Log Exports Panacea, Poison or Painkiller? David Lewis January 31, 2013 Note:
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Log Exports Panacea, Poison or Painkiller? David Lewis January 31, 2013 Note: Can also be found under the working title: “Log Exports: Why you got out of bed today to listen to some former industry bozo”
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Log Exports Panacea, Poison or Painkiller? David Lewis January 31, 2013 Note: Can also be found under the working title: “Log Exports: Why you got out of bed today to listen to some former industry bozo”. - PowerPoint PPT Presentation
Transcript of Log Exports Panacea, Poison or Painkiller? David Lewis January 31, 2013 Note:
Log Exports
Panacea, Poison or Painkiller?
David Lewis
January 31, 2013 Note: Can also be found under the working title:“Log Exports: Why you got out of bed today to listen to some former industry bozo”
“EDUCATION IS WHAT REMAINS AFTER YOU HAVE FORGOTTEN EVERYTHING THAT YOU LEARNED AT SCHOOL”
- ALBERT EINSTEIN
Coastal Harvest Trend (1987 – Present)
Coastal AAC vs Harvest
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
1985 1990 1995 2000 2005 2010 2015
m3
Crown AAC(coast)
CrownHarvest(coast)
Foregone/lost Jobs Due to Unharvested AAC
-20,000
0
20,000
40,000
60,000
80,000
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
Full-Time Equivalents
Lost Jobs(Annually)
Lost Jobs (Total)
Coastal AAC vs. Harvest (exports overlaid)
0
5
10
15
20
25
30
35
1985 1990 1995 2000 2005 2010 2015
Mill
ion
m3
Crown AAC (coast)
Crown Harvest (coast)BC SW Log ExportsVolume (m3)
90 Million m3 of unharvested AAC between 1990 and 2012
Log Exports: Cause or Reaction?
Export process
Mid-Coast – OG, Cedar leading stand, high costs (engineering, roads, harvesting, transport & stumpage)
AMV DC HC TC St+F $115/m3 > $20/m3 + $45/m3 + $12/m3 + $30/m3 High value timber can overcome high costs North Coast – OG, HB (80% pulp stand), low costs, except for transportation
AMV DC HC TC St+F $ 55/m3 ≠ $12/m3 + $30/m3 + $18/m3 + $0.25/m3 Poor timber in an isolated location doomed to fail due to transport cost. (All costs minimized) West Coast, Vancouver Island – OG, HB, avg. timber, avg. cost, avg. transport
AMV DC HC TC St+F $75/m3 ≈ $17/m3 + $40/m3 + $10/m3 + $7/m3 The average OG stand borderline economic, extremely sensitive to market fluctuations. Requires high up front investment. West Coast, Vancouver Island – 2G, HB, avg. timber, avg. cost, avg. transport
AMV DC HC TC St+F
$65/m3 > $10/m3 + $25/m3 + $10/m3 + $7/m3 Cost pressures have forced a shift into 2G harvest
Regional Harvesting Economics
The Economics of Producing Commodity Lumber Commodity = Sawmilling + Delivered + Tariffs/taxes Lumber Price Production Cost Log Cost Two Different Industries in BC Interior $235/mfbm > $100/mfbm + $125/ mfbm (SPF ≈$30/m3) Coast $235/mfbm < $100/mfbm + $330/mfbm (HF ≈$78/m3) (Note: 2009 Avg. Delivered Log Costs used – source PWC. ) (In 2009, Chinese buyers paying $380/mfbm for commodity grade coastal logs - more for logs than lumber.)
The Economics of Harvesting: Stand AMV > Development + Harvesting + Transportation + Stumpage/ $/m3 Cost Cost Cost Fees Development Costs = Planning, Engineering, Road Building, Silviculture (obligation incurred) Harvesting Costs = Falling/bucking, Yarding, Loading, Hauling, Sort/Scale Transportation Costs = Delivery of logs from the sort to the point of sale Stumpage/ Fees = Government Rents, taxes, fees
Operability Equation for Domestic Commodity Log Sales PLc > CM + CDT + CHT + CT + CS WHAT CAN BE CONTROLLED OR INFLUENCED HERE?
PLc = Price of Commodity Lumber (price takers, little control @ commodity level) CM = Cost to manufacture lumber (coast uncompetitive, antiquated mills, no investment in sight,
taxes – maybe but with public backlash, labour – probably not, land – values increasing)
CDT = Cost to develop timber (Roads/Regs getting more expensive, substitute 2G for OG, smaller harvestable land base, lower vol/ha which lead to smaller harvest)
CHT = Cost to harvest timber (can substitute 2G for OG and seek to innovate to reduce costs, however current logging rates unsustainable, fuel and labour rising, regulation increasing.)
CT = Cost to transport timber to mills (fewer mills, all lower mainland/mid island, again fuel/regs)
CS = Cost of stumpage/fees (gov’t has cut rates or rates have been blended to historic lows, little room left to go down, SLA implications)
(Lesson: Constant cost side pressure when trying to compete in commodities. Cost factors will determine harvest level. Dumbing ourselves down.)
Coastal AAC vs. Harvest (exports overlaid)
0
5
10
15
20
25
30
35
1985 1990 1995 2000 2005 2010 2015
Mill
ion
m3
Crown AAC (coast)
Crown Harvest (coast)BC SW Log ExportsVolume (m3)
90 Million m3 of unharvested AAC between 1990 and 2012
Log Exports: Cause or Reaction?
