COFI 2021: BC forest industry a ‘bright light,’ but needs to be more resilient
According to a new economic study from the BC Council of Forest Industries (COFI), in 2019, the B.C. forest industry generated $13 billion in GDP and almost $8.5 billion in wages, salaries and benefits. So, it’s no surprise that speakers at COFI’s 2021 virtual convention on April 8 emphasized the sector’s role leading the province’s economic recovery from the COVID-19 pandemic.
Value over volume
The industry is a “bright light,” for the province’s economic recovery, said Katrine Conroy, B.C. Minister of Forests.
However, “we can’t repeat the mistakes of the past; we must create a more resilient forest sector that is innovative and responsive,” she cautioned.
Since last summer, the industry has been experiencing a boom, with strong demand and high lumber prices. But, as the saying goes, what comes up must come down. The forest sector is a cyclical one, and to be able to weather the next downturn, we need to offer a more diverse range of products, with a focus on high-value engineered wood products, Minister Conroy said.
For example, Mass timber products represent a big opportunity, helping to combat climate change while also opening up a new market for the industry.
As such, the B.C. government on April 7 announced a $4.2 million investment in mass timber for eight new demonstration projects and four research projects. The provincial government also created a mass timber advisory council, whose members consist of architects, builders, designers, engineers, and industry experts such as Susan Yurkovich, president and CEO of COFI.
These demonstration and research projects will show that building taller buildings with wood is feasible, and will help speed up the adoption of mass timber building systems, Minister Conroy said.
Adding value to lumber products will be key as the B.C. forest industry transitions to a tighter fibre supply caused by multiple factors such as pests and wildfires.
During his keynote speech, B.C. Premier John Horgan echoed Minister Conroy’s concern about the industry’s ability to withstand future downturns and the need to invest in value-added wood products.
“An essential part of our approach to the industry is to make sure that we do focus on that value-added marketplace, and we stop chasing every stick to get it out as quickly as we can,” Premier Horgan said. “The prices are staggering, but we also know when the sun shines, that’s the time to prepare for the rainy days and put that money away.”
Addressing the dwindling fibre supply in B.C., Premier Horgan warned attendees that the government might take tenure away from large tenure holders.
“There have been some business-to-business tenure sales and arrangements with Indigenous nations, but there is progress yet to happen and I’m disappointed about that,” he said.
Premier Horgan also said he was disappointed about the lack of coalitions that have been established, and noted that secondary manufacturers need to have greater access to fibre so their businesses can grow.
“Repositioning a greater proportion of our fibre to manufacturers is a key part of our plan; we want to do so collaboratively, in a way that is fair and just for tenure holders, but also shares the bounty,” he said.
‘Preparing for the worst’
Collaboration and resiliency were key themes throughout the conference, especially in light of the ongoing COVID-19 pandemic. A panel discussion with Ray Ferris, president and CEO of West Fraser, Don Kayne, president and CEO of Canfor, and Jeff Zweig, president and CEO of Mosaic Forest Management, moderated by Bridgitte Anderson, president and CEO of the Greater Vancouver Board of Trade, gave some insight about the pandemic’s impact on the B.C. forest sector.
“After a difficult and unexpected 2019, the initial optimism going into 2020 eroded very quickly,” Ferris said. “[The pandemic] quickly devastated the world financial markets, and many companies, like ours, despite being strong and healthy, were concerned.”
West Fraser looked for additional credit to ensure they could survive a long downturn, while Canfor reduced production significantly, running at about 30 per cent in B.C., 50 per cent in the U.S. South and 80 per cent in Sweden.
“We were preparing for the worst,” Kayne said.
But, by April, there were signs that the lumber market was recovering, particularly on the repair and remodel (R&R) side of things. Since then, lumber prices have jumped from $250-275 per 1,000 cubic board feet to $1,100, thanks to the strong housing and R&R markets.
“I think we learned our industry is resilient, if we didn’t know that before,” Ferris said.
