Fractured Economics From The Log Exporters
Wednesday, June 04, 2008 03:45 AM
By Kim Pollock
In a recent op-ed piece Private Managed Forest Landowners Association executive director Rod Bealing offers his views on the economics of the forest industry and log exports. ( see Private Land owner Calls for Log Exports)
Bealing’s article reveals a very strange view of how things work.
Bealing suggests that today Coastal BC has the highest costs of any forest sector on Planet Earth. He blames wages and government regulation.
But Bealing doesn’t remind his readers that BC has some of the most rugged terrain of any place on Planet Earth. He also doesn’t point out that on Crown lands, companies must go farther and farther into the woods to get less and less timber, while on private lands companies are knocking down less-than-40-year-old Douglas firs for export. Currently as Bealing says “private forest owners invest decades growing trees” – actually, three or four decades at most.
Bealing’s biggest sin of omission, however, is his failure to acknowledge that BC’s problem with “mill-cost competitiveness” flows from companies’ continued failure to invest in new plant and equipment. As long ago as 2001 Dr. Peter Pearse warned Coastal companies they weren’t even meeting their depreciation costs. Indeed, this is increasingly a problem across BC. Steelworkers’ recently showed, for instance, that five big BC companies invested 1.65 times as much in solid-wood mills in the US than the entire industry invested here in BC between 2004 and 2007.
In other words, BC mills are inefficient and uncompetitive because firms like Interfor and Brookfield Asset Management prefer to buy sawmills in the US rather than upgrade their BC mills. They say “we won’t invest because we aren’t making profits;” the real truth is that “they won’t make any profits until they invest.” That leaves workers trying to compete globally in old, run-down, dangerous mills.
Even more curious are Bealing’s arguments about the relationship between timber harvesting and manufacturing. He thinks lower log prices would make it harder for BC mills to get wood. But it’s not true! Sawmills export lumber, not logs – logs are a sawmill input, therefore lower log prices mean opportunities. Everything else being equal, the lower the price of sawlogs, the more lumber and money sawmills make.
Bealing also thinks you produce more jobs by exporting logs than by processing them in BC. Of course, that’s also untrue. Bealing suggests that “in BC there are two woods jobs for every sawmill job.” This is simply false. Just one of many examples: Dr. Gary Horne’s paper Estimating Economic Impacts for the BC Forest Sector, published by BC Stats in October 2005. Dr. Horne, reporting data from the 2001 provincial input-output analysis, found that while logging and forestry produced $5.17 billion in output, using the same volume of timber the wood sector added $11.2 billion, pulp and paper another $6.16 billion. Had we simply exported all those logs as Bealing suggests we ought to have done, we would have thrown away $17.36 billion worth of production, an amount fully 3.3 times as great as total logging output.
That’s why Steelworkers propose several measures aimed at increasing manufacturing. We suggest an equivalency tax equal to the difference between the domestic and export price on all raw-log exports, whether they are from private or public lands. That would mean nearly no logs would be exported,; that would drive down the price for domestic sawmills, encouraging them to buy logs.
In addition, we suggest moving the collection of stumpage to the back door of the sawmill, value-added plant or pulp and paper mill. Again, the domestic price of logs would fall some more, while at the same time encouraging companies to add more value to their product, this driving down the tax per unit. The Crown would collect just as much or perhaps more revenue, more jobs would be created. Everyone wins – except the big, greedy log-export companies who employ Bealing.
And therein lies the rub. TimberWest and Island Timber Lands are responsible for over 90 percent of BC’s log exports. They don’t want any changes to the status quo because they are making out like bandits. Sawmills and pulpmills struggle to get fibre –Gord Hamilton noted recently in the Vancouver Sun that we’re actually importing sawdust. Meanwhile TimberWest, according to company statements, is creaming some of BC’s best timber at a rate of from 10 to 15 percent per year. Do the math: even at the current, scandalous under-40-year rotation age, that means liquidation, a fact TW acknowledged recently when CEO Paul McElligot declared that from now it’s a real-estate company, not a forest company.
British Columbians should ignore the log exporters’ weird science. It’s obviously just self-interested gobbledygook from companies that don’t want any change because for them, the status quo is just fine.
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Posted by: pisspulper on June 4 2008 7:40 AM
IMO its further evidence that the doors are wide open for the wholesale of all of BC's assets whether it be the rail road that serviced the interior, the forest them selves, or the rivers that run through them. Meanwhile we begrudge that we have to vote for the liberals... because we can't have the n.d.p. back in power????