Value-Added Mills: A Solution for B.C.’s Lumber Industry

Image: Peter Holst

Gorman Bros. is part of a subset known in the lumber industry as the value-added sector, which includes not only specialty lumber used in cabinetry and furniture, but also veneer panelling and plywood, cedar shingles and shakes and engineered wood products such as laminated support beams – in short, all the wood products that come out of B.C. forests apart from pulp, raw logs and commodity lumber such as two-by-fours. According to B.C. Stats, the value-added sector accounted for $973 million in exports in 2011, compared to $3.8 billion in softwood lumber exports and $587 million in log exports. The most recent revenue and employment stats come from a 2009 B.C. government report entitled “Generating More Value From Our Forests,” according to which, in 2006, the value-added sector generated $4 billion in revenue and employed the equivalent of 19,600 full-time employees, compared to $13.4 billion in revenue and 48,400 FTEs for the commodity-lumber sector.

To some, the Interior’s pine beetle crisis serves as a dire warning for the future of the forestry industry province-wide. An internal Ministry of Forests, Lands and Natural Resource Operations memo, which was leaked to media in May this year, predicts imminent reductions in the supply of timber in the Interior: in the Quesnel Timber Supply Area, for example, as much as 48 per cent of the pine forests may be lost, potentially slashing forestry employment in the region from a peak (between 2006 and 2009) of 3,667 person years to 1,567 person years by 2023. The news should be no surprise; the province had upped the annual allowable cut (AAC) in order to retrieve value from the dead trees before they rot; for the Quesnel Timber Supply Area, the AAC jumped from an average of 2.3 million cubic metres between 1981 and 1996, to a peak of 5.3 million in 2004.

Now many Interior mills face critical fibre shortages, and in response the province established a committee last spring to search for ways to mitigate the crisis. At press time everything was on the table, from reducing old-growth retention areas and wildlife preserves to eliminating visual quality objectives in some areas, all in an effort to find more fibre. This worries folks like John Allan, CEO of the Council of Forest Industries, who says such measures could undermine B.C.’s hard-won environmental reputation. Bob Simpson, outspoken independent MLA for Cariboo North, takes objections further, saying that government should drop desperate measures and instead help affected communities prepare for a downsizing while fostering a forest industry that gets more out of each log and depends less on high-volume production of commodity lumber and raw log exports.

In spite of lofty targets set by government to extract more value in 2020 per hectare of forest land than any other jurisdiction on earth, according to B.C. Stats value-added exports from B.C. shrank from $2.2 billion in 2002 to $973 million last year, dropping from 24 per cent to 17 per cent of total wood exports. In its 2009 report on the value-added sector, the province points out that “many countries have found ways to generate more economic value from their forest resources than Canada.” For example, between 1990 and 2000, Canada generated US$123 of GDP per cubic metre of harvested wood, less than a quarter of what Germany and Japan generated, and less than half of what the U.S. generated during the same time period.

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Image: Paul Joseph
Ron Gorman (left) and father Ross, a founder of
Gorman Bros. Lumber who, at 92 years old, still
enjoys the smell of freshly milled wood.

Though value-added was never the stated objective of Gorman Bros. Lumber, it has been the company’s modus operandi since struggling Okanagan orchardists and brothers John and Ross Gorman spotted a need and a business opportunity in 1953, and started milling wood and banging together wooden fruit boxes. And even though Gorman Bros.’ products are now more sophisticated, diverse and refined than they were in the post-World War II economy, the company remains as unassuming as a wooden fruit box.

After the mill tour, Nick Arkle leads the way to the company’s post-and-beam head office – a showcase of wood craftsmanship – and is joined by one of the original founders, Ross Gorman (who, at 92 years old, still enjoys the smell of freshly milled wood), his son and current CEO Ron Gorman and sales manager Cameron Cook.

“We know that we can’t compete in the low-cost commodity market. Other companies do that well like Canfor in Houston and West Fraser, but that doesn’t work for us,” says Ron Gorman. “We’ve never bought into the idea that you have to be huge to survive and be competitive.”

Like all wood-products manufacturers, Gorman Bros. struggles against a fragile U.S. economy and competition from low-cost producers in other countries, and the company isn’t exactly flush with cash. However, investment and innovation in both products and markets has been key for Gorman Bros. Today the company recovers 30 per cent more fibre from each tree than it did 30 years ago. In 1999 the firm bought a $1-million moulder to produce boards with a finish so smooth they make sandpaper redundant. Lumber that isn’t sold as simple one-by-four or one-by-six boards, for example, is transferred to one of the company’s plants to be remanufactured into others products, such as bevelled panelling, tongue-and-groove or finger-jointed laminated panels used for finished products like shelving. And with 24 kilns at its West Kelowna operation, Gorman Bros. dries its boards to within very strict – and, by industry standards, low – 13 to 14 per cent moisture content levels. The result is a butter-smooth, very stable product – meaning dry and less prone to warping and cracking – that is the hallmark of the company’s Finest Boards brand.

