Chineese Philosophy In Lumber, Why Buy the Milk When You Can Own The Cow

By Ben Meisner

 Prince George - It was best put by an insider in the forest industry this week when told that the Chinese had bought the assets of some of Pope & Talbot’s operations.

 “I’m not opposed to trying to develop new markets but I am opposed to government / elected officials creating false hope or using unfortunate times to their own advantage. Of course the Chinese business person sees the writing on the wall too - why buy the milk when you can own the cow - so in they come and buy the Pope pulp mills,”

Sinar Mas of Shanghai has just purchased Mackenzie Pulp, Harmac pulp in Nanaimo and a pulp Mill in Oregon for $225 million. They also bought a mill owned by Pope and Talbot in Ft St James, no price mentioned for that purchase.

It also lays out a pattern of what the Chinese intend to do as they extend their influence into the forest industry in Canada.

Again from our insider in the industry, these comments:

Also in our ongoing talks about China and all the wood we should sell them here is some more data. The final numbers aren’t added up yet but  preliminary shows about $95 million dollars of Canadian wood products were
sold to China in 2007 that’s up a whopping $25 million over 2006 okay so not too bad right. But compare that to the good old US of A  -  we sold $3.6 billion of wood to the US in the same period. I think we need those boys down south.

Mayor Kinsley has made 8 trips to China with intent of expanding trade. The results speak for themselves. What does $95 million dollars in lumber sales mean?  Well it is about three quarters of the production of one average mill in Prince George.  If we are making inroads they are very slim pickings indeed.

Now to add to the dilemma in the forest industry you need to look at the housing starts in Canada, they will drop from 228,343 in 2007 to 211,700 in 2008 and to 204,700 in 2009.

Those numbers may not be significant in the lumber industry, they represent only about 10% of production, but if you add in the Pine Beetle ,the US market and  the dollar, suddenly they become very important for companies in difficult times finding the sledding just more difficult.

Now whether the province recognizes that we are heading into a slump and the areas to be most heavily affected will be communities such as Prince George is not known. That will be spelled out in the budget to be presented by Carole Taylor. Taylor in her third quarter report made no bones about the fact that we in this province need to set some money aside for the leans times ahead. Whether she is now increasing that stance we will have to wait and see.

In Prince George, as we head into budget talks in the city, we continue to hear an air of optimism. The glass is half full not half empty they suggest. Spending is great in an election year.

The problem may on the other hand be that the economy will catch up with the locals before that election.

I’m Meisner and that’s one man’s opinion.

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