 million bf (620,000 m3)! The largest incremental volume was from Canada, led by BC (almost 1 billion bf, or 1.55 million m3). Despite the huge sawmill  capacity increases in the US South, incremental volumes from there will amount to just 330 million bf (510,000 m3) in 2021, followed by the rest of the US regions at 240 million bf (370,000 m3).

Of the incremental lumber volume required to meet US consumption (plus increased US exports), a total of 2 billion bf (3.1 million m3) of addition volume is required in 2021. Europe imports will represent about 20% of this incremental volume in 2021 and a similar increase in volume (or more) will be required for 2022 for the US to meet total demand. While the largest incremental supplier to the US in 2021 was Canada, any increase in production and export volumes will be much lower in 2022, especially from the pending timber supply reductions that are already impacting BC. BC provided the largest incremental volumes to the US in 2021 – over 900 million bf ( 1.4 million m3) and almost 95% of Canada’s volume increase – but only small increases are expected from BC in 2022. This will require Europe to potentially provide even higher incremental lumber volumes to the US in 2022 to meet the expected US demand! This could be quite a challenge, but also a terrific opportunity for European lumber exporters.

Source: Russ Taylor, RUSS TAYLOR GLOBAL originally published on Timber-Online – https://www.timber-online.net/

Timber-Online (in English) and Holz Kurier (in German) are two excellent sources of industry and market information in Europe and for key export markets. Regular industry and market updates are provided twice per week in Timber-Online on logs, lumber, wood products, bio-energy, the economy, etc. Along with Data Cube (numerous monthly statistical series on production, imports, exports, prices, economy, etc.), the website offers lots of relevant information. Overall, this is a great source of practical European and global information and statistics on the log and wood products trade.

Subscribe to the free newsletter and ensure that you will not miss any offers or news on Timber-Online.net . Register on any of the opening pages (right-hand side) at: https://www.timber-online.net/

Special Offer from RUSS TAYLOR GLOBAL:

Complimentary copy of the newsletter, View from the Stump – an insightful look at the dynamics in the BC forest industry

The View from The Stump newsletter is a ground-level perspective of the BC forest industry and fills a void on what is really happening in BC timber, lumber and key markets. David Elstone is the publisher and editor of the report, and his almost 30-years of forest industry experience includes that of a field forester, equity analyst and executive director of the BC Truck Loggers Association.

The newsletter brings a unique and strategic perspective to the decision-making process for BC businesses as well as those wanting more insights into the industry, including government forest policy. The objective of each edition is to provide an analysis of key issues affecting the BC forest industry and its supply chain, up-to-date snapshots of key BC Forest Industry Metrics (stumpage, log prices, harvest, lumber production, log exports and lumber production), and other relevant updates for local businesses as well as those from international regions. As there are numerous current and pending issues that are impacting the BC forest industry, subscribers can obtain timely analysis and up to date trends on what is really going on in BC.

As a supporter and collaborator with David, he is offering my RUSS TAYLOR GLOBAL network a complimentary issue of latest View from The Stump newsletter that was released on January 31. If you would like a copy, please contact David directly at:  david@spartreegroup.com and reference this RUSS TAYLOR GLOBAL Special Offer. And please consider subscribing!

Regards

Russ Taylor, President, RUSS TAYLOR GLOBAL

PS – Here is what is covered in the January 2022 Issue:

ANALYSIS:                                                                                       PAGE

A New Year, But No New Answers On Old Growth Deferrals            2

China’s Impact On The BC Forest Industry                                        3

Getting More From Less – BC Timber Harvest 2021                         7

STATISTICS:

BC Coast Forest Industry Metrics                                                        9

BC Interior Forest Industry Metrics                                                     10

BC Forest Industry Metrics                                                                 11

BC Forest Industry Metrics – Quarterly View                                      12

TRENDS:

Fundamentals & Forecasts                                                                 13

Canadian Mill Watch                                                                           14

The Radar Screen                                                                              15

Or for more details and some back issues, visit Spar Tree Group:  https://www.spartreegroup.com/

Timber Exchange by Centersource Technologies  https://www.timber.exchange/ 

Timber Exchange is a one-of-a-kind end-to-end supply-chain automation platform. It is s meant for global trade management to provide the forestry industry with a smooth-functioning flow of operations.

Have you missed any of the 3 events this month? Here is your change to catch up now! 

1. Discussing the American Grading System: Speakers – Timber Products Inspection

View Webinar

2. Dynamics of the India Timber Market & Outlook: Speaker – Ayush Gupta, Director, Shreek AK Impex LLP

View Webinar

Fill in form to get instant access!

