Timber Crisis Looms In British Columbia Officials Blame High Logging Costs, Low Pulp Prices For Dilemma

British Columbia’s forest industry is sliding into a crisis prompted by high logging costs and depressed pulp prices, two industry analysts say.

Already 1,000 workers face a bleak winter because Evans Forest Products has shut its Golden plywood plant and West Fraser Timber is closing its money-losing Terrace sawmill for six weeks or longer starting Dec. 23.

Both companies cite the high cost of logging and the low selling prices for pulp logs and wood chips.

West Fraser Chairman Hank Ketcham said his company’s stumpage costs - royalties paid for cutting publicly owned timber - have gone up 400 percent in the last three years.

Logging costs have been escalating because of the stumpage increases and the costs of implementing the provincial government’s new Forest Practices Code, said Mike MacCallum, chairman of Price Waterhouse’s forest group.

“The government has been working on the principle that if it puts prices up high enough it will force companies into value-added products,” MacCallum said.

“They forget there is an alternative, and that alternative is being exercised at the moment by Evans moving towards bankruptcy and West Fraser closing a mill.

“We are in a serious financial situation in this province and it is getting close to a crisis.”

Hamish Kerr, industry analyst for Goepel Shields, said near-record prices for lumber in the United States should be resulting in “a king’s ransom in profits,” not shutdowns.

“The government has gone too far in increasing logging costs,” he said.

Kerr said the seriousness of the financial crisis was masked in 1995 by the high price companies were getting for pulp logs, up to $100 per cubic meter.

They now are $25-$30, which Kerr said is closer to the price pulp logs have brought during the last 10 years.

On top of the sawmiller’s woes, pulp markets are remaining depressed, with pulp prices dropping below $580 U.S. per metric ton and inventories building.

The solution for most B.C. pulp mills is to take an extended Christmas shutdown.

The provincial government has been meeting with industry associations to discuss the situation.

Forests Minister David Zirnhelt said possible solutions include changes to the stumpage appraisal system or changes in regulations requiring companies to harvest money-losing pulp logs along with saw logs.