Following Canfor’s recent announcement, I find myself reflecting on my forestry career, which began in 1974 following my graduation from UBC as a forester, when I started working for Northwood Pulp and Timber in Houston, BC. Two years prior, they had acquired the mill and its forest licences from Bathurst-Bowater who had just finished building a new state-of-the-art sawmill before having financial difficulties. I didn’t really know at the time that I was working at the largest sawmill in the world (which it continued to be until its closing). It was booming times in BC as other greenfield sawmills were being built in the north to take advantage of ample timber supplies.
Canfor’s decision on Houston, BC sawmill
Fast-forward nearly 50 years; in early 2023, Canfor, owner of the Houston sawmill since 1999, closed the original mill as it was too old and oversized for the available timber supply, later announcing they would move forward in mid- September 2023 with building a new, smaller mill. In May 2024, they then announced, “we have made the difficult decision to suspend our plan to build a new state-of-the-art sawmill in Houston, as we are not confident that an investment of this magnitude can be successful at this time.”
A number of reports and opinions have since been voiced over this decision, and I am adding one more with a different perspective. This announcement may look somewhat like many of the dozens of other news releases over the last 15 years outlining sawmill closures from a lack of fibre in BC, but this one is much more serious. It is a message to government that BC is “uninvestable” as some analysts have previously stated due to its ongoing and numerous forest policy changes that continue to create business uncertainty, resulting in a negative business climate for investors considering BC. This is a real slap in the face for BC’s Ministry of Forests and government, and is also a clear dose of reality that most in the BC forest industry already understand.
BC disadvantages go back decades
When I reflect on North American industry presentations I did 25 years ago (and am still doing today), I have continually highlighted that the stumpage rates and/or stumpage formula for BC logs created excessive log costs for BC sawmills as compared to competing regions. Being labelled the “highest operating cost region in North America” for over two decades has made investing in BC sawmills a more difficult financial decision. Investors simply direct capital to where better returns can be achieved. When you add in the past four years of ongoing BC forest policy changes, which include: old-growth deferrals, landscape plans, tenure transfers to First Nations, protecting 30 per cent of lands by 2030, log export restrictions and fees, proposed Land Act changes, cutting permits no longer a mandatory contract but a discretionary one between government and licensees restricting compensation, etc. with almost no input from industry, it creates massive uncertainty for investors. Add in a failing BC Timber Sales program, cutting permit delays and increasing wildfires and you have a perfect storm, leading to a loss of industry investment and credibility with the current government. Over the last few decades, an increasing handicap for the forest industry in BC has been operating on public timberlands that are managed and influenced by politics.
While communities, labour, and government want to blame Canfor for its reversal in its decision to build a new mill, my view is that it lands squarely at the feet of the BC government. Since 2010, timber harvest reductions and sawmill closures from the mountain pine beetle and now new forest policies have been predicted by myself and colleagues (Jim Girvan, Murray Hall, Rob Schuetz) on an ongoing basis. The Ministry of Forests is well aware of our forecast reports, presentations and articles, but they continue to act surprised and disappointed when mill closures are announced, and worse, try to shift the blame to the companies.
In September 2023, Forests Minister Ralston made the statement on Canfor’s decision to move forward: “Our government is committed to ensuring that forestry remains a strong and sustainable industry in BC.” Some eight month later, following the initial Canfor decision, it appears Minister Ralston has either been a man of too many words and not enough action, or has done too little, too late.
Sending the right message is a problem now
In terms of BC marketing, permanent mill closures and withdrawn investments are some of the worst news a lumber exporting region can deliver to world markets. From a North American and international perspective, one of the previously biggest problems was labour disruptions and strikes in the BC forest industry curtailing production indefinitely and creating uncertainty with customers for when they would receive shipments. Back then, BC was a formidable industry in terms of size and scale, so strikes impacted global markets.
As lumber production has dwindled to just 40 per cent of its 2005 and 2006 output compared to today (17.4 to 7 billion bf), world markets do not have to factor BC in as much. It is not labour strikes that customers are concerned about now, it is more about all these uncertainties caused by BC forest policy and what that means to a predictable supply of commodity and specialty lumber, as well as remanufactured products from BC. I remember 15 years ago talking to some European importers about BC coastal lumber and they already had diversified their lumber buying to limit their exposure to the BC Coast due to declining output and environmental issues, not to mention strikes and other factors. This situation in BC now appears to be much worse.
My concern is the BC Interior will now be facing a similar, negative response from customers as it continues to downsize and tries to navigate through many government initiatives and roadblocks. Normally marketing wood products to the world is about how good you are and how you can meet customers’ needs with the right product and service. BC continues to lose that ability more and more, as there is so much uncertainty about what the BC forest industry can sustainably produce amidst all the mayhem introduced by government.
All the rhetoric about having “the best forests in the world” and a progressive industry in BC are being eroded and will be further dissipated if a clear and concise message cannot be sent to the world markets. Under the current government, I see this only getting worse, as their forest policies continue to appease urban voters (where they are strongest) at the expense of rural BC and the forest industry. What a shame it has gone this way, and so quickly.
Russ Taylor, President