Temporary Change Sought to Get 2,000 Workers Back on the Job and Logs to Local Mills

In announcing a new, landmark labour agreement in principle between Mosaic and the United Steelworkers Local 1-1937 on May 12th, important information was provided regarding temporary measures being sought from the Federal government on its international log market access policy related to private land.  Additional information is provided here.   

Mosaic curtailed its operations last November due to market conditions.  Log pricing and the ability to export had declined to the point that substantial losses were being generated with no near-term prospect of improvement.  The major impediment to restarting and getting 2,000 Coastal forest workers back to work is the inability to access international log markets. 

As a result, Mosaic is seeking temporary relief to allow private logs to be exported at no more than long-run historical levels.  With this request, Mosaic is not seeking to increase log exports nor increase its harvest levels. Most of Mosaic’s supply is sold to domestic mills, with well below half sold to international mill customers.  Historically, log exports from private land represent less than 15% of total Coastal harvest. Private managed forest land constitutes less than a quarter of the Coastal working forest area and a fraction of BC’s working forest. BC’s log export restrictions on private land do not exist anywhere else in North America. 

Under Federal Notice 102, logs from private lands must first be offered to BC mills.  Mosaic agrees with this principle, but takes exception to then being forced to accept prices that are significantly below international benchmarks and often below the cost of production.  As a result of the decline in log production from public land, Mosaic has borne a significant increase in demand from local BC mills.  Effectively, Mosaic is blocked from selling at long-run typical sales volumes to our international customers. Without international sales, this generated substantial losses in the 2nd half of 2019 and led to curtailment. 

Mosaic has not restarted because it lacks market certainty.  Without the ability to export some of its logs, restarting will generate further losses.  The unfortunate alternative is to defer the harvest and let the trees continue to grow. 

Mosaic also produces logs from public land and accepts that government may set different log export policy for public logs since they originate from trees that belong to the public. 

The only way to supply local mills at typical domestic pricing is with some access to international markets and pricing. No forest company can sell production at below cost – nor should they have to. After months of prices trending down, the table below sets out November 2019 international vs domestic log prices (apples-to-apples), and highlights the challenge faced at the time Mosaic curtailed:

Screen Shot 2020-09-06 at 1.53.11 PM.png

The average Coastal tree-to-customer cost of log production is roughly $100/m3 before any stumpage / royalty fees.  This is well above average domestic prices in the above table. 

Even if an average domestic price of $100/m3 were attained, it would not compensate for the decades of investment in planting, tending, and growing trees on private land.  For example, Mosaic’s property taxes alone are ~ $13 million / year incurred every year over the average 50 year harvest cycle.   

Given harvest costs on the Coast, log exports are necessary or there will be significant further declines in harvest. 

The situation can be summarized as follows: 

  1. The cost of harvesting trees is higher than domestic mills are willing / able to pay; 

  2. Coastal harvest volumes have been declining for years; 

  3. Some access to international log markets is required to maintain Coastal harvest levels and supply local mills; 

  4. Log exports from private lands have remained relatively flat over time and are part of the solution, not the problem.

Mosaic is proudly 100% Canadian owned and operated and its predecessor companies have operated on Vancouver Island for more than a century. We grow seedlings from our own seeds and protect the trees we plant for decades. It would be irresponsible to sell these trees at a loss. When Mosaic is in production, over $25 million is injected every month into local vendors and contractors, which helps create many thousands of well-paying jobs across Vancouver Island.   Mosaic’s forest operations also provide important ecosystem services and public recreational opportunities as well as forest management / marketing support to 23 First Nations forestry operations, 4 community forests, 23 woodlots and 625 smaller private woodlot owners.   

We will continue to work with government, as well as our customers, contractors and labour partners to find a reasonable solution to get people back to work. We are committed to achieving a viable, competitive Coastal forest sector that recognizes all producers must achieve a reasonable return on their investment.

Sue Handel