Export of raw logs has been an issue for years and today more so as the numbers increase. On the Coast the Mills closed and the increase in logs exported expanded, and that wrong, in the north as the price of lumber and demand increases the cost for shipping becomes less of an issue.The forest act was changed in 2001 and the result is communitys were less of an issue as with the jobs mills produced.We must get bck to proccessing our logs here. logging show with trucking 35 jobs Mill producing the logs 250 plus, staff and management.Everyone should support ways to proccess our logs at home it our future.

The issue may yet be solved by economics. If the so called “Supercycle” of lumber demand persists, the value of the wood might rise to the point that a local mill makes sense. All that is needed is a law that allows local mills the right to bid on all export wood. Modern mills create so few jobs, that the differential between Chinese and Canadian wages may be overcome by the extra costs of shipping raw logs.

Serious thought should also be given to a road tax, so that logging trucks ripping up public highways to Rupert should pay their freight.

There are valid arguments to be made on both sides of the issue. Traditionally,in virtually every jurisdiction, raw log exports have given way to lumber manufacturing closer to the source of supply. Simply because it’s generally more cost effective to ship lumber than logs ~ the volume carried via any method of transportation is way greater, and ‘unit cost is a function of volume’.

Part of the problem we face with this issue today is due to manipulated currency exchange rates, and the fact that some of the Asian importing countries internally use what could be called ‘national credit’ to target a national purpose in obtaining raw materials abroad and sending finished products out into the global export markets to secure a currency acceptable in any international market for any commodity, generally American dollars.

In a sense, they are able to ‘subsidise’ their citizens’ incomes by having the State, or large semi-private conglomerates with their own ‘in house’ bank, finance the provision of many of their living costs.

The degree of control this gives the State or those conglomerates over their citizens’ lives would be intolerable in our culture, but is quite acceptable in theirs. Given the alternative, a life of near endless primitive agricultural drudgery, and the ever present prospect of famine.

In my opinion, we continue to approach this issue, like we do so many other issues, from the foolish perspective of ‘job creation’. And in doing so we are quickly at cross-purposes with ourselves. For here we have those who are or would be in government, those who perpetually talk about industry, attempting, in essence, to make every industrial process as ‘labour intensive’ as humanly possible. While those charged with conducting industry are hell-bent-for-leather trying to find ways to eliminate as many of those jobs through automation, etc., as a matter of controlling ‘costs’ within the financial parameters necessary for survival.

Until we get our heads around the idea that the ‘job’ and the ‘income’ are TWO entirely DIFFERENT things, we’re going to endlessly debate how not to beggar ourselves while actually doing just that.

Not all logs are created equal. Most of the wood around the Terrace area is rotten old Hemlock that is of no use to anyone in North America. The Chinese are willing to buy it so why not sell it to them? That’s a better scenario then milling it ourselves and having it sit because no one is going to use a 2×4 milled out of a Hemlock.

Dix’s entire 5 point plan is so full of holes I’m surprised he was able to deliver it with a straight face.

Axman, along with that rotten hemlock, there is also top grade spruce and fir being shipped as raw logs. It is not ONLY low grade hemlock. There is always going to be raw log shipments, I just wish the government would quit treating us like dummies and saying it is ONLY low quality logs being shipped. That’s like saying, it is ONLY low grade lumber being shipped overseas. We know WHO really gets the low grade lumber. For a lumber town, I am hard pressed to find a lift of lumber where 20%+ doesn’t go back to the lumber yard because they are useless for building with.

We don’t have a monopoly on trees. If the market demands raw logs and can’t get them from here, they’ll go somewhere else.

It’s a complex issue, but it’s better to have some people working and generate some economic activity than have none at all.

We have already sold lumber to the Chinese. Large amounts of it. Which proves our sawmill technology can compete with their low wages. Time to open up all log exports to bidding by domestic sawmills. Proof that we can compete?

http://www2.news.gov.bc.ca/news_releases_2009-2013/2010FOR0177-001275.htm

Posted by: But on April 17 2013 8:42 AM
Axman, along with that rotten hemlock, there is also top grade spruce and fir being shipped as raw logs. It is not ONLY low grade hemlock.

——————-

That is true, however the minor amount of other species that comes out of the Terrace area is not enough to make a sawmill viable.

I’m not sure they even have fir in the Terrace area. Unless by fir you mean balsam, which is another less than useful tree species.

