Lumber Business

STEVE: I am sitting here with Richard Robertson who is involved in the lumber business which is, of course, a dominant industry in British Columbia. Richard, how long have you been in the lumber business?

RICHARD: Fifteen years, now.

STEVE:Fifteen years. And did you think when you were at school or at university that you would end up in the lumber business?

RICHARD: Not at all. My original intention was to be a Marine Biologist. When I was growing up in Winnipeg one of my idols was Jacques Cousteau. And when we moved to Vancouver in 1972 through school I thought, "Well, I still want to be a Marine Biologist; here I am living by the ocean." And my plan was to do that and in grade eleven I actually started working at the Vancouver Aquarium and after high school continued at the aquarium while I was going through UBC and got my degree in Marine Biology.

STEVE:Wow, so you were a committed Marine Biologist. What did you do at the Aquarium?

RICHARD: I was a marine mammal trainer or a whale trainer.

STEVE:Oh really. So you got to know the whales personally. Nice people, nice whales to deal with?

RICHARD: Very intelligent animals. I always say to people that, in some respects, I think they are more intelligent than human beings in that they tend to alter themselves to their environment, rather than human beings who alter their environment to themselves. And in respect to the killer whales, each pod, each grouping has its own unique language and they’re able to communicate with each other and other animals in the area.

STEVE:They communicate with non-whales?

RICHARD: They communicate with other killer whales in the same area. Other animals learn to know when killer whales are in the area and when they are, they don’t stay there very long.

STEVE:I see. Nevertheless you moved from Marine Biology to the lumber business. Of course it’s a key industry here in British Columbia. Is there any community in British Columbia that isn’t affected by the lumber business?

RICHARD: No. And I think that that’s one thing, living in Vancouver, there’s some people here that feel that they’re not connected to the industry, but the whole province is basically, intricately involved with the lumber industry.

STEVE: And this would be activities like logging, or tree planting, or saw milling?

RICHARD: Everything from silviculture to logging to processing, remanufacturing, shipping

STEVE: Equipment supply.

RICHARD: Exactly. Equipment supply - everything with respect to services that are needed to run the industry. We’re very dependent on the forest industry.

STEVE: And I guess you end up spending a fair amount of time visiting smaller communities where these sawmills are located?

RICHARD: Yes.

STEVE: And, now on the marketing side, where are the major markets?

RICHARD: For British Columbia woods?

STEVE: Right.

RICHARD: The major market would be the United States, Canada, Japan and to a lesser extent Europe.

STEVE: And are you involved in all those markets?

RICHARD: Yes.

STEVE: The American market: right now, there’s a lot of news in the paper about this dispute - what’s the background, what’s going to happen there?

RICHARD: There’s a lot of uncertainty right now. Prior to Christmas I think the general feeling in the industry was that there will not be a negotiated settlement. I think that right now there’s a realization that that’s not going to be the case. And from the discussions I’ve had, particularly this week, people are actually now betting on or thinking that the greater likelihood is that there will not be a negotiated settlement simply because the two sides are too far apart.

STEVE: So in what way is the Canadian system different from the American system?

RICHARD: I would say basically in the eyes of the U.S. coalition, which is a group of sawmills that have launched the complaint against Canada, in the U.S. they think their system is set, their log prices are set by the market, whereas in Canada the price is artificially set by the crown, by the government.

STEVE: But the Canadian prices do also reflect market conditions?

RICHARD: Yes.

STEVE: But I guess, the Americans they don’t like it that our system does reflect the market. When markets go down then our log prices go down, whereas their log prices goes down and it costs them money if they own the logs?

RICHARD: I think part of their issue is that the Canadian prices flow up and down, it’s often linked to a periodical, Random Lengths publication.

STEVE: I should explain Random Lengths is the trade journal which kind of does surveys of market levels and tells the industry where prices are and it’s kind of like the standard.

RICHARD: It’s the standard. Every Wednesday and Friday they put out, essentially a newsletter. Friday is very comprehensive and it covers most lumber products indicating from a broad range of companies and sources what the market prices are. And a lot of the systems in Canada are linked to Random Lengths so the timber prices follow the market up, and they follow the market down. And I think one of the issues is that the Americans think that that actually helps us to lead the log prices down, therefore allowing us to produce lumber cheaply and perhaps at a subsidy.

STEVE: Do you market both in the U.S. and Canada?

RICHARD: Yes.

STEVE: And of course, Canada has something like 35 percent of the U.S. market?

RICHARD: Roughly. It varies, but right now I think it’s around 35 percent.

STEVE: And where would the Americans like to see us?

RICHARD: I think they would like to see us back down 26-27 percent, which is about where we were 10 years ago.

STEVE: Mind you, the American market is an enormous market. The Americans themselves are also very large producers of lumber. But they still need about 25-30 percent if not more from Canada.

