THE WESTERN CANADIAN LUMBER WORKER. automatically increase the worker’s hourly paycheque each time the Consumer Price Index rises. The escalator clause relates each increase in the CPI to the worker’s hourly pay by means of a formula, for example 1 cent for each 0.3 points (3/ 10 of one point) increase in the CIP figure. Usually the clause includes an index table so that the worker can simply read off the number of cents per hour he is due under the latest CPI figure. Most escalator clauses now provide for a quarterly system of adjustments for cost of living, although the current high rate of inflation would justify a monthly adjustment. The longer the worker must wait for cost-of-living in- creases during a period of rapid price increases the more money he is going to lose. The purpose of an escalator clause is to protect the purchasing power of the wage increase negotiated at the beginning of the _contract. For this reason escalator clauses include a floor below which the cost-of-living allowance cannot drop if the Consumer Price Index should decline. The floor allows the worker to maintain the same standard of living even if the cost- of-living declines. THE LOGGING AND WOODS INDUSTRIES The United States housing in- dustry is.a key indicator of demand for British Columbia lumber since nearly 80 per cent of the province’s production is shipped to U.S. markets. After three boom years the U.S. housing market began to slump in the summer of 1973. Annual housing starts were above the 2.1 million mark early in the year but dropped to a very low rate of 1.35 million in December (see chart: New Housing Starts). Forecasters predict slow residential construction through the first half of 1974 and a revival during the second half for a year- end total of between 1.6 million and 1.8 million. While this represents a significant 25 per cent decline from earlier record levels it is still sufficiently high to make 1974 a comfortable year for British Col- umbia lumber producers, if not a record year. . U.S. mortgage interest rates edged upwards throughout 1973 and the impact was readily felt in - residential construction. Late in 1973, however, many experts detected a leveling off of interest _ rates at around the 8 percent level. Interest rate declines will be essential to the revitalization of the U.S. housing market. If the face of declining housing starts in the U.S., uverseas markets for B.C. lumber will take on increased importance in 1974. Japan, United Kingdom and _ Australia purchase about three- quarters of the total B.C. lumber shipped to “non-U.S.”’ markets. Japan, especially .has been a growing market for B.C. lumber. ‘The accelerated building program continues in Japan after a brief encounter with oil shortages. The government is striving. for 1.9 million new homes per year. Japan purchased 335 million board feet of B.C. lumber in 1973 — about 40 percent of it in the form of 12 x 12 and 14 x 14 squares. The United Kingdom consumed 330 million board feet of B.C. lumber in 1973 and was expected to increase purchases in 1974 until the coal miners strike. An extended strike could result in a setback for all economic activity, including construction. Much depends on a quick resolution of the dispute. Australia is presently in a boom economy and lumber purchases are expected to rise during the year. The British Columbia lumber industry has been operating at, very high levels for the past three years; 1973, especially, was a high output year. The most recent figures available show that lumber production for the first nine months of 1973 was 11.3 percent ahead of production for a similar period in 1972. The interior is becoming more important in the balance of lumber output, ac- counting for close to 58 percent of the total B.C. production in 1973. Production on the coast and in the interior was close to equal from 1958 through 1969 and then interior output began increasing at a faster pace. Due to available timber supplies the interior will continue to grow at a faster rate. Shipments of Lumber from B.C. Sawmills (million board feet) Coast Interior TOTAL 1972 1973 1972 1973 1972 1973 Jan. 386.7 302.4 365.3 468.2 752.0 7170.6 Feb. 381.0 354.3 391.2 449.0 772.2 803.4 March 434.5 403.0 453.1 484.3 887.6 887.2 April 365.4 354.9 489.0 524.7 854.4 879.5 May 447.3 413.7 510.2 493.4 957.5 907.2 June 319.0 385.7 505.1 527.4 824.1 913.2 July 123.1 306.4 427.4 _ 477.2 550.5 783.7 August 293.6 348.0 524.7 358.7 818.3 706.7 Sept. 329.6 323.7 452.1 402.4 179:3 726.1 October 400.9 360.7 514.3 512.3 915.2 872.9 Nov. 353.1 397.5 491.2 481.4 844.3 879.0 Dec. 351.1 433.8 785.0 SOURCE: Production, Shipments and Stocks on Hand of British Columbia Sawmills, January 1972 through November 1973, 35-003, Statistics Canada. Lumber shipments have lagged a bit behind production because of bottlenecks in getting lumber to” customers. Exports of Lumber from Canada Douglas fir, Western white spruce, Hemlock and Western red cedar (million board feet) Per Cent Month 1972 1973 to Mo. Change Jan. 473.8 544.1 14.8% Feb. 609.6 563.4 -7.6 March 545.6 575.0 5.4 April 624.1 N/A — May 685.1 806.6 17.7 June 627.1 735.8 17.3 July 498.8 559.9 12.2 