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Alberta forest products sector has a lot on its mind

September 21, 2015

By: Edmonton Journal

This week in Jasper — an appropriate setting, it turns out — the Alberta Forest Products Association holds its annual general meeting. Paul Whittaker, the association’s president and chief executive, talked about pine beetles and other issues facing the industry in this province.

BEETLES

The mountain pine beetle is “Item 1” among issues of concern to the industry, Whittaker said, adding the pine-tree killing insect poses a threat that is “real and not going away.”

“We have some significant challenges in places like Jasper National Park, where it’s spreading and it’s difficult to eradicate,” Whittaker said. “We know what happened in British Columbia — we can see what happened. Our forest-fire season this year will look like a drop in the bucket if the pine beetle works its way through Alberta as it has through British Columbia, with giant stands of dead trees just waiting to catch fire.

“That’s the reality B.C. is dealing with now, and if industry and government don’t work hard fighting this, to try to stop the mountain pine beetle, we’ve all got a massive problem on our hands — we as a province, not we as an industry.”

Alberta has about six million hectares of pure and mixed pine forests. Pine beetles are estimated to have affected one-quarter of the total. Since 2012, the Alberta government has earmarked $18 million to rehabilitate damaged forests.

U.S. HOUSING

The United States is a significant market for Alberta lumber producers. Its housing industry relies on Canadian lumber to meet its needs. In 2014, 24 per cent of all lumber produced by AFPA member companies was shipped to the U.S.

Last week, the U.S. Census Bureau reported 1.13 million privately owned housing starts in August, down three per cent from July’s 1.16 million but up 16.6 per cent from August 2014. The industry has been recovering for years from the housing crash that began early in 2006 and saw monthly housing starts bottom out in April 2009 at just 478,000.

The recovery “still hasn’t seemed to jump off the diving board yet the way we think, but it looks like it’s testing the waters to grow,” Whittaker said. “It’s rebounding. That’s a tremendous opportunity, but it hasn’t yet hit the springboard, so we’re hoping it’s something we’ll see in the year ahead.”

When he discusses the U.S. housing market at the Jasper meeting, Whittaker will also talk about the Oct. 12 expiry of the Canada-U. S. softwood lumber agreement. The U.S. isn’t showing interest in renewing or renegotiating the deal.

CHINA

China is another important market for Alberta’s forest products industry. Alberta has an 11-per- cent market share of Western SPF (spruce-pine-fir) lumber exports to China. The other 89 per cent comes from British Columbia.

“China seems to be a little bit stagnant at the moment, or at least slowing down from where it was before, but at the end of the day it’s slowing down to a mere seven-per-cent growth, perhaps,” Whittaker said. “So in a global context, China is still a huge market, and still growing.

“You add to that the other potential opportunities in other markets in Asia and we see great opportunity there. Those are sort of the opportunities and positives. We haven’t got there yet but we can see them; they’re there on the horizon.”

A recent report from the Canada West Foundation said that since a new Canada-U. S. softwood lumber agreement doesn’t appear likely at this time, Canada should be looking to open new markets in Asia and Mexico.

WORKFORCE

In the current economic downturn, oilpatch pain has been the forestry sector’s gain.

The forest products industry in Alberta has “a very skilled, capable workforce” that has been augmented in recent months by workers who have left the oil and gas industry, Whittaker said.

“The current economic environment in Alberta, I think, affords our companies the opportunity to retain employees as they perhaps haven’t been able to in the past five years, and probably attract some of the skilled people that we’ve had difficulty attracting.

“A lot of our companies use power engineers, for instance. Those power engineers can also work in the oilsands, so we always had a hard time finding them and retaining them. We’re a bit better off now on the labour front.”

TRANSPORTATION

Eighty-five per cent of all Alberta forest products move to market by rail. In 2014, three million tonnes of Alberta wood and wood products were loaded onto rail cars to get where they were going.

But getting shipments onto rail cars last year was challenging because of competition: a record 2013 grain harvest and a growing trend to moving bitumen by rail.

Whittaker says 2015 has presented more favourable conditions.

“We’re in a better place than we were a year ago, when we had concerns about the capacity of the rail system to cope with a bumper harvest, a bumper crop of bitumen going by rail, and an awful lot of wood,” he said.

“The rail system couldn’t cope a year ago, whereas today I think the exports of bitumen by rail are dropping a lot, and there’s more capacity in the system. I think our guys are able to get rail cars where they weren’t a year ago, a year and a half ago, so that’s better.”

By: Edmonton Journal

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