Tolko Wants Stumpage Equity

Tuesday, February 26, 2008 03:58 AM

Prince George, B.C. – Talks are planned this week between the Ministry of Forests and Range, and the top brass for Tolko. At issue, is stumpage inequity.

Heating a winter harvested log to a summer temperature has proven to be a cost saving move for Canfor and West Fraser. Heating the log releases the winter moisture and reveals the true condition of the wood, complete with cracks. That means the log will have a lower value and lower value means lower stumpage.

For Canfor, CEO James Shepard says it has meant a 5% savings in stumpage.

Canfor and West Fraser have been enjoying the cash benefits of this system since December, while Tolko and independent saw mills have just come on line in February.

Tolko has been asking questions about why it has taken two months for the approval to lower the log grades to be passed on to its mills and those of small independents.

The forestry industry is facing one of the most difficult times in recent history. West Fraser CEO Hank Ketchum referred to the current situation at mills as a “blood bath” as companies cut jobs and curtail production, while Canfor CEO James Shepard called the market conditions a tsunami.

Canfor has started off 2008 with production down 25% from the same time last year, there have been hundreds of jobs lost. At West Fraser, considered one of the most efficient operators in the industry, the fourth quarter loss was $3 million bringing the 2007 loss to $34 million.

Tolko recently announced downtime at its three mills in Williams Lake, and one in Quesnel, could stand to benefit from the cost savings its competitors enjoyed. The four mills will start a shut down March 3^rd, about 1,100 people will be impacted.

Tolko’s General Manager of Cariboo and Alberta Lumber, Rob Fraser, says the return to operation for all four mills will depend on market improvements. "I don't want to call this an indefinite closure as that seems to have taken on a new meaning" says Fraser. He says the company is hoping the fundamentals, i.e. stumpage, price of chips, price of lumber, demand, and the exchange rate, will see some modest improvements to allow the mills to reopen sooner rather than later. "It is never one thing , but I am looking for the seasonal up-tick in construction starts. The closures might be extended for a bit, we will take it one week at a time."

Fraser says Tolko could have experienced some major savings had they been in on the new heated log grading system two months earlier.

When the market will improve is anyone’s guess, Canfor’s CEO James Shepard is one of many who isn’t willing to put a date to it “Right now it is a moving target.”

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Posted on Tuesday, February 26, 2008 03:58 AM in News by Elaine Macdonald

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Comments

Posted by: YamaDooPolCat on February 26 2008 8:05 AM

"..the fourth quarter loss was $3 million bringing the 2007 loss to $34 million..."

Seems like the workers never win. If the mills had made $34 million, the unions would have dragged them off the job to strike for a part of the profits.

Now that the mills are facing huge losses, the union thugs go hide in the bar and the mills have to put the workers on the street. Crazy way to make a living. Worker are expendable by both sides.

Posted by: Dr.Doom on February 26 2008 8:42 AM

Yama, you seem to forget that those "union thugs" were also workers at the mills at one time, so I think they know where the worker is coming from. We are faced with large forest companies that dont care about the workers with families and mortgages. 12 and 10 hr. shifts, 24-7 operations. We are only a statistic to them.The blame lies with the Gov't for not attaching timber rights to communities and mills. Thanks alot Gordon Campbell.

Posted by: dendroaspis on February 26 2008 8:45 AM

Why is there no outrage about the practice of "heating" logs to open cracks. If the heat in the kiln is cranked up enough, even prime saw logs can be made into twisted, cracked and useless bits of wood which when scaled make at best a grade 4 log. Is the purpose of doing this to get timber for free? Is the government complicit in this sham between buyer and seller? The public ought to know what is going on.

Posted by: realitysetsin on February 26 2008 8:52 AM

That West Fraser 3 million loss is misleading to. They are using their non lumber business to offset the losses being sustained in lumber.

Also the manager guy quoted in the story above makes reference to the price of chips. There are 3 big lumber companies in BC. Which one doesn't have a pulp mill? Tolko. So you can bet that Canfor and West Fraser realize that and probably don't pay Tolko fair market value for their chips. Heck, in Quesnel Canfor is chipping whole clearcuts into chips. There is no way that is cheaper than buying a residual chip from a mill at this point.

