After a year of keeping a close eye on the softwood lumber file, the Forestry Products Association of Canada (FPAC) says that while the dispute continues to rage between Canada and the United States, things are still looking up for the industry.
“We remain very concerned but I think the reason you’re not hearing the doom talk is because the market is so strong in the US,” says FPAC CEO Derek Nighbor. “A big determinant for success in our sector is where US housing starts are at. The quality, durability and flexibility of Canadian softwood lumber is the preferred building material in the US for home construction.”
Nighbor says that the forest fires in Canada – 1.1 million hectares lost in the BC interior alone – also tightened supply, which, combined with strong housing starts in the southern US along with hurricane damage, have created a strong market and higher prices.
“The big question now is how long is that going to sustain itself,” says Nighbor. “For now, things look pretty good, but that could change.”
But while this current softwood lumber dispute continues to play out, a bigger concern on the horizon is a trade action filed by a mill in Washington state against Canada on newsprint shipments, based on the same kinds of complaints around subsidies that are being argued in the softwood lumber dispute. The value of the market is some $2.5 billion in newsprint being exported to the US.
“In some ways, it could be worse than softwood“
While the category is declining about 10 percent per year, the dollar figure and the 25 mills that it affects, largely in Ontario and Quebec, is still significant. Nighbor suspects that this complaint is opportunistic, taking advantage of the mood of protectionism in the US.
“In some ways, it could be worse than softwood,” says Nighbor. “Everybody is aware of it and concerned, but we’ll know more in January.”
As Canada gears up for carbon pricing, FPAC sees a great deal of opportunity for the sector, not only around the economic benefits as well as the environmental sectors. Part of the concern is that the industry is central to the economic well-being of some 600 rural and northern communities who can’t transition to a digital economy like larger cities can.
“We have a huge opportunity to maximize those [carbon] sinks, to lock carbon in to long-lived wood products, so we ourselves as being a big solution provider,” says Nighbor. “The other opportunity is in the bio [fuel] space. We have a really cool bio-crude project that’s going on in Prince George, BC, right now, and there are examples of those kinds of innovative projects.”
Monetizing carbon sinks, however, is still on the horizon as governments grapple with cap-and-trade mechanisms and what the economic models work like.
“I think 2018 is going to be a big year for all of that,” says Nighbor. “There’s talk around the low-carbon fuels standard, and the carbon pricing mechanisms need to be done by the end of that year, so it’s going to be a big year for the carbon file.”
Nighbor does raise caution about the possibility of multiple levels of taxation on different fuels, and hopes that the various stakeholders and levels of government get it right.
Fire and invasive species remain challenges for the industry. Damage from both fire and insects was 24 times the amount that was harvested by the industry, and damage from pests like the pine beetle provided fuel for the forest fires in BC.
“We have some serious mitigating to be doing,” says Nighbor. “We need to continue to look for these early interventions to prevent the spread of these pests. We also, through science and genomics, can be looking at whether we should be planting a different type of tree that might be more resistant to certain pests.”
With that in mind, the industry plans to spend a lot of thinking about how to mitigate these problems in the future.
“The big plan for us next year is setting up our forests for a healthy future – the science work, learning from some of the experiences of the past few years,” says Nighbor. “How can we ensure that we can continue to enjoy forests forever, and that they’re going to be healthier and more resistant?”
The trade agenda is also high on the list for 2018, not only with ongoing disputes with the US, but also looking toward better diversifying markets in Asia. That means not only the Trans-Pacific Partnership, but also a trade deal with China that includes a dispute resolution mechanism.
“We’re keen for TPP to get done,” says Nighbor. “We’re interested to see what the potential might be for China. We already some companies that have been selling to China for 40 years, but if we can enable and remove any additional barriers, we’re all for that.”