Mar 2, 2009

Memo to Colin Hansen: Time for forest industry reality check


If Finance Minister Colin Hansen’s budget forecasts are right, British Columbia’s battered forest industry is in for a modest recovery this coming fiscal year and a more robust recovery in 2010/2011.

Gian Sandhu isn’t buying it.

Owner of the Jackpine Group of Companies in Williams Lake, Sandhu was a leading light in British Columbia’s interior forest industry, at one point employing upward of 300 people. In December, with his workforce down to 116 employees and over 27 million board feet of product sitting on his lot with not a buyer in sight, he was forced into receivership. In an industry renown for turning out billions of board feet of commodity lumber, Sandhu’s workers took a different approach, making high-value, re-cut boards that were actually stronger than traditional lumber products. His workforce (non-union but paid close to union scale) turned out made-to-length, tension-tested floor joists and rafters as well as a range of laminated furniture and shelving panels.

But no amount of entrepreneurship could shield Sandhu from the economic havoc unleashed by the collapse in the US housing market. “I’ve never seen this in close to four decades in the industry,” Sandhu says. “There are no buyers. In previous downturn cycles you could sell. Not now. We’re pretty much dead.”

Sandhu is not alone in being stunned by the breadth of the downturn. Elsewhere in his central BC home city, three sawmills owned by Tolko Industries Ltd. are idled at a loss of another 600 jobs, plus a related 150 or so jobs in logging and related activities. And at least one locally owned independent mill – Sigurdson Bros – is also down putting another 100 workers off the job.

Sandhu says that that the breadth of the housing crisis in the US throws into question any economic recovery this year. “There’s 11 months of [new] unsold houses in the US,” Sandhu says. “Then there’s the existing inventory that the banks have taken over. That’s another nine months or so of inventory.”

The sheer size of that unsold inventory, will delay the advent of even a modest recovery for several quarters Sandhu believes. In the meantime, a steady deterioration in the quality of trees in BC’s interior continues, thanks to the ongoing mountain pine beetle attack. That likely means that only some of the many idled mills throughout the province will reopen when markets pick up.

To prepare for that reality, Sandhu says governments need to introduce new policies that encourage a transition in forest industry output – one where fewer commodities are made because there are less raw materials to work with, and more jobs are created by taking commodities and re-working them into higher value products. Barring significant changes in industry output, a 20 per cent increase in forest industry revenues, as Hansen predicts will occur in two years time, seems a stretch.

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