Forestry is a notoriously cyclical industry with log prices changing constantly. On a yearly basis, log prices can vary by 10-20% and during the last ten years coastal log prices have decreased 16% for Douglas-fir and 50% for hemlock, while cedar has increased by 20% (CIBC World Markets). Understandably, with some of the highest operating costs in the world, the coastal forest industry has had a negative 2% return on capital employed (ROCE) over the last eight years (CIBC World Markets). However, the companies that are purely timber oriented have fared the best (TimberWest with 9% ROCE) compared to integrated companies with milling and processing facilities.
Although the current situation is challenging, there are encouraging signs for the economic viability of the community forest, especially in the long term.
- A new stumpage regime designed to help community forests is currently being
developed - The new log export policy has confirmed the ability to export up to 35% of the
logs from Mid Coast community forests - Environmental market campaigns have ceased as a result of the Central Coast
land use decisions - A softwood lumber agreement is in place with U.S.
- Pulp log prices have increased significantly during last two years>
- Progress is being made in the marketability of hemlock
- Transition to harvesting second growth is occurring quickly
- Chinese and Asian economy is rapidly growing
- The glut of beetle kill timber in the interior will wind down over the next five to ten
years and Bella Coola is well positioned to fill log supply needs.
Furthermore, there is growing interest in the holistic attributes associated with community forests which can be promoted as an ethical choice for discriminating log customers.