However, it wasn’t all good news. The B.C. sawmill industry took more downtime than any other region in North America. When demand came to a halt, half of the downtime in North America was in B.C., he said.
“We learned again, as in 2019, that B.C. is not as well positioned as it needs to be,” he said.
Looking ahead, the market will continue to be volatile, Kayne said. But as more people become aware of the environmental benefits of wood products, he expects the market and the industry to be solid for the rest of the year.
An exciting time to be in forestry
And with that recognition of wood products as green products, the forest industry, particularly in B.C., will become more resilient to market fluctuations, said Zweig.
New technology such as mass timber will allow the industry to build taller wood buildings that also store carbon. Around the world, there are dozens of 10-storey-plus buildings being built with engineered wood products, which results in a substantially reduced carbon footprint, Zweig said.
“Against that backdrop, B.C. is in an extraordinary position as demand for wood continues to grow as a solution to climate change,” he said.
But to further contribute to the fight against climate change, Zweig said the industry needs to reduce emissions that come from the processing and harvesting of trees and wood products.
This is a core part of Mosaic’s strategy. The company has set a goal of becoming net-zero by 2035, and is pursuing a variety of measures to meet that goal, including trialing electric logging trucks.
“It’s an extraordinarily exciting time to be in the forest sector, given our contribution to the climate change fight, the focus our sector has on reducing its carbon footprint and exciting developments around mass timber and wood products,” Zweig said.
Canada in good negotiating position
The environmental benefits of Canada’s wood products, record prices and high demand for lumber is also putting Canada in a strong position to negotiate with regards to the softwood lumber duty.
Canada’s Ambassador to the U.S., Kirsten Hillman, shared an update on the situation in the U.S.
The high price of lumber is receiving a lot of attention in the U.S., she said. Supply shortages are becoming a significant issue for American homebuilders, who are bringing their concerns to Congress and the Biden administration.
According to the National Association of Home Builders (NAHB), the increase in lumber prices has added $24,000 to the average price of a single-family home and $9,000 to the average price of multi-family homes.
“Homebuilders tell us they’ve delayed construction projects by four to six months because they’re not able to secure lumber products they need,” Ambassador Hillman said.
The NAHB also reports that every time the price of a house in the U.S. goes up by $1,000, 154,000 Americans are pushed out of the market for housing. Consequently, more than three million Americans are being pushed out of the housing market.
This goes against the Biden administration’s goal of addressing economic inequality, said Ambassador Hillman. President Biden, as part of his $2 trillion infrastructure plan, wants Congress to pass $2 billion worth of tax credits to help Americans build and rehabilitate approximately 500,000 homes, and help more Americans become homeowners.
“These objectives, with respect to certain segments of American society, are not as achievable with the prices that we’re seeing now,” Ambassador Hillman said.
Consequently, Canada has a stronger position at the negotiating table, with several new arguments to use, such as the importance of housing for the U.S.’s economic recovery, the administration’s focus on affordable housing and commitment to addressing economic inequality. The Biden administration is also prioritizing supply chain resiliency and working with trusted allies such as Canada, Ambassador Hillman said.
Combatting climate change is also an important element that runs through all of the Biden administration’s objectives, and as a green building material, lumber will be critical, she added.
“With all of that in mind, we are tailoring our advocacy and bringing this to the table, making sure that, across the country, all of these facts are known,” Ambassador Hillman said. “We encourage you to continue your advocacy with your allies, customers, and industry contacts in the U.S.”
“I think that we will find the pressure will mount for the American side to want to return to the negotiating table,” she concluded.
Reconciliation through partnerships
Another area where Canada and the U.S. are working together is on increasing Indigenous participation in lumber and value-added exports, Ambassador Hillman said.
Both governments recognize the disproportionate impact of the pandemic on racialized communities, particularly on Indigenous peoples, and are working to figure out how to support and guide Indigenous small businesses, she explained.
