Lumber at Galloway. Phil McLachlan/The Free Press

Lumber at Galloway. Phil McLachlan/The Free Press

Logging companies diversifying products amid high fibre costs, oversupply, more

For many months, issues in the logging industry have made headlines across the country. Companies continue to deal with high fibre costs, a recent increase in stumpage, low lumber prices, a declining annual allowable cut, oversupply in the market and punitive softwood lumber duties.

Together these combine to create a challenging time across the B.C. forest industry.

Different parts of the province have been impacted by this in different ways. Even in the interior, central parts of the province are being affected in different ways compared to lumber companies in the East Kootenay.

Tenure holders, companies like Canfor, that harvest timber from the land for a fee to the provincial government, have been affected greatly by an increase in these stumpage fees. USW Wood Council Chairperson, Jeff Bromley, explained that these fees were established in 2007 under a market based system. This system, he explained, is following the fluctuations of the lumber market. Predominantly in the U.S. the price for lumber has fluctuated continuously over the last 15 months from a record high of over $600USD/MBFT (per thousand board feet) to about $350USD/MBFT.

However, due to ‘lag time’, Bromley explained that the fees companies in B.C. are logging under are prices that were established 15 months ago; $500-600/MBFT.

Despite the decrease in the value of lumber, stumpage fees have not decreased.

What goes along with this is a ~21 per cent tariff that has been established on all wood products going across the U.S. border. Many local mills in the Elk Valley send product over the line, which is subject to that tariff.

The third part of the problem, which moreso affects the Northern Interior and Central Okanagan is the availability of fibre. For about the last 20 years, there has been an ongoing battle against the Mountain Pine Beetle, predominantly in the Lodgepole Pine Stands of Central and Northern B.C.

Bromley explained that the West and East Kootenay was affected by this shortage, but in his opinion, because of the diversity of species in the East Kootenay, the region was affected less.

This, combined with fibre shortages due to forest fires have impacted the industry greatly.

“Those are all combining right now to really have an impact, and that’s why you’re seeing the curtailments, and that’s why you’re seeing the layoffs and that’s why you’ve seen a closure of four mills in B.C. over the last six months,” said Bromley.

“Those four aspects and those four prongs of a perfect storm are all conspiring to impact our industry in B.C., and it is impacting families in our small communities and – it’s obviously impacting the industry – but the ones who are hurting the most are families and communities in B.C. and in particular, my members,” he said.

Locally in the Elk Valley, sawmills have seen a fair amount of downtime. Some are even investing in the production of more specialized wood products, or different products entirely, in order to gain an upper hand.

The Canfor Elko Sawmill, which employs 170, has seen 17 days of downtime in 2019 so far. These curtailments, explained Canfor, were largely due to the ongoing low price of lumber and high cost of fibre, which made operating conditions in B.C. uneconomic.

“We deeply regret the impact these decisions have had on our employees and their families, and the community,” said Michelle Ward, Director of Corporate Communications, Canfor.

In late 2015, the Canfor Mill in Canal Flats closed, affecting 150 USW members and roughly 300 total. In spring 2019, Galloway Lumber was sold to Brian Fehr from the Nelson family. There has been a mill in Galloway for over 100 years, and previous to this it had been in the Nelson family for over 75.

Fehr immediately focused on moving the company in a different direction, with more focus towards diversifying and producing value-added product out of their trees. One of the products they aim to produce is CLT, or cross-laminated timber.

CLT is being used more and more as a building material for homes across the province and beyond, and is seen as a more environmentally friendly option over concrete.

“It’s certainly a good vision, but it’s going to take some time,” said Bromley.

The Wood Council Chairperson explained that as a result of this transition, about 30 of the 40 workers in Galloway have been laid off in curtailment since the takeover on April 1.

However, Bromley explained that in negotiation with the local Union, the company has agreed to extensions in seniority. He further explained that when the mill fully resumes operation in roughly 18 months to two years, those jobs will come back, and these employees will be recalled.

United Steelworkers Local 1-405 representative Don Wheaton said that at the takeover in April, all but two employees were laid off. Slowly more employees have been brought back.

The sawmill is also being reworked and rebuilt in order to create more specialty products. What used to be the planer at the mill is now a metal fabrication shop. Wheaton said they were told in April that within two years, Fehr was hoping to build a new plant on site to create cross-laminated timber.

Mass timber facilities are popping up in rural B.C. In May 2019, Kalesnikoff announced a $35M multi-species manufacturing facility near Castlegar.

An employee for 37 years, Wheaton is one of two workers who hasn’t lost any time at the mill. He and another employee were brought in the day after the takeover to help with the transition.

