West Fraser'swake-up call shows the industry it needs to take care of business
Elsewhere in this issue of Logging and Sawmilling Journal is a story about West Fraser Timber's new sawmill at Chasm, in southern British Columbia. It's a good news story when the province's forest industry can sure use one. Gordon Campbell, BC's Liberal premier, recognized that and showed up at the mill's official opening, lending personal support to an ailing sector.
To his credit, the premier stayed around for more than the obligatory photo op. He was probably heartened by what Hank Ketcham had to say. "We are especially pleased that the premier joined us today as it is his vision for the future of British Columbia that encouraged us to make this significant investment," said Ketcham, West Fraser's chairman, president and CEO.
"While these are challenging times for Canada's forest industry, we at West Fraser feel that this investment demonstrates our confidence in our employees, in Canada's ability to prevail in addressing the present lumber trade issue and in the future of British Columbia's forest sector." There's some important symbolism here. Ketcham's words are not politically correct rhetoric. The "significant investment" he refers to is $80 million, an impressive figure by any reckoning.
The company making the investment is one of the largest and most successful forest companies in the nation. That fact alone garners the serious attention of financial institutions and markets, of other forest companies and of BC-watchers everywhere who have recently downgraded the province's investment potential. It's an eye-opener to the doomsayers and those who are in unseemly haste to write off the forest industry.
The trade issues, log cost issues, regulatory issues, land base issues and the myriad other concerns of the industry have contributed to the protracted on-hold, we'll wait and see stance adopted by the industry. But as West Fraser's timely wake-up call indicates, if you're going to stay in business, you'd better take care of business. And that includes making capital investments in plants and people to get better yet at what they do, in pursuit of the competitive edge. Rumours have been abounding for several weeks-months-about forest company plans for expansion or upgrade.
Publicly, at least, they've been kept close to the vest. Hopefully, by the time this is read, some of them will have been announced. It's quite possible, however, that such intentions will be hitched to more bad news. Companies are examining their options in the cold, clinical glare of survival. Consolidations will continue, some plants, some mill capacity will likely be sacrificed to create a viable blueprint for the future. More job losses, community losses and personal upheaval will result.
It's initiative and the efficient operation of technologically advanced processing plants that have allowed the BC interior forest industry to remain in business, despite the millstone of high costs. It's a continuous process. It's made more complicated by trying to keep abreast of the pace of technological change that renders today's sawmill tour de force obsolete tomorrow.
Companies are figuring out what changes make most sense for their wood profile and equating that with what can be afforded. What it all boils down to is an overdue need for investment. Steady activity levels in sectors of the sawmill service industry support the pent-up demand hypothesis. Companies other than West Fraser may have been sitting on their hands as far as major projects are concerned, but there continues to be a steady stream of smaller jobs.
Good sawmill managers, production crews and maintenance staff are regularly identifying little ways equipment can work more efficiently. Most sound ideas come with an implementation cost but sawmill equipment is like an airplane: you have to run it effectively and often to make money.
These housekeeping, fine-tuning and bottleneck-reducing types of work are increasing production and improving recovery levels. They are helping mills run when margins are tight and times tough. But the harsh operating environment of a sawmill and what's going on out there in the rest of the global forest industry mean that sooner or later important decisions need to be taken about more fundamental aspects of a plant's operation.
And that is where we appear to be in BC right now. It's a good bang-for-the-buck time to make investment decisions. Throughout the sawmill supply and service industries, pencils are sharp and competition for business is keen.
Good, experienced people are ready to go. Hopefully, Hank Ketcham's optimism in the future of the BC forest sector is about to become contagious. And other forest company executives will become infected with the glass half-full virus and will work to convince their shareholders that there's more to be gained by taking action and more to be lost by inertia.
Economists look to their favourite indicators to forecast trends and argue prospects amid the bears and bulls of the marketplace. The payoff for past consolidation, production cuts and layoffs is on its way. When it arrives, the economists will revise their position and begin again to make positive observations and predictions about the forest industry. What West Fraser and Hank Ketcham have demonstrated to the forest industry with their Chasm sawmill rebuild is: now is the time to get on with it and make it happen
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