Forest products giant Canfor Corp. cut the ribbon at the world's largest sawmill in Houston, B.C., yesterday, a state-of-the-art facility it hopes will blunt the impact of crippling softwood duties and the rising Canadian dollar.
The move -- part of a global "bigger is better" trend in the industry -- poses a threat to smaller mills in the province that may find it increasingly difficult to get raw logs for processing, observers said.
The super sawmill has the capacity to produce 600 million board feet a year, easily eclipsing the next largest facility, a sawmill in Germany owned by Fritz Klausner that is capable of cranking out 475 million board feet a year, according to Russ Taylor & Associates, a Vancouver-based forest industry consultant.
In fact, the Houston plant is so large, B.C. Premier Gordon Campbell quipped that it could provide twice the amount of lumber needed for all the housing starts in the province last year.
The new mill will produce value-added dimension lumber, typically used in house construction, for U.S. big-box home supply stores, such as Home Depot and Lowe's.
"These mills are part of our future in British Columbia," Canfor chief executive officer David Emerson said following yesterday's ceremony in Houston.
The launching of Canada's first super sawmill is part of an effort by major European and North American lumber industry players to get bigger globally, either by investing tens of millions of dollars to upgrade existing mills or by swallowing smaller rivals.
Yesterday, as rumours swirled that Weyerhaeuser Co. is planning to build its own super mill in Kamloops, B.C., Mr. Emerson admitted that smaller independents may have to find a niche for themselves in order to survive.
"The market is changing," he said. "This investment is to ensure that we become more competitive in the global marketplace."
Analysts said the investment is launched at a time when U.S. duties on Canadian softwood is putting industry giants such as Canfor and Weyerhaeuser under pressure to use economies of scale to cut the cost of converting raw logs into dimension lumber.
Sarah Goodman, a spokeswoman for Weyerhaeuser, declined to comment on speculation regarding plans for Kamloops, but added that there is a general trend in British Columbia toward the "scaling up" of sawmills. After closing its Vavenby mill near Kamloops, the company is now producing the same volume of wood using only three mills in the region instead of four.
"It seems that the way of the forest industry these days is to be bigger and better," said Laurie Cater, publisher of Madison's Canadian Lumber Directory, a Vancouver-based newsletter that tracks wood prices.
Mr. Cater said the development of such huge operations has been made possible by advances in computer technology and a wave of industry consolidation that ensures that a long-term supply of logs is available to keep them running.
The Houston mill is an expansion of an existing mill, which was upgraded at a cost of $26.4-million. Canfor said the mill is expected to reduce log conversion costs in Houston by 24 per cent, and by 4 per cent across the entire company.
The lower costs are achieved through the use of computerized scanning and other technology that permits Canfor to tailor its cuts to take advantage of fluctuations in the price of certain types of lumber.
For instance, if the price of 2-by-10 floor joists rises ahead of other sizes of dimension lumber, the mill can reconfigure its production schedule to produce the required size in just 48 hours.
The super mill was being launched yesterday as the price of spruce-pine-fir construction lumber surged to a 52-week high of $376 (U.S.) for 1,000 board feet from $365 last week.
Analysts say prices could continue to rise on the back of strong housing construction activity in the United States and supply disruptions caused by freezing temperatures in Eastern Canada and the United States.
"That is scaring the pants off a lot of people who have gambled that the market is oversupplied and allowed their inventories to fall," said Graham Dallimore, senior vice-president of Global Futures Corp., a Vancouver based commodities trading firm. "We are heading into spring and a lot of people haven't covered their spring needs yet."
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