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Government Agreement in the Lumber Forest Logging Industry

Volume 51 No. 16, April 20, 2001

The High Cost of Peace

One of the biggest con jobs in history was foisted on the forest industry and the people of British Columbia on April 4, 2001, when Weyerhaeuser, Canfor, Western Forest Products, Norske Skog Canada, along with six coastal First Nations groups and the B.C. NDP government, signed the Great Bear Rainforest Agreement with environmental groups to end the war in the woods. This agreement, which covers approximately three million hectares of B.C. coast from the northern end of Vancouver Island to Prince Rupert, as well as the Queen Charlotte Islands, consigns the logging industry there to a new regime of conservation-based forest management and ecosystem logging, incorporating methods and equipment yet to be developed.

Originally this area was known as the Mid Coast Region and that’s still the official name, but in instituting their nasty international campaign against forest industry customers, the greenies had to come up with something more provocative, so they called it the Great Bear Rainforest, and that name seems to be sticking. This may not be such a good idea in the long run, however, since this name will doubtlessly carry a negative connotation in the future and serve as a constant reminder of the chicanery perpetuated there, especially for people in the many small communities that are about to experience the abrogating results the deal carries with it.

Part of the greenies’ strategy in achieving this agreement included not only perpetuating a bunch of b.s. about the impact of  onventional coastal clearcutting, but also saving the so-called Spirit Bear—more correctly known as the Kermode bear. In fact, there is

no indication logging posed any threat whatsoever to the bear’s existence, but that was all part of the con job. Put simply, the greenies didn’t want conventional clear cut logging on the mid coast, so they set about to stamp it out any way they could, and they finally achieved their goal with this agreement.

The bare bones explanation of the agreement is as follows: Of the approximately three million hectares, about 600,000 hectares will be set aside for new protected areas with logging deferred on another one million hectares; a community-based consultation process will determine how specific areas are to be managed; the forest industry will incorporate new logging methods and systems that are more environmentally sound; First Nations will be able to start logging operations of their own; environmental groups will kick in a million bucks to help fund scientific assessment of the area (the level of scientific assessment still to be determined); the government will kick in $10 million to help compensate the estimated 500 people who will lose their jobs as a result of the agreement; and environmentalists and logging companies are to be involved jointly in marketing forest products from the region. And—oh yes—the war in the woods is to end.

Near the top of my list of things I don’t like about this agreement is that it was developed by a select few determined to make their piss mark in the snow. The greenies, for instance, are eco-warriors with a single-minded agenda, which is now being imposed on us whether we like it or not. Ask the people in Port Hardy or Bella Coola, or the people who are about to lose their jobs, how they feel about the agreement and I’m sure you’ll hear a different story. Most people in this province earn their living from the forest industry or from activities related to it, and they don’t take kindly to changes that impact negatively on their lives, particularly when those changes are being made simply to satiate a single-minded objective.

Perhaps the most distasteful aspect of the agreement, however, is that it was foisted on the industry by a government desperate for votes. Many times I have harpooned this government for not taking a firm stand on environmental issues, but it has been to no avail. By not opposing the greenies, the government has indirectly sanctioned their activities, and the result has been continual erosion of the forest land base, a constant flow of new environmental rules and regulations, and continually increasing operating costs. B.C. is already the highest cost producer in the world and we don’t need to add to that burden.

After years of resisting the greenies’ onslaught on its own, the industry had to concede defeat the day the greenies launched their international campaign against the industry’s customers. If you can’t sell your products, there isn’t much use producing them. I still have trouble understanding why a government would allow its main source of income to be throttled without making even the feeblest of efforts to protect it. The only plausible explanation I can come up with is that this government actually believes there is majority public support for this agreement and the issue will garner votes. A government driven by votes will sell its birthright if there’s even the hint of a vote—especially the current government. Obviously the NDP has a significant vote problem, but that’s small comfort for the rest of us who are wondering how the hell are we going to earn a living here.

There is much speculation about this agreement since there are still many issues to be resolved, but a certain myth is that the war in the woods is now over. B.S. The ink was barely dry on the agreement when the Forest Action Network (FAN) and the Elaho Valley and King Island protesters started marshaling their troops to carry on the war against the forest companies and their financial institutions. FAN says they weren’t part of the agreement and they want more yet from the industry. For that matter, even Greenpeace, one of the main environmental signatories of the agreement, says not all issues are resolved and it’s not surprising some environmental groups aren’t coming on board.

