Alberta forest industry needs the trains to run on time
Action needed after lumber shipments to U.S. dropped 22 per cent in first quarter this year
Canada's strained rail network is damaging Alberta's forest industry.
After a winter of delayed shipments, high storage and trucking costs, and difficulty getting our products to customers, we need real action to improve the situation.
Rail service is having a real impact on our ability to export. During the first quarter of 2018, Alberta's shipments of lumber to the United States fell 22 per cent.
It's certainly not fair to say that rail is the only culprit. U.S. lumber tariffs are also part of the problem. Still, mills are having a tough time getting their products to customers, and it's taking a bite out of exports.
The Alberta Forest Products Association has done an informal poll of forest companies, asking, "What percentage of rail cars you ordered this winter arrived on time?"
Only one of the companies surveyed got more than half of its cars on time. All other mills were under 50 per cent, with the worst-off mill only getting 14 per cent of the rail cars it ordered.
Millions in extra costs
Companies are also incurring millions of dollars in extra costs for trucking and warehousing, additional handling of the product, and late delivery penalties.
Since pulp can't be stored outside, companies are forced to scramble to find extra warehouse space. In rural communities, this can be a significant challenge. Shutdowns are a real possibility if mills run out of space to store product and can't find additional warehousing.
Many of these mills are smaller, family-run operations that need timely rail service to ensure the future of their business.
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The forest industry faces many external challenges, including a mountain pine beetle epidemic, trade challenges from the United States, and the ever-present threat of forest fires.
A very strong commodities market is offering some relief, but it is frustrating to not be able to realize the full potential of a strong market because of challenges in the transportation system.
Not pointing fingers
I should make it clear that we are not pointing fingers. We do understand that the rail transportation system is stretched beyond capacity and that strong global markets for grain, lumber, pulp, and other commodities mean demand has been higher than anyone forecasted.
We also know that labour disputes are looming, and, while we're not taking sides, any work stoppage will need to be resolved immediately, if we don't want to see the situation move from very bad to much worse.
Finally, we understand that you can't expand the rail system overnight. But the bottom line is that decisive action is needed.
We need more investment in rail lines and equipment immediately. It seems there simply isn't enough track, engines and rail cars to deal with demand.
Rail companies also need to be encouraged to hire and train skilled workers because they don't have enough qualified personnel to run the number of trains that our economy needs.
Finally, the situation at our ports has to be rectified. Product is piling up in Vancouver at a faster rate than facilities can handle. Those facilities need to be expanded, or the system will continue to back up all the way down the line.
Canada's reputation in jeopardy
What's at stake here is Canada's global reputation as a supplier. In the forest industry, reliability has always been our calling card. Discerning customers have always known that if they order from Canada, the product will be of the best quality and will arrive on time. Now, that reputation is in jeopardy.
Diversification of our economy has been a watchword for generations in Alberta. But diversification doesn't just mean attracting new industries. It also means expanding our customer base for existing industries.
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With the United States putting up trade barriers, market diversification is more imperative now than ever. Asia offers the most promise, but forays into those markets will end badly if we can't get the product there on time. Our customers and jobs will be taken by someone who can deliver.
Time to act is now
In the short-term, we need governments and rail service providers to remember that we are all in this together. Legislation has been introduced in the past to fine rail companies if they failed to deliver certain quantities of grain.
This was good for farmers, but caused other commodities (like lumber and pulp) to be shunted to the side. If stop-gap measures like non-performance penalties are going to be introduced, they need to be applied fairly and equally, to ensure effective rail service for all.
In the long term, we need more investment in rail and port facilities. Canada is a leading commodity supplier with an enviable reputation. We need to safeguard that reputation by ensuring efficient transportation.
Our future is at stake, and the time to act is now.
Paul Whittaker is president and CEO of the Alberta Forest Products Association. The AFPA represents companies in Alberta who manufacture lumber, pulp and paper, panel, and secondary wood products. Alberta's forest industry directly employs 20,000 people and creates thousands of additional jobs through spin-off economic activity.
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