Industry recovery not without problems

Last week, we examined our worsening skilled worker shortage; this week we review factors that are already limiting contractor capacity as the recovery strengthens.

Part 2 of a three-part series.

The past three years have been tough for loggers and truckers.

The recession meant lower lumber prices and less logging, and as forest companies cut costs, contractors were hit by reduced work and lower logging rates.
Some quit, while survivors struggled.

Ask a logger “how’s business?” and he’ll say he’s been busy, but not making money; that it’s been tough just staying in business. Ask about logging rates, and he won’t hesitate to say they’re too low – that he can’t replace aging equipment, now has to pay more to keep skilled operators, and can’t put any money away. Some will tell you they’re working for wages and not much more.

Contractors all over the region are apprehensive over rates and future logging volume. In the Williams Lake area, three replaceable logging contracts have been for sale for several months. So far, no takers – a clear sign that either the risk is seen as too high or nobody can afford to purchase them.

This apprehension has its roots in possible future AAC reductions, and forest company consolidation which over time has made negotiations more difficult for contractors.

Some contractors and truckers could see what was coming, and began developing new customers in the oil patch, mining, Highways and BC Hydro, gaining flexibility if forestry wasn’t profitable.

More recently, tougher negotiations, the recession and emerging opportunities in other industries have brought a mindset change that has more loggers and truckers thinking of themselves as resource contractors.

Now, having endured rate cuts, freezes and lost volume for the past three years, this identity shift is giving them determination as they enter rate and amount-of-work discussions. They know they can move to other industries as they become more active rather than try to live with low logging rates.

Forest industry consultant Russell Taylor recently commented that the contractor capacity issue is the “Achilles Heel” of the recovery, adding industry costs on this part of the supply side will rise as contractors leave. (It costs money to attract and keep contractors from elsewhere – if you can find them.)

This worsening capacity issue can be addressed, but it will take a level of sincerity, commitment and trust by both sides that so far has eluded everyone.

Some loggers and truckers have left the industry already, and more will follow. If this drain continues, the day will soon come when mills will be competing with each other to be able to hire a contractor.

We’re all in a waiting game that neither forest companies nor contractors can afford to play.

Next week: What forest companies, government and contractors have to do to overcome a harvesting capacity situation that threatens to limit the milling sector’s recovery?