Money From Trees

The settling of the Canada-U.S. softwood lumber agreement earlier this year not only quells acrimony between two of the world’s best business pals, it should also revitalize Canada’s lumber industry at a time when confidence is seriously needed. And that’s good news for truckers.

The high-Canadian dollar, rising energy costs, and the perennial driver shortage have been stressing the truckers who specialize in hauling for this most-important Canadian industry.

Before the softwood agreement was signed, the industry went through considerable rationalization and consolidation and reinvestment was slow. “Decision makers waited to see what the landscape was going to be like,” says Avrim Lazar, head of the Forest Products Association of Canada (FPAC). Now, they can move ahead, buoyed by the good news of the softwood agreement.

Truckers, as well as forest-products producers have to be flexible to stay alive, according to Paul Landry, executive director of the British Columbia Trucker’s Association (BCTA). There was more fear at the time the softwood agreement fell apart that cross-border trucking would slow down, but that didn’t materialize. “The wood-products companies responded by becoming even more productive and there was no real downturn for the truckers.”

Thus, the problems with forestry and the people who haul for the wood-companies were not the result of the softwood issue. But its resolution will give them confidence in the industry.

At the heart of the dispute was the American assertion that Canadian stumpage fees — the price set for wood that comes from Crown Land –served as an unfair subsidy. However, according to the agreement announced by Prime Minister Stephen Harper, Canada can continue to use the traditional method of determining stumpage fees.

That’s a huge breakthrough, analysts say. Canadians will also continue to have stable access to the American market and the Americans have agreed to repay about $4 billion to Canadian producers.

The proposed seven-year deal will see Canada lift punitive duties against U.S. softwood imports, in return for Canadian producers agreeing to cap its share of the U.S. market through provincial quotas as well as imposing an export tax if lumber prices fall below certain levels.

Says Lazar: “It’s very good for trucking to get some business stability and get this behind us.”

After all, it’s been a rough couple of years for the wood producers of Canada. “Our inputs — trees, energy, labor — are in Canadian dollars. So the dollar has forced the industry to improve our cost effectiveness by 40 percent.”

Log truckers and forest products haulers have
to be flexible to stay alive these days

At the same time, competitors in other parts of the world are starting to pick up the pace — Russia is now the number-one softwood supplier to a hungry Chinese market, and is rapidly making gains in the fibre market, while Brazil is now a big competitor in pulp.

In Canada, the East Coast now has the world’s highest prices for wood chips thanks to a diminishing supply, while B.C. is experiencing a glut as loggers race to salvage what they can of the province’s pine forests in advance of the mountain pine beetle that’s been chewing its way through western forests.

There’ve been about 11,000 jobs lost in the wood industry in the past four years, and quite a few truckers were thinking of abandoning the field.

“A lot of my colleagues are looking to get out of the logging industry and converting their trucks to haul gravel,” says Ron Lepine, a Timmins, Ont. logging driver, and president of the Independent Truckers Association Corp., a collection of logging truck owner-ops around Timmins, Kapuskasing, and Hearst in northern Ontario.

He says many drivers would rather invest in a belly dump trailer and haul gravel six months of the year, with perhaps a month or two of log drawing during the best months, than go through the headache of full-time log hauling.

Any young people interested in buying a truck to haul logs are looking at a big investment, because they need to be able to haul logs and chips, on-highway, in order to stay solvent and work year round, according to Lepine. At $125,000 for a tractor, $80,000 for a log trailer, $70,000 for a chip trailer and $45,000 for a flatdeck, that’s a lot of money. “You’re not going to pay your equipment off in four or five years. You’re looking at seven years.”

Richard Lappage, an owner-op out of Lower Kintore, N.B., says the logging-truck industry in his region is losing people to the oil boom. However, the softwood agreement will apparently allow his province to help the situation. “Until the US dollar goes up, or lumber tariffs get changed, then forestry in this province is heading to a point where government is going to have to step in.”

Not everybody is griping. Logging truckers around British Columbia have had it pretty good so far this year, according to Dan Henry, an owner-op and ex-president of the Prince George Truckers Association. Local truckers renegotiated their terms with area contractors and got their base rate bumped up from $2.34 per ton/hour to $3.01 per ton/hour, plus a fuel clause that boosts the rate three-quarters of a cent for every cent that fuel goes up. “It’s really improved. Now we have the highest rates in the province,” says Henry. And there’s been lots of work this past winter, with area mills piling in tons of inventory.

While rate decisions are obviously up to the individual companies, FPAC Director of Transportation David Church repeats the assertion that everyone’s hurting these days — including the mills.

“Every single penny has to be looked at very closely because you can’t pass those costs on to the customer. We don’t set the price of the product, that’s set by the marketplace, thus we have to absorb those costs. So it’s very difficult for companies to grant additional rate increases to the truckers simply because those costs have to come from somewhere,” he says.

Church says that in light of the “perfect economic storm” now gripping the Canadian forest products industry, companies are doing all they can to help themselves and the industry for the future — including investing $4 billion in R&D and capital improvements.

One place where they shouldn’t be cost cutting, says Church, is on freight rates. There’s no benefit to driving down the prices charged.

“We need them as much as they need us, and there’s no benefit to us to try and gouge these guys and drive rates down to the point where they can’t make money. It’s obviously a negotiating process and you have to end up in a situation where it’s a partnership.”

Lazar adds that the industry leads in productivity gains against other Canadian industries, and Canada is always going to be a manufacturer and supplier of forest products to the world.