British Columbia is in the midst of an extensive review of timber supply on regulated lands, which is not due for completion until December 1995. Therefore a detailed presentation on B.C.’s timber supply is not possible at this time. Consequently, the timber supply forecasts presented in Section 7.1.6 are limited to global outlooks.
Timber demand is derived almost completely from consumer demand for forest products. To examine timber demand, one must first consider the demand for forest products and then work backwards to the timber resource. The processes that manufacture forest products transform product demand into demand for timber, therefore the structure of the forest products industry must also be examined.
British Columbia’s “forest industry” can be broadly separated into three main sectors:
In this discussion, the first sector is often referred to as “forestry” or the “logging industry,” and the latter two collectively as the “forest products industry.”[116]
Statistics Canada distinguishes between the solid wood industries and paper and allied industries in the classification system shown in Table 7.1. Well over 90% of the activity in B.C. takes place in four categories: logging; sawmill, planing mill and shingle mill product industries; veneer and plywood industries; and pulp and paper industries. Table 7.1 Statistics Canada classification of the forest products industry
No single statistic adequately captures all aspects of the forest industry’s contribution to British Columbia’s economy. This section examines some of the measures commonly-used to assess the industry’s importance.
Figure 7.1 shows the annual “value added” by each forest industry category for the period 1987-1991. In this context, value added denotes the value of sales of products less the costs of goods and materials used to produce them. By this definition all sectors, including logging, produce value added.
The more popular use of the term “value-added” describes the remanufacturing of lumber or other forest products into higher value products such as door frames and siding. Also included are activities which use logs as an input (e.g., log home building) because they result in a higher degree of employment and other economic benefits than conventional log processing facilities such as sawmills. This type of value-added activity is discussed under “Challenges and Opportunities” in Section 7.1.8. The value-added industry is difficult to measure because definitions vary and Statistics Canada has no value-added category for the forest products industry. The activity is dispersed among regular forest categories and some non-forest categories. A recent study estimated that the value-added wood products industry accounted for more than 11 000 jobs and $1.5 billion in sales in 1990.[117]
The forest industry directly contributes approximately 9% to the provincial GDP, ranging from 6.5% to 11.3% over the last 10 years.
Notably, the forest industry’s share of GDP is higher than its share of provincial employment and the paper and allied industry’s share of forest industry GDP is higher than its share of forest industry employment. These differences reflect a variety of factors, including the capital-intensive nature of the forest industry, particularly the paper and allied sector. British Columbia’s forest industry, like most capital-intensive industries, exhibits high labor productivity, which contributes to the high income of forest industry employees.
Figure 7.7 shows the forest industry’s direct contribution to gross provincial revenues for the same period, not including personal income tax paid by forest industry employees. On average over the 10-year period, the forest industry directly contributed 8.3% to provincial government revenue; in 1993 it provided 9.5%.
The contribution to provincial government revenue of stumpage and corporate income tax follows the cycles of the economy. The cyclical nature of this contribution is demonstrated by the wide range in the percentage of government revenue provided directly by the forest industry. The high for the last 10 years was 13% in 1987 and the low was 6% in 1990.
Manufacturing shipments and export figures overstate the forest industry’s importance, because not all wealth in B.C. is generated by the production and sale of manufactured goods. Activities such as tourism, investment income, financial and other services and the production of “soft” goods, such as technology that do not require ships, trains or trucks for delivery outside the province, are not included in the provincial total.
Direct employment and GDP figures understate the forest industry’s importance, because they do not include activities which are totally or partially dependent on the forest sector, such as employment in forestry equipment sales and service or businesses in forestry-dependent communities. Attempts to estimate a “multiplier” to account for indirect employment attributable to the forest industry have generated a range of values. Most analysts estimate that the indirect and induced economic activity generated by the forest sector is one to two times that of the original activity.
While advances in technology have reduced the overall level of employment in the forest industry from its peak around 1980, the B.C. economy still relies heavily on the forest industry. A 1991 report examining the structure of the provincial economy and the role of resource industries found that, despite growth of the services sector over the past 30 years, the province’s economic structure had not changed radically.[118] Moreover, when inter-industry linkages are taken into account, the report concluded that, “the provincial economy continues to be heavily reliant on resource industries.”
Many more species and grades of logs are produced on the Coast than in the Interior. To capture their value, logs must be sorted by species and grade and directed to the type of mill best suited to process them. Water sorting and transport predominates on the Coast. An organized log market centred near Vancouver facilitates the purchase, sale and transfer of logs on the Coast.
The harvest of timber on regulated land[119] in B.C. is controlled by the chief forester of the Ministry of Forests, who sets the allowable annual cut (AAC) for Crown-managed forest in timber supply areas and for Crown- and privately-managed forest in tree farm licences. The AACs for these management units are currently being re-evaluated in conjunction with an extensive Timber Supply Review (TSR) project.[120]
Within the constraints of the AAC, forest companies have some flexibility to respond to market forces. “Cut-control” provisions in the Forest Act allow companies to harvest 50% more or less than their AAC in any one year and 10% more or less than their AAC in any five-year period. This flexibility allows companies to increase harvest in strong markets and decrease harvest in weak markets.
Figure 7.8 shows the volume of timber products billed (i.e., the provincial timber harvest) for the fiscal years 1984-85 to 1993-94. These figures illustrate the cyclical nature of markets for forest products. In 1984, harvest levels were still recovering from North America’s economic recession of the early 1980s. The total harvest of 1987-88 (including volumes from regulated and unregulated lands) was 89.1 million cubic metres, the historical peak for timber production in B.C.[121] Since then, the harvest has fallen below 80 million cubic metres.
