Economy spins around urban log brokers

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From his office in New Westminster, Probyn Log vice-president Bill Markvoort is about as far from the woods as you can get, but he is at the hub of a business that keeps the coastal forest industry humming

 

As the vice-president of Probyn Log Ltd, one of the companies under the umbrella of the Probyn Group, Bill Markvoort does far more than buy and sell logs and it would be a mistake to dismiss Probyn Log as simply the middle men in an enterprise that exists only for the benefit of loggers in small resource towns.

First, there’s Markvoort himself. He does not fit the mould of a resource industry worker. At 65, he’s a committed cyclist and plans on riding in late June from Vancouver to Banff with a goal of raising $65,000 for cystic fibrosis, a cause he supports strongly. He is considered knowledgeable enough in his field that he is a regular guest lecturer on forestry at the University of British Columbia. He is a university grad himself and is a registered professional forester. He lives on a quiet street in New Westminster but his business contacts span the world. And he is as much at home in his office as he is walking a Fraser River log boom with a client.

Probyn Log and 10 other major log brokers in the Vancouver area all operate under most people’s radar screen. But they penetrate the Lower Mainland economy in a way that far outweighs their size.

An entire economy spins around the activities of Vancouver’s log broker community.

It starts with the contract loggers in the coastal rainforest and the millions of dollars worth of logging equipment they purchase, but then shifts to Greater Vancouver: to the tugs, the water taxis that regularly shunt clients back and forth along the Fraser River booming grounds, the hotels and restaurants that cater to overseas clients, the legal and accounting firms, the foresters designing logging plans, the computer mapping services, even the foundry in Chilliwack that makes the hammer marks to identify each log harvested.

“We are very low profile. People in the business know us. Nobody else does,” Markvoort said of the Probyn Group, which has six divisions in the forest products sector, 400 employees and revenues of $250 million a year. “I would say the mayor hardly knows we exist around here. The bankers do, of course,”

The bankers know Probyn because the brokerage side of the business doesn’t just buy and sell logs. The company also finances the independent loggers, the backbone of the coastal forest industry, who are viewed by the banks as too high a risk. Banks will finance logging equipment purchases – a million-dollar piece of equipment is something tangible – But they won’t touch the operating side of the business. Costs like road building, planning, consultations with stakeholders, and the cost of holding an inventory of logs, that if left in the water too long, will sink, are all too risky for banks. If they had to call a loan, what would they do with a load of logs decked on a remote roadside 200 kilometres up the Coast?

They would only end up calling a broker anyway.

Markvoort said brokers like Probyn – who know the business and have the capital – are willing to take on the kind of risk that is inherent in logging on the B.C. Coast.

“We occupy a niche position, much like GM runs its own finance department for car loans. We are unique in the sense that we are willing to lend money. It’s because of our relationships and our knowledge.”

Brokers understand the risk levels far more than anyone not involved directly in the business, said John Iacoviello, a Probyn broker and forester who works with the company’s First Nations clients.

Outside of the two major forest companies on the Coast, Western Forest Products and Interfor, log brokers are a critical piece that keeps the rest of forest industry operating, and from it flows unseen economic benefits. The B.C. forestry sector employs 17,000 people in logging alone and consultants PwC estimate that every job generates two spinoff jobs. Many of those jobs are in Greater Vancouver. The 25 people employed at Probyn Log would be considered as spin-off jobs. But drill down into Probyn and it quickly becomes apparent that the spin-off jobs create their own spin-offs.

“People are running businesses off this, but you wouldn’t know it,” said Iacoviello.

For example:

  • GIS mapping services, preparing forest stewardship plans, conducting fieldwork and road layout, all major parts of the planning process before any trees can be cut, are provided by Chartwell Consultants, with a staff of 45. Chartwell’s headquarters is an office off Marine Drive in North Vancouver. “People driving by would see the Chartwell Consultants sign and wouldn’t have a clue that they are part of the forest industry,” said Iacoviello. The spin-offs go even deeper. Rob Deines, co-owner of Chartwell, said the consulting firm has three sub-offices in southwestern B.C. and hires its own consultants, about 25 individuals and small firms.
  • There’s the lawyers and accountants, two firms of each in both New Westminster and Vancouver that handle accounts for Probyn as well as its clients.
  • Down the road from Probyn’s New Westminster office is Garrett Log Service, a log scaling company that provides the computerized log scaling services needed to measure the volume and quality of each log that’s sold.
  • Log buyers, often from Asia, are setting up their own offices, hiring staff and making Vancouver their headquarters for their growing North American business enterprises.
  • Tow boat companies like Seaspan, and their crews, bring the logs to Vancouver, using wire rope lines manufactured locally. At Fraser Surrey docks, longshoremen load logs marked for export aboard container ships.
  • At Horseshoe Bay, Old School Marine Services operates 12 water taxis delivering brokers and their customers to the log booms in Howe Sound and along the Fraser River. The water taxi business provides commuter services, summer trips for tourists and even does emergency work, like towing pleasure boats in distress to safety, said owner Mike Shannon. The Coast Guard calls him in after they have removed the people. Shannon is better known in Vancouver as the owner of English Bay Launch, a fast ferry service between Vancouver and Bowen Island.

