Alberta wood products reach record prices

Earlier this week, the Government of Alberta announced that the provincial forestry sector has recently seen record wood prices.

They used these prices to claim that there’s been “a spike in forest product demand”. However, nowhere in the announcement was there evidence that demand has actually increased, only that prices have.

According to the announcement, solid wood prices are $1,288 per thousand board feet for western spruce, pine, and fir. As well, benchmark prices for lumber, oriented strand board, and plywood have increased 125–215%.

The announcement discussed reduced production at the beginning of the pandemic, for example:

despite the COVID-19 crisis initially reducing demand for pulp and paper products this year.

Many jurisdictions saw reduced production levels leading up to and resulting from the pandemic that proved difficult to reverse as demand for wood products ended up outperforming expectations. In contrast, Alberta saw limited production curtailments during this time, maintaining a competitive advantage.

But as I mentioned, the announcement doesn’t indicate how much demand has increased, or even how they’re measuring demand.

For example, the number of people working in the forestry industry was down 36.8% last year over 2018, and that was after 4 years of straight increases under the NDP:

Year	Jobs
2014	3,000
2015	3,600
2016	4,000
2017	4,500
2018	5,700
2019	3,600

And while data for all of 2020 obviously isn’t available yet, what we have for the first 7 months of this year isn’t any more promising:

Year	Jobs
January	3,911
February	3,759
March	3,668
April	3,552
May	3,206
June	3,376
July	3,521

We were on track at the beginning of the year to increase over 2019, but then we kept losing jobs right from February, dropping nearly 700 forestry workers between January and May of this year. Jobs have started to rally, but, as of July, we were still below staffing level for each of the first four months of the year.

And perhaps it’s possible that jobs skyrocketed in this industry in August and September, but if that’s the case, why not indicate that in the announcement?

Why am I focusing on jobs? Well, jobs are a good indicator of demand. If demand increases, companies hire more workers to meet that demand. So if the number of workers increases, it probably means demand had increased, too.

Even if we measured it by GDP, the annual numbers don’t look that hot:

Year	Jobs
2014	$460.3 million
2015	$462.3 million
2016	$445.6 million
2017	$449.9 million
2018	$445.6 million
2019	$406.0 million

We increased by a couple million in forestry GDP in 2015, but then lost that gain—and then some—the following year. We were up slightly again in 2017, but then we had two consecutive drops in GDP.

And as of last year, the gross domestic product posted by Alberta’s forestry sector was down nearly $54 million from 2015, which saw the highest GDP in the sector over the last 2 decades at least.

I couldn’t find monthly GDP data by sector for Alberta, so it’s difficult to say how much more we’re producing this year so far compared to last year, or even to 2015, the highest point in the last 5 years.

Which—again—brings us back to the point: if demand has gone up, why didn’t the announcement indicate how much demand has increased, or even how they’re measuring demand.

Even if we recovered that $54 million in lost GDP, we’d still be only back to where we were in 2015, not really that much ahead.

For the record, having an increase like that doesn’t happen often. Since 1997, it’s only happened twice: when it jumped $90 million between 1999 and 2000 and when it jumped $54 million between 2009 and 2010. The next largest jumps were $41 million between 2010 and 2011 and $39.5 million between 2013 and 2014.

Yet despite a lack of accountability in the announcement, the UCP government insisted that

A spike in forest product demand underscores the importance of Alberta’s forest industry as an economic powerhouse in Alberta’s Recovery Plan.

If there truly has been a spike in demand, tell us what it looks like. Just the price in products? And how will this help Albertans? Will it mean more jobs?

One thing the announcement failed to mention is that last week, Lee Woodham, the director of Forest Economics and Trade, issued a letter to all forest management agreement and quota holders, saying that the government had increased crown timber dues.

For October, dues will be $29.36 per cubic metre for sales under 107,296 m³ and $53.04 for sales over. Last month, they were $22.70 and $41.94, respectively. Last October, they were $4.76 and $7.86, respectively.

Dues are based on current market prices, so higher prices means higher dues. And that means higher government revenues.

Well, kind of.

Timber dues fall under what the government calls “premiums, fees, and licenses”. Last year, the government received $3.93 billion for all premiums, fees, and licenses. This year, they anticipate $3.87 billion:

	2019–2020	2020–2021
Post-secondary institution tuition fees	$1.311	$1.349
Health / school board fees and charges	$0.703	$0.702
Motor vehicle licences	$0.518	$0.510
Crop, hail and livestock insurance premiums	$0.321	$0.339
Energy industry levies	$0.325	$0.215
Other	$0.751	$0.754
Total	$3.929	$3.869

I assume timber dues fall under “other”. If that’s true, then all “other” fees are going up by only $3 million. Granted, that’s based on August calculations and doesn’t include the new timber due increases.

But given that timber dues make up only 1.96% of total government revenue—and that’s after you lump them in with land titles, land and grazing, health benefit premiums, and the like—I don’t anticipate it’s going to increase government revenues in any substantial way.

Certainly an extra $3 million won’t make up for the $1.961 billion in lost corporate tax revenue this year.