3. Analyzing Carrier & Port Performance – Congestion, Blank Sailings & Dwell Times: Speaker – Josh Brazil, Project 44

Listen on Spotify

 4. And visit the Timber Exchange Market Data Hub for global statistics, prices, inventories, etc.

Market Data Hub

Details on all three speakers and topics are below:

WEBINAR with Timber Product Inspection covering:  Introduction of Timber Products Inspection What led to the creation of the American Lumber Standard Committee (discussing ALSC’s history and their current day to day function) Why do we have grade rules (discussing the US building code system’s International Building Code (IBC) and the National Grade Rule (NGR)) How are the grade rules created and published (discussing NGR committee and the rules-writing agencies) How are design values established for dimension lumber (discussing ASTM D1990 process) What are the phytosanitary requirements for lumber imported into the US What is the qualification process How does a monthly routine inspection work What does ALSC do during their routine inspection

View Webinar

• Dynamics of the India Timber Market & Outlook: Ayush Gupta, Director, Shreek AK Impex LLP

We bring on board Mr Ayush Gupta (Director, Shreek AK Impex LLP) to discuss the current situation of the timber market in India, logistical aspects and what the future has in store for the Indian timber market, among other subjects

Listen on Spotify

• Analyzing Carrier & Port Performance – Congestion, Blank Sailings & Dwell Times: Josh Brazil, Project 44

This WEBINAR with Josh Brazil of Project 44 covers: 

• Port Dwell Times
• Port Congestion
• Transit times
• Schedule Reliability
• Transshipment Rollovers

View Webinar

Any questions? Let me know or contact Timber Exchange directly at:

https://www.timber.exchange/

https://www.timber.exchange/contact-us

You are invited to attend the complimentary Webinar with Timber Product Inspection on Tuesday January 18th

Zoom event registration link:  https://us06web.zoom.us/webinar/register/WN_IUFp8E4ASCiqBizqHEVgBA    As part of my Advisor Role with Timber Exchange in Sweden, I would like to invite you to attend our upcoming Webinar with Timber Product Inspection  on Tuesday January 18th at 13:30 Central European time, or 07:30 EST and 04:30 PST (sorry!) A replay will be available later in the week! The event will be a panel discussion with our two guests: David Conner (Senior Vice President Operations, TPI) and his colleague Robin Lillandt (Senior European Representative, TPI). Together they can give a comprehensive overview of the timber grading rules, their history, function, application, sawmill qualification process, inspection and more. This webinar will follow the following structure: What led to the creation of the American Lumber Standard Committee (discussing ALSC’s history and their current day to day function) Why do we have grade rules (discussing the US building code system’s International Building Code (IBC) and the National Grade Rule (NGR))? How are the grade rules created and published (discussing NGR committee and the rules-writing agencies) How are design values established for dimension lumber (discussing ASTM D1990 process) What are the phytosanitary requirements for lumber imported into the US? What is the qualification process? How does a monthly routine inspection work? What does ALSC do during their routine inspection? Followed by a Q&A session with the audience We look forward to your attendance at the Webinar and/or its replay! Register for Webinar: https://us06web.zoom.us/webinar/register/WN_IUFp8E4ASCiqBizqHEVgBA  To stay up to date with developments on timber markets around the world with Timber Exchange Data Hub, where you can find monthly data for Production, Inventory, Logistics and more. Market Data Hub Timber Exchange – Automation Tools | B2B Marketplace   https://www.timber.exchange Timber Exchange is an independent digital platform and toolkit that automates the most time-consuming processes facing companies today. What we provide is not simply a management platform, but an entire ecosystem of Forestry Supply Chain tools that includes a supply chain platform, global marketplace and data hub. Regards Russ russtaylor@russtaylorglobal.com www.russtaylorglobal.com

In case you missed this last week on Lesprom.com…

Russ Taylor: BC government forest policy changes to cause up to 12,000 job loss

Source: Lesprom Interview      Moscow  03:18 AM / December 2, 2021

https://www.lesprom.com/en/news/Russ_Taylor%3A_BC_government_forest_policy_changes_to_cause_up_to_12_000_job_loss_101503/

Many new and substantive forest policy changes in British Columbia have just been announced by the provincial NDP (New Democratic Party) government. These changes are transformative and, if implemented, are anticipated to be negative for the province’s existing forest products industry.

