Forestry has long been an anchor, if not the very backbone, of B.C.’s economy. Lumber, pulp and paper have typically been the province’s most valuable exports, and the sector a major employer in small town B.C.

But lumber is no longer king, it seems, and B.C.’s forestry sector is shrinking at an alarming rate.

Last year, metallurgical coal and natural gas both outstripped lumber as B.C.’s most valuable export commodities, and the number of people employed in forestry has been steadily declining, thanks to a wave of sawmill closures and, more recently, closures of pulp and paper mills.

Central 1 Economics noted earlier this year that 800 jobs were lost from sawmill and pulp mill closures in the first two months of 2023 alone, with towns such as Port Alberni, Chetwynd and Houston hit hard by the loss of major employers.

In 2022, B.C. metallurgical coal exports totaled $11.9 billion, followed by natural gas at $7.7 billion and lumber in third place at $7.3 billion, according to BC Stats. That is a reflection of both of higher prices for coal and natural gas, and lower lumber prices and falling production.

Ken Peacock, chief economist for the Business Council of BC, noted that in the early 1990s, economists could forecast B.C.’s economic health just by looking at housing starts in the U.S. – that’s how important forestry was to the economy.

That is no longer the case.

Forestry is still important, he said, especially in terms of providing jobs, but it has been shrinking in size relative to other sectors.

“Forestry has long been the biggest backbone,” Peacock said. “Now it’s very much energy. When LNG comes on, then energy eclipses – in terms of export dollars – forestry. Mining will surpass it, too – mining and oil and gas.

“It doesn’t diminish the importance of forestry, but it is no longer the king. It’s always going to be large in B.C.’s economy. It’s just the proportion is going to diminish.”

In the early 2000s, logging and wood manufacturing (including sawmilling and pulp mill activity) made up about five per cent of B.C.’s GDP and employed 90,000 people, Central 1 Economics estimated. As of this year, forestry employed fewer than 50,000 and accounted for only two per cent of provincial GDP.

And if projections made by forest sector analysts David Elstone and Jim Girvan prove right, B.C.’s forestry industry will be much smaller a decade from now.

The industry’s decline has a lot to do with the Mountain pine beetle epidemic. It has created a timber famine, but first it created a feast.

Girvan and Elstone say there were 111 sawmills in B.C. running full-tilt in 2005 on an annual allowable cut (AAC) that had been boosted to 86 million cubic metres to allow forestry companies to salvage dead and dying beetle-kill pine.

Today, with most of that beetle kill wood used up, the AAC has fallen to 62 million cubic metres, they say, and nearly half the sawmills that operated in 2005 have been shuttered, with 64 remaining. At the current trajectory, they warn that, by 2035, the AAC will be down to just 38 million cubic metres and B.C. will be down to just 47 sawmills.

In an attempt to do more with less, the NDP government has been trying to encourage higher value-added manufacturing – engineered wood products, for example – and using more wood in construction. Just last week, it announced $500,000 in grants to businesses in the Kootenays, including $400,000 for Creston’s J.H. Huscroft Ltd. to upgrade its sawmill to process multiple species of timber simultaneously and produce a wider range of wood products.

“The province is doing an excellent job on promoting mass timber, but we still haven’t figured out where that fibre is going to come from to supply that type of manufacturing,” Elstone said.

On the coast, many older sawmills were built to process large old-growth trees. But there’s little of that old growth left, and when these older mills shut down, few companies are willing to invest in newer mills designed to process smaller second-growth trees, because they simply can’t get guarantees of a reliable fibre supply, said Tom Sundher, president of Sundher Group, which does specialty sawmilling.

“Nobody’s going to invest if they don’t have the surety of supply,” Sundher said. “I can’t build a $40 million mill if the government doesn’t assure me of a log supply, and they’re not.”

Because B.C.’s forestry sector is so highly integrated, the loss of major sawmills in recent years has also contributed to the permanent closure of pulp mills, which rely on sawmills for wood waste. Since 2020, pulp and paper mills have shuttered permanently or indefinitely in Powell River, Mackenzie, Prince George and Taylor, resulting in the loss of hundreds of high-paying jobs.