But if it weren’t for the log brokers, his water taxi business would not exist, Shannon said.

“I’ve been out this morning all day looking at logs, actually. If we didn’t have the logging industry, we wouldn’t have the water taxis. The tourist industry is something you get for a couple of months in the summer. You would never own a water taxi if you had to rely on it. The logging stuff is year-round.”

For communities that have received a forest licence, First Nations or woodlot owners, the brokers can play a key role. At Probyn Log, Iacoviello, is working with First Nations in the Chilliwack area to develop their forest licences. Those forestry enterprises are growing businesses. Iacoviello cited an anecdote of the growing size of the native businesses: The equipment operated by one Chilliwack area contractor goes through an entire tanker truck of fuel a day. That equipment needs regular maintenance by skilled Chilliwack mechanics.

Dwight Yokim, executive director of the Truck Loggers Association, said it can be daunting for any community that has received a licence – First Nations or otherwise – to become successful loggers overnight.

“You’ve got your allowable annual cut and you say ‘Okay now what do I do, where do I start?’ It can be a daunting task. The financing of some of these ventures is not something banks are willing to risk right now. And keep in mind you don’t just walk out there tomorrow and start falling trees. It takes a couple of years to get everything arranged, laid out, approved, permitted, consultations completed, to the point where you can actually fall a tree to build a road.

“Someone’s got to finance that. Someone’s got to carry that load, and that’s some of these brokerages are saying ‘I will come in, I will get that all laid out, knowing I will have business at the end of the day helping you sell that wood.’ For some of these companies, small towns and First Nations, that’s a huge outlay to make, knowing you are not going to have any returns for two years.”

The brokerages do a lot of mentoring, helping these new clients develop the skills and expertise needed to financially succeed in the logging business, Yokim said. With First Nations participation in forestry growing, the brokerage businesses are growing as well, he said.

Probyn offers marketing and strategic services, but it also takes on varying roles in the actual business, depending on the circumstances and the risk. They do commission sales, where they will sell a logger’s wood for a commission, and joint ventures, where both parties share in the financing, as well as purchases where they buy timber on their own and hire contractors to log it.

Export sales, always controversial in British Columbia, are part and parcel of the log brokerage business. B.C. restricts log exports by imposing fees and requiring they be advertised for sale in the lower-priced domestic market first. Sawmillers can block the sale but are under no obligation to purchase. In return, the brokers can cut off people who block them from any future domestic purchases.

Coastal logger Eric Dutcyvich, of LeMare Lake Logging  has described it in the past as an imperfect system, but one that works. He called it the right mix of global competitiveness mixed in with protection of the local sawmilling sector.

Markvoort said the main buyer now is China and he credits their entry into the B.C. market just as the U.S.market tanked as a lifesaver for the forest economy.

“The Chinese saved our bacon when they started buying,” he said. “If they didn’t, I think you would have seen a 1980s-style recession in B.C.”

He argued that if there were no exports, local sales would go down because less logging would take place. But, he added, the coastal forest industry is a complex business that has its own unique issues, none of which are easy to resolve.

“The whole log brokerage business is a coastal British Columbia phenomenon,” Markvoort said. “There is such a disparity of log species and log types, and there are many different types of mills and purposes for the logs. Everything can be moved by water very easily.”

We sell to over 100 clients. We have custom-cut mills, cedar mills, veneer mills, and we have access to the export markets.”

 

Gordon Hamilton is an award-winning writer and freelance journalist specializing in the resources sector. Much of his career was spent at The Vancouver Sun, where, from 1993 to 2013, he was the forestry reporter, writing about the politics, environmental clashes and social issues surrounding resource use. He tells his stories through the people whose lives are touched by our resource economy.


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