JOCK FINLAYSON
By Jock Finlayson, ICBA Chief Economist
BRITISH COLUMBIA – British Columbia’s forest products sector has been struggling for several years, weighed down by a mix of dwindling fibre supply, high operating costs, U.S. duties on southbound lumber exports, and cumbersome regulatory and permitting systems designed and administered by the provincial government. An industry that long served as both B.C.’s leading source of exports and a foundation for jobs and business activity in every region of the province has truly fallen on hard times.
Even in its diminished state, however, the logging, wood products manufacturing, and pulp/paper industries continue to make substantial contributions to the province’s economy. An updated 2024 study commissioned by the B.C. Council of Forest Industries estimated that the forest sector collectively accounts for $17.4 billion of gross domestic product and directly and indirectly supports some 100,000 B.C. jobs. It generates more than $6 billion in annual revenues for various levels of government and pays $9 billion in direct wages and salaries to B.C. workers. Also, forestry is still B.C.’s second biggest source of export earnings (after energy).
Apart from what every forest industry executive I have consulted since 2021 describes as a punishingly uncompetitive regulatory environment, the biggest problem facing the B.C. sector is the steady decline in the supply of available fibre. Without an adequate supply of raw material, the industry has been forced to shrink.
Actual harvest volumes in B.C. have plummeted by around half since 2010. Moreover, due to the bureaucratic nightmare that often attends the process of obtaining cutting permits, the volumes harvested have fallen dramatically below even the smaller targets approved by the Chief Forester. The meltdown in fibre supply reflects several developments: fallout from the pine beetle infestation that devastated forests in the early to mid-2000s; the impact of wildfires; and myriad provincial government policy decisions and administrative practices that have effectively sterilized growing portions of the Crown land base, increased operating costs for industry, and curtailed timber harvesting.
The NDP government seems belatedly to have recognized that the forest industry has entered a period of existential crisis. Upwards of 35 sawmills have closed their doors since 2017, along with a number of pulp/paper mills. Tens of thousands of good family-supporting jobs have disappeared. Casual observation confirms that forest-dependent communities across B.C. are hurting, badly.
In a positive sign, the mandate letter to the Minister of Forests penned by Premier David Eby in January specifically referenced a goal to modestly increase timber harvesting after years of painful – often policy-influenced – declines. The government has also loudly touted its commitment to promote “mass timber” construction as a way to boost local demand for wood. The “mass timber” policy is welcome, but the hard truth is that 85% of the lumber produced in B.C. is exported and the local market is simply too small to matter much to the industry’s commercial health. To succeed, what B.C. forest companies need more than anything else is reliable access to raw material and a domestic policy and regulatory environment that supports investment and enables efficient day-to-day operations. These are sorely lacking at present.
Now comes news that the Eby government is establishing a Forest Advisory Council, to “help” the sector while also paying close attention to “forest ecosystems.”
This announcement drew a mix of yawns and expressions of exasperation from industry leaders. The composition of the Advisory Council speaks volumes about the NDP’s blinkered approach to economic development and industrial policy. The usual assortment of “stakeholders” are represented. But no current industry leaders (or investors) are included. One might say that, in pondering the future of what, until recently, was B.C.’s single largest export industry, the NDP government has concluded that it’s best to sideline the “capitalists” who finance the industry, along with the managers who run the businesses that populate the sector. No wonder B.C.’s most prominent forest companies increasingly have been investing and directing their growth ambitions elsewhere – to the U.S. south, Scandinavia, and the rest of Canada – as they struggle to stay in business here.
The hard reality is that B.C. has become a relatively high-cost jurisdiction, with a shrinking and unstable fibre supply base and an exceptionally difficult day-to-day operating environment for logging contractors and lumber producers. On the current trajectory, the industry’s future doesn’t look terribly bright.
Source: icbaindependent.ca
