Industry should prepare for better times

Peter Woodbridge - “My point is, once we get beyond the short term in the mid- to longer-term there are some great opportunities in the forest industry,” says Woodbridge. “The Alberta forest industry has done very well and there are some excellent opportunities out there, too.”

Mac Olsen
South Peace News

Although the global economic crisis has affected the Lesser Slave Lake region’s forestry sector, it should prepare for an eventual recovery and seize the mid- and long-term opportunities, says Peter Woodbridge.

Woodbridge is the president of Woodbridge Associates Inc. in Vancouver and discussed the state of the industry in the region, the impact of the global recession and future opportunities in the High Prairie council chamber Feb. 24.

The Lesser Slave Lake Economic Alliance has hired him to do a study of the forest industry in the region and develop a plan for new business opportunities.

Despite the gloom and doom predictions about a prolonged global economic slump, he is optimistic a recovery in the forestry sector will take place.

“My point is, once we get beyond the short term … in the mid- to longer-term there are some great opportunities in the forest industry,” says Woodbridge. “The Alberta forest industry has done very well and there are some excellent opportunities out there, too.”

He adds it is important to make sense of what is happening in the global recession. It’s not a question of if, but when a recovery will take place, particularly for lumber and engineered wood in the medium to longer term.

The worldwide timber supply is changing. For instance, Quebec has reduced its harvest levels by 28 per cent over the last two years. He predicts British Columbia’s lumber supply will be 40 per cent smaller within a decade because the mountain pine beetle has devastated much of it.

However, Alberta will benefit because the pine beetle has not hit its timber supply as hard.

Russia is restricting log exports because it wants to develop its own value-added industry. It provides 60 per cent of the world’s softwood log exports and withdrawing them has changed the outlook for the Chinese, the Japanese and Europeans, says Woodbridge.

“So what you’re looking at around the world is a tightening timber supply situation, particularly saw logs because they are very, very hard to get. It’s not that the supply isn’t there, but it’s not there at today’s price levels. What you’re going to be seeing is much, much higher prices for lumber and wood products, going forward.”

This is good news for the Lesser Slave Lake area over the medium and long term, when profitability will return. However, the profits will have to be put back into future investments and product mixes.

As for the U.S. market, although there won’t be 2.4 million housing starts annually as in 2003, he predicts they will grow back to 1.5 million by 2019. He predicts 960,000 housing starts in 2009.

Woodbridge says OSB has been replacing plywood and it now has a dominant market share. OSB mills have been replacing the first- and second-generation mills, including some in the early 1990s.

He also says the Lesser Slave Lake region could benefit by manufacturing products which reduce material waste.

“The point is, construction methods have changed. They’re changing dramatically. Site labour is very expensive, so home builders are doing a number of things.”

Construction companies are going into off-site fabrication, using embedded labour to control costs, which is more reliable and will reduce material waste on site. He says it is appropriate given the shift to constructing energy efficient “green” buildings, which is an opportunity for the area as well.

However, because of high transportation costs and long distances from markets, the region will have to adapt to manufacturing semi-finished goods instead of complete products.

“The disadvantage you’ve got here is distance, market and transportation. What you’ve got to do is fit into a supply chain role where you can play a major role in that – not shipping final products, but intermediate products and component stock. You’re taking what you’ve got today and further processing locally and then shipping down to markets where they’re further assembled and then distributed.”

CN Rail should be utilized to transport products to Prince Rupert, B.C. for overseas markets, he says.

Woodbridge also says human resources must be utilized for maximum productivity, but it is going to be a medium- or long-term problem.

“You have to be able to invest in your people to get the highest productivity. So training, more and more investment in upgrading skills, retention-type strategies to keep people and productivity gains through state-of-the-art equipment – all of those things are very much tied into your people resources,” he says.

Woodbridge held a question and answer session following his presentation. Jeff Burgar, a director for Community Futures of Lesser Slave Lake, picked up on Woodbridge’s assessment about the impact the pine beetle has had on B.C.’s forest industry. He says it is likely other provinces, including Alberta, will have to replace B.C.’s lost production.

“Long term, it is a growth industry, so there’s lots of opportunity here,” says Burgar.

He adds it is important to seize the opportunities before it is too late and somebody else does.

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