Not wanting to miss an opportunity for some publicity on the subject, Tom Tevlin, president of the Forest Alliance, tried to explain away the renewed activity by maintaining the Forest Action Network is an extremist group that doesn’t have a social licence to conduct its campaigns. Tevlin said FAN wasn’t there for the solutions and could now lose its relevance. The real extremists are going to fall by the wayside, Tevlin explained, summarily dismissing the problem.

One of the peculiarities of this deal was that it was orchestrated and defended by people who have never had mud on their boots. Individuals such as Tom Tevlin and Linda Coady, vice president corporate relations for Weyerhaeuser Canada, likely wouldn’t know a pike pole from a pickaroon, yet they have played a key role in putting this milestone deal together. I’m sure this agreement doesn’t pose any direct threat to either of their jobs as is the case for some loggers and mill workers, but I can’t help wondering if they would have submitted so readily were that the case?

No matter how you look at it, the B.C. forest industry has been blackmailed into submission, but how much things will change

as a result of this deal is yet to be seen. It’s hard to imagine more financial burdens for the logging industry being brought on by new rules and regulations and new logging practices that may not necessarily result in better forestry. Most certainly there will be lost jobs, lost economic activity, lost timber and lumber production, lost forest land base, and lost revenue for government. The public is doubtlessly placated by the false belief that the impacts will all be borne by forest companies, but don’t forget, for every direct job in the industry, there are four or five multiplier jobs that could also disappear.

Perhaps we will have peace in the woods, perhaps we won’t. Only time will tell. Many believe this agreement is the only way the coastal B.C. industry can continue, but should peace be achieved, I fear it comes at a high price.

U.S. Starts Fall

March housing starts in the U.S. fell 1.3 per cent to an annualized rate of 1.613 million units, the Commerce Department reported. March permits also dropped, declining 3.6 per cent to an annualized rate of 1.615 million units. Single family starts fell 4.3 per cent to a rate of 1.241 million units, while multi family starts rose 11.6 per cent to 376,000 units.

Although there is still a pervasive feeling the U.S. housing sector remains strong, this is the second month in a row U.S. housing starts have declined. At 1.615 million, permits were also below analysts’ expectations, which were set at 1.665 million for March.

Starts declined the most in the South, falling 5.8 per cent; in the Midwest, starts were down 2.8 per cent. An increase of 6.9 per cent in the West and 4.0 per cent in the Northeast provided partial compensation for the overall decrease.

Fraser Mills Closes

Interfor has announced it will close its historic Fraser Mills sawmill located in the B.C. lower mainland at the end of October 2001. 300 sawmill workers and 200 loggers on the central coast will lose their jobs. Interfor President Duncan Davies says the closure is the result of The Great Bear Rainforest deal that preserves large sections of B.C.’s central coast. Interfor is the largest operator in that area. According to Davies, the lost wood represents more than a third of his company’s log supply from that area and a sixth of the total log supply. He says Interfor can’t keep the mill operating in the face of such significant cut reductions.

Defending the Great Bear agreement in the face of the Interfor job losses was B.C.

Premier Ujjal Dosanjh. He said he expected short term job losses, but if it weren’t for the agreement, there would be even more job losses. The NDP government has just anted up another $25 million in addition to the $10 million already committed for workers losing their jobs as a result of the agreement.

WSPF Life Is Good

To a fisherman, nothing puts a bounce in your step and a smile on your face like an early morning when the salmon are running; in the lumber business, it’s a vigorous spring buy. This renewal of life was skipped altogether last year.

Despite plenty of negative pressure, this market has been holding its collective breath, waiting for evidence of a direction. Will it go up or down? Last week’s upward movement could have been a blip on the screen, but combined with this week, there is no denying the trend is UP.

Results could have been much different this week. Mildly negative housing starts and permit figures paired with uncertainty over the Softwood Lumber Agreement could have killed this budding market . On Wednesday, however, Greenspan gave the economy a boost by peeling back the prime interest rate a full half percentage point. Markets from stocks, to commodities, to cash responded immediately with a round of buying. In cash lumber, speculative buying was at a minimum, but with field inventories at such a low level, replenishing stock constituted substantial orders from many customers. Order files grew into the week of May 7 at most mills.

