Canadian timber industry downturn

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Canadian maker of logging equipment goes out of business

By Tim Christie

The Register-Guard

Published: April 18, 2008 12:00AM

A venerable Canadian logging equipment manufacturer has gone out of business, the latest blow to the battered timber industry.

The British Columbia Supreme Court declared Madill Equipment to be bankrupt on April 1, and ordered its assets sold and employees terminated. A representative of the court-appointed receiver told the Vancouver Sun that 50 or more employees would be kept on at distribution centers and at the head office while a sale of the company and its assets is organized.

The company, which operates a sales office in Eugene, has been making equipment for logging outfits in the Pacific Northwest since the 1950s, such as feller bunchers, log loaders, harvesters and cable yarders. In addition to its main manufacturing plant in Nanaimo, B.C., it also built equipment in Kalama, Wash.

Bob Luoto, owner of Cross & Crown Inc., a logging outfit in Carlton, said the closure of Madill was "huge."

In the bankruptcy papers, the company attributed its woes to a "significant downturn" in the timber industry since the second half of 2005, which has hurt demand and prices for logging equipment. A steady decline in lumber prices, the downturn in the U.S. housing market and the appreciation of the Canadian dollar hurt the company's business, it said. In addition, slow sales of forestry equipment created excess inventory, which depressed prices, and customers bought smaller, less expensive equipment. Madill officials also said their company lacked product diversity, leaving them vulnerable to industry downturns.

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Given the generally strong across-the-board commodity prices, in concert with a strong Canadian dollar and massive immigration, the Canadian economy is doing very well, and the above is much more a minor irrelevancy than any kind of economic indicator.

Understand that Canada's economy, is still to some large degree, commodity based, contrary some "economic pundit's" assertions.

The higher Canadian dollar is more an opportunity to lower interest rates and/or reduce public debt without fear of excessive negative repercussions in concert with making imports much cheaper, than it is a negative to exports, with the obvious proviso that in the process of lowering interest rates, the Canadian dollar would have an in-step decline.

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I was surprised that the article didn't mention the mountain pine beetle, which has devastated the logging industry in British Columbia, and is now spreading east to Alberta, and many fear it will spread to the boreal forests of Ontario and Quebec, too. The warmer winters of late have protected it from what was otherwise a significant winter die-off. This company was suffering from a downturn in the logging business, all right--it's hard to log when the trees are dying and rotting where they stand.

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This is an article from the Washington Post about the mountain pine beetle. The spread of this infestation is also seen as a significant indicator of global warming.

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Setanta wrote:

This is an article from the Washington Post about the mountain pine beetle. The spread of this infestation is also seen as a significant indicator of global warming.

I have read a number of articals on beetle killed timber. As I recall there is some chance that killed timber is still a harvestable commodity after death.
I seem to recall that the articals dealt with the slow pace of harvest licences being issued.

We have the same problem (slow pace of harvest licence being issued) for Fire killed mountain ash.

I'll post a photo later of a local log dump Its F*** huge.

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From Setantas W/post artical.

Ironically, Quesnel is booming now. The beetle has killed so many trees that officials have more than doubled the allowable timber harvest, so loggers can cut and haul as many dead trees as possible before they rot. The icy roads are choked with giant trucks growling toward the mills, loaded with logs marked with the telltale blue stain fungus.

In town, two sawmills and the plywood and pulp plants of the largest company, West Fraser Mills, are "running flat-out," with shifts round-the-clock, said Tom Turner, a manager there. He walked the catwalks of a sawmill as whirling machines below grappled and twirled the offloaded trees. Computers sized up each log, instantly figured the best cut, and shoved it at furious speed through giant disk saws and planers to produce lumber that rail cars would carry to home builders in the United States.

West Fraser is spending $100 million to upgrade the mill. Other companies have added shifts and proposed new plants to make chipboard or wood-fuel pellets. Property values in Quesnel are rising, rents are up, the local shopping center is flourishing again and unemployment has dropped, said Nate Bello, the mayor of Quesnel.

But the boom will end. When what people here call "beetlewood" is removed or rots out -- and no one is sure how long that will take -- the forestry industry "will be running at about half speed," Bello acknowledged.

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The problem with this is what to do with the extra timber being generated when US building starts are so far down.

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I've been to Quesnel many, many times. In fact I had a great girlfriend whom I considered marrying, but my wife-at-the-time has alternate ideas.

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Your article, and the Washington Post article are also missing another significant factor. I'm not surprised--for most contemporary journalists, "deep background" means finding out what was happening six months ago. Before the American housing industry began to slow down, the soft wood lumber industry in Canada was already hurting because the United States was strictly limiting the import of Canadian soft woods. American trade negotiators alleged that they had the right to do this under the terms of NAFTA (the North American Free Trade Agreement) and Canadian government officials denied that this were true. For whatever justice one might allege for either point of view, the practical result was that the Canadian soft wood lumber industry was already very depressed. Your original article says that this corporation bought a Eugene, Oregon based timbering equipment company in 1999, which is just a few years before the soft woods import dispute began. I suspect that this company was already reeling from the effects of the soft woods dispute and the dramatic increase in the speed of the spread of the mountain pine beetle before the slump in the American construction industry began.

All things considered, the last five or six years have been a particularly bad time for the timber industry in Canada.

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This dispute has been going on forever, it seems. Here are a couple of pretty good summaries.

http://www.acah.org/history.htm

http://en.wikipedia.org/wiki/United_States-Canada_softwood_lumber_dispute

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There ya go . . . if you look at Mame's link to Wikipedia, under the rubric "Lumber IV," you'll see that the American lumber industry took out the hoary old "Canadian soft wood lumber is subsidized by the Federal government" line and dusted it off again in 2001.

So, it looks like Madill was hit by slump in the Canadian lumber industry occasioned by the softwood dispute, by the increase in the spread of the mountain pine beetle, the rise of the Canadian dollar to par with the U.S. dollar, and the slump in the American housing market.

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Has it recovered well? I wonder if there is space for Teak wood imports in Canada. It's a higher profile type of wood, used mainly in fine interior decoration and furniture making. For what I understand it is not produced in the country.

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Canadian timber industry downturn

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