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Economy

Tolko’s Okanagan cuts a sign of bigger problems for B.C.’s forestry sector

Watch: B.C. mills impacted by low lumber prices and supply problems.

These are uncertain times for many Okanagan residents who work in the forestry industry.

Dozens of mill workers are receiving layoff notices after Tolko announced it’s cutting a shift at its Kelowna operation.

Meanwhile, its Armstrong mill is also facing a temporary closure.

With more B.C. sawmills expected to close in the years ahead, Tolko’s Okanagan slowdowns are a symptom of larger challenges facing the province’s forestry sector.

READ MORE: Mountain pine beetle epidemic sparks wildfire concerns in Jasper

After record highs last year, lumber prices have crashed and there are problems on the supply side as well.

“We are seeing lumber prices at levels that are probably anywhere between 15 and 25 per cent below costs, and at those kind of levels, mills either curtail or in some cases close,” Russell Taylor, the managing director of Forest Economic Advisers Canada, explained.

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In the Okanagan, Tolko’s announcement earlier this month that it is cutting a shift at its Kelowna sawmill was followed by another sign of trouble.

Less than two weeks later, the company announced its Armstrong mill is taking two weeks of downtime.

READ MORE: Tolko Industries announces downtime for two of its B.C. lumber mills

The local president of the workers union said the temporary shutdown in Armstrong surprised workers because things seemed to be going well.

“This one really caught them off guard with a day-and-a-half’s notice that you are going to be out of work for two weeks,” said Pat McGregor, the United Steelworkers’ local’s president.

“I do believe one week may be covered by EI, but [for] at least a full week a lot of people will be laid off.”

WATCH: (April 27) WorksafeBC issues report on Tolko worker death in 2017

WorksafeBC issues report on Tolko worker death in 2017
WorksafeBC issues report on Tolko worker death in 2017

As it announced the Armstrong downtime, the company said it does not make these decisions lightly.

“We know we have great people working at these operations and this is in no way a reflection on them or their commitment. However, industry conditions in B.C. are challenging,” said Troy Connolly, Tolko’s vice-president of solid wood, in a media statement.

READ MORE: Mountain pine beetle larvae may be reduced by 90% due to Alberta’s cold winter

Around 90 people are getting layoff notices in Kelowna, but some are expected to be able to move to other Tolko facilities.

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“A lot of ’em got caught by surprise,” said McGregor.

“They weren’t really expecting the notice. A lot of them are sad and in turmoil. This has been their life for the last five, six [or] seven years.”
Tolko’s Kelowna mill will be cutting a shift in mid July. The change means 90 people will receive layoff notices.
Tolko’s Kelowna mill will be cutting a shift in mid July. The change means 90 people will receive layoff notices. Dan Couch / Global News

While lumber prices are expected to bounce back, there will continue to be lack of wood to supply the mills.

“We expect there is going to be further closures in the B.C. Interior because of the fiber shortage from the mountain pine beetle. There is also a spruce bark beetle, there is also forest fires that have caused reductions in the future harvest levels and we also have caribou to protect,” said Taylor.

READ MORE: Non-functioning life jacket cited as factor in 2017 Kelowna millworker drowning

Taylor is predicting up to 12 more B.C. sawmills will close in the next decade and business strategy will determine which ones will shut their doors.

“A company may want to shut down one mill in the Okanagan to feed logs to other areas nearby. It becomes a corporate strategy to some degree as to which mills survive and which mills may not survive which is making it difficult for communities,” Taylor said.

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One factor that may help Okanagan mills stay open is that the region is not at the epicentre of the mountain pine beetle problem.

For its part, Tolko says its Okanagan mills are well-positioned and no further closures are expected.

The company said it is not currently planning any more downtime “but if weak markets and high log costs continue, we may have to re-evaluate.”

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