When a region loses vital infrastructure and expertise, they can be lost for good, warned Harry Nelson, a professor of forestry at the University of British Columbia.

“If we don’t maintain some infrastructure – some mill capacity and stuff – we start to lose these possibilities and opportunities,” Nelson said. “It gives us fewer options for how we’re going to manage our forests. Once you lose the mill, they don’t come back in this part of the world it seems.”

The Fort Nelson region is one example of this. Despite having an abundance of timber, Fort Nelson has struggled to revitalize its forestry industry since mills shut down there in 2008. A consequence of the mill closures was that a railway line between Fort Nelson and Fort St. John has not been maintained to the standard needed to handle major freight volumes, according to the Fort Nelson First Nation, and would need to be upgraded to facilitate the construction of a new wood pellet mill in the area.

In recent years, B.C.’s biggest forestry companies have been investing almost everywhere but B.C., as timber has become more scarce and the cost of operating has become too high. A recent announcement by Canfor Corp. (TSX:CFP) that it plans to spend $200 million to rebuild a sawmill in Houston, B.C. was a rare exception to the trend of B.C. forestry companies investing outside of the province and mostly in the U.S.

Facing a declining timber supply, high operating costs, a moratorium on cutting old-growth trees, new caribou habitat protection measures, a new forest landscape planning scheme and tenure reforms, the industry appears to be in reset mode, as it tries to figure out how – or if – it can continue to do business in B.C.

“We’ve sort of been in this period of disarray, with the government throwing up all these different policy initiatives,” Nelson said.

Despite all the challenges the industry faces, Kurt Niquidet, vice-president and chief economist for the Council of Forest Industries (COFI), said he believes forestry will remain a major economic anchor for B.C.’s economy. The outlook for lumber demand is at least good, thanks to demand for new housing in the U.S.

“I think the forest sector will continue to be a major contributor, if not the No. 1 export from the province, certainly within the top three,” Niquidet said. “I think within the forest sector there are going to be some downward pressures on the annual allowable cut, but the sector, I think, will continue to be a big driver of economic activity in the province.

“The demand-side outlook for forest products – wood products for construction – is really quite bullish once you push past current interest rates. The long-term outlook, I think, is very positive. It’s just a matter of making sure that B.C. has appropriate policies in place.”

The softwood lumber war that never ends

With $8.4 billion worth of softwood lumber duties sitting in deposit accounts, one would think that Canadian and U.S. governments would be seeking a resolution to the issue with more urgency.

But it has been eight years since the last softwood lumber agreement expired. The North American Free Trade Agreement (NAFTA) has since been renegotiated without a resolution to softwood lumber duties.

Meanwhile, the biggest forestry companies in B.C. – Canfor Corp., West Fraser Timber Co. (TSX,NYSE:WFG), Interfor Corp. (TSX:IFP) and Tolko Industries – have been buying up American sawmills over the past decade, which has given them something of a hedge against the duties.

Is it possible that forestry just isn’t as important to the Canadian economy as it once was, and that resolving the softwood lumber dispute is therefore no longer a priority? Should the industry get used to duties as a permanent cost of doing business with the U.S.?

“There is certainly no urgency to reach a resolution, I think, on either side,” said Nelson. “Folks have learned to live with it.”

Linda Coady, president of COFI and the BC Lumber Trade Council, said she believes there must inevitably be a resolution to the dispute.

“We do not see the duties as an ongoing aspect of trade,” Coady said. “We are very actively involved in the litigation pathway around the duties.”

Canada has been challenging the duties – recently lowered by the U.S. Department of Congress to 8.6 per cent from 18 per cent – through Canada-United States-Mexico Agreement (CUSMA) dispute panels. But there have been years-long delays in forming these dispute panels, so the process is taking longer than it has in the past.

“The appeal process is running about three years behind what the normal expectation would be,” Coady said. “These appeals are starting to roll now, three years late, but nevertheless they’re up and running.”

Whereas in the past, softwood lumber duties were a major impediment and preoccupation for B.C. forestry companies and governments, they may no longer be the top concern, at least not for companies operating in B.C. A dramatic decline in available timber now constitutes the single biggest business concern for the province’s industry.