Comment by Russ Taylor, President of Russ Taylor Global, Vancouver  based on an interview with the Lesprom.com  network

There are numerous changes being undertaken by the government as it moves to reshape the forest sector into its vision, as described in their Modernizing Forest Policy In BC: Intentions Paper. One disruptive change is an announced policy to defer timber harvesting in 2.6 million hectares of old growth forests despite having already protected most of these types of forests in the province. The second policy involves an involuntary redistribution of long-term forest tenures or harvesting rights from forest products companies to First Nations, communities and the government’s arm’s length timber auction program, BC Timber Sales (BCTS).

These two policy announcements will collectively be a significant impact to the industry with a potential loss of between 10,000 to 12,000 jobs (my loose estimate), where up to 18,000 jobs for the old-growth deferral alone has been cited by Council of Forest Industries (COFI). The full spectrum of the sector will be negatively affected, from timber harvesting businesses to sawmilling and value-added sectors, to reduced pulp production and impairment in companies’ balance sheets. In essence, the government is attempting to placate a heavily influenced “green-conscience” urban voter base, and at the same time, attempt to shift control of the forests away from major forest product companies and back to government.

I support developing longer-term strategies when they are based on sound methodology to achieve global objectives that are to be used as a compass for future direction. Trying to develop a correct or workable strategy is always challenging, especially for governments and even more so involving public land. It is even more challenging when politicians tend to make decisions more around getting re-elected every four years as compared to creating long term plans that result in good forest stewardship and industry confidence. And this is where BC finds itself.

Like many other voices starting to emerge, it is my opinion that the BC government’s new forest sector strategies have flaws. They do not seem to be based on science, socio-economics or even good forest data, as the proposed policies show a lack of process and understanding about how the existing forest industry really works. The new policies create more of a “feel good” strategy to feed the public, and this comes directly at the expense of forest product companies that have contributed significantly over the decades with long-term capital investments that have helped to build the economy of BC. Now the tide has turned where the objective is the creation of a new social license that will empower others at the expense of the existing investments that were made in good faith around what was thought to be the security of long-term and renewable forest licenses.

Old-Growth forest deferrals in BC

The newly announced government policy on protecting old growth forests was supposed to be based on the best science and data available. An old-growth panel of five experts was selected by the government, four of which had significant ties to the environmental community, including the Sierra Club and other groups. When you have four of the five being environmental-biased members on a committee with a mandate to assess old growth forests, you are going to get a report that does exactly that – preserves old-growth forests. Some of the “science” in the report has been challenged given the perceived bias of the four “experts.” Furthermore, there has been no socio-economic analysis conducted to fully understand the impacts on workers and communities. It really does make it difficult for the forest industry to understand the government’s rationale in making strategic decisions that have huge impacts on workers, communities and companies, but without the real or complete facts. Despite that 75% of existing old growth forests already protected or unlikely to be ever harvested, additional old growth protections are being proposed at the expense of thousands of high-paying jobs.

From the proposed reduction in old-growth timber, one credible forecast is that five to six smaller sawmills would close on the BC Coast. This is where most of the high-valued western red cedar and yellow cedar timber as well as Douglas-fir timber is located. The BC Interior is a much larger industry that produces mainly spruce, pine, and fir (or SPF) lumber and it is forecast that another five to six sawmills could close there. This is not only due to potential old growth timber withdrawals, but also due to other factors that are in the works such as protecting habitat for caribou as well as further reductions from extensive forest fires as well as the mountain pine beetle and other beetles in the province. Nevertheless, the deferral of old-growth timber harvesting will simply accelerate this process and add to the mill closures.

The compounding effect will result in the eventual closure of some 10-12 sawmills along with the loss of thousands of jobs and over C$400 million in annual revenues to the government. It comes at a time when the BC government has incurred massive infrastructure losses in the billions of dollars from the recent 100-year catastrophic floods that have wiped out roads, bridges and rail lines. Nevertheless, the strategy seems to involve shrinking the existing forest industry, creating more unemployment and reducing forest revenues to benefit others, such as the environmental community who are not responsible for creating government revenues. The BC forest industry has contributed about $4 billion in revenues to the government each year .

And because of the lack of fibre, a couple of pulp mills could be negatively impaired with potential closures. The government does not seem to understand all the real implications of how companies and its logging and sawmill workers will be negatively impacted, and if it does, it certainly does not seem to care. The loss of old growth forests will have a negative and direct impact on the value-added sector, which ironically is being proposed as a “new growth sector” by the government.

Government’s proposed policy on forest tenure takebacks

Another major government initiative is to redistribute forests from existing longer-term tenures through legislative reform of the Forest Act. Changes to legislation will enable the government to reduce harvesting rights of established companies that have built up world-class sawmills and plywood mills over the decades. The government’s strategy is to take part of those timber rights away for the purposes of old growth deferrals or reallocation to First Nations, communities and BCTS. The transfer of forest tenures will not be at a fair market price because the government has cleverly changed how it will compensate companies for the reductions to harvesting rights. This is one more way for the government to send out strong signals that investing in BC is now a very high-risk proposition. With little guidance from the government on what the end result of the redistribution of forest tenures will look like, forest companies are left with an almost unprecedented level of uncertainty which will most likely result in a quicker pull-back of capital.

