BC Coastal Forest Sector Hem-Fir

Initiative

BC Coastal Hem fir BC Coastal Hem-fir Initiative Overview

Gail ShersonJune 16, 2011One vision

Global competitiveness

BC Coastal Forest Sector Development Initiative

Objective:To enhance the competitiveness of the BC coastal industry by – To enhance the competitiveness of the BC coastal industry by increasing the value of the coastal hemlock and amabilis fir (hem-fir) resource.

FPInnovations in partnership with:p p• BC Coastal Forest Industry• BC Ministry of Forests and Range• Natural Resources Canada• Natural Resources Canada

$3 million annual investment

Motivation

• High value western red cedar on decline• 60% of forest resource is lower value hem fir• 60% of forest resource is lower value hem-fir• BC Coast has 2nd highest delivered log cost

in the worldin the world• Manufacturing technology and practices are

out dated not well suited to rapid new productout dated not well suited to rapid new product incorporation

Initiative Background and Guidelines

• Partnership between industry, government and research communities– Guided by Steering Committee (Industry and Government)Guided by Steering Committee (Industry and Government)

• Multidiscipline approach covering the full value chain, with market driven focus and four program areas: – Products and Markets– Resource Attributes– Harvesting and Conversions g C s– Bioenergy and Biorefinery

• Applying best practices for managing the process of Innovation• Developing and applying solutions in short, medium and longer term• 2 and 5 year financial targets using common metrics

Industry Engagement

• Western Forest Products• Teal Jones Forest

• Probyn Log Ltd• TMAR Industries Ltd

Industries• Catalyst Paper• Coast Forest Products

• Hamilton Logging• Dyer Logging• Rugged Mtn Ventures• Coast Forest Products

Assoc.• Truck Loggers Association

• Rugged Mtn Ventures• Island Timberlands• Husby Forest Products

• United Steel Workers• BC Timber Sales

BC W d

y• Triumph Timber• Brinkman Forest Ltd.

• BC Wood• Timber West• Interfor

• Regional Monitoring and Implementation Committees (North and MidInterfor

• CIPA LumberCommittees (North and Mid Coast)

Full Value Chain Approach

Manufacturing Distribution Products &MarketsTransportLog Grade

& SortingPlanning& Harvest

ResourceAttributes

Genetics & Silviculture

Targets

2 ProjectsQuality of the hem-fir

BC Coastal Initiative Projects and Linkages

TASS

Targets

resourceRight trees to the right product

Projects R02,R06 / H01, H08

H02, H03, H04, H05Improve Operating Margin

p

B01/ H04, H07, H09 / P02, PO3 Make higher margin products

Progress and Benefits

Short term value delivered:• $36 million implemented and validated savings$ p g• Measured cost/benefit ratio = 3.3

Medium term strategic & operational opportunities:Medium term strategic & operational opportunities:• $71 million value targeted by March 2013

• New products; improved operating margins• Strategic planning tools, scaling and log delivery

Longer-term transformation benefits:$• Over $200 million projected benefit

• Higher margin products, including bio-products• More efficient and agile manufacturingg g• Improved log delivery

BC Coastal Forest Sector Hem-Fir

Initiative

Recent HighlightsRecent Highlights

One vision Global competitiveness

New Products: Sound Abatement

Accomplishments• Residential demonstration installed and working well• Official sound testing completed and threshold passed• Targeting “Green Municipal Fund ”for demonstration funds”

Sh t t B fitShort-term Benefits• Margin improvement of installed product is $3.50/bf for

residential (double for highway)• 1 tonne carbon savings per 5 meter installation at 8’ height

Medium / Long-term Benefits • 5% wood substitution for concrete/stone/brick fence market =

55 million bf in NA• Upsides to wood use: advertising, lower cost of installation, g

replacement, modification and addition than concrete

Alternative Scaling - Simple Sampling Method

Accomplishments• Demonstrated lower cost scaling method:

O b d i ht l f l d i t l – On-board weight scales for load size control – Simple sampling meets the established

scaling guidelinesShort-term Benefits• Cost for simple sampling at the trial site was less than alternatives

• $0 24 - $1 72/m3 less depending on method• $0.24 - $1.72/m3 less, depending on method• Eliminates worst case cost scenario at $8.19/m3 (trucking to permanent scale)

Medium / Long-term Benefits • Implement simple sampling at remote sites where cost of installing platform scales or

weigh bunk is prohibitive; benefit is greatest at temporary sites• $2.25M per year at average cost saving of $0.75/m3 (based on 3M m3/year of 2nd-y g g ( y

growth)

High Speed Sawing and Kerf Reduction

Accomplishments: • $1.1 million / yr in total sawing improvement at 1 mill due to kerf and

saw plate reductionsaw plate reduction

BenefitsSaw Speed and Kerf Value

0.010” kerf and saw plate reduction on 1st double-arbor gang maintaining cutting accuracy & surface finish – 2009

$150,000 / yrLumber Recovery

0.010” reduction on second double-arbor gang – Aug. 2010 $250,000 / yr0 0 0 educ o o seco d doub e a bo ga g ug 0 0 $ 50,000 / y

Saw and feed speed increase on two edgers tested up to +43% reduced downtime from unscheduled saw changes – Feb. 2011

$350,000 / yr / millDowntime

0 010” further reduction on double arbor gang gangs from 0 080” to $400 000 / yr / mill0.010 further reduction on double-arbor gang gangs from 0.080 to 0.070” planned – May 2011

$400,000 / yr / mill

Solving Cockling/Fluting Issue of Coated Papers

Accomplishments• Root causes identified through a comprehensive

Fluting

microscopic analysis against the competitors’ papers– Poor coating coverage– Two-sidedness in coat weight/coating coverage– Inherent high hygroexpansivity of CTMP

