Coast Tsimshian Resources says it has opened new market for B.C. wood

The largest first nations-owned logging company in the province has begun shipping logs to China, bringing jobs and revenues into the province's economically hard-hit northwest.

Coast Tsimshian Resources Ltd., the last surviving remnant of the Skeena Cellulose forest empire, announced its first large shipment over the Thanksgiving weekend: 25,000 cubic metres of lower-grade hemlock logs on their way to China. The first-nations company says it has opened a new market for its B.C. logs that will bring new opportunities to the northwest.

But the log shipment, coming weeks before Forests Minister Pat Bell embarks on a trade mission to China to promote B.C. lumber sales, has reignited the log-export controversy.

Critics of exports won't condemn the first nations program. It is, after all providing jobs. But they say the province has failed to provide incentives for manufacturing investment here while quietly allowing log exports to China, where low-paid workers are converting them to higher-value products.

"I do get it when people in these communities need some short-term jobs," said Ken Wu of the Western Canada Wilderness Committee. "But it's the government's responsibility to ensure the regulations are in place and the incentives are in place to build up a B.C.-wide manufacturing capacity to buy those logs."

Wu said Bell has clearly stated the province's China policy is to export lumber, not logs.

Yet log exports to China are growing.

Bell described Coast Tsimshian Resources as a success story. There is no manufacturing capacity in the region and the first nations company has managed to find markets for its logs domestically as well as offshore.

"I am not a supporter of log exports, but I also understand that until we have sufficient manufacturing capacity in place it will be necessary, providing a significant number of jobs to the log harvesting sector in the northwest part of the province," Bell said.

Coast Tsimshian chief executive officer Wayne Drury makes no apologies for the export business. The 25,000-cubic-metre sale is just the first. Another sale is already in the works.

If the company could not export, it would not be able to survive on the domestic market alone. There would be no logging in the northwest and no logs for those B.C. mills that depend on its timber.

Drury said the company is developing new opportunities in China and that log exports are part of an overall plan to grow into a thriving forest products enterprise.

Coast Tsimshian Resources is owned by the Lax Kw'alaams First Nation, located at Port Simpson, 35 kilometres north of Prince Rupert. The company bought its forest licences from a bankrupt successor to Skeena Cellulose, which itself went bankrupt, and began logging five years ago, putting logging contractors in the Terrace area back to work. It employs 120 people, about 30 of whom are first nations.

Coast Tsimshian Resources expanded to Asia last January, opening an office of its own in Beijing, which it used to develop ties with Chinese companies.

Drury said it has annual revenues of $30 million and has been profitable every year, except for last year. This year, the company's worst-case scenario is to break even.

The first nations company has also developed a logging plan that protects environmental values as well as provides jobs, Drury said. The Lax Kw'alaams want the forest licences to be providing jobs and revenues for their community not only for today, but for 250 years into the future.

Coast Tsimshian Resources voluntarily dropped its annual harvest on the forest licences from more than one million cubic metres of wood a year to 750,000 in order to preserve features on the land the Lax Kw'alaams value.

It is currently harvesting only about half its allowable annual cut -- 350,000 cubic metres -- because it can't sell more wood. Of that harvest, 200,000 cubic metres a year is exported under a special cabinet order that permits northwestern logging companies to export 35 per cent of the allowable annual cut. The policy is to encourage some economic activity in the region.

Coast Tsimshian is the province's sixth largest forest licensee, yet it operates under the radar screen of the provincial forest industry.

Drury said the company likes it that way. It owes much of its success, he said, to keeping costs under control: no fancy offices, no corporate cars and no large corporate staff.

Coast Tsimshian's office is located in Terrace. Across the street is the abandoned site of Skeena Cellulose's sawmill. Drury describes it as paved emptiness in the heart of the city. Since government-owned Skeena Cellulose went bankrupt almost a decade ago, it has gone through several owners who attempted to restart it. All ended in bankruptcy, a testament to the hardships of developing a manufacturing industry in the region. A few standing posts are all that remain of the mill.

The problem manufacturers encounter, Drury said, is that 45 per cent of the forest licence is old, decadent hemlock. The wood is not suitable for sawmills, whose high-speed blades require uniform logs. The other domestic alternative is pulp.

Some of the wood is sold to mills along the coast, all the way south to Harmac at Nanaimo. But there's just no domestic market for all the wood, Drury said.

Exports are the only alternative at the present time.

The Chinese mills, he said, are slow-running, using workers at every stage, including de-barking the wood, which is done by hand. The jobs are all low-paying.

"They run like an old B.C. bush mill from the '60s," he said.

But the Chinese are able to take the logs and cut the good pieces out of them, cutting them further into fine strips that they laminate together into beams and then cover with a thin veneer of high-quality wood. The end product is exported to Japan.

The company's success in landing contracts in China is the first step in what Drury expects to be a long-term relationship that develops beyond log exports.

"We are not doing this just for us but for the whole of the North to assist the North in development. We see some opportunities in custom-cutting for very specific niche markets over there and we see some opportunities for close cooperation with some of the mills there in doing some product development over here.

"In the end, our goal is to be a full-phased manufacturer of various forest products here."