5/13/05

Lumber firms plan to expand

They want to take advantage of larger harvests resulting from pine beetle infestation

BY DERRICK PENNER
VANCOUVER SUN

British Columbia's lumber companies are poised to pour huge amounts of capital into their already rapidly modernizing mills to capitalize on the rare opportunity of expanded harvests due to the mountain pine beetle.

A panel of forestry experts told a Vancouver Board of Trade breakfast meeting on Thursday that such investment will help solidify the companies as efficient, high capacity, low cost producers of wood in the global marketplace.

Canfor Corp. CEO Jim Shepherd said that his company's plans for the future include a $100 million retooling of its Plateau sawmill in Vanderhoof.

"Canfor, as a company, has a number of these opportunities [to pursue]," Shepherd said. "Over the next three to five years, you will hear of significant investments in this industry in this province, with money being spent in the province of B.C."

B.C.'s forest sector posted its most profitable year on record in 2004, despite the punishing combination of softwood lumber duties and a rising Canadian dollar that drained, by accounting firm PricewaterhouseCoopers' estimate, some $3 billion from the industry's bottom line.

Shepherd said Canfor is pouring investment into its operations to make use of the huge amount of pine beetle infested timber that companies are furiously harvesting before the trees are dead and useless as lumber.

Craig Campbell, forest industry practice leader for PricewaterhouseCoopers, said the mountain pine beetle has infected some 160 million cubic metres of Interior pine trees, which is equivalent to two years worth of B.C.'s entire timber harvest.

"I think [the pine beetle] has been a little bit maligned," Shepherd said.

He added that while some people look at the beetle infestation of B.C.'s forests as devastation, it also provides an opportunity.

"The worst thing we can do is nothing and sit back and do nothing, let the pine beetle do its thing and let the economic value [of infested timber] dwindle away," Shepherd said.

Canfor hopes to use beetle wood as low cost fibre to expand its markets by selling Canada's wood platform style housing in the rapidly growing economies of China and India.

For instance, Shepherd said beetle wood could be used to produce the machine stress rated lumber used in roof trusses for the roofing systems his company is promoting in China.

John Allan, president of the Council of Forest Industries and the B.C. Lumber Trade Council, one of the key lobby groups fighting the Canada U.S. softwood lumber dispute, said the pine beetle infestation will give forest companies about seven or eight years worth of elevated timber harvests before the available wood begins to decline.

"It's pretty clear [the timber] supply is going to drop off," Allan said. "It's not a matter of if we can remain competitive or not, we're going to have less [timber] supply for a fewer number of mills."

Allan added that it is incumbent upon governments to first reforest the beetledevastated lands, and then help forestdependent communities to find other economic opportunities.

Shepherd, however, remained skeptical about a doomsday scenario from the pine beetle. He said not every pine tree is infected, and timber companies will still have access to good stocks of spruce and balsam trees to harvest, as well as stands of healthy pine trees.

Even as the pine beetle harvest dwindles, Shepherd said Canfor will simply scale back its new, highly efficient mills from round the clock operations.

"We wouldn't be putting $100 million into [Canfor's Plateau mill] if it was only a 10 year horizon," Shepherd said. "I'm looking at sustainability forever."

Campbell said the B.C. industry's bet on building big, high capacity, high efficiency mills has paid off. Canfor and rival West Fraser Timber Co. Ltd. have made themselves the world's second and third largest lumber producers, and the province's solid wood companies are among the Canadian industry's most profitable.

Campbell said the B.C. Liberal government has helped mills take on their "bigger is better" position by changing the rules for harvesting restrictions and requirements to mill timber near where it is cut down.

"We've gone a long way, with the Liberal policy reforms, [toward] getting the economics of regulatory reform right," said George Hoberg, director of the forest resource management department in the University of B.C.'s faculty of forestry.

He added, however, that the government has had less success in implementing its objectives for revamping forest management.