Why a lumber price boon won't lead to a jobs boom at some Alberta sawmills

Visiting Spray Lake Sawmills in Cochrane, Alta., you'd expect to see a chaotic scene with workers scrambling to churn out more and more two-by-fours and fence posts to take advantage of unprecedented lumber prices. But it's pretty much business as usual.

"It's steady as she goes," said Ed Kulcsar, the manager of the company's woodlands division, which oversees tree harvesting. 

Lumber prices have been anything but steady. They've been riding a well documented ascent into unprecedented territory. Two-by-fours are usually around $400 for 1,000 board-feet at this time of year, but now the price is closer to $1,600. 

"What we've seen are unprecedented prices in the lumber industry," said Brock Mulligan, who is with the Alberta Forest Products Association.

It's added hundreds and thousands of dollars to the cost of building projects — from fences and decks, to renovations and new home builds.

"We empathize with people on the consumer side, these levels of prices are completely unprecedented," said Mulligan.

"It's really just a perfect storm of supply and demand factors that are feeding it."

Since prices have gone up, lumber companies in Alberta must return a bigger share of their profits to the government through increased timber fees. And while it may be tempting in an industry where money almost literally grows on trees, many are reluctant to cut down more to cash in. But they can make adjustments to increase the amount of lumber they get from every log and ultimately increase their profits.

Harvest plans unchanged

Kulcsar says if they harvested more spruce and pine trees this year, they'd have to reduce their cut next year under the terms of their forest management agreement with the province. An agreement can't be adjusted to take advantage of market prices.

"If we were to overcut in one period, we'd have to cut back significantly to match that in the next period," he said.

And that could lead to job cuts if production is affected.

Kulcsar says the 78-year-old company prefers to keep its operations running steady and stable, without creating too many price-induced production swings for its 210 employees. It produces 120 million board-feet a year.

The COVID-19 pandemic did force a six-week shutdown last year.

The company — which started in Sundre, Alta., in 1943 and moved to Cochrane in 1969 — operates 22 hours a day, four days a week. Fridays, Saturdays and Sundays are set aside to maintain all of the cutting, planing, sorting and drying equipment. 

"We can't just crank the tap on when the market gets good," said Mulligan.

"The biggest factor in our industry is sustainability, making sure that we're harvesting in an appropriate level and managing the forest."

Increased lumber recovery

Spray Lake Sawmills turns 100 per cent of every tree it harvests into a marketable product, from two-by-fours, to fence posts, to mulch, wood chips and sawdust. It's upgrading its production facility to increase the amount of lumber it produces.

"Certainly the residue products that we have markets for, such as sawdust and chips, potentially, the volume of those will go down as we're able to get more square boards out of that log," said Kulcsar.

The upgrades were planned just as prices were taking off last year and are expected to be online by August. If prices remain as high as they are, the timing will be perfect. 

"We're focused on producing lumber and that's the higher value product."

Mulligan says the Cochrane operation is not alone. Other companies are taking advantage of increased earnings to upgrade their facilities to improve profitability.

"We're seeing a number of capital improvement processes being undertaken. Those create jobs, they're good for the economy."

Government revenue up, harvest increasing

While most companies aren't tinkering with their harvesting plans, the provincial government is allowing more trees to be cut down. The plan is meant to create jobs, but also to better manage the forests to help prevent wildfires and contain mountain pine beetle infestations.

A government spokesperson says steps are being taken to increase fibre access up to 13 per cent for eligible companies, "with a stretch goal of reaching 33 per cent." 

It's a plan that's expected to take years to implement.

The government is likely in line for a significant windfall from rising lumber prices. The industry paid $350 million in timber fees in the last fiscal year — an increase of more than 300 per cent from the previous year.

Kulcsar says this is a good time for the industry, but he has seen plenty of ups and downs over his 20-plus years at the sawmill.

"We're always mindful that the lumber markets are very cyclical. And as good as things are today, they can be just as bad tomorrow."

Bryan Labby is an enterprise reporter with CBC Calgary. If you have a good story idea or tip, you can reach him at [email protected] or on Twitter at @CBCBryan.