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Report stresses need to act on value-added now (03/04)

The clock is ticking and opportunities for Ontario’s wood industry to produce new products for a world market hungry for engineered wood are in danger of slipping away, says a new report commissioned by Ontario’s Living Legacy Trust (OLLT).

The clock is ticking and opportunities for Ontario’s wood industry to produce new products for a world market hungry for engineered wood are in danger of slipping away, says a new report commissioned by Ontario’s Living Legacy Trust (OLLT).

In January, the OLLT released a voluminous four-part report by Woodbridge Associates. The report details the status of Ontario’s forest industry, the challenges it faces and the opportunities it has that represent a departure from its traditional role of producing dimensional lumber.

OLLT executive director Karan Aquino says the hope is for the report to serve as a market analysis for Ontario’s wood industry. Three parts of the report, including a 150-page main report, an industry profile and products benchmark report, are available to the general public. For competitive reasons, a fourth part detailing market opportunities in the Great Lakes is available on a limited basis to industry representatives.

“There is a global over-supply of lumber so, if we’re going to try to continue to compete on lumber, it’s just going to get harder to compete against countries like Russia and Chile,” she says. “(Value-added) just makes good sense. It evolves and changes and what better time and what better start going toward value-added?”

An area that no part of the world has any dominance in is components for pre-engineered houses, says report author Peter Woodbridge.

“There is a huge change in how residential houses are being built in North America and this is bringing about opportunities,” he says. “It’s a shift away from the conventional methods of building houses and more in the direction of using engineered wood components and off-site manufacture.

Products like finger-joints blend themselves better into that market than conventional two-by-fours.”

The advantage of value-added production to Ontario’s wood industry is that, unlike dimensional lumber, wood products that have received additional manufacturing are not subject to duties such as the 27 per cent countervailing and anti-dumping duties imposed by the United States Department of Commerce. These duties have cost the national industry over $1 billion since 2002.

By adopting the changes recommended in the report, Woodbridge estimates Ontario’s lumber industry could increase its revenues by $2 billion between 2003 and 2010. Much of that requires improvements in Ontario’s sawmills that would increase efficiency and shift focus away from lumber dimensions in multiples of two.

Aquino says the report used, as a baseline, an earlier report by the OLLT that identified the Great Lakes states of the U.S. as a main market for Northern Ontario’s wood products. The states of Minnesota, Michigan, Wisconsin, Ohio, Indiana, Illinois and Pennsylvania and New York represent more than one-quarter of the total U.S. market or about 83 million people.

Woodbridge says Ontario first started realizing its wood potential in the 1990s when the Ontario government encouraged more wood that was being used by the pulp and paper industry to be channeled into lumber production. That move made Ontario the third-largest lumber producer in Canada after Quebec and British Columbia.

However, the tariffs and countervailing duties have made access to the United States market “more limited” for Ontario’s wood, he says.

Meanwhile, companies in southern Ontario have made tremendous progress in the value-added manufacture of wood products, particularly in areas such as component manufacture and factory built modular homes.

Woodbridge says wood harvesting and lumber producing in the North has a “disconnect” with southern Ontario’s wood manufacturing industry. While Northern Ontario has been a producer of lumber, southern Ontario manufacturers have relied heavily on wood from the West Coast for the production of products such as I-joists.

A common Ontario species, the black spruce, is one that currently is shipped out with much of Ontario’s spruce-pine-fir (SPF) dimensional lumber.

Woodbridge says it is a species of wood that offers tremendous strength value and is considered some of the best in North America.

Another opportunity is in the prefabrication of external house panels.

Due to a shortage of qualified labour, Woodbridge says there is demand for “off-site” manufacture of exterior wall panels for housing.

“Rather than ship down two-by-fours to framers in the United States, send down the entire panel using Ontario two-by-fours, perhaps exterior panels of Ontario-made oriented strandboard,” he says. “You can add to that windows for a complete exterior panel. You can start adding insulation, plumbing and end up sending down a completely finished, sealed and pre-inspected exterior panel and ship it down by flatbed.”

Woodbridge says Ontario wood manufacturers are in a position to meet a demand that already exists and it is one that has impacts throughout the chain, including an increase in jobs for qualified labour in Ontario.

“We see this an opportunity,” Woodbridge says. “We can see how, by working together, the North and south start to get some synergies happening, particularly as you move into high-technology areas such as system-built housing.”

“There’s a quid-pro-quo by buying lumber from the major producers; you’re also looking for distribution,” Woodbridge says. “Larger producers don’t want to go offline and get into these medium and small businesses, but they are very interested in selling the end products to some of their customers in the United States. That’s because producers in the States don’t want to buy lumber from producer X and OSB from producer Y. They want to buy the whole thing as a package.”

It is, however, a window of opportunity closing very quickly, says Woodbridge. Areas such as skills development to ensure there are trained people able to come into the industry to produce the products that are going to be needed will require development.

However, areas that have to be addressed now include quality and variable moisture contents of wood products, as well as the ability of the industry to identify and target markets for its products.