With the recovery of British Columbia’s forest industry underway, tensions are also rising between coastal logging contractors and the major lumber producers they cut timber for.
The B.C. Truck Loggers Association (TLA) argues that contract rates being paid aren’t keeping up with contractors’ costs and that many companies aren’t getting consistent enough work, which is causing some to abandon this segment of the business.
One of those companies, Alternative Forest Operations Ltd., was at an equipment auction in Nanaimo Tuesday selling off $2 million worth of equipment, after which it planned to lay off half its 50-member workforce.
Even when they are happy with the rates being paid, companies often can’t find consistent enough work to sustain operations, said AFO co-owner Sig Kemmler. Over six months of 2014, his company lost $500,000 working for one major firm, he said which pushed him and his partners to their decision.
“My two partners are 32 years old, I’ve been in the business for 37 years,” Kemmler said. “The three of us took a look at it and said it makes no sense to have the capital invested in doing what we’re doing.”
The major forest companies they cut for, however, don’t see problems being as big as the TLA is making out, said Rick Jeffery, CEO of the Coast Forest Products Association.
Jeffery said contractors cut 95 per cent of the logs the major timber-owning companies need, but there is a shortage of them on the coast, so contractors should have the leverage they need to negotiate appropriate rates.
“We have, as an industry, a vested interest to make sure we have a supply of contractors, and that those contractors are making money,” Jeffery said, adding his members are “frustrated by these allegations.”
However, getting the major companies to acknowledge some of the problems is one of the issues, said David Elstone, the TLA’s executive director.
The association is wrapping up the concerns it is seeing under the term “contractor sustainability,” Elstone said.
And while improving conditions have allowed the major timber companies to repair their balance sheets, Elstone said that hasn’t flowed down to logging contractors, whose finances remain weaker.
Elstone didn’t have a complete count on numbers of layoffs, but between Tuesday’s auction in Nanaimo and an auction last October in Chilliwack, he’s seen at least three of his members sell off equipment to step back from this segment of logging, which he finds concerning.
“It’s a bit of a conundrum when we’re talking about the upside in the forest industry, and when we have this little bit of disconnect in what’s happening with contractors,” Elstone said.
Though a shadow of its former self coming out of the U.S. housing collapse and recession, with associated mill closures, forestry remains the financial backbone of rural B.C. supporting 40 per cent of the province’s regional economies, according to a recent economic impact study conducted by the consulting firm MNP LLP, co-sponsored by the Coast Forest Products Association.
In 2013, the MNP report found that the coastal industry accounted for almost $6 billion of the $15.7 billion generated by the forest sector.
Elstone said many TLA members either haven’t been able to line up consistent amounts of work, or not enough effort is being put into advance planning to allow for a smooth logging workflow, which congests the supply chain.
Kemmler added that loggers have limited time windows to work in between the summer forest-fire season and winter’s bad weather, but market-sensitive timber owners have sometimes been too quick to curtail operations on them.
“You can’t have an organization that has multi-millions of dollars invested in machinery turn on and off like a water tap,” Kemmler said. “And that’s ultimately what seems to be happening.”
The forest industry has been competing for labour with other industries, Jeffery said, adding some contractors might have left the sector to chase those opportunities. And there are regulations under the B.C. Forest Act that regulate their contract relationships with big companies.
“I would say that if you talk to my (member) companies, they’d say they have very good relationships with their contractors, and in 90 per cent of cases there are no problems with rate negotiations,” Jeffery said.
“The whole industry has gone through a difficult time, and things aren’t spectacular now. There’s a limited amount of revenue generated by the forest industry, and that gets distributed throughout the industry.”