Moving forward, this will help get more First Nations involved in forestry. But, the key really is partnerships with the forest industry, said B.C. Assembly of First Nations Regional Chief Terry Teegee, who spoke about how to get more Indigenous peoples and First Nations in forestry.
With the B.C. Declaration on the Rights of Indigenous Peoples Act (DRIPA), passed in 2019, which recognizes Indigenous peoples’ rights in accordance with the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), “we can really start actively looking at things such as statutory decisions, annual allowable cut determinations, etc.,” Chief Teegee said.
He noted that giving First Nations access to tenure will mean the vast majority of resources will stay in local areas, benefitting local governments and people.
The Huu-ay-aht First Nation is a prime example of this.
Last year, Huu-ay-aht and Western Forest Products (WFP) formed a limited partnership. As part of that, Huu-ay-aht bought a majority stake in WFP’s Tree Farm License (TFL) 44 on Vancouver Island.
Huu-ay-aht has also signed a Memorandum of Understanding with United Steel Workers (USW), Local 1-1937 to ensure the TFL 44 undercut volume is allocated to Huu-ay-aht and to develop a job creation and training plan through the TFL 44 Woodlands Contractors.
Huu-ay-aht Chief Councilor Robert Dennis Sr., Don Demens, president and CEO of WFP, and Brian Butler, president of USW, 1-1937, spoke about these partnerships during a panel discussion moderated by Shannon Janzen, WFP’s vice-president and chief forester.
Chief Dennis, when asked what his philosophy is for creating these partnerships, explained that “the old way of doing business in the forest industry and in our territory wasn’t working.” So, he met with Janzen and Demens to see what they could do to advance the interests of the Huu-ay-aht. In developing their partnerships, the reconciliation protocol agreement was critical, he said.
The partnership with the Huu-ay-aht is a new model for WFP. There were some challenges initially, but they were able to overcome them because, first and foremost, their relationship is based on respect and trust, Demens said.
That relationship was formed over a number of years. WFP first sold a dryland sort to the Huu-ay-aht, to help them meet their needs, and that eventually led to the limited partnership and Huu-ay-aht’s majority share in TFL 44.
“CEOs come and go,” Demens said. “What I’m hoping for is that the foundations we’ve established here through our work will live long past this particular CEO and provide benefits for many years to come.”
Butler also shared the process for developing the MOU with Huu-ay-aht. He explained that after meeting with Chief Dennis, he saw the benefits the partnership would have for USW members, including advanced training and more opportunities and jobs in the Port Alberni, B.C., area. As more USW members reach retirement age, there will also be more openings for Indigenous people.
“I think there was only one First Nations member working on TFL 44, and that’s not right,” he said. “It was clear that Huu-ay-aht and other First Nations group haven’t been significantly involved in the forest industry, and hopefully by working together we can change that.”
Demens added that partnerships can encourage reconciliation if they support both parties’ interests and are long-term.
“To do that, we have to have a commitment from both sides to listen and learn, because we don’t always know what’s important,” he said. “If you’re willing to put that work in and you’re both wiling to seek mutually beneficial outcomes, then it will provide benefits for both parties well into the future.”
Butler added that while the USW can’t provide the same tools as government or support First Nations by creating economic partnerships, they can “be open to new ideas, be flexible in our negotiated agreements to try to ease barriers to opportunity and facilitate those improved relationships, as I think we’ve done and are working on in our discussions with Huu-ay-aht representatives.”
Thanks to these partnerships, the Huu-ay-aht has increased the number of workers in the forest industry from two in 1992 to 20 today.
“I’m very happy we found two organizations that were willing to work with us to create the change that’s necessary to advance that Huu-ay-aht interest,” Chief Dennis said.
But, both Demens and Butler recognized there is still more work to be done when it comes to reconciliation and partnering with First Nations. WFP operates on the territory of 45 First Nations, and Demens wants to try to roll out a similar partnership throughout these territories.
“I think if we do things right, we can make a more resilient business for workers, for First Nations, for B.C. in general,” he said.