Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 2 - Evidence - Meeting of April 15, 2010
OTTAWA, Thursday April 15, 2010
The Standing Senate Committee on Agriculture and Forestry met this day at 8:10 a.m. to study the current state and future of Canada's forest sector.
Senator Percy Mockler (Chair) in the chair.
[Translation]
The Chair: Honourable senators, good morning. As we have a quorum, I would like to call this meeting to order.
This morning we have the honour of having with us two industry leaders, Mr. Frédéric Verreault and Mr. Rob Third. I would like to welcome you to this meeting of the Senate Committee on Agriculture and Forestry.
I am Senator Percy Mockler from New Brunswick, chair of the committee.
I would like to start by asking the senators to introduce themselves, starting with the committee's deputy chair, on my left.
Senator Robichaud: Fernand Robichaud from New Brunswick.
[English]
Senator Fairbairn: I am Joyce Fairbairn, from Lethbridge, Alberta.
Senator Hubley: I am Elizabeth Hubley, from Prince Edward Island.
[Translation]
Senator Nolin: Pierre Claude Nolin from Quebec.
[English]
Senator Plett: I am Don Plett, from Manitoba.
Senator Segal: I am Hugh Segal, from Ontario.
Senator Eaton: I am Nicole Eaton, from Ontario.
[Translation]
Senator Rivard: Michel Rivard, from Quebec.
[English]
The Chair: This committee is continuing its study on the current state and future of Canada's forestry sector. The Standing Senate Committee on Agriculture and Forestry is examining the causes and origins of the current forestry crisis. We are also examining the ways to promote the development and marketing of value-added products in order to be partners.
[Translation]
In order to study the whole forestry industry, added value and the development of new markets, of North American markets and global emerging markets.
Today we welcome two witnesses: Mr. Frédéric Verreault, from Chantiers Chibougamau. I must say, Mr. Verreault, that your reputation precedes you. Thank you for accepting our invitation to appear.
[English]
Today we also welcome Mr. Rob Third, President of George Third & Son Ltd. Mr. Third, thank you very much for accepting our invitation. We know that your reputation also precedes you. We are anxious to hear from you.
I am advised by our clerk that we will start with Mr. Verreault, then Mr. Third. Following the presentations, we will move to questions.
[Translation]
Mr. Verreault, you have the floor.
Frédéric Verreault, Director of Corporate Affairs and Communications, Chantiers Chibougamau: Mr. Chairman, I thank you for the invitation to appear this morning. It is a pleasure and a privilege to be here with you to discuss the forest industry, the wood products industry, about which we are passionate and which is inspirational for us in Chibougamau. This is a very sensitive issue that rallies many in regions across Canada. Obviously, our perspective is guided and coloured by what we have experienced in Quebec. As we are currently in a crisis, we are more or less in a rescue and survival mode, which means that we are much more focused on our issues versus the time and energy required to go out and find a broader perspective on the industry.
This morning, I will not claim to deliver any perspective on the Canadian industry as a whole. Nor will I claim to do so for the entire Québécois forestry industry. In my humble way, I will speak to you of our journey and our experience in the hope that this may provide some ideas for you in the study that you are currently undertaking.
People often talk about Chantiers Chibougamau, of the northern products it manufactures, and it sounds like a fairy tale. As if on some beautiful morning there was a magic wand that someone at home held and suddenly, we shifted towards value-added products and all was for the best in the best of all possible worlds. However, this must all be seen in context and it is explained by some very specific elements that I will allude to here this morning.
Chantiers Chibougamau has existed as a business since 1961. It was founded by Mr. Lucien Fillion, who was originally from the Quebec region. He made an investment and at a certain point things were not going well at all and he was obliged to go and look after his investment in Chibougamau, where he remained.
In its infancy in 1961, the business had five employees and today it has approximately 600. In a small town like Chibougamau, with a population of 7,400, which is situated in the middle of nowhere in the northern boreal forest of Quebec, we employ one-quarter of the working population of the town of Chibougamau, people who are directly on our payroll. This obviously makes us a business that is heavily involved in its environment. The business remains to be closely held and owned by Mr. Fillion and members of his family. This also explains the development of the organization.