Wheaton believes the downturn in the industry could be the reason the sawmill was sold, and also the reason the new owner is doing the things he is doing; turning the planer into a fabrication shop and repurposing the sawmill.

When Fehr took over April 1, Wheaton said they were told there would be about five people working for the first while, then 10 more would follow, and another 10 as of August 1.

“The sawmill was supposed to run on June 1, and then by August 1, everybody that was working when he took over was supposed to be back to work,” said Wheaton.

“That hasn’t happened yet, and it probably isn’t going to happen for some time yet.”

He explained that when Fehr took over, Galloway had 44 unionized employees on the seniority list, not including contract workers. In a slight downturn, about 25 of the 44 were working at that time.

With regards to the downturn in the industry, Wheaton says some things have to change.

“I think some things probably have to change as far as stumpage rates, raw log exports and stuff like that, to get the industry to come back.

“The forest industry has always been kind of a cycling thing, where there’s ups and downs… but this down seems a lot worse than any down I’ve ever seen,” said Wheaton.

He recalled a previous shutdown between December 2007 to May 2010. But, he said they eventually bounced back from that.

“That seemed fairly serious at the time, but I think this one definitely seems like something’s got to change – and I’m no expert on that – but something’s got to change to make things come back,” he said.

Wheaton, 58, says there’s workers of all ages at the mill, including some in their 20’s.

Meanwhile, managers at the Galloway sawmill believe it is the diversity of industries that will make them successful. The finishing touches are currently being put on a new a steel fabrication shop, which will be used to produce steel components and equipment to support the surrounding industries.

“There (are) some positives there… that they’re starting to make progress on at Galloway, but it’s not without its challenges,” said Bromley. “But we’re hopeful that we’re going to work through those challenges, that that operation will be there for many years to come, and able to continue to provide the stable, high-paying jobs that it has for the last hundred years.”

Bromley explained that Canfor’s operations in Elko and Radium have also started creating more value-adding products; products that aren’t your standard two-by-four or two-by-six. Products that aren’t strictly for the U.S. market, but products of different sizes for the Chinese and Japanese markets as well, that aren’t as exposed to tariffs.

Galloway Lumber Mill site manager Tyrone Yee explained that their sawmill, when operational, will target higher end products like timbers, Lamstock, Genban, Access Mat, and more.

Currently Yee says they are focusing their efforts on producing these products, launching their fabrication shop into production, and the future of a cross-laminated facility in Galloway.

“That’s the big picture for Galloway, and the idea from the new ownership, to diversify into those type of products,” said Yee.

On the 17th of October, Yee anticipated that their sawmill would be operational in two weeks’ time. Crews are currently testing out equipment, and hope to be operational by the end of the second week.

The fabrication shop, Yee said, is already fabricating some steel components, but in a slightly manual way.

Asked if specialty products are the future for the lumber industry, Yee said it depends on the fibre basket, as well as the region. He said in the East Kootenay they’re lucky to have high quality fibre which they can pull high quality products out of. Some regions, he said, don’t have that luxury.

“This area has some of the best timber,” he said, adding that the majority of their products will be custom cut from Douglas Fir and Western Larch.

Yee hopes that by the time they’re operational, they will employ up to 20 in the sawmill. In the fabrication shop, short term, seven employees, with the long term goal of 20 or more depending on business.

In addition to this, he said the fabrication shop is being developed in part as a training facility, to train trades like millwrights and machinists. He says they hope to hire apprentices, and after four or five years they will be certified tradesmen.

“We’re really excited with the fab shop, in it being a training facility for apprentices,” said Yee.

The future of the CLT plant, a newer market in North America, Yee says could bring in another 20 people, totalling roughly 70 people at the Galloway Lumber Mill within the next two years.

 

Phil McLachlan/The Free Press

Phil McLachlan/The Free Press

Phil McLachlan/The Free Press

Phil McLachlan/The Free Press

At the Galloway Lumber Mill the finishing touches are currently being put on a new a steel fabrication shop, which will be used to produce steel components and equipment to support the surrounding industries. Phil McLachlan/The Free Press

At the Galloway Lumber Mill the finishing touches are currently being put on a new a steel fabrication shop, which will be used to produce steel components and equipment to support the surrounding industries. Phil McLachlan/The Free Press

At the Galloway Lumber Mill the finishing touches are currently being put on a new a steel fabrication shop, which will be used to produce steel components and equipment to support the surrounding industries. Phil McLachlan/The Free Press

At the Galloway Lumber Mill the finishing touches are currently being put on a new a steel fabrication shop, which will be used to produce steel components and equipment to support the surrounding industries. Phil McLachlan/The Free Press

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