January 2001 - Logging and Sawmilling Journal -

When a January, 1995 earthquake levelled part of the city of Kobe in Japan, the aftershocks were felt in British Columbia. They're still being measured in BC on their own Richter scale calibrated in lost hemlock sales and the costs of retooling equipment to handle one of the province's more profitable species. The quake, which sent the real Richter scale up to 7.2, lasted only 20 seconds. But it shook in two directions, laterally and horizontally, which is very unusual and devastatingly damaging. As a city which had much of its housing stock built following World War Two, Kobe was not prepared for that kind of assault. Its building codes were out of date and the structures didn't have a chance.

The coastal BC industry where more than 60 per cent of the cut is hemlock must develop new kilns to meet new standards resulting from changes in Japanese construction codes.

There was a lot of rot resulting from Japan's humid climate, especially in the older houses. More than 5,000 people tragically lost their lives. Under the weight of heavy clay tile roofs, the structures disintegrated and buried many. They simply fell down and fed many raging fires that consumed whole sections of the city. While Japan had become a big market for BC hemlock and cutting for this market had developed into a lucrative component in BC sawmilling there had been a shift away from hemlock in the Japanese market. The earthquake delivered yet another blow to this sector of the industry. Added to this is the stiff competition hemlock now faces from engineered wood products. The Japanese have changed their construction codes and forced BC to rethink the way hemlock is produced for foreign markets.

That, in turn, has prompted the provincial government to change stumpage policy to cut costs while the industry redesigns its equipment to dry the hemlock the way the Japanese want it. In an eight month pilot project, stumpage rates will be tied more directly to market prices for standing timber rather than the value prices for finished product. A review of the success or otherwise of the experiment will begin next April. Until now stumpage has been calculated on the Statistics Canada lumber index, which includes higher value timber. The purpose of the change is not to bring the whole stumpage system into line with open log market pricing but to respond to specific conditions in the target export market. The rate should drop from $20 to $12 to $14 a cubic metre.

In the wake of the earthquake, the Japanese government ordered that design codes should conform to more reliable seismic standards. It abandoned the use of green or undried hemlock. Those codes were being developed when the 1997 Asian recession hit Japan and put an end to any major revision. But in the summer of 1999, things got moving again. Changes in the Standards Law were brought in and are coupled with a new Housing Quality Assurance Law, mandating builders to provide a 10year warranty on their work. The warranty requirement reverberated through the Japanese housing industry.

The builders sought to limit their exposure to liability over such a long period and decided to move away from the green timber, Japanese or Canadian that is traditionally used in house construction. They turned to Europe for the dried material that is considered more stable than the undried material. Japanese builders themselves liked green hemlock. It's one of the strongest species for house construction. It has great nail holding capacity, which had been relied on for stability in an earthquake zone. But Kobe 1995 has radically changed all that thinking.

As a result, the industry on the BC central coast where more than 60 per cent of the cut is hemlock must develop new kilns to meet the new standards. Green shipments to Japan have dropped from 978 million board feet in 1996 to 618 million board feet last year. By 20012002, half of all hemlock sales are expected to be dried product. Last year there were 1.2 million housing starts in Japan, a remarkable recovery from the recession days. So the pressure is on to get the drying technology on stream fast, hence the break on stumpage costs. BC Premier Ujjal Dosanjh made the stumpage announcement himself. "International markets for BC coastal products are changing," Dosanjh said. "Not only are more customers demanding environmentally certified products, they also want a different product mix. Innovative actions such as this (hemlock stumpage policy) allow the coastal industry to change, remain competitive and continue to support our communities and their families."

BC is gearing up for a provincial election expected some time in the next six months. It's well known that Dosanjh wants to put some distance between himself and former premier Glen Clark, who is considered by many in the forest industry as the chief author of most of their misfortunes in the last six years, particularly the onerous constraints of the Forest Practices Code. Whether the hemlock initiative has a political quotient depends on the viewpoint. At any rate, it has been welcomed by the industry. "We see this as a step along the way to a secure future for hemlock," says Brian Zak of the Coast Forest and Lumber Association. "It isn't going to create new jobs but it should stabilize employment." If the market can be recovered, however, there is hope of restoring some growth to the sector. The pilot project will give the industry some protection while the research for new kiln technology goes on. In addition, the BC government in November announced a $4.2 million initiative to promote research into new dried hemlock products and the development of new markets for hemlock.

The pilot program for BC coastal sawmillers may have some political spin to it since BC is gearing up for an election in 2001.

Hemlock, abundant as it is in BC, is a problem species. It used to be considered a weed. But milling techniques made green shipments very attractive to Japan. In the early 1980s, BC switched from two-by-fours and retooled to produce the metric dimension material posts, laminated squares, joists, roof trussing and so on demanded by the market there. Now the retooling will have to start all over again. Conventional kilns won't work. Hemlock twists and splits when kiln dried. If moisture is removed completely or too quickly, as would be the case in those kilns, there's a lot of "fall down" in the wood. The wood disintegrates and is useful for nothing but chips. If it's overcooked, it loses all its strength characteristics.

Before Kobe, hemlock was what Japan wanted for precisely those characteristics. Now thicker dimension wood is required. To make it suitable for the new specifications and to be competitive with the Europeans, the scientists are going to have to find a way of reducing the fall down effect from 50 per cent to about 10 per cent. They will also have to develop systems to cut the production costs by 50 per cent in order to be competitive much of the engineered wood hemlock is going against in Japan comes from cheaper fibre sources. On the announcement, former BC Forests Minister Jim Doyle said the new stumpage regime will create a foundation for industry to make the necessary kiln and modernization investments. "We're committed to working with industry and other interests to support the revitalization of this important sector," he says. "The trial of market based timber pricing for coastal hemlock may have the added benefit of demonstrating our stumpage system's integrity to United States trading partners." To what extent it will do that isn't clear. J

ohn Ragosta, of the US Coalition for Fair Lumber Imports and a primary architect of the Canada US Softwood Lumber Export Agreement, calls the pilot project a "useful" move. No doubt the Americans believe it may bolster their position that stumpage is a form of subsidy for Canadian export lumber. But whether the same technique would be acceptable for higher valued cedar and Douglas fir, for instance, is a different matter, especially when the provincial government has said there's no direct link to the issue of open log markets, which the Americans want. The biggest apprehension in BC about log markets is that as soon as they become "open" the Americans will be able to able to bid up prices with their premium dollar and make things even more difficult for Canadian producers.

That's why only logs surplus to BC's needs are now exportable. In any event, the Americans have their own log export restrictions which, the Canadian industry says, makes it hard for the US coalition to insist on prices being set in open markets. That's why the "market based" pricing for hemlock may not be a precedent or even a good move from the US point of view. Open market and market based pricing are two different animals. But in the meantime, the new pilot program just may help the BC industry regain some of what used to be a lucrative market for hemlock and fight back against the inroads European producers have made in Japan.

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Resurrecting Hemlock

The BC government has implemented a pilot project designed to help the industry resurrect the market for hemlock in Japan.

By John Clarke