The Cielo di San Francisco, a newly built cargo ship, is sailing across the Pacific Ocean, destination Vancouver, and set to arrive in late May with one purpose: bring British Columbia lumber to China.
Booming sales of B.C. wood to China - March sales tripled from a year ago - have injected the long-suffering forestry industry with some much-needed optimism and a sense that better days could be lasting.
But the surge has created its own problems.
For decades, most of B.C.'s wood went south to the United States, by rail or truck, with a smaller portion exported by sea. Today, however, the U.S. market remains extremely weak in the wake of the housing bust, while lumber is lined up at jammed ports in Vancouver and Prince Rupert ready to set sail for China.
Faced with a transportation bottleneck that will only worsen as demand in China soars, the forestry industry has come together in a deal to secure vital shipping capacity.
This spring, four leading forestry companies - West Fraser Timber Co. Ltd., Canfor Corp., Tolko Industries Ltd. and Western Forest Products Inc. - partnered to charter the Cielo di San Francisco for the next year, an experiment to give the firms more control over the movement of their products.
"We are putting the ports under a lot of pressure, with the volumes of lumber," said Chris McIver, vice-president of lumber sales at West Fraser, North America's top producer. "We've never seen anything like this."
The chartered cargo ship is the latest solution for an industry enjoying and grappling with an export renaissance.
Lumber and pulp now fill about half of all containers exported from Vancouver. That has helped strain the availability of containers at the busy port.
Years ago, industry powers such as MacMillan Bloedel actually owned their own fleets of ships. This strategy was largely abandoned in the 1990s when containers - a cheaper way to move wood - became widely available and deals to move product were made with shipping companies.
But as available containers become more scarce, forestry companies are turning more to cargo ships. Vancouver-based International Forest Products Ltd. in January bought full control of Seaboard Shipping Co., which owns two cargo ships and has contracts for others. The firm was created in 1936 to export B.C. wood.
For West Fraser and its partners, the Cielo di San Francisco offered a perfect chance to ensure access to the lucrative Chinese market.
The ship was built in a Korean shipyard, set sail for Vancouver on May 9, and is expected to arrive around May 24. The first official fully loaded sailing for the ship, owned by d'Amico of Italy, is slated for the end of May from Vancouver.
Seven round-trips are planned for the next year, which would bring a total of 175 million board feet of lumber to China - about 3 per cent of the wood B.C. will send to China in 2011. To put the export growth in perspective, the 175 million board feet is more than the amount of wood B.C. exported to China in all of 2005.
Tolko, privately held and based in Vernon in the province's interior, has had several record months for overseas sales, said John Langley, general manager of export sales. He called the chartered cargo ship a "hedge" against troubles securing enough containers and said shipping has squeezed the industry before.
"It's been the pinch point many times," Mr. Langley said.
This time, the move to charter a cargo ship stems from the strained availability of export containers, on which the industry has come to rely.
Pat Bell, B.C.'s Minister of Jobs and formerly in charge of forestry, called it a "major challenge" earlier this year. B.C. foresters depend on so-called backhaul containers, which arrive from Asia fully loaded with other products. Once delivered largely by rail to their destinations in different parts of Canada or the U.S., they return empty to Vancouver.
Given the still-uncertain future of the U.S. economy - and thus demand for imported goods, and a steady supply of empty backhaul containers - foresters decided to co-operate on their year-long bet on the cargo ship.
"It gives us control of our own destiny," said Dave Lefebvre, a Canfor spokesman.
Companies that are normally rivals have learned to co-operate as they have cracked China. Under the leadership of Mr. Bell, who is widely credited by industry executives for leading the charge, companies present a united front in China rather than individually competing for business.
The strategy has produced spectacular results. Last year, B.C. sales to mainland China jumped 112 per cent to $668-million, exceeding Japan for the first time to make China the No 2 destination for Canadian wood.
This year, the pace of growth has picked up significantly. March was the second-biggest month ever for exports to mainland China and sales are up 158 per cent to $240-million in the first three months of the year. It is surprising because even as B.C. ships more wood, the percentage growth increases - gains in 2009 and 2010 were roughly 115 per cent.
The strong start to the year is somewhat unusual. Demand in China for B.C. wood is generally strongest in the last four months of a calendar year and if the current pace of growth holds up, B.C. exports to China would reach $1.7-billion in 2011.
That would be a dizzying figure, nearly as high as the value of wood sent to the U.S. in 2010 and far greater than even the most optimistic forecasts of Mr. Bell, a major industry cheerleader whose bullish forecasts have often seemed wildly aggressive. Even if growth slows, B.C. appears certain to hit four billion board feet of wood shipped to China this year. When Mr. Bell first made a forecast of four billion board feet three years ago in 2008, it was roundly dismissed as impossible to reach.
|WFT-T West Fraser Timber Co.||51.10||
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|CFP-T Canfor Corporation||23.40||
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|WEF-T Western Forest Products||2.245||
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