RBC Capital analyst Paul Quinn says duties of 8.6 per cent are manageable.

“I think Canadian companies are well-versed in running their operations with a 10-per-cent duty,” Quinn said. “It’s not a game-changer.”

But he warns that, if there isn’t a resolution to softwood lumber duties soon, Canadian forestry companies could be facing duties of 20 per cent to 30 per cent in 2025.

“Then you’ll see a lot more Canadian companies going, ‘Wait a second – we’ve got to resolve this,’” he said.

nbennett@biv.com

1,402 Responses

  1. Wow, wonderful blog layout! How long have you
    ever been running a blog for? you made running a blog look easy.
    The total look of your web site is excellent, as well as the content material!
    You can see similar here sklep internetowy

  2. Attractive part of content. I just stumbled upon your weblog and
    in accession capital to say that I get in fact loved account your weblog posts.
    Any way I will be subscribing in your augment or even I achievement you
    get entry to persistently fast. I saw similar here: E-commerce

  3. Hey! Do you know if they make any plugins to help with SEO?
    I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very
    good results. If you know of any please share. Many thanks!
    You can read similar text here: Sklep internetowy

  4. Good day! Do you know if they make any plugins to assist with SEO?
    I’m trying to get my blog to rank for some targeted keywords but I’m not seeing very good gains.
    If you know of any please share. Cheers! You can read similar art here: Hitman.agency

  5. Hey there! Do you know if they make any plugins to help with SEO?
    I’m trying to get my site to rank for some targeted keywords but
    I’m not seeing very good success. If you know of any please share.

    Many thanks! I saw similar text here: GSA Verified List

  6. Wow, amazing blog format! How lengthy have you been running a blog for?
    you made running a blog look easy. The full glance
    of your site is wonderful, let alone the content! You can see similar here dobry sklep

  7. Ad impossibilia nemo tenetur — Нельзя заставлять выполнить невозможное.

  8. Amicus cognoscitur amore, more, ore, re — Друг познаётся по любви, нраву, лицу, деянию.

  9. 7 Small Changes You Can Make That’ll Make A Big Difference In Your Truck Accident Compensation Claims truck
    accident lawyers dallas (https://m.makeforests.com/member/Login.html?noMemberOrder&returnUrl=Https://hartman-camacho-2.hubstack.net/what-are-the-reasons-you-should-be-focusing-on-enhancing-truck-accident-lawyers/)

  10. 1kg Coffee Beans How Many Cups Techniques To Simplify Your Daily Life 1kg Coffee
    Beans How Many Cups Trick That Every Person Should Learn 1kg coffee beans how many cups
    Patti

  11. The 3 Most Significant Disasters In Emergency Car Locksmith The Emergency Car Locksmith’s 3 Biggest Disasters
    In History fobs

  12. Strollers Strollers Tips To Relax Your Daily Lifethe One Strollers Strollers Trick That Everybody Should Know strollers strollers (Otilia)

  13. 7 Effective Tips To Make The Most Out Of Your Double Glazing
    Units Near Me double glazed window replacement, Jay,

  14. Fridge Freezer Cheap Tools To Help You Manage Your Everyday Lifethe Only Fridge
    Freezer Cheap Trick That Every Person Must Be Able To fridge freezer cheap; Beth,

  15. Pushchair Easy Fold Techniques To Simplify Your Everyday Lifethe
    Only Pushchair Easy Fold Trick Every Person Should Know pushchair easy fold – Jon,

  16. Ghost Alarm Installation Near Me Tools To Streamline Your Everyday Lifethe
    Only Ghost Alarm Installation Near Me Trick That Everyone Should Know Near me

  17. Windows And Doors Luton Tools To Streamline Your Everyday Lifethe Only Windows
    And Doors Luton Trick That Every Person Should Be Able To
    Windows And Doors Luton (http://In.Dpgst.Com/Member/Login.Html?Nomemberorder=&Returnurl=Http://Airbusoxygen4.Bravejournal.Net/Glass-Repair-Luton-The-History-Of-Glass-Repair-Luton-In-10-Milestones)