After the U.S. housing crash and market meltdown of 2008, Gorman Bros. strived to diversify further, rather than jumping exclusively on the China-export bandwagon. A map on the wall in sales manager Cameron Cook’s office is like a map of global conquest, with orange dots indicating the countries where Gorman Bros. products are sold: 25 and counting. Gorman boards can be found in markets as tiny and obscure as Jordan and as potentially massive as Taiwan and the Philippines. The company sells in all 50 U.S. states, but is much less dependent on our southern neighbour than it was before 2008, when it sold 80 per cent of its product to the U.S. Today its sales are split roughly in thirds – North America; Asia; and elsewhere in the world including Europe, South America and the Middle East. This market diversity and balance gives Gorman Bros. at least a modicum of confidence and security in a volatile forest-products industry. “We’re guarded about our customers. These markets don’t just happen like ‘poof’; it takes a lot of hard work to develop them,” Cook says.

From its humble origins – just two brothers, a 12-inch circular saw and a 54-inch band saw – Gorman Bros. has grown into one of the Okanagan Valley’s most stable businesses and employers. The firm processes roughly 650,000 cubic metres of wood annually, 240,000 of which are harvested from its forest license, the remaining 60 per cent is bought on the open market. The firm employs more than 700 people at four operations: the mill in West Kelowna; a remanufacturing plant in Oroville, Washington; Downie Timber Ltd., a largely specialty cedar mill that Gorman Bros. bought in the early 1990s; and a pole yard in Lumby that churns out 30,000 cubic metres a year. Now the company is undergoing due diligence in a pending deal to buy Federated Co-operatives Ltd. lumber and plywood mill on the shores of Shuswap Lake near Salmon Arm, which has sat idle since late 2007.

When people tout the value-added sector, they’re in essence touting jobs and dollars per cubic metre of wood – two stats for which the dominant commodity-focused, highly mechanized B.C. forest sector doesn’t exactly set high benchmarks. Ben Parfitt, a longtime independent resource-sector researcher and writer and now an analyst with the Canadian Centre for Policy Alternatives, released a report last summer called “Making the Case for a Carbon Focus and Green Jobs in B.C.’s Forest Industry.” In his report, Parfitt says it takes 1,189 cubic metres (one cubic metre roughly equals one telephone pole) to create a single full-time job in B.C., compared to 205 and 298 cubic metres in Ontario and Quebec respectively. By Parfitt’s math, Ontario sells $928 million of higher-value wood products, out-performing B.C. by a factor of almost three to one.

Langley-based B.C. Wood is an industry association representing manufacturers of value-added wood products, and CEO Brian Hawrysh points out that comparing B.C. to Central Canada is like comparing apples to oranges: B.C.’s softwood-dominated industry doesn’t lend itself as easily to manufacturing boutique wood products the way Quebec and Ontario’s industries do with their access to a much higher proportion of hardwoods. However, Hawrysh agrees with Parfitt that B.C. punches well below its weight in the value-added sector.

In the home riding of MLA Bob Simpson and elsewhere in the central Interior hardest hit by the pine beetle, there are some examples of value-added manufacturers that have been able to carve out a niche in a difficult market dominated by commodity lumber and pulp and paper.

Quesnel’s C&C Wood Products Ltd. started in 1975 building kitchen cabinets; however, it was demand for decorative panelling that set the company’s future course. Currently, the company produces pine and cedar panelling, as well as wainscot material made from fibre sourced largely from its Sustainable Forestry Initiative-certified forest licence.

Sinclar Group Forest Products Ltd. in Prince George is an integrated forest company that produces standard commodity lumber and also prefabricated-home packages and pre-framed cabin kits under its AllPro Building Systems brand, engineered roof trusses and housing systems under its Winton Globe Homes division, and pellets manufactured at its Premium Pellet Ltd. operation in Vanderhoof from waste sawdust and wood shavings, and sold largely to European customers. In Williams Lake, Zirnhelt Timber Frames Ltd. builds custom timber-framed homes for mostly western Canadian customers.

Simpson would like to see more of these kinds of value-added wood manufacturers in his hometown of Quesnel, and in other forest-dependent Interior communities, and fewer of the insatiable super mills like Canfor’s Houston operation, capable of churning out 600 million board feet of lumber a year, a milling capacity predicated on what he and many others say are unsustainable harvest levels in a post beetle-epidemic world.
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Image: Peter Holst
The Gorman Bros. sawmill in West Kelowna
processes 650,000 cubic metres of wood annually.

