Re: Re: Re: Re: Timber Models
Written by BC Wet Coast on Wed Aug 26 16:30:42 1998 GMT
It's a made at home problem, but has many factors associated with
The industry is split into two sectors, the Coast and the Interior.
Traditionally, the major markets for the Coast has been Asia and
Europe, because of the easy access to shipping. For the Interior,
traditional market has been to the US by truck and rail.
A couple of years ago, when the Canada/US Softwood Agreement was
signed, duty-free supply quotas were negotiated and allocated to
various mills/provinces/companies (I'm sure of the details of quota
allocation). The Coastal companies were not allocated any US quota,
because their markets were abroad. Since then, the Asian economy
is in the tank, and the Japanese have found a very cheap supply of
logs and lumber from Russia. (Although, I don't think this will
as there is no effort being put into reforestation).
As far as the Interior is concerned, they are still selling as much
into the US as they ever have, but are still losing money. Why?
Production costs have skyrocketed and the increase can be
completely placed at the hands of government regulation. Virtually
forest land is governement owned (95%) and then allocated to
companies in varying forms of long term operating licences. Some of
the licences are volume-based, and some are area-based.
Because of this ownership model, the government can dictate the
level of planning that is required prior to any harvesting. To
environmentalists, in 1995, the government enacted the Forest
Practices Code. This code is extremely process oriented, rather
results oriented with trust put into the hands of the professional
foresters. The amount of paperwork to get cutting permits is
The upshot of all this is the stumpage rates are now through the
The stumpage system is very complicated, but in essence, it is the
value of your stand minus the costs for an average efficient
minus the average stand value for the region. This figure is then
added to the "base rate" to give your stumpage. The base rate is a
target government stumpage revenue divided by the forecast annual
cut for the province. So if you have a totally average stand with
average logging costs you will pay the base rate. Better quality
you pay more etc. The Coastal Base rate for June was $25.35 /m3. It
is not uncommon to have stumpage rates for cutting permits at
$100/m3. One m3 = 35.32 cu ft or about 212 bd ft.
On top of the stumpage, we have a surcharge called superstumpage
for a fund called Forest Renewal B.C. Good name, but it has become
slush fund for many waste money projects.
On top of the stumpage and superstumpage, you then have your
basic planning, harvesting, milling and transportation costs. The
Forest Practices Code alone has raised planning costs about $8/m3.
The other factor is a low pulp market, which is affecting people
worldwide, but the sawmills can't get enough for their chips to
the cost of logging the pulp logs.
So why are the mills closing? Simply, the government has tried to
more economic rent out of the forest that the forest can produce
is killing the goose that laid the golden egg.
Some interesting notes:
-Stumpage rates in Alberta are about 1/10th of ours. -Swedish mills
can put 1" boards into Minnesota cheaper than we can by rail -A new
Austrian supermill on the Danube can put wood into our traditional
markets in the US cheaper than we can.
Thanks for giving me a chance to rant, I'm just getting so
with this government it hurts.
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