“It just doesn’t add up that we can’t process our logs here given that our exports of lumber are up sharply to China. But it is a decision over which we have no control.”

Companies reap higher profits by exporting raw logs than they would if they were shipped to a local sawmill.

Mind you, the companies could fix that by employing temporary foreign workers in those mills!

Washington and Oregon have struggled with the same problem.

“Foreign log buyers are willing to pay $650 per thousand board feet, while
Northwest mills struggle to pay $500 to $550 per thousand board feet, said Tom
Partin, president of the American Forest Resource Council in Portland.”

Read more about it here

http://www.andykerr.net/storage/conservation-uploads/LOP%2010%20Log%20Exports.pdf

Axeman is right about the timber grades..

Just to add to the dicussion.

When a company wants to export raw logs from provincial crown land they have to prove that they cant find a local processing facility. Exported crown timber needs a ministers signed approval first and even then there are volume restrictions on this timber.

The kicker here is you can export from your private land at will as well First Nations land(federal lands.) There is no reason here for the provincial government to get involved. Example: If you have timber on your land that you want to sell and you have a buyer lined up why would you want the governement to dictate who you sell to? It just creates a barrier to trade and justifies a reason for more buracracy and governement. So be carefull what you wish for.

How about the right of a local mill to match the price of a foreign buyer? That would enable some certainty of timber supply for a startup mill.

The Russians have been down this road as well, and they didn’t blink when they decided it was time to put up an 80% export tariff on raw logs.

Posted by: herbster on April 17 2013 10:22 AM
How about the right of a local mill to match the price of a foreign buyer? That would enable some certainty of timber supply for a startup mill.

———————

Again, the majority of the wood being exported from the Terrace area is low grade hemlock which nobody in BC wants to mill.

However, if any mill in BC was to match the price and guarantee the amount being purchased I’m 100% certain that they would get that wood. Not sure what they’d do with it though. How many warped 2 by 4’s could you possibly need?

Do the Chinese make warped 2×4’s out of it? There is certainly some use for it, or there wouldn’t be a market for it

Posted by: herbster on April 17 2013 12:44 PM
Do the Chinese make warped 2×4’s out of it? There is certainly some use for it, or there wouldn’t be a market for it

————–

I suspect the building code is a bit more relaxed in China.

(axman) I suspect the building code is a bit more relaxed in China.

Yeah, right!! — that must be why they have all those curvy edges up on the roof.

If balsam fir is a less than useless species than why do mills like Polar stock it for sale to specialty mills in the Lower Mainland, and highly successful mills like Dunkley Lumber process it almost exclusively? Its a lot tougher wood than the pine kill wood most mills are processing.

The biggest problem with the North Coast is they don’t have the split off benefits we have in the central interior. They haven’t had pellet plants for hog, shavings, and sawdust… and they don’t have finger joiner mills for trim blocks… and they don’t have pulp mills for wood chips and hog.

How can one compete when the only end product is lumber and the shipping costs for the split off products are prohibitive? 300km is as far as one can expect to ship the split off products economically. If you don’t have the revenue of the split off products to contribute to overhead, then the contribution margin has to be made up in lumber.

Most successful lumber towns have diversified their split off product options. Look at Vanderhoof… one of the worst log supply markets around and yet some of the most successful milling industry in the province.

L&M/Nechako makes lumber for bed frames and its hog powers its co-gen that powers 1500 homes, and its sawdust and shavings make wood pellets for export, and its trim blocks don’t leave the mill site. No waste other than wood chips that find a market in PG. Its a fully integrated mill able to ride the various market highs and lows without missing a beat.

Even Plateau has trim blocks they send to the Fort and Nechako, hog that powers their kiln dryers, and sawdust/shavings going to pellet plants, and wood chips to PG pulp mills. Up in Chetwynd they are building a new pellet plant right at the saw mill so as to keep more of the split off products on site and processed locally. We see this taking shape in Mackenzie and places like Houston are also becoming fulling integrated.

One can not run a saw mill in isolation these days and compete. So what is the provincial policy to create economic regions of integration? All the wasted tens of millions on the pine beetle action committees and they haven’t figure this out yet. What does the province do to incubate the ability for these regions to diversify to a sustainable manufacturing base? Or is it simpler just to export the raw resource for generating government revenue?

Especially if the wood volume has a lot of waste then they need to be integrated.