Notion of more value-added industries in BC

The dilemma is that it is very peculiar for the government to say that it wants the BC forest industry to grow and it is looking for capital investments, but it seems to be focused only on the value-added sector. With a reduced timber harvest, it can be understood that producing commodity lumber is not as desirable as the potential from more specialized sawmills that produce higher valued products. However, a healthy commodity industry is still a prerequisite to allowing success to slowly build in other small or specialty businesses over time. By flipping a switch to reduce the forest tenures for established mills with the hope that unproven and under-capitalized smaller sawmills and value-added businesses can grow is a high-risk strategy.

This harkens back to a similar value-added policy initiative that previous NDP governments implemented to allow forest licenses to be bid on by value-added companies in the early 1990s. This resulted in a huge failure throughout the value-added industry, so this new policy has the initial potential to be a repeat of an ill-fated program unless it is reformed to something different. And the government never defines what “value-added” is in its strategy, but they only justify this as a high-value way to utilize scarce fibre.

It is a great theory, I get it, as you can theoretically obtain more value AND more income from a log by creating more jobs through a value-added facility. In reality, the BC value-added sector has been shrinking steadily for decades – it is certainly not a growth sector, and it is riddled with a graveyard of closed uneconomic and under-capitalized companies. There are certainly some growth opportunities in the BC value-added business. Some of the new policies will assist in allowing some of the existing survivor companies to expand. But the growth opportunities for any new businesses to survive will likely be limited to only a few companies and products, as this is what history in BC suggests.

Where is the government’s Forest Policy headed in BC 

It is too bad that the current NDP government has not chosen to be inclusive in determining its new forest policies with all stakeholders. And if they did a deeper dive and looked more around the world to see which countries or sectors are doing things right, then they would have seen that there are different options to achieve more industry diversity and prosperity as well as strategies to avoid. Instead, it appears that they have looked more at idealistic options that could be heading back in the direction where some previous initiatives failed. It is, perhaps, “easy” for me to make some of these assertions since I travel regularly outside of BC (and to almost all continents) and see what is going on around the world. Consequently, it is easier for me to see that these new proposed changes to BC’s forest policy are very risky and could be heading in the direction of making the province’s sector less competitive on a global basis.

Even before all these announced policy initiatives, the government can also be credited for allowing BC to be positioned as one of the highest cost commodity lumber producing regions in the world, tied to an ill-designed stumpage formula (I have analyzed this topic for a number of years but will leave any further discussion on that topic for another day). Social engineering of the forest industry by the government never really works since you need to have the confidence of investors. Quickly devised social programs that benefit one part of an industry and the expense of another will cause investors to flee.

Nevertheless, the current situation now is very messy, given that the government has chosen to use faulty science, a lack of economic considerations and inappropriate forest inventory data for developing their new forest strategies and policies. This is really a shame to those forest product companies, workers and communities that invested in BC for decades as they will now be on the losing end of a number of socialized forest policy initiatives now being proposed.

For further details on all the recent BC forest policy announcements and other BC wood products industry analysis, as well as ongoing data updates on the BC timber harvest and sawmilling industry, I recommend the very insightful and useful newsletter, View From the Stump https://www.spartreegroup.com/view-from-the-stump by David Elstone. Newsletter extracts as well as past complete editions are posted there. Or contact myself at russtaylor@russtaylorglobal.com and I can put you in touch .

 

Russ Taylor is a Guest on Materials Xchange’s Live Smart Market Call: Friday Dec. 3 at 12:00 CST (1:00 PM EST; 10:00 AM PST)

My colleagues at MX (https://materialsxchange.com/ ) in Chicago have asked me to discuss my latest summary of the Top Global Lumber companies and also how the European sawmills mills will need to maintain and maybe increase lumber exports to help balance out US lumber demand in 2022.

This will be on Linkedin Live and also Youtube at the above time. You may have to wait a few minutes before the broadcast goes live. Here are the links:

Linkedin: https://www.linkedin.com/events/6872336785070985216/about/

Youtube: https://www.youtube.com/channel/UC8PsPNb-TNDiqgkForL5fLA

If you miss it, look for the replay on either channel!

And check out Materials Exchange – a very interesting and progressive company if you are looking to buy or sell lumber on a digital platform!