Northern B.C.'s newest lumber player, Conifex, is bullish on the future, calculating that lumber supply constraints, a continually growing U.S. population, and the advent of a Chinese market will jack up prices in the medium-term future.
Conifex chairman and CEO Ken Shields also believes there's an opportunity to get value for its logging and sawmilling wood residuals - formally called waste - by continuing to supply the pulp sector, but also tapping into new areas like bioenergy.
Shields also indicated there's no question the Fort St. James-based company is looking to buy other sawmills, but only if they are underpinned by a solid softwood timber base.
The company is already operating on one shift, employing 171 people. The plan is to invest $30 million in improving its finishing and drying operations and moving to two shifts by the summer.
Shields' enthusiasm comes against a forest sector reeling from low prices, a rising dollar and export taxes to the U.S.
More than 3,500 forestry workers have lost their jobs in northern B.C. in the past three years as mills have shut down, cut shifts and moved to reduce work weeks. Just last week, Canfor Corp. announced another mill closure with 180 job losses in its Quesnel plant.
"In a few years, I hope to return here to present financial statements to you which confirm my main point. That well situated sawmills with quality saw logs at affordable prices will produce record-high cash flows," Shields told the the seventh annual B.C. Natural Resources Forum at the Civic Centre.
"The best days of our industry are not behind us, they are yet to come," said Shields, the former chairman and CEO of Raymond James Ltd. in Canada, a financial services firm.
The two-day forum, which attracted about 200 people Wednesday morning, continues today with CIBC World Markets managing director Don Roberts delivering the luncheon address on outlooks for bioenergy.
Privately-owned Conifex purchased its Fort St. James sawmill for $12.8-million through the bankruptcy proceedings of Portland, Ore.-based Pope and Talbot.
That was much less than the $39 million that Pope and Talbot paid for the mill three years earlier, and that low-entry price helps explain, in part, why Conifex decided to invest in the forest sector, knowing that they would not be making money initially, said Shields.
He said Conifex's analysis is that lumber supply constraints in B.C. from the mountain pine beetle, but also timber decreases in Ontario and Quebec, and a recovery in the housing market in the U.S. this decade, will put upward pressure on prices.
Conifex expects U.S. housing starts to reach the 1.3 million mark by the middle of the decade and 1.7 million by the end of the decade. That's below the two million peak reached in 2005, but well above the level today, which is under 700,000 starts. The company also expects prices to rise to the $325 US level in the long run, well above the $200 level today.
Conifex's analysis is similar to that of some other forecasters, including that of Russell Taylor's Wood Markets. As a result of timber supply cuts in Eastern Canada and the pine beetle epidemic, Taylor believes Canada's lumber production has peaked and may never return to the record output in 2004.
B.C. Forests Minister Pat Bell, who hosts the forum, said he continues to believe that natural resource industries will continue to drive the economy not only of northern B.C., but the province as well.
That will be increasingly true as the Chinese economy comes into play and its thirst for natural resources, he said.