Try buying a piece of hemlock from your local building supply store, it’s anything but cheap.

Posted by: Eagleone on April 17 2013 3:43 PM
If balsam fir is a less than useless species than why do mills like Polar stock it for sale to specialty mills in the Lower Mainland, and highly successful mills like Dunkley Lumber process it almost exclusively? Its a lot tougher wood than the pine kill wood most mills are processing

————————–

They use subalpine fir, not balsam fir. The cost of getting Balsam fir to Dunkley’s mill would be astronomical.

Going from eagleone’s theme of an integrated set of facilities being needed in the northwest. Wasn’t that what Bell and others were trying to do a few years back in Terrace? They wanted to combine the players who held timber rights with a manufacturing “cluster” of various facilities who could manufacture the various high and low grade logs from the region. What happened to that?

That might be so Axeman, but the mill itself calls their fir Balsam, so maybe they just mix up what they call their wood? Same with Polar when they run heavy wood they call it balsam….

Yes this is a complicated issue. Most people miss the business realities involved here and simply listen to the messages without realising who and why those messages are put out there.
At the center of this and the biggest part of the story that few realise the importance of is simply about who is to profit from the cutting of provincial forests? Is it government through stumpage/royalties/taxes or is it market logging companies or is it milling companies? Who is supposed to get what share? Does the current provincial market pricing stumpage system and independent market logging system allow mills to operate and receive their share? It would seem fairly apparent that on the coast it does not.

How many profit centers can there be and which one of these should be in the controlling position?
Depending on whether a mill has their own timber supply or whether they have to buy most/all timber from the open market loggers makes a huge difference to the delivered wood costs to the mill. When a mill cannot control these open market log costs they are practically guaranteed to fail, especially if they have to compete with log export markets. Trying to figure out why export markets pay more is a useless distraction to solving our issues of efficiently converting our resources into manufactured products on our soil.

Supposing that mills are what government and the general public want then the realisation of who it is that bears the costs of each and every part of the supply chain, of the stumpage costs, then the harvesting and transportation costs and finally the milling costs are all combined and carried by the mills. The mills by far carry the biggest risks. Whether it be the NDP super stumpage of the 90s or the additional costs of new era environmental protection measures such as the forest practises code which came, destroyed and went or increased fuel and labour costs or lesser availability of quality timber or lumber markets going for crap it all lands upon a mills bottom line in the biggest way.

The business of market logging and selling logs to the highest bidder is a different beast than that of modern day milling.
Logging is not easy nor is logging equipment cheap but it is an investment that is portable and versatile and liquid if it need be sold. Modern milling equipment is very expensive and a fixed asset that cannot be simply moved or sold easily and therefore is not liquid should it need to be sold. That difference is that a mill is much more vulnerable to stable long term supply of the logs that it requires. Those logs must be of a cost that allows the mill to profit and continuously upgrade during the majority of market conditions. The investment into a mill is completely lost should it run out of timber or run out of timber at a price which it can make ends meet. It is a worthless pile of scrap iron that costs more to clean up than the scrap is worth. Compare that to hauling the logging equipment to another site or work for another company or simply haul the equipment to the auction where it still has a reasonable value. There is a reason why it is much easier to finance logging equipment than it is to finance a large modern mill that would cost over a 100 million dollars to build and that is the reason why it must be the mills and not the market loggers who control the pricing of logs in this province.

Financing a mill without long term timber supply of its own is nearly impossible as lenders know that if they rely upon open market timber that the mill will likely be short of logs or have to pay so much that they lose money. Imagine a banker lending 100 million to a mill that has no timber supply security and will likely go broke and having nothing but a clean up bill as equity?
A market logger will explain that as the mills are not efficient and add that they are out dated or poorly run because they will not pay the amount that a market logger wants. Nobody asks the question of whether the coastal logging sector is the efficiency problem.

With very few exceptions every mill in the province has been built because it had its own long term forest tenure and therefore could control its log costs while being assured of adequate supply. The second reason that most mills were built was that the forest tenures were provided in (almost every instance) only to those companies who would build and operate a mill of some sort.
That has changed over the years especially on the coast where numerous and sizable tenures have evolved from directly feeding a specific mill into harvesting/market logging operations selling and trading to anyone.
Until the government restores the principles that it used to require timber tenure holders to manufacture their timber there is simply no reason why anyone including tenure holders would build their own mills and risk those investments. It will not happen until they have no option otherwise and you can thank the liberals for disconnecting our provincial forest resources from the communities that were built and depended on them.

