Tag Archives: Canfor

B.C. forest companies can’t get enough rail cars to ship products to customers

B.C. forest companies can’t get enough rail cars to ship products to customers.

VANCOUVER – B.C. forest companies say they can no longer get enough rail cars to move their products to market at a time when the U.S. housing market is going through a major recovery.

U.S. housing starts topped one million in March on a seasonally adjusted rate, more than double the low point hit during the recession, prompting a run on rail cars that Canadian mills use to get their wood products to market. It’s not just lumber that’s being affected. Oriented strand board, plywood and even pulp inventories are building at the mills, forcing companies to turn to trucks – which are also in short supply.

“If you had a pickup truck, we would use it,” Bob Hayes, transportation vice-president at Canfor Corp. said Tuesday.

Earlier this year, Canfor came within four hours of shutting down a pulp mill because of a rail car shortage. Pulp production is also up and because it is perishable, it cannot be stored outside, Hayes said. Canfor has erected a big-top style tent at one of its Prince George pulp mills to store inventory but so far hasn’t had to use it.

However, the rail car crunch is adding to costs, from additional trucking to causing ships to be delayed in port, he said.

“We were trucking this week from Prince George to Squamish terminal. We have never done that before. We had to find emergency trucks this weekend to go from Prince George to Squamish to keep the product flowing to the vessels and to keep the warehouses from overflowing,” Hayes said.

“I think transportation and the lack thereof, is going to be the biggest challenge for B.C. forest products companies to get their product to market in 2013 and beyond. Usually economics will drive solutions, but right now, that solution is to constrain the industry.”

Catherine Cobden, executive vice-president of the Forest Products Association of Canada, said the rail car shortage is systemic, with both CN and CP unable to deliver enough cars to meet growing demand.

“It’s very disappointing at a time when markets are rebounding and we are gearing up to support and supply, not just our traditional markets but our growing emerging markets,” she said.

“Our members are saying in some cases they are only getting half the cars they need to service their marketplace. Obviously this is a very difficult and untenable position for us.”

U.S. housing starts reached 1.036 million units in March on a seasonally adjusted rate, seven per cent higher than February and 46.7 per cent above March 2012, according to the U.S. lumber publication Random Lengths. March’s rate was the highest since 2008. The 2013 forecast had been for from 885,000 to 985,000 starts.

Doug Routledge, acting president of the B.C. Council of Forest Industries, said B.C. sawmills have responded by returning to two shifts. Employment in the forest industry has climbed marginally, from 51,490 direct jobs in 2009 to 56,340 in 2012, according to Statistics Canada.

“Most mills are back on a two-shift capacity which would be equivalent to normal production levels. A few mills, not many, have added in a graveyard shift. But it’s being buffered by transportation issues – not just railcars – where people are not able to get rid of finished inventory. That is buffering the ability to put on that third shift here and there,” Routledge said.

“We aren’t currently not supplying the U.S. market with quite as much product as I think they would like. It’s shortage of rail cars, a shortage of trucks and generally, a shortage of all transportation vehicles.

Further, a shortage of skilled labour is hitting the supply chain.

“There’s no question: There’s a shortage of drivers and a shortage of trucks, whether lumber or log, to move the product,”

The rapid rebound in housing coupled with the rail car shortage has forest industry leaders wondering if the two rail companies will be able to provide enough cars on a long-term basis to meet the U.S. appetite for Canadian wood products.

In an email statement, CN said since January, CN has been challenged by extremely cold weather in Western Canada, snowfall and several line disruptions.

“As a consequence, train velocity has declined, while terminal dwell times at classification yards have risen. These factors have adversely affected the productivity of the rail network, as well as service levels for all customers,” CN spokeswoman Emily Hamer said in the email.

“Throughout the winter we have been in close communication with our customers to keep them informed of these situations. We continue to work with customers to address their service needs.”

Routledge said CN has told the industry that rail cars got sidelined and then frozen in the snow.


Read more: http://www.vancouversun.com/business/resources/forest+companies+enough+rail+cars+ship+products/8251305/story.html#ixzz2QlhepptT

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Fibre optics in the forest sector

Fibre optics in the forest sector.

Diversification is the key to survival of the industry after pine beetles, market collapse
A Laser Ace bulk carrier is loaded with logs on northern Vancouver Island for export to Asia. Supplied by Lemare Lake Logging Ltd.

A Laser Ace bulk carrier is loaded with logs on northern Vancouver Island for export to Asia. Supplied by Lemare Lake Logging Ltd.

When Canfor Corp. president Don Kayne talks to customers, whether in the United States or in China, they all ask the same question: who has the fibre to supply them with lumber in the future?

