Lumber producers angry over rail bottlenecks

Canada's lumber producers ought to be enjoying the fruits of a U.S. housing recovery. Trouble is, they can't take full advantage of it.

The forestry companies say that a shortage of rail cars is causing them to lose sales and market share, just as American demand for their products returns after a long, severe slump.

The problems the companies say they face include irate customers threatening to impose penalties for late delivery; empty ships sitting uselessly in port for lack of lumber to move; and idled shipments that have to be stored under tents.

Western Canadian producers have added their voice to the chorus of industry complaints in Ontario and Quebec over major rail shipment delays.

The robust pickup in the U.S. housing market has resulted in new orders for lumber, strand board, plywood, pulp and other products, and Canadian producers require more rail cars to get those products south. But they claim the two major Canadian service providers – Canadian National Railway Co. and Canadian Pacific Railway Ltd. – are not doing enough to help them out of a jam.

"Slowly but surely, the lumber and panel and pulp markets are coming back and it's getting more difficult to supply as quickly and as consistently as possible, especially with just-in-time delivery becoming commonplace," says Doug Routledge, acting president of the B.C. Council of Forest Industries.

"That spills over to offshore deliveries, with ships sitting in [the Vancouver] port and charging for waiting to be loaded," he said.

The rail carriers say they are doing all they can to provide more cars in the face of the sudden upsurge in demand, but that the car supply for forestry producers is based on their own shipment forecasts. Compounding the problem has been an unusually brutal winter that sidelined cars, they add.

"CN's rail car supply for forest products is customer-driven, based on shipment forecasts and commitments from its forest product customers over the prior year. The strong upturn in U.S. housing starts this year was not anticipated by the forest products industry in its forecasts and in its car ordering with the railways," CN spokesman Mark Hallman said in an e-mail.

The growth in U.S. markets has also resulted in more long-distance hauls that increase car-cycle times, he said.

CN has taken large numbers of cars out of storage to increase fleet availability, he added. And new premium forestry box cars are on their way, with more to be delivered beginning in the third quarter of this year, he said.

But Catherine Cobden, executive vice-president of the Forest Products Association of Canada, said there are difficulties just getting the cars that were pre-ordered.

"We're only getting half the cars we had pre-arranged to get. This is not a case of 'outside-of-anybody's-control,'" she said.

"Every day this week our members have been phoning in with crisis situations. We asked for these cars well in advance and we're not getting them."

Some desperate western producers are building tents to temporarily warehouse their products, she said.

"We have to ride the rebounding marketplace and get our product out," she said. "The railways are a large monopoly. They can dictate the terms. They're not customer-focused, they're profit-focused."

Alternate means of transportation – such as trucks – are being used but are not available in sufficient numbers and are not fast enough, said Ms. Cobden.

CP spokesman Ed Greenberg said the railway is working closely with its forestry customers to resolve the problem.

"Our car order fulfillment is currently greater than 90 per cent and our railway is well-positioned to address car-supply requirements going forward. It's something we're taking seriously."