Redistributive policy

BC NDP castigated for forestry policy

“BC is becoming uninvestable,” warns Paul Quinn, BC paper and forest products analyst for RBC Capital Markets

The next few years are good and bad for BC’s forestry sector, predicted market experts who spoke today at a Truck Loggers Association conference.

The good news is that the outlook for lumber demand and prices in 2022 and 2023 “looks very good,” according to Russ Taylor, president of forestry consultancy Russ Taylor Global.

The bad news is that by the time John Horgan’s NDP government finishes ‘modernizing’ BC’s forestry sector, it will be down to half what it was when the NDP took power. for the first time, said Paul Quinn, a British Columbia newspaper and forester. product analyst for RBC Capital Markets.

Quinn said the mountain pine beetle infestation will be responsible for reducing the sector – meaning the number of factories and jobs – by 30%.

“When you add in the old growth carryovers that are being described, and probably the caribou mitigation efforts that the government is about to introduce, I think BC industry will be about half of what it was at the start of the current NDP (government) when they were elected,” Quinn said.

These policies include the removal of up to 2.6 million hectares of old-growth forest from timber harvesting territory, a return to a more prescriptive forestry practices regime, and a tenure redistribution regime that Quinn characterized as taking “ more efficient companies and redistributing it to less efficient players.

The industry could have a few good years ahead of it, with a US real estate market continuing to fuel a bull market for lumber.

“The outlook is very good,” said Taylor, who predicted “incredible prices” in 2022 for the timber.

Taylor said the U.S. new housing market has been “underbuilt” for 13 years.

“Because we’re underbuilding homes (and) right now trying to catch up, things look good for the next few years,” Taylor said.

He said repair and renovation makes up about 40% of the North American market for lumber and other wood building products, with new homes making up 31%.

Last year, lumber hit record highs of $1,600 per thousand board feet. There was a correction, but currently the price of 2 X 4 Western Spruce, Pine and Fir lumber is around $1,000 per thousand board feet, which is about three times higher than the average.

“I’m very confident that we still have three or four years of heavy wood consumption ahead of us,” Taylor said. “So 2022 should be another good year.”

He said the greatest production growth will occur outside of British Columbia, notably in the southern United States, where BC lumber majors have bought sawmills and built new ones. news, thanks to the availability of wood there and lower operating costs.

Taylor said 8 billion board feet of new sawmill capacity has been added in the United States since 2018, although those sawmills are not yet operating at full capacity.

“BC’s story is different,” Taylor said. “The coast is actually a shadow of itself. It’s come off even since 2000. That’s half the size it used to be. And, of course, inside… the pine beetle, of course, has really taken production down since 2017.”

Canada still accounts for 86% of US lumber imports, with Europe (mainly Germany and Sweden) accounting for 10%.

Because the annual allowable cut is shrinking in British Columbia—due to fires, the mountain pine beetle infestation, and conservation (parks and protected areas)—the Horgan government embraced the idea of ​​doing more with less. He touted higher value-added industries like cross-laminated timber (CLT) production.

Taylor said it could be a good strategy if the government understands the industry, which it doesn’t.

“That’s not government expertise at all, and that’s my concern,” he said. “What I learned is that added value is not added margin. History tells us again and again that it is not always possible to make money with added value. In fact, it is a very dangerous profession for those who try it.

One of the problems with value-added industries is that they depend on highly integrated primary manufacturing industries, and when sawmills collapse there is a cascading effect on other businesses. This has been happening in British Columbia for some time now.

“You see factories closing everywhere,” Taylor said. “Whether it’s sawmills, plywood mills, pulp and paper lines, renovation factories, furniture factories, shingle and shingle factories – everything. We had closures at all levels.

“If you want to invest in the future, closing sawmills is not necessarily going to help the value-added sector. It will also be reduced proportionally.

Taylor said his analysis showed that the United States has advantages for value-added companies, so if new CLT plants are built, they could more likely be built in the United States than in British Columbia.

British Columbia has gone from one of North America’s lowest cost forestry producing regions to the highest. And a long list of new forest policy changes coming from the Horgan government are set to make it an even less attractive place to invest.

“BC is becoming uninvestable,” Quinn said bluntly.

Government-imposed moratoriums on old-growth forests would result in the loss of 4,500 jobs, according to the British Columbia Minister of Forests. The Council of Forest Industries estimates the losses more around 18,000 jobs and 14 to 20 sawmills. Taylor estimated job losses at around 10,000.

“I’m more in the latter camp,” Quinn said. “It will certainly be multiples of the minister’s estimate, and I think we should be upfront and candid about that.”

Part of the government’s tenure redistribution plan aims to give smaller players and First Nations more timber and a more active role in forestry.

But currently, logging companies with stumpage rights on First Nations-held tenures can be taxed twice, as they pay both stumpage fees to the province for Crown stumpage fees and access to First Nations holding stumpage rights. These fees can be minimal, Quinn said, but can be as high as $15 per cubic yard.

If the Horgan government is serious about using forestry and forest tenure as part of a strategy for economic reconciliation with First Nations, Quinn suggested that First Nations should get the full share of timber revenues.

“Let’s move quickly to full revenue sharing with First Nations,” Quinn said. “Let’s tear off the bandage. I believe the majority of businesses in British Columbia would welcome this change, it ends the current double taxation and it allows First Nations to grow in their future role in forest management.