Short-term Benefits • Progress to date has returned $200k/y• Progress to date has returned $200k/y

– Reduction in fluting/cockling achieved by adjusting coat weights and improving CD profile

M di / L t B fit Medium / Long-term Benefits • This product performance issue in pressroom costs ~ $2.5 million / yr

– Preventing the loss of major customers• Larger long-term impact expected by opening up additional market opportunities

Bioproducts from BC Coastal Mills – Pyrolysis

Accomplishments• Compared biomass from different regions in pyrolysis trials (with CanmetEnergy)

– Results show significant decline in yield for salt-laden coastal sample vs pine biomass– Next steps – further testing to confirm preliminary findings

Biomass Type Oil (%) Char (%)

Gas (%)

Eastern pine 66 12 19pInterior hog fuel 52 20 28Coastal forest residues 54 26 20Salt laden hog fuel 44 27 23Salt-laden hog fuel 44 27 23MPB forest residue 61 17 18

The apparent decrease in yield for salt laden hog fuel vs eastern pine reduces ROCE from 20% to 9% and EBITA from $13M to $7M*

* Based on BioPathways

Three key goals for 2011-1013

• Strengthen market-driven focus

• Accelerate medium-term implementation

D t t t iti f l t t f ti• Demonstrate opportunities for longer-term transformation

Alternative Transportation Networks

Need• Alt. to current transportation networks may provide benefits in special applications• Direct to mill offers niche opportunities for lower inventories and short radius harvesting • Direct to mill offers niche opportunities for lower inventories and short radius harvesting • Historic transportation methods may be more expensive than alternatives when the cost

for total network is included

Approach• Build awareness on recently completed survey of total transportation costs • Develop transportation network software to compare total direct and indirect costs of

t t ti b t l l d illtransportation between log supply and mills• Demonstrate and apply in specific geographical locations

BenefitBenefit• Cost reduction in niche opportunities (e.g., Port Alberni, Gold River/Woss calc. savings

of $350,000 per year by backhauling 120,000 m3) – $200,000 in 2011/12• Understand the long-term implications of changing environmental regulations: g p g g g

$600,000 savings identified for water transport alternatives

Log Allocation Decision Support Software

Need• Complex coastal supply chains from multiple sources to multiple destinations • Finding feasible solution using manual tools is time consuming limiting consideration

of alternatives and optimization is usedApproach• Demonstrate 1st annual optimized log allocation model in spring 2011 • Continue development of annual, monthly, and weekly optimized allocation tools• Tools integrated with existing systems such as corporate databasesTools integrated with existing systems such as corporate databases• Work with cooperating industry company to implement the system operationallyBenefit• Estimate 5% improved return-to-log value: ensuring the right log to the right mill has

$9.7M annually on coastal harvest• Improve harvesting and transportation costs through better planning:

estimate 1% improvement in costs with industry wide impact is $12M annuallyestimate 1% improvement in costs with industry-wide impact is $12M annually

Economic Operability of BC Coastal LandscapesNeed• Cruising the quality attributes worked well for groups of log sorts, but individual log

sorts need improvementsorts need improvement• 3P sampling (probability proportional to prediction) works

better for quality attributes than traditional DBH-based samplingA hApproach• Cruise cutblock with 3P sampling method, compile with

NCCruise, and monitor the as-produced volumes by individuall tlog sort

• Work with companies to implement NCCruiseBenefitBenefit• cooperating company reports 1% improved log value from the

ability to try different bucking solutions using the software. $2M annual benefit to company$2M annual benefit to company

– estimate $3.5M for coastal harvest of the high-value sorts

Planning and Decision-making Tools for Solid Wood Products Manufacturing

Need• Uncertainty when a mill introduces a new order file or log type

– what grade recovery to expect– conduct trial runs, which are time consuming and expensive– long learning curve for operators

i ti i d ti i ti t h l di t d t tt b t t ff t ill fl– existing scanning and optimization technology can predict product outturns, but not effect on mill flow

Approach• Develop a mill simulation software to combine grade outturn and the effect on mill flow

– link Optitek with Simul8– run both platforms iteratively until a “best” solution is found

Benefite e t• Evaluate new order files; increase revenue by $500,000 per sawmill per year• Reduce number of trial runs; save $500,000 per sawmill per year• Reduce learning curve through better planning to set up mill for a new run; $1M per mill

Bioenergy Opportunities from Forest Residues

Need• Opportunity to grow biomass industry on harvesting residues

feedstock supply and characteristics required to secure capital– feedstock supply and characteristics required to secure capital• Strategy to manage in-woods residue storage

– piling plan, drying/recovery rates, machine productivity

Approach• Monitor seasonal moisture content for various locations• Evaluate piling and storage techniques for year-round Evaluate piling and storage techniques for year round

biomass delivery• Evaluate hem-fir roadside residues for pucks and pelletsBenefitBenefit• +$130 M capital investment at risk• 10% moisture reduction can gain $10/ODt value

– $200 000 per year

Decision support tools for industry competitiveness

• Collaboration Opportunities with NSERC VCO Network• Several projects address BC Coastal issues and opportunities:Several projects address BC Coastal issues and opportunities:

• Scenario planning tools for forest industry (UBC)• Effect of transportation system on strategic development

of the BC Coastal Industry (UBC)of the BC Coastal Industry (UBC)• Rethinking Sustainable Supply Chains: A Case Study of

Paper and Digital Media (UBC)• Wood Biomass Procurement for Bioenergy (Lakehead)Wood Biomass Procurement for Bioenergy (Lakehead)• Evaluating Potential Partnerships in Forest

Products Value Chains (UBC)• And more • And more ………………………..

Source : Pricewaterhouse Coopers