Substantial shipments of western spruce lumber were heading south by rail and by trucks which were lined up to cross at the U.S./B.C. border. Mills stipulated that these shipments were either sold or were heading for their own U.S. reloads. Rail cars are becoming scarce as more rolling stock is going out than is returning, due to recent minimal shipments. Truck transportation is currently flowing smoothly, but labor problems with truckers could arise in the near future.

Prices in KD R/L Std&Btr 2×4 zoomed up $20 to $260. In KD R/L #2&Btr, 2×6 tacked on $15 to $230. Mid-width #2&Btr 2×8, up $5 to $225, was traded very little. Customers were buying 2×4 and consequently mills chose to split 2×8’s to double their 2×4 inventory. The surge was not as evident in wide dimension: KD R/L #2&btr 2×10 rolled up $12 to $282; 2×12 poured on $10 to $345.

Studs Awesome

Superlatives such as big, huge, and awesome inadequately describe the magnitude of stud sales this week. Not only was the order volume up, up, and away, but prices took the biggest one week jump in recent memory. KD WSPF 2×4 92-5/8” PET studs popped upward anywhere from $20 to $30 over the previous week, depending on the manufacturer and when you talked to them. Every level of the buying crowd, from retail buying groups to distribution, was represented. Too conservative for their own good, wholesalers lagged behind the pack and made their buys just after the price whooshed through the roof. Order files expanded into the week of May 7.

MSR Climbing

Dimension dragged MSR up the ladder into the realm of improved prices and plumped order files, which were approximately two weeks. Sales into the southwestern reloads were cited as the biggest volume of the week. Small buys constituted the rest of the order file, but no one was complaining about having so many to write up. Market tone was very good. Specific products in 2×4 were healthiest, while 2×6 MSR was still waiting for the alarm clock to wake it up.

ESPF Piled On

Eastern spruce producers piled dollars on their asking prices this week. Rumors of anti-dumping penalties spurred them into fore-arming themselves by charging extra. The price increase was initiated to cover any penalty on the mill and/or reduce the volume of orders. Prices increased $30 to $50 on KD R/L Std&Btr 2×4 to approximately $360 (f.o.b. Great Lakes zone). New orders at these numbers diminished quickly.

Cedar Good ‘n Rough

Rough timbers were the best of the lot in cedar. Significant sales were booked in 6×6 through 12×12 rough timbers, with 4×6 and 6×8 the only unpopular rough dimensions. Among the appearance grade products, 4×4 was especially desirable.

OSB & Plywood

Even a little wet snow was unable to slow OSB activity in central Canada. Buying was steady for the coming construction season. Wholesalers feel that buyers are under-bought and will be back looking for more product as the weather warms. 7/16” Toronto sold for C$230 this week, up $15. Job sites are still soggy and order files are about three weeks.

In western Canada, the Vancouver lower mainland market slowed this week, but the smaller, active Alberta market more than picked up the slack. Albertans have more money to spend, according to one wholesaler. Most of the buying push this week came from California, along with the Pacific northwest and mountain states. OSB producers are getting close to their asking levels for 7/16” Vancouver, which late this week was selling easily at C$225. Higher mill asking prices are anticipated next week. Order files are well into the week of April 30.

Cargo & Reload

Lumber activity improved this week in the U.S. northeast, but green fir selling prices did not begin to keep pace with surging western SPF prices. There are two reasons for the lagging prices: There is too much lumber on the ground, and buyers know it; and the cool, wet weather makes job sites too wet to work. The prevailing buyer attitude is “I don’t need it so I’m not going to buy it”. Wholesalers have more lumber on hand than they are comfortable with, so they put a lid on prices while they compete with each other in a market where construction buying is still not fully underway.

Green fir selling prices barely moved this week, except for 2×12 which jumped $10 when Hampton went off the market for this item. Green hemlock selling prices moved higher but are still a bargain compared with green fir. Delivered prices for green fir from mills in the U.S. west jumped this week and are now at nearly the same levels as selling prices. This is an indication green fir selling prices are likely to in-crease—a near certainly if the weather

Refer to Madison’s Lumber Reporter for the latest news in the lumber industry.

 

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