This is the most northerly forestry business in all of Quebec. As a result, and this is normal, the wood at our disposal is the smallest in the entire Quebec forest. Good quality trees in Chibougamau have a diameter of approximately 12 to 14 centimetres. If you have ever seen the dimensions of a log of wood going into a wood processing plant on the other side of the country in British Columbia, a stem that is 12 to 14 centimetres in diametre is —
Senator Nolin: It is a toothpick.
Mr. Verreault: We are close to the toothpick stage. They are very small trees that pose processing challenges. All of our product development started from that. The changes we made come strictly from the properties of this forest which is at our disposal and that we process. At a certain point in time, even if we had a productive sawmill with good wood product results, good production of pieces of wood for each of the logs coming into the plant, effective and productive, that would have allowed us to reach a certain level of competitiveness, we were limited. Because the trees are so small, we were producing a lot of two-by-threes. If you have ever examined the value of pieces of softwood, a two-by-six is more valuable than a two-by-four and a two-by-four is worth more than a two-by-three. This is true the more we reduce the dimension of the pieces of softwood. Even if we obtained the best in technological developments and had had the best investments in the world, we were faced with this inevitable fact. We were doomed to process the smallest forestry sector in which we found ourselves. The choices we had were to either accept this inevitability and have no choice but to face difficulties, or we asked ourselves if there was any way we could capitalize on the properties of this tiny forest. This small forest is primarily made up of black spruce. I put a great deal of emphasis on the concept of raw materials.
When it comes to industrial development in the wood industry, you can carry out as many market and technical feasibility studies as you wish, look at the technological developments for product assembly, et cetera, if you do not have a sustainable competitive advantage with the properties of the raw material before the processing stage, you cannot generate anything productive and promising in the long term. Therefore, I will close that parenthesis and come back to the properties of this raw material.
So we were faced with this inevitability of counting on this small forest in Quebec and this small forest is providing us with a lot of two by threes at the sawmill. It consists of black spruce and we have studied the situation. Black spruce as a species has physical and mechanical properties that are extremely interesting when compared to other species within its group, such as fir, spruce and pine. When we sell black spruce softwood, we cannot benefit from this added value. The two-by-three, if it is sold as softwood, is really limited in terms of the value gained when you take into account the properties of this superior two-by-three.
Therefore, we looked for what we would have in terms of value-added products in order to capitalize on that, and from that perspective, we introduced the ``I'' beam. This I-beam is an engineered wood product made up of an assembly of two chords that make up the horizontal bars of the ``I'' that are made of finger-jointed two-by-threes. Two chords make up the horizontal bars of the ``I'' and an OSB particle board makes up the web or core assembly, therefore the vertical bar in the ``I''. These floor beams are mainly used in residential home construction throughout North America in order to support the floor structure in new home construction.
From that point, we were in a position to benefit from the inherent properties of the raw material which, at the outset, represented a disadvantage. Our adventure started there. Once this was developed as a technology, that is where the shock of market realities hit us, which is to say we might well have had a good product which we considered worked well, was competitive and advantageous in terms of costs, but if we did not have a solution that would meet the markets' or client's expectations, we could not manage to sell this wonderful product at a competitive price.
Clients needed a floor system that was comprehensive. Therefore, we were naïve in our venture, we thought we had won the lottery and that we had found the magic solution. In fact, we could not stop there.
Clients wanted a complete flooring system, therefore a complete support structure for the floor, and it was from that point that we integrated glue-laminated wood products in our basket. From what I am told, you have been able to see the application of glue-laminated wood in the context of non-residential construction, including the FondAction office tower in Quebec City, the six-storey building, and in the interior soccer stadium at Chauveau park, which you have been able to visit.
Initially, the glue-laminated wood that we introduced was not intended for these non-residential applications, but rather for floor systems, that is to say that a floor beam does not float in a void, it must rest on structural elements that are strong and solid. That is what encouraged us to introduce glue-laminated wood in our range of products.
What distinguishes our product from others sold across Canada — because there are other manufacturers in Quebec, and there are many out west in Canada using mostly Douglas fir — what really sets our glue-laminated wood apart from what we see in the Scandinavian countries, in Germany, in France, in European countries who have shown great leadership in non residential wood construction, is that it is not made up of large pieces of softwood that are essentially two inches by six inches.
