Forest sector hit by supply chain challenges

by Krystyna Shchedrina

Canada’s forest industry is being hit hard by supply chain challenges.

Rail, marine and trucking backlogs are forcing lumber and pulp companies to slow down production and exports, which is damaging Canada’s reputation as a forest products exporter, said Joel Neuheimer, vice-president for international trade policy at the Forest Products Association of Canada (FPAC).

Vancouver-based lumber producer Canfor reduced operating schedules at its 11 sawmills in Western Canada. The measures were taken due to the global supply chain slowdown and will remain in place for at least four weeks, said Michelle Ward, senior director of communications and government relations. The company said the anticipated impact would affect production capacity by 100 million board feet at least.

“These challenges are the cumulative effects of the ongoing backlog of Covid-19 related slowdown in global goods movement and staffing shortages, together with impacts on transportation networks from prior extreme weather and wildfires in BC,” Ward said. She added that the inability to move products to market from Western Canada has necessitated a cutback in production at both sawmills and pulpmills.

On March 29, Canfor’s Taylor pulp mill announced it was continuing a slowdown of bleached chemi-thermo mechanical pulp (BCTMP) production for at least another six-weeks. A statement said the further reduction production by at least 25,000 tonnes was due to rail transportation issues.

Affected companies

Neuheimer said Canfor is one of four lumber and pulp products companies that had to cut operating hours due to global supply chain disruptions.

West Fraser announced on March 1 they are switching to a three-day workweek, which has affected 700 employees. On April 5, the company said it would permanently reduce capacity at its pulp mill in Hinton, Alberta, by the end of this year. One of the two production lines will be shut, and the staff will be reduced from 700 to 345 positions.

Paper Excellence’s Meadow Lake pulp mill in northwestern Saskatchewan said on February 11 that it would indefinitely slow down production due to a recurring lack of railway service.

Alberta Pacific also announced on January 27 that it would take unexpected downtime at their pulp mill due to supply chain challenges.

Forest products make up 10 percent of the rail freight traffic in Canada, and the rail service has been extremely poor in Western Canada, Neuheimer said. He said some facilities receive 50 percent – or less – of the services they need, and that there is a significant railcar shortage on top of an insufficient number of crews and locomotives.

While Canfor is served by both CP and CN Rail, only four percent of CP’s revenue comes from forest products, and CP rail does not service Canfor’s Taylor pulp mill. CN rail did not provide any comments with regards to this story.

CP Rail spokesperson, Salem Woodrow, said despite the challenging operating environment in Western Canada in recent months, CP was able to exceed service commitments to Canfor this year, providing more rail capacity to one of the two B.C. mills it serves. So far, the service volume of the mill has increased by 16 percent compared to 2021.

Trucking can’t meet demand

“We are moving such large volumes and the forest products, lumber or pulp and paper, that we could never find enough trucks to make up for the lack of rail cars we’re experiencing. But trucking, to a certain extent, is a band-aid solution,” Neunheimer said.

“Trucks have been tough to come by because we had a truck driver shortage in Canada before the pandemic, and we still have that same shortage. Across Canada, we are approximately 23,000 truck drivers short. And in some parts of Canada, the cost of a truck increased by 150 percent.”

Trucking is an expensive solution, and this is why Canadian companies mainly export their forest products to the U.S. by rail, while exports to Asia travel by sea. The distribution of forest products within Canada is carried out by both rail and truck.

Dave Earle, the president of the B.C. Trucking Association (BTCA), said there are several factors affecting road freight transportation. B.C.’s major route, the Coquihalla (Highway 5), finally reopened in April after last year’s floods. However, Earle said it now takes about 30 to 40 minutes longer each way than it did before the disaster. This affects drivers under the Hours of Service regulations, who are allowed to drive roughly 13 hours in a 14-hour period. He said drivers have to stop overnight, which causes delivery delays.

Highway One, coming through the Fraser Canyon, has also reopened. However, Earle said coming through that area is the luck of the draw because a separated rail crossing is now at grade.

” If you get there and there’s no train, you continue on your way. If there is a train, you have to wait,” Earle said. “There are 64 trains a day that go through there. Sometimes the delay can be 10 minutes. Other times it can be two hours. So the delays and overnights are impactful. They’re incremental, they can be managed, but they’re impactful.”

Earle also noted the manufacturing of new trucks and trailers has been disrupted due to the chip shortage. “If it was one thing, we could fix it. But it’s a bunch of things incrementally acting together that push and create this instability. And it’s creating problems, and there’s just no easy fix to it.”

Lack of storage space

Neuheimer added the lack of warehouse space is another underlying issue. He said it is “basically non-existent” in Vancouver and Edmonton. And even though there have been no reported incidents, this issue puts pulp products at risk of being damaged. He said that pulp is a perishable product that can be destroyed by humidity and moisture if not stored properly.

Backlogs at ports pose the same risk to pulp products. Neuheimer said freight from Western Canada mostly goes through the port of Vancouver with a smaller amount moving through the Port of Prince Rupert.

However, some ships bound for China, for example, are skipping congested ports. “They just move on to the next spot, going down the West Coast to the US and then to Asia,” Neuheimer said.

“Another strange thing we have seen is that there is such a demand for containers in Asia that oftentimes the empty containers available at places like Vancouver are not even getting filled up with goods. They do not wait and basically ship them back empty, wanting to get them there as fast as possible. This also leaves a certain amount of our products waiting at the border for the next available container for weeks.”

In 2021 the Vancouver Fraser Port Authority reported that exports of lumber products declined 14 percent, while the amount of wood pulp exported fell by 20 percent. The port’s president and CEO Robin Silvester says the situation will only get worse if the port’s ability to handle more containers is not addressed promptly.

Neuheimer said these challenges are really hurting Canadian forest products and manufacturers. “I would say if it’s especially bad in Western Canada. It has hurt our reputation as a global exporter. Because customers are questioning our ability to get products to them in a timely fashion,” he said.