Supply-chain problems compromise rail service; shortage of industrial space hampers port operations.
Canada’s forest products industry has been having a hard time of late sending and receiving shipments and keeping up with production schedules. Some regions in Canada have been plagued with some nasty weather in the last few months, but industry officials also complain that a fragile and under-performing transportation system is not serving the industry well.
Part of the forest industry’s problems stem from global supply-chain issues which have had ripple effects across many transportation sectors, including the rail services that the industry relies upon to receive its raw materials and carry its products. Extreme weather events have also negatively impacted rail service and operations at coastal seaports. An extreme scarcity of available industrial real estate is also hampering forest products shippers.
“Bottlenecks in key corridors are repeatedly slowing our supply chain down and hurting our global competitiveness,” said Derek Nighbor, CEO of the Forest Products Association of Canada (FPAC). “Getting to the bottom of issues in frequently congested spots like British Columbia’s Lower Mainland must be a top priority.”
The Lower Mainland is dealing with an extreme shortage of available industrial land, noted Robin Silvester, president and CEO of the Vancouver Fraser Port Authority. “A central challenge we’re facing is the Lower Mainland’s industrial land crisis, which has squeezed key supply chain activities,” he said. “Having those functions close at hand supports a more resilient supply chain and facilitates Canadian exports.” To exacerbate the situation, massive rainfalls in late 2021 and early 2022 caused flooding and landslides, which effectively cut off the Lower Mainland from the rest of British Columbia.
“International demand for Canadian goods remains high, so this is a missed opportunity for Canada for additional exports,” Silvester added.
Impact on Shipping
The Vancouver port saw declines in lumber volumes in 2021, which were down 14%, and wood pulp, down 20%, as well as decreases in other breakbulk cargo sectors such as fertilizers, down 13%, and chemicals, down 19%. All this Silvester attributed to “a combination of global supply chain challenges and weather events.”
The Canadian Government invested $4.1 million, in the wake of the flooding in British Columbia, to help the Vancouver port authority prepare a parcel of vacant industrial land for cargo operations, a move that Silvester applauded. But, he emphasized, it’s important “to ensure sufficient industrial land is available in the Lower Mainland for the port to continue to facilitate Canada’s growing trade efficiently and reliably. When our core Canadian supply chains are constrained by the tightest industrial land market in North America, that’s a problem that reverberates across Canada.” One recent report indicated that the Vancouver region has the lowest industrial real estate vacancy in North America and the highest leasing costs in Canada.
When it comes to rail-service reliability, or the lack thereof, Canada’s forest industry is facing the recurring problem of many mills not getting sufficient numbers of rail cars when they need them. “This can have a negative impact on customer relationships and confidence, especially as more and more customers in Canada and around the world are turning to forest products for their climate benefits,” said Nighbor. “Labor supply challenges are an ongoing concern as well, especially as it relates to truck driver shortages across the country.
“We understand there are going to be system delays when the weather is bad or when employees are off sick because of COVID-19,” Nighbor added. “But over the past few years there have been way too many Groundhog Day moments. There are systemic issues that absolutely require solutions for the long-term.”
Supply Chain Woes
All of these supply chain woes have begun to have a negative impact on the production of Canadian lumber and wood pulp. Canfor Corporation, an integrated forest products company based in Vancouver, announced in April that it would be reducing operations at its British Columbia sawmills for a minimum of four weeks. Canfor CEO Don Kayne blamed the slowdowns on “the cumulative effects of the unprecedented global supply-chain crisis that has been ongoing for several months.
“We are experiencing extreme supply-chain challenges that are significantly impacting our operations,” Kayne added. “It has become imperative to reduce operating schedules to address unsustainable inventory levels.” He pledged to “continue to leverage our global operating platform to minimize disruptions in supply to our customers.”
The reduced operating schedules will impact production capacity by a minimum of 100 million board feet, according to Kayne. The reduced operating schedules will remain in effect, he added, and the company will continue to assess and make adjustments to operating schedules as supply chain conditions evolve.
The April cutback at Canfor’s sawmills came on the heels of another by Canfor Pulp, in mid-February, which curtailed production at its Taylor Pulp facility, and yet another, in April, which extended that cutback by a minimum of six weeks—all due to the same ongoing transportation shortages. The situation has “resulted in continued high finished product inventories at the pulp mill,” said Kevin Anderson, vice president of operations at Canfor Pulp. The first six-week curtailment reduced the mill’s production by about 25,000 tons and the second cutback will further reduce production by at least another 25,000 tons, Anderson said.
The company had “no choice but to extend the current production curtailment,” according to Anderson, because “the ongoing rail transportation situation has not improved.”
Long-term solutions to the problems being faced by the Canadian forest products industry revolve around three policy priorities, according to Nighbor: “future-ready infrastructure,” rail service reliability, and proper labor-force preparation. “A resilient and reliable transportation system,” he said, “is critical to Canadian forestry’s ability to meet increasing global demand for our products, keep forestry workers working, and improve economic conditions in rural and northern forestry communities.”
Globally-based supply-chain problems are one part of what the Canadian forest products industry is experiencing—but there is also a made-in-Canada component, according to Silvester. Further development of Canada’s infrastructure, he said, “would be foundational to Canada’s trade future. But if we don’t act, it’s ours to lose.”