RICHARD: Correct.

STEVE: So they do need our lumber. It’s just a matter of trying to see who can out muscle whom to get the best deal?

RICHARD: My personal opinion is that we’re dealing with, in particular, in the Southern U.S., the Southern Yellow Pine producers. Sawmills that are in some cases, antiquated and they simply are not very efficient at producing lumber. They’re trying to protect jobs. Canadian lumber can access their market and compete with them quite well. Not only because of the prices at which we can supply wood, but in terms of the quality of the wood. The carpenters in the U.S. prefer Canadian Spruce, in particular.

STEVE: So it’s not a matter that it’s necessarily manufactured better, it’s more the species; the inherent quality of the species.

RICHARD: I think one of the big issues is the species; that’s what we’re told by our customers. The Spruce holds the nail better; it’s easier to nail, whereas if you’re dealing with a Southern Yellow Pine product it’s a very heavy, very dense wood, harder for the carpenter to handle, and it’s very difficult to put a nail into and when you do drive a nail, often the piece of wood splits.

STEVE: Now you have also been active in the Japanese market. Did you find significant cultural differences in the Japanese market compared to the North American market?

RICHARD: Ten, fifteen years ago more different than it is now. Ten years ago you spent a lot of time building a relationship with a customer. You developed that relationship, you’d start doing business slowly, it would gradually build. It would be regular, it would be continuous; an understanding on both sides that each side needs to make money. Basically, the main thing being that they wanted it to be regular, continuous business.

STEVE: And that’s no longer the case today?

RICHARD: Today, I would say much more opportunistic. One of the differences being ten years ago the core suppliers to the market were North America, Southeast Asia and Russian logs. Today you will find wood in Japan produced from all over the world; Europe, Australia, New Zealand - everywhere.

STEVE: So partly it’s a reflection of more competition. This greater competition, is that basically a worldwide phenomenon, just more and more suppliers of wood products competing with British Columbia? Where B.C. was a dominant player 20 years ago, they were the kings, and today they’re just one of many?

RICHARD: I would say that’s true. We do live in a global market, not only for wood, but for all products.

STEVE: And the fact that there is more wood in the world, what is this a result of? People who read the newspapers always are often given an impression that we’re running out of wood and yet, in the industry we know that there’s more and more wood in world markets. What’s happening?

RICHARD: I would say a few things. In terms of statistics, and there is a few sources to go to, to look at these. There is more wood growing today than is being harvested. And the sawmills that are running today are much more efficient than they were 20 years ago. And consolidation in terms of production as well, you don’t have so many small mid-sized mills; now you have large groups, big companies that are producing lots of wood in many different countries.

STEVE: Now, in British Columbia we are still one of the largest wood-producing areas in the world. The province is covered in forests; our houses are mostly built out of wood. Is there an opportunity to use more wood in British Columbia?

RICHARD: I would say yes, particularly in the area of light industrial usage. There is a lot of wood used in home building, but from the industrial side of things, it’s still mainly steel.

STEVE: And would simple lumber products compete with the steel, or are there another generation of products?

RICHARD: I would say in glue laminated, like laminated lumber and other engineered products. In Europe there has been an initiative towards that. I think we should be following the same here.

STEVE: I gather in Europe they are promoting more wood use in these end uses because of the environmental benefits of wood as compared to steel, concrete, brick, and so forth.

RICHARD: Yes because it is a closed-carbon cycle with wood and there’s less consumption of petrol-chemicals in the production and use of wood.

STEVE: Could you explain what you mean by closed-carbon cycle?

RICHARD: Basically with the wood, there’s carbon trapped in the wood. You harvest a tree. It’s trapped in the carbon is in the wood. When the wood is finished, if you tear that building down, the wood basically turns back into soil again. Whereas in terms of steel, you manufacture the steel, and you’re releasing carbon into the atmosphere during the manufacturing process.

STEVE: Trees a growing tree too is a great absorber of CO2; I gather it absorbs 150 percent of its own weight in the form of carbon dioxide.

RICHARD: And it will absorb more CO2 in the younger stages of its life, than in the later stages of its life. So one could also argue that in terms of harvesting wood, you’re replanting younger trees that consume more carbon dioxide.

STEVE: Last question, then, what do you see as the future for the lumber industry here in British Columbia?

RICHARD: I think the lumber industry here has to become more diversified in terms of the products that it’s making. Up until now it has basically been a commodity-based type of industry where they go to market and say, "Here’s what we have to sell - this is what we want you to buy." They should take the approach of allowing the customers to come to them to say, "Here’s the product I want to buy, will you make it?" and then finding some way to do it.

STEVE: Let’s hope for the sake of all of us in British Columbia that the industry can rise to the challenge.

RICHARD: I hope so

STEVE: Thank you very much.

RICHARD: Thank you.