Posted by: vulcan on February 26 2008 9:09 AM

It sure seem to me that Canfor gets treated alot different then any other mill in this province, they must contribute big money to the liberals. I have to agree with Yama, about the unions hiding out, they collect big money in union dues but don't seem to give a rats behind when the employees that they are suppose to be representing are out of work. But with no dues being paid there jobs can't last forever. I have not heard one thing about what the USW, are doing in Mackenzie for the Abitibbowater workers. All you here about is Canfor, maybe USW has interest in Canfor because they sure seem buddy buddy with them.

Posted by: metalman on February 26 2008 9:47 AM

Wholly Shite.
If it were'nt for politics and the love of money (read: greed) people could just go cut trees and make lumber and paper.
metalman.

Posted by: Andyfreeze on February 26 2008 9:48 AM

It does at least SEEM like a very strange practice...I would like to know more about it!
And Vulcan is also correct...Canfor does appear to be treated differently than other forest companies!
Why is that?

Posted by: thereasonableman on February 26 2008 9:48 AM

I think the outrage is that Tolko was excluded from the process for two months, putting them at a severe disadvantage in an already disadvantaged climate.

Posted by: northman on February 26 2008 9:53 AM

dendroaspis -The purpose of this is to open up minute cracks that do currently exisit in the logs that determine the grade of the log(beetle killed) but arent visible in the winter to scalers. All this is doing is helping the scalers make accurate calls in the log yard with the new grading system.

Posted by: dendroaspis on February 26 2008 10:09 AM

Thanks northman. If its all above board that's OK. As long as they are not manufacturing more cracks in the process.

Posted by: northman on February 26 2008 10:19 AM

I beleive its just in the beetle killed pine from talking to scalers and not green wood.

Posted by: realitysetsin on February 26 2008 10:29 AM

I know a bit about the practice.

Logs are warmed at 85f for 24 hours in a Kiln
The humidity is controlled.

This is supposed to simulate an interior summer day when the checks are wide open and easy to see. It is not supposed to induce more checking.

If a load of green logs is randomly selected for sample they too would be put in the kiln, but very little if any more off grade should be seen as 85f isn't going to do much in 24 hours.

As a taxpayer I think it's a scam.
I gotta think the Americans are going to be all over this as they already think stumpage is too low, now we have forest companies putting logs in kilns?

Posted by: Andyfreeze on February 26 2008 10:43 AM

Now I know,as I had not heard of this process.
I can understand where it may in fact be a good thing when gauging the condition of something like pine beetle killed timber.
In any event,it's a tough slog for these companies!
Here's hoping for better days,and sooner than later!

Posted by: woody on February 26 2008 4:17 PM

Tolko was also given the chance to try putting beetle killed logs in the kiln but opted out at the time. Now they are saying it wasn't fair. They just didn't have the kilning capacity at the time.

From what I have seen in Quesnel, everyone is taking out the sawlogs and peelers and it is just the undersized, spiral checked, and rotten logs going to pulp, not the entire block. There just isn't enough money in pulp(yet)to chip the whole block.

Posted by: Harbinger on February 26 2008 7:27 PM

Cooking logs? And all this time I thought companies just "cooked the books". Oh, well.

Posted by: realitysetsin on February 26 2008 10:05 PM

Clearly whatever Canfor is doing, isn't working. They keep it up and they will be the next to go bankrupt.

Posted by: Dr.Doom on February 27 2008 6:58 AM

Vulcan,It would be nice if the union had a magic wand to wave when times are bad, but their job is to administer collective agreements and to guide and advise the membership. I am completely against the 10% rollback on wages at the CanFor plywood plant. This is a dangerous precedent. I am employed at one of Tolko's idle plywood plants and I can guess what the next topic of discussion will be with managemnent. DONT SELL THE FARM..they will just ask for more

Posted by: tnaques on February 27 2008 2:58 PM

I know a lot about the kiln process, If you put a green log in the kilns, it won't down grade the log. Scalers have a tough time trying to scale logs when you can't see the checks that are already there. The pine trees are dead standing and check while they are standing. Canfor and Westfraser are trying show forestry that the checks are there whether you can see them or not. The mills are still cutting out the same percentage of 2 and better lumber now as they did in the summer. What does that tell you. If West Fraser goes down then we will all be out of work and then what, everyone will bitch about that they have no work. People who bitch about this does not have a clue on what has happened to the forest industry and the pine logs and now the spruce is going to be the same.