The harvest level in a given year largely depends on the level of lumber production in the sawmill sector. As shown in Figure 7.9, approximately 82% of the 1992 harvest was initially processed in sawmills. Veneer, panel and pulp and paper mills absorb most of the remaining roundwood production. The pulp and paper sector relies mainly on residual wood chips produced by sawmills and veneer mills for their fibre. Only a small fraction of the provincial timber harvest is not processed in British Columbia, due to long-standing export controls designed to encourage development of the domestic wood processing industry.
Figure 7.10 shows Coast and Interior lumber production for 1984-1993. In 1993, lumber production in B.C. was 14.4 billion board feet, compared to the historic peak of 15.9 billion board feet recorded in 1987. Over the last 10 years, the Interior share of provincial lumber production has risen. Historically, this trend was a result of the interior industry growing faster than the coastal industry, but recently it has been as much a result of declining coastal production.
The coast and interior components of the provincial sawmill industry differ significantly. A broad range of products including dimension lumber, boards, timbers and many specialty lumber products are produced on the Coast. This diversity is due primarily to its broad range of log sizes and species and the ready access of coastal mills to overseas markets and a broader range of customers. Also, the higher delivered wood costs[122] experienced by coastal mills has encouraged producers to seek out overseas markets willing to pay a premium for quality lumber products.
The Interior is heavily oriented to producing dimension lumber for the North American market. This is a result of smaller, more consistent log sizes in the Interior and ready access to rail transport throughout the continent. Some producers have attempted to reduce this reliance on the North American market by finding offshore customers, especially in Japan and Europe.
Figure 7.11 shows the distribution of 1993 sawmill capacity by mill size and forest region. Clearly, capacity is dominated by large mills with capacities greater than 100 million board feet per year based on two shifts per day. Mills in this category represent over 40% of the number of mills and 70% of the sawmill capacity. The Prince George Forest Region has the greatest concentration of large mills. The predominance of such large mills is unusual by international standards.
Table 7.2 shows plywood capacity on the Coast and the Interior in 1993.
The primary reason for the gradual decline in plywood production has been the emergence of oriented strand board (OSB) as a competitor for sheathing applications in construction. Most of the OSB competition is from outside B.C., from eastern Canada in particular. OSB is a reconstituted panel product which can be made from hardwood species such as aspen, for which there is little competition for other applications.
Plywood, on the other hand, is made from logs which make excellent sawlogs for lumber. Good logs have become more scarce and consequently more expensive. Lumber producers, with fewer competing products, have been able to compete for logs by passing on the costs through higher prices. With the emergence of OSB competition, plywood producers have not generally had this opportunity, except in very strong markets.
British Columbia is not presently a major producer of OSB but capacity is expanding quickly. As of December 31, 1994, the province has two OSB mills in operation (Dawson Creek and 100 Mile House) and one under construction (Fort Nelson).
Dominant products of B.C.’s pulp and paper industry are market pulp — primarily bleached softwood kraft — and newsprint. Other products include softwood and hardwood mechanical pulp, dissolving and paper-grade sulphite pulp, kraft paper, linerboard, fine paper, groundwood specialty paper, tissue and sanitary paper and recycled paperboard.
Table 7.3 shows all provincial pulp and paper facilities by location, capacity and product.
Many mills have undergone environmental and capacity upgrades in the last few years. New provincial government effluent standards require adsorbable organic halogens (AOX) such as dioxins and furans, which are byproducts of using chlorine in the bleaching process, to be reduced to 1.5 kilograms per tonne of pulp by the end of 1995 and to zero by the end of 2002. All mills but one have made the modifications necessary to meet the 1995 standard.[124]
Capacity additions province-wide exceed the capacity lost by the Port Alberni mill closure in November 1993. Higher capacity, combined with strengthening markets, will likely result in chemical market pulp production surpassing its 1988 record of 3.9 million tonnes.
Non-chemical market pulp capacity has also expanded, most notably with the relatively recent addition of bleached chemithermomechanical mills in Taylor and Chetwynd. The mill in Chetwynd uses primarily aspen, which until recently was not considered a commercial species. The use of aspen for pulp and OSB has been one of the more important recent developments for the B.C. forest industry.
Recent capacity increases were responsible for record newsprint production of 1.9 million tonnes in 1993. By October 1, 1994, there were three new machines in Port Mellon, Mackenzie and Gold River, in addition to a de-inked pulp mill in New Westminster. In British Columbia and around the world, newsprint supply exceeded demand, which resulted in a surplus of worldwide newsprint capacity. Some B.C. producers responded to this surplus by converting older newsprint capacity to other, higher value-added products. Recently, newsprint capacity in Crofton and Powell River was converted to groundwood specialty paper production.[125] The Port Alberni mill will soon replace its newsprint capacity with light-weight coated paper capacity.[126] The Gold River mill closed in 1993 due to financial problems attributable to soft newsprint markets.
The B.C. pulp and paper industry, particularly in the Interior, is dependent on the solid wood manufacturers of the province for fibre supply. Approximately 40% of a log processed in a sawmill is recovered as lumber. The remainder of the log becomes chips, sawdust and shavings, which constitute over 80% of the fibre used in provincial pulp mills. This direct linkage between the two sectors provides for more efficient use of the resource. Historically, it has also benefited pulp mills by providing a low-cost fibre supply. Other major pulp and paper producing regions of the world generally have much lower, and in some cases no, dependence on wood residue.