If the goal is to have local milling and mill jobs and be regarded as the economic vehicle which can sustain a community then the playing field must be set up by government to have that happen. To think that anyone in their right mind will invest into mills without them given reasonable chance to succeed over the long run is dreaming as it simply is never going to happen.

I concur with foresight. That’s a most excellent post. Well said.

Pat Bell insisted when he was elected that he was elected as a free market deregulator. The post above points to the limitations of rigid ideology… especially as it goes with deregulation.

If we are to have log yards to provide access to logs for those without tenure they should be run by the province as crown agencies with industry, community, and employee stakeholder input.

Where we are a version of that was tried, Eagle. It was a complete flop.

Getting the ‘government’ involved in the running of log yards that way, at ANY level of government, simply ensured the logs, on average, ended up being too high priced for a mill to cut viably, and too low priced to keep those who are logging logging.

In theory, it should have been a great success. In practice, it proved to be anything but. It could be classified in the same folder as Bill Bennett’s old BC Small Business Forest Enterprise program, or Glen Clark’s Jobs and Timber Accord.

Or going back further, the whole notion that we could have Sustained Yield Forestry through TFL’s. That latter was clearly done in by ongoing inflation, and government’s own attempts to induce it (to maintain employment and ‘stimulate’ a cyclically moribund economy where business profits, in dollars, were insufficient to fully amortise bank loans, leading the banks to curtail further lending, making the situation worse).

That inflation wrecked the whole concept of sustainability as companies had to cut more timber faster to try to keep operating where their operating costs were rising faster than the prices of the ever increasing supply of their products were.

In my opinion we will NEVER succeed in setting a sensible forest policy trying to do it that way we have been. We need to look at the ‘bigger picture’ involving how industry is financed, understand clearly that inflation and prosperity are two different things, the same as jobs and incomes, are two different things. And decide what it is we REALLY want.

Russia never implemented the 80% export tax on logs. Because they wanted to enter the World Trade Organization they kept the export tax to 25% after a certain quota. Some logs are exempt from the tax.

Lumber exports to China for the most part are low grade lumber used for concrete forming and do not attract high prices. The high price for lumber is paid by the Japanese, and Americans.

When the price of lumber in the US drops below $300.00 per 1000fbm the Canadian export tax of 15% kicks in. This tax makes exports to China look more attractive, because it allows BC mills to continue to get all the benefits of integration of their mills, even if they are just making operating costs on the lumber. There is no 15% export tax on lumber sales to China.

So with high prices for lumber in the USA and Japan log exports to China will probably decline. When the price drops, they will increase.

The “cluster” of a number of different types of wood processing facilities in the Northwest was a good idea in my opinion. As I understand it the costs to sort and distribute a number of species and grades/sizes should have been reasonably low and likely less overall to doing it in any other fashion. It would be very efficient should it be possible to have all the users of the various sorts located adjacent to the sort yard. It should in theory be a cost efficient solution to bringing the full forest profile (and dramatically improve utilization) to a high speed merchandising/sorting system to which could then directly feed a number of specialised facilities. Everybody should win by doing that, especially a community such as Terrace which at that time had essentially no operating mills. So why hasn’t that happened there or in most places for that matter?

Everyone except the once bitten socredible wants to increase employment from local manufacturing of our forests. Everyone wants to improve the utilization of our forest resources and yet our governments have given very little but lip service to helping that happen. We see the consolidation of mills being larger and fewer and we are told that is the only way we can have any forest industry successfully operate in this province even though that means less and less employment. We used to legally require “close utilization” when harvesting our timber and now we have the “take or pay policy” which allows cutting down and leaving behind whatever species, type, grade, size or volume of wood that a company doesn’t want to remove from the site and that is ok because that company says it isn’t profitable for them to utilize it. Common sense aside, it was determined by our government that we should allow wasting of what is widely known as our quickly diminishing remaining commercial forests and we do that so less people can work today and for sure far less will be able to work in the future.

