How is it domestic log prices flat line while forest product markets rise? The short answer: Log export restrictions continue to hurt log producers, even though the market for forest products has improved considerably.
As U.S. construction activity increases, and the demand from Asia holds, media stories report a strong resurgence in the forest products industry after a long lean period. With this resurgence comes an increased demand for forest products, and a rise in lumber, veneer, board and pulp prices.
Given such encouraging news, you might assume things look good for B.C. mills in the business of processing these forest products. By logical extension, you might also assume, if things are good for the mills, they must be good for the people in the business of producing and selling the logs necessary to make the products.
Unfortunately, this is not the case. Despite a significant rise in forest product prices (especially lumber and veneer markets) the domestic prices offered for the logs used to make these products have barely budged.
How does this happen? Currently, the log export permitting surplus test enables domestic mills to obtain all the logs they need at domestic, not international prices. This is a substantial barrier to a healthy, competitive log market on the B.C. coast.
PFLA continues to actively advocate for progressive changes to log export policy to allow B.C.’s forest owners to obtain internationally competitive prices for our products.
We’re putting together more detailed information to fully illustrate the problem, but in the mean time, here’s one example that clearly shows how B.C. log producers are prevented from reaping the benefits of a worldwide price increase for forest products.
The graph above depicts price changes (in percentage) from February 2012 to February 2013.
The bottom, flatter line represents the price log producers receive from local mills for a particular Hemlock sort. The top, dynamic line represents the international price mills receive for the forest products they produce from the same Hemlock sort.
Because the log export permitting surplus test enables domestic mills to purchase certain Hemlock sorts at almost half the international price, forest owners are prevented access to competitive, international prices and the kinds of gains represented by the top, dynamic line.
Stark disparities like these are unsustainable for forest owners on the B.C. coast. We look forward to the day we can sell logs domestically to competitive, thriving mills without being penalised.