Aug. 599.5 493.0 -17.8 Sept. 518.2 536.6 3.6 Oct. 646.0 617.2 —4.5 Nov. 700.0 = Dec. 602.3 ‘SOURCE: Production, Shipments and Stocks on Hand of Sawmills in British.Columbia. January 1972 through October 1973, 35-003 monthly, Statistics Canada. : B.C. Lumber exports continue to look strong. During the first eight months of 1973 exports were Lumber prices reached astronomical figures in the early months of 1973. As an example, green 2x 4 random length Douglas fir was selling for $180 per thousand board feet and dry White spruce 2 x 4’s were selling for $216. From that peak, reached in April 1973, lumber prices have dropped considerably but they - still represent good price levels for the industry — $145 to $155 for green Douglas fir 2.x 4’s and around $160 for dry White spruce 2 x 4’s (see chart on Prices for Selected Dimension Lumber). British Columbia plywood production has shown steady gains during recent years — from 1.7 billion square feet in 1970 to 2.2 billion in 1973 (on a %”’ basis). The slump in U.S. housing starts is not expected to have significant im- British Columbia Lumber Shipments (million board feet) 1971 1972 1973 (est.) Japan 241.3 280.1 335 United Kingdom 327.6 262.3 330 Australia 127.7 137.6 135 SOURCE: Pacific Lumber Inspection Bureau Waterborne Shipments of Lumber running about 320 million board feet ahead of the same period in 1972 pact on B.C. plywood production since tariff restrictions prevent Canadian plywood from being shipped to the U.S. The Canadian housing market, not showing the same weakness as its U.S. coun- terpart, will continue to require large volumes of B.C. plywood. In addition, residential construction, industrial products and homeowner projects will also add Strength to the 1974 plywood market. Plywood prices have climbed steadily over the past two years, not demonstrating the degree of fluctuation as lumber prices. Unsanded %”’’ sheathing delivered in Montreal and Toronto sold for $145 per thousand square feet in January 1972 and by January 1974 had risen to $204 — a 41 percent increase over the two- year period. CORPORATE GIANTS OF THE BRITISH COLUMBIA WOODS INDUSTRY A study of the giant corporations of the British Columbia woods industries must recognize three basic factors: 1. Many of the corporations are of gigantic size, or are owned or partially owned by giant cor- porations; 2. Most of them are no longer purely wood products companies . — they are conglomerates with $ 210 same * New Housing Starts US and Canada, Annual Rate January 1972 through December, 1973 2,900,000 2,750,000 2,600,000 2,450,000 2,300,009 2,150, 000 2,000,000 1,850,000 1,700,000 1,550,000 1,400,000 1,250,000 UNITED STATES 300,000 275,000 250,000 225,000 200,000 175,000 150,000 125,000 100, 000 TT JFMAMN J 1972 ——r as Sones aca as JAS ON SOURCES: mR SO GE ae (ae eae sees Cae Bo a ame yore = DJ FNMAKN I IASON 1973 National Association of Homebuilders, Mousing Starts Bulletin, Decerber 18,1973 Canadian Housing Statistics, Central Nortrage and Housing Corporation, Monthly Bulletins January, 1972 through October 1973. Prices for Selected Dimesion Lumber January, 1972 through January, 1974 200 190 180 170 160 150 140 130 120 110 100 90 1972 Note: JFMAMIJIITJTASONDIFMAMIITASON D . ee a . 1973 Green Douglas fir 2x4 Random Length Standard & Better Green Hemlock 2x4 Random Length Standard & Better Dry White Spruce Random Length Standard #2 & Better Prices are early month FOB mill destined for U.S. rail market Source; Madison's Canadian Lumber Reporter operations and interests in a number of industries; “3. It is becoming increasingly difficult to identify any of them as ‘Canadian’ or ‘American,’ because they are multi-national .in scope, both in terms of having operations in a number of countries and in terms of ownership and management being vested in the citizens of many nations, including not only Canada and the United States but also Japan, Germany and other countries. For the analysis, fifteen cor- porations were chosen. Nearly all of them had sales in 1973 ranging into the hundreds of millions of dollars. Six of them, in fact, had one or more billions of dollars in sales. The exception among the fifteen is Scott Paper Ltd. but it ranks among the corporate giants because of its close relationship to Scott Paper. Weyerhauser is by far the largest of the giants; in fact, Weyerhaueser is the largest woods industry corporation in North America and probably in the world. The thirteen corporate giants for which 1974 sales and profits figures are available all report very large increases in sales, ranging from 11 per cent to 55 per cent. Two of them — Evans Products and MacMillan Bloedel — became billion-dollar corporations for the first time in their history. Large as the sales increases were, however, in most cases they were nowhere near as large as the increase reported for profits after taxes. The following table illustrates the enormous profit increases: B.C. Forest Products reported an increase in net profits of 135 per cent on an increase of 55 per cent in sales. Crown Zellerbach reported an increase in net profits of 133 per cent on an increase of 23 per cent in sales. SEE “REPORT” P.13