Customers follow the news. They have seen the annual timber harvest in British Columbia reduced because of the mountain pine beetle infestation. They know the B.C. government is considering controversial measures such as logging in forest reserves to keep mills supplied with timber. It raises questions about B.C.’s ability to supply global markets in the years ahead.

“Who has the fibre. That’s what they are asking now,” Kayne said in an interview at the company’s Marpole head office.

That’s the defining question for the B.C. forest industry as it moves into the post-beetle future.

Canfor management asked themselves that question a number of years ago. The company has 14 wood manufacturing plants in B.C. and has been making lumber from beetle-killed wood at some of its mills for 15 years.

“We have learned how to process it,” said Kayne.

The future of the B.C. forestry sector was cast in 1994 when the tiny mountain pine beetle began showing up in unheard-of concentrations in the forests along the eastern slopes of the Coast Mountains. It quickly spread east, moving into forests where loggers harvested timber for sawmills, which in turn produced lumber and wood chips. The chips were sold to pulp mills, which made a long-fibred commodity pulp in high demand on global markets. When lumber prices were low, pulp prices were generally high.

Since then, the beetle has killed almost 60 per cent of the pines in the province and has changed everything in the process.

Besides learning how to mill it efficiently, companies have diversified. Both West Fraser Timber and Canfor have bought mills in the southern U.S.

Canfor has also diversified in B.C., buying timber tenures in the province’s southeast, which was spared most of the impact of the beetle. It is some of the best timber in the province.

Companies also have been investing in their mills. Canfor is spending $300 million on new equipment alone.

As a result, Kayne has no doubts that Canfor will not only be making enough lumber when the recovery finally comes, but it will be producing a higher-quality product from mills that are in the global top quartile for cost and efficiency.

“We can demonstrate that we can be sustainable into the future.”

Companies like Canfor are proving that despite the challenges that face the forest industry — from the beetle, to the collapse of the U.S. housing market and softwood lumber taxes on American exports — it is not only surviving but has used the downturn, the worst in memory, to develop a sustainable industry.

It will be smaller but more diversified, with new customers like China playing a much larger role.

Lumber is the largest sector in the B.C. forest industry on a value basis. Despite depressed prices, sales of B.C. wood products still brought in $5.9 billion in 2011. Pulp, the second component of the industry, produced sales of $5.2 billion in 2011.

The industry as a whole contributed $7.62 billion to the provincial GDP in 2011, five per cent of the province’s $157.5 billion GDP for all industries.

Industry CEOs say never again do they want to be tied to only one market. When the U.S. housing sector imploded in 2007, B.C. lumber sales dropped from a high of $12.4 billion in 2004. Prices fell 54 per cent and production also declined by 25 per cent over the same period.

Kayne is not counting on the U.S. ever recovering to the pre-2007 level, when housing starts surpassed two million units a year.

But one million starts a year is achievable. That market, coupled with new markets in China and other Asian countries, is the foundation for the future, he said.

Forest companies saw the downturn coming and prepared for it. Canfor’s Plateau sawmill at Vanderhoof has been cutting beetle wood for 13 years.

The mill was modernized over that time period as management and employees learned how to best cut the logs. The company also made investments in kilns for drying the wood evenly at many of its mills and focused on the finishing end of the manufacturing process to produce the highest quality lumber possible.

Making transition

Canfor is not alone in preparing for a future where timber supplies are in decline, but its strategy demonstrates that B.C. forest companies are making the transition successfully.

Although the pine beetle is an Interior pest, it is expected to have an impact on the coastal forest industry as well — except the industry is betting it will be positive.

The coast’s largest forest products company, Western Forest Products, is sitting on the largest pine beetle-free supply of timber in the province: 3.1 million hectares of forest that provides an annual harvest of 7.5 million cubic metres of timber.

In 2004, when Brookfield Asset Management engineered the restructuring of Western, it had a long-term strategy: let the beetle eat its way through the Interior timber supply. In the face of timber shortages, those who have logs, like Western, will thrive.

The coastal forest industry — unlike the Interior where high-speed mills turn out lumber from generally uniform logs — produces a wide range of specialty lumber products from species like cedar, fir and hemlock.

They are generally manufactured in custom mills, where the emphasis is on extracting the highest value from each log.

But the fibre crunch created by the beetle is expected to raise all lumber prices, not just the prices of two-by-fours.

Diversification has not been restricted to seeking new fibre supplies or new markets alone. In both the sawmilling and the pulp sector, diversification has also meant developing new revenue streams.

Mills are turning to bioenergy to fuel their own energy needs and, in the case of pulp mills, selling the green power they generate into the grid.

At Mercer International’s Celgar pulp mill at Castlegar, for example, the company spent $102 million in capital investments, mostly to increase its power generation ability to create a dual revenue stream: one from pulp and one from clean energy sales.



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