2024 hope for B.C. industry is that they’ve left the worst behind them

B.C. industries face “transition year” in 2024 following a slowdown that caused exports to fall in 2023.

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For a lot of people in B.C.’s resource industries, such as sawmill owner Jake Power, the optimism for 2024 comes from a sense that they’ve left the worst of 2023’s downturn behind.

The post-COVID-19 boom in commodities in 2021 and ’22 — and the soaring inflation that came with it — came to a crashing halt in 2023, evident in a 15 per cent decline in the value of B.C.’s exports to the end of October, the latest month for which B.C. Statistics has numbers for.

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“It was definitely the most challenging year we’ve had since we expanded (in 2019),” said Power, CEO of Mission-based specialty sawmill Power Wood.

B.C. shipped some $46 billion worth of materials, from aircraft and automobile parts to lumber, paper and mineral products, over the first 10 months of 2023 compared with $55 billion in the same period in 2022.

The trade in lumber, still the province’s biggest export, declined by 17 per cent by volume to the end of October. But the value of the 11 million cubic metres of timber exported fell by 43 per cent to $3.8 billion over the first 10 months compared with $6.6 billion during the same period a year ago.

“I think the biggest thing to be optimistic about would be (that) I think most of us expect the drop in values is behind us,” said Power.

“It’s a big question mark, 2024, I would say,” Power said. “You have this little bit of optimism that we’re all feeling at the moment because central banks are starting to get a little more dove-ish on interest rates.”

Economists anticipate central banks, starting with the U.S. Federal Reserve, will begin reversing their inflation-fighting spike in interest rates sometime in 2024, which gives mills, including Power’s, hope U.S. housing starts will start to rise again.

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“Everyone (has been) looking for hope here for the last year-and-a-half,” Power said. “And that’s kind of our sliver of hope.”

Power’s mill is a value-added facility that turns out specialty building components, so it was fortunate to maintain sales levels, though not at profitable prices.

Much of B.C.’s primary lumber sector, the mills that produce lumber for framing new homes, remains at “a crossroads’ moment,” according to Linda Coady, CEO of the Council of Forest Industries (COFI), the group that represents the interests of its major producers.

“The hope is that things will get better, that we will be able to meet the new goals for (forest) conservation and biodiversity protection,” she said. “But certainly the data points, the metrics are not looking good.”

In a broader sense, 2024 should be a “transition year” in the global economy for markets that buy B.C. exports, though growth is going to be slow, according to Bryan Yu, chief economist for Central 1 Credit Union.

“So it shouldn’t get much worse,” he said.

For the lumber industry, Council of Forest Industries chief economist Kurt Niquidef said signs are that U.S. demand is increasing. The commodity price for a thousand-board-feet bundle of two-by-fours, a key measure, has risen to US$440 in recent weeks, compared with US$345 a year ago.

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However, Coady said the B.C. industry’s biggest challenge remains getting more certain access to timber for their mills.

“Just in the last five years, harvest levels on public forest lands in B.C. have dropped by almost half from 60 million cubic metres in 2018 to 35 million in 2023,” Coady said. “Then in the last year, the actual harvest in 2023 was 42 per cent below the annual allowable (harvest).”

Timber supplies in a lot of B.C.’s forests, particularly in huge swaths of the Cariboo and Prince George forest districts, have been depleted by the mountain pine beetle infestation of the late 1990s and early 2000s, and need to regrow and recover.

Coady said recent government policies related to old-growth protection and ecosystem-based land use planning, both of which prioritize Indigenous participation in decision-making, are still being put in place.

That has held up the approvals for a lot of harvesting permits, which has prompted some sawmill companies to curtail operations.

“In the meantime, there’s just a lot of uncertainty over what the harvest levels are going to be, and that’s affecting investment,” Coady said. “And that is affecting confidence in the sector.”

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