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News
Daily business news at www.biv.com August 16–22, 2011
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Foresters face freight headaches head-on Lumber companies are grappling with road, rail and port challenges as the industry ramps up to satisfy growing Asian demand for B.C. lumber By Joel McKay
T
West Fraser CFO Larry Hughes: the company’s sea-borne shipping challenges have disappeared since it chartered a ship
of time before ships and containers would be hard to come by. That’s a big deal in an industry where transportation is the second largest cost of doing business. In the first six months of 2011, West Fraser and Canfor spent $465 million on freight and other distribution costs. That includes everything from trucks and railcars to ships and containers. “These particular participants were looking for a way to assure themselves of delivery of their product to market … this is a strategic move,” explained Robert Fischer, CEO of Loadline Forest Carriers, the company
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he massive Cielo di San Francisco will steam into a Chinese port in the coming days laden with as much as 18 million board feet of B.C. lumber. The ship, which departed a North Vancouver port earlier this summer, is evidence of an unprecedented level of co-operation among B.C.’s largest forestry companies. The mission? To not only get Asian customers hooked on the quality of B.C.’s trees, but also to make sure the products made from those trees get to market on time and within budget. T h at ’s w hy We st Fr a s er Timber (TSX:WFT), Canfor (TSX:CFP) and Tolko Industries have joined forces to charter a ship for a year to carry their products to market. Larry Hughes, West Fraser’s vice-president, finance, and CFO, said despite the efficiency of B.C. ports, the rapid increase in lumber shipments to Asia, notably China, started to put a strain on container availability last year. “There had been at times late last year … some challenges with lumber shipments,” said Hughes. Their products were still getting to market, but the forest companies could see that if the volume of exports continued to increase it would only be a matter
Lumber shipments through Port Metro Vancouver increased 48% in the first half of the year thanks to Asian demand
created to charter the Cielo di San Francisco. The pinch at the port came on the heels of record levels of lumber exports to China, totalling $687 million in 2010. Exports to the Asian juggernaut continue to soar, eclipsing the value of lumber sent to the U.S. in May for the first time on record. (See “B.C. lumber firms court more clients in Asia” – issue 1137; August 9-15.) That’s good news for foresters across the province. Yet the market shift, following years of downsizing and mill closures, has also revealed major gaps in the industry’s logistical capacity. MaryAnne Arcand, executive director of the Central Interior Logging Association, said Interior producers are battling a “continuous shortage of truck drivers.” The shortage is a result of the
“We can ship lumber from our Quesnel mill to Shanghai for roughly the equivalent cost of shipping it to San Antonio, Texas” Larry Hughes, vice-president, finance, and CFO, West Fraser Timber
recent downturn in the industry, which saw many drivers leave forestry for jobs in Alberta’s oil and gas sector. “We’re seeing cost increases as a result,” said West Fraser’s Hughes. On top of that, sawmills remain at the mercy of two rail companies, which some in the industry have called a “monopoly.” “I’m hearing from the sawmills that moving lumber by rail is also a challenge, not enough railcars available,” said Arcand. She added that Highway 16 has become a bottleneck for forest products moving west toward Prince Rupert. Despite the challenges, forest product shipments from B.C. ports have shot through the roof. The volume of containers exported via the Prince Rupert Port Authority jumped 82% year-over-year. “That’s mostly attributed to