On Vancouver Island, though its forests have been spared from a pest infestation, at least eight mills have closed between 2000 and 2010, thanks to an atrophy in investment in new technology and a shift toward increased log exports (the province exported $587 million of raw logs last year, compared to $278 million in 2008). However there’s a small but tenacious value-added sector on the Island. For example, Comox Valley’s Woodland Flooring Co. Ltd., with its minuscule peak staff of a dozen workers, remanufactures between 16,000 and 20,000 board feet of B.C. soft- and hardwoods annually into flooring. According to general manager Steve Roscoe, his small shop generates $1 million in sales annually, averaging between $1,500 and $3,000 per cubic metre, a stat he likes to quote alongside the value of raw logs exported to China. (In 2010, the B.C. government reported more than 83 million logs were shipped to China at an average value of $73 per cubic metre.)

In Nanaimo, privately owned Coastland Wood Industries Ltd., which produces wood veneer products, has annual sales between $20 million and $50 million. For the company’s ability to survive economic swings, management credits a nimble workforce that can grow and shrink when necessary, as well as regular reinvestment in new technology. Penticton’s Structurlam Products Ltd. belongs to that echelon of companies in the business of producing next-generation wood products; however the company’s origins date back to the early 1960s when brothers Al and Gord Kenyon, co-owners of Kenyon Construction, started glueing together structural beams. In the 1970s, the brothers opened a facility to produce these glulams, a stress-rated, engineered beam consisting of wood laminated with strong waterproof adhesives. Structurlam craftsmanship is now showcased in spectacular fashion at the Richmond Olympic Oval. Today the firm is one of three companies in B.C., along with Vancouver’s StructureCraft Builders Inc. and New Westminster-based CST Innovations Ltd., producing cross-laminated timbers. CLTs, as they’re known, are solid wall, floor and roof panels that are as much as six times lighter and cheaper than concrete and steel.

Back at Gorman Bros., Arkle shares a conversation he had with a visiting Swedish forester back in the 1990s, one that left a lasting impression. Although the Swede acknowledged that B.C. is blessed with vast forest resources, providing the opportunity for both a robust industry and a healthy conservation program, according to Arkle he also said B.C. lacks something Sweden has in spades – a strong wood culture and public acceptance for the forest industry. The public acceptance piece is forever a work in progress in B.C.’s tumultuous and often combative forest industry, but an authentic wood culture is starting to take root, a key component for what Arkle hopes will form the foundation of a higher-value forest sector. “So much of our wood is hidden behind drywall. In Scandinavia and other mountain cultures wood is front and centre,” Arkle says.

Image: Peter Holst

Wood Works! B.C., an industry-led initiative of the Canadian Wood Council, supports innovation and the use of wood in design and construction. Every year with its Wood Works! B.C. Wood Design Awards, the organization singles out exemplary uses of wood in new buildings, as with two of this year’s winners: the LEED (Leadership in Energy and Environmental Design)-certified École Mer-et-montagne in Campbell River and the airy Nanaimo cruise-ship terminal building.

In September 2009, the province enacted the Wood First Act, requiring provincially funded building projects to use wood as a primary construction material. As of the end of 2011, 37 B.C. municipalities had enacted wood-first resolutions. This, coupled with amendments to the B.C. Building Code, which now allows for six-storey wood-frame construction (in Europe, nine-storey is standard), has also helped raise the profile of wood.

Outside the Gorman Bros. mill in West Kelowna, it’s afternoon shift change as workers shuffle out, hard hats on, lunch kits in hand, to their vehicles baking in the oven of an Okanagan summer. The company is fortunate in many ways. Whereas mills in Houston, Prince George and Quesnel depend on a fibre supply that is as high as 80 per cent lodgepole pine, the Kelowna-based mill is blessed with access to a much more diverse basket of species that includes cedar, fir and spruce, as well as lodgepole. Though the company is a substantial employer, with more than 700 on the payroll, it’s not large enough to have its own research arm, so it looks largely to Europe and elsewhere for new ideas, markets and applications for its high-value one-inch boards. Ron Gorman, who is continuing the family tradition started by his father and uncle more than 60 years ago, doesn’t get too excited about government policy, beyond macro-economic concerns such as trade barriers and access to timber. What he does get excited about is a loyal, skilled workforce that enables the company to be dynamic in times of market uncertainty. In turn, longtime employees have much invested in the health of the company. Arkle and sales manager Cameron Cook both started with Gorman Bros. the unglamorous, hot and sweaty way – as young men pulling lumber from the green chain. When they say Gorman Bros. is like a big family, they mean it. And now, as senior managers, these days they’re simply too busy to blow the company’s horn or enlist PR professionals to massage the corporate image.

Earlier this year when the Royal Bank of Canada short-listed Gorman Bros. for a business award, the firm declined the honour when, as part of acceptance, they would be asked to divulge details about operations, markets and customers. “We just want to run a good business and keep people employed,” Arkle says. “We’re not in this business for the awards.”