Few realise that in many parts of this province that the forest profile that remains is really the “guts and feathers” of the era of its previous abundance of premium timber and desirable grades and species. Who is it or how is it determined that something is or is not useable or profitable or is it actually a matter of it being simple/easy/lucrative instead of hard/difficult and less profitable? There is a difference between a forest profile that is deemed by some large scale only interests to be “worthless waste” and what the rest of us should demand as deemed to be perhaps worth less but still worthwhile and feasible and definitely not wasted. Common sense aside, our government listens and does exactly what it is told by a few forest industry giants even when it goes against everyone else’s interests.

What that translates to is that the very large forest companies are facing a reality that the scale of the operations which they operate do not fit with every timber supply area they dominate. Their solution is to increase production which increases the consumption which exponentially expands the area and distances which are required to support them. Your timber beside your town is no longer enough to sustain them. Actually it was Mike DeJong in 2003 that decided that the timber supply that was allocated to a company so that it would build and operate a mill in your community was now allowed to close that mill and take their timber (the good wood at least) anywhere they like. Common sense aside, it is determined by our government that the unlimited increased production and consolidation and improvements to the profits of fewer super sized mills is more important than the sustaining of an increasing number of doomed communities in this province.

From a big forest business, all perfectly profitable and understandable from their standpoint of making money doing what they do in a big way. However, it is our government that is supposed to be responsible to more than just those who no longer fit with the limited resources which remain with that of our needs and every other aspect of governing the social and environmental and economic needs of this province and its people. That is not happening as every part of our provincial forest policies introduced over the last several decades has lead us to this point where it is ONLY the highest possible volume operations and their profitability that matter to our government.

To answer Ben’s question of what needs to be fixed in all this is to first realise that practically nothing that exists today in our forest act, our forest policies and regulations have anything to do with proper management of our provincial forests for the best interests of the people, its communities or the economic or environmental wellbeing of this province.

Most of this legislation is garbage, our phoney stumpage system is garbage and needs to be disposed of. The Americans will gladly bring their own gas to help that be burnt and bring the softwood war to an end and we will save lots of money not having to pay to defend the companies who rip us off.

From the times long ago when there was local accountability of how things were managed and locally controlled mostly by a Forest Ranger rather than a pile of useless central command bureaucratic nonsense that works feverishly at paving over all truths and common sense to act on the wishes and demands of a few international companies who have no particular interest in our wellbeing. That fixed and then we are good to go.

I don’t have anything against increasing employment from our local forests, foresight. Provided that employment is needed to actually satiate a genuine consumer demand for our forest products. And not just an excuse to pay someone to essentially ‘dig a hole and then fill it in again’, ad infinitum. Only using our forests to do what any old bare piece of earth would do. Just to say they’re ‘working’. With our main purpose being to keep them that way, and under control. Not to produce something that actually adds to the ‘wealth’ of the world. To me, that is simply a tragedy of human effort. And a great waste of a valuable resource.

As I’ve said before, we really need to look at the bigger picture before trying to correct many of the problems that you’ve mentioned above. When we fail to do that, we’ll just find we’re going to go round and round in circles. Repeating once again what’s already been tried, and failed, and won’t likely improve the next time around.

In my lifetime I’ve seen our forest industry go from one which believed its participants had to be totally vertically integrated to survive and prosper, to one that’s recently seen almost all of the giants spin-off one thing after another in a frantic desire to get back to some ‘core business’ that’s supposed to be profitable. (And they’ll no doubt soon find it isn’t either, if they haven’t already. It may be profitable, but it’ll never be profitable ‘enough’).

The problem we don’t want to face up to is how the ‘accounting’ that every business uses and bases their decisions on ~ accounting using figures denominated in ‘money’ ~ actually relates to the economy as a whole and ‘money’ itself. Trying to set down any kind of industrial policy before we’ve straightened that out is just dancing in the dark. Especially one that puts us in a position where our success is predicated on ‘capturing’ some export market, and increasing it to the detriment of that country’s own industries.

Well socredible, of course there are more details to this than what can be said in these posts.

Just because there is a bigger picture out there doesn’t mean we should procrastinate here in this province and sit and wait for our future to be further destroyed. You can poo-poo change by inventing all sorts of fears of the bogey-man having to “dig and fill holes” but those freakish extremes that you speak of do not warrant leaving things as they are.

Your continuing theme and reference to ~money~ and ~accounting~ is indeed at play but it is the depth of which power and influences by big business throughout our government that dictates how that the game be played which our wealth in natural resources are converted to the money that is delivered to them.

Facing the fact that we have real problems with our government allowing big industry to run their agenda overtop our interests has to stop.