Our glue-laminated wood is different from what you see elsewhere because it is made up of small pieces of wood that measure one-by-two inches. These pieces of softwood, which constitute a starting point for the assembly of our glue- laminated wood beams, come from the tree tops. Once again, when we wanted to add this to our basket of products, we looked at the available raw material. What did we have at our disposal? What are the properties of this raw material?
The top of a tree is not highly valued. It is too small when you reach a diametre of three or four centimetres to cut out a single piece of two-by-four. Therefore there is no viable industrial production of softwood one might hope to achieve from this part of the tree. But if you have ever seen a transversal cut of a tree, you can see the tree rings that determine the age of the tree, and it is these tree rings and their density that gives strength to the tree, that give it its rigidity, and the solidity to the pieces of wood we take from it.
Obviously when you take a tree top of a tree that is 125 or 150 years old, where within three to four centimetres' diameter there is such a density of tree rings, we can manage to cut out pieces that are one-by-two which, in theory, on the softwood market, have no value in the lumber yard, but we manage to get pieces that have a great mechanical capacity.
It was from that point that we started finger-jointing these small pieces, and we are certainly approaching the properties of toothpicks. We therefore started finger-jointing them and the large joined pieces were glued together to assemble a layer. We then glued these layers together one of top of the other to make up the major structural pieces that you were able to see in the buildings in Quebec City that you visited.
As you have seen, and we will be able to go into more detail in our discussion, there was no magic wand, flash of genius or crystal ball that would explain this industrial development. Everything comes from the raw material and everything was motivated and encouraged by our clients' expectations. This is really what explains the development of our range of products.
I will conclude my introduction on this point, and I hope we will be able to go more into detail in our discussions.
[English]
Rob Third, President, George Third & Son Ltd.: I am happy to be invited here this morning and thank you for having me here today. I am the president of George Third & Son Ltd. and I am the grandson of George Third the founder. I was groomed in the family business since childhood. I was fascinated by my father's skill and strength at the blacksmith's forge shoeing horses, and then later watching my father take off structural steel drawings at the kitchen table.
Senator Segal: Does that make you George Third the Third?
Mr. Third: No, but I am a third generation.
We have grown from those humble beginnings to a corporation with plants across Canada and sales of $100 million a year in good times. Our firm designs, fabricates and erects structural and architectural steel in the Canadian international marketplace. We are not the average steel fabricator but specialize in landmark structures and architecturally exposed structural steel. We do not build residential properties, almost never, unless someone has a lot of money. We build commercial buildings and bridges.
We recently built the Richmond Olympic Oval, which I will talk about later; and the 2010 Olympic ski jumps. We also recently completed the Coast Meridian Overpass. We have a wide diversity of projects and products that we do, but all of them contain steel.
We also build the world's largest astronomical telescopes. We have built 10 of them over the course of the last 20 years, and we are presently designing the next largest telescope that will be enlarged from a 10 millimetre to a 30- millimetre mirror. The international community has commissioned us to design that telescope. That project will likely go out for tender and we will likely build it. We also build iconic rides for Disney and Universal Studios through our sister company, Dynamic Structures.
We will celebrate our one hundredth year in business this year, of which we are very proud. There is a George Third — we call him Geordie Third, my son — who is there today working in the shop. For your interest, the blacksmith's forge is still hot almost every day. We do not shoe horses any more but we still have a blacksmith and a forge.
I am also the chairman of the Steel Structures Education Foundation. I sit on the board of directors of the Canadian Institute of Steel Construction, and I am a past board member of the Canadian Welding Bureau. I am somewhat of a voice for steel in Canada.
George Third & Son Ltd. has gone through many transitions and many good times and bad times in 100 years. Our product is steel. We started with wrought iron and rivets; we now use high strength alloy steel and weld it with robots. When the steel industry competition found new ways to make steel cheaper, it was necessary for us to develop product innovations ourselves. When the cement industry invented new recipes for concrete, the steel industry developed high- strength steels.
Probably the most important breakthrough, and something you are probably aware of, is when steel making in North America moved from mining iron ore and started making steel from scrap. Previously milled steel used for a car, a washing machine, building a bridge, et cetera, is now recycled, melted down, and rolled into a new steel beam plate or piece of pipe. Steel never loses its strength and can be recycled over and over again. We can take the Brooklyn Bridge and tear it down and make it into another bridge in Canada. We can then tear that down and make it into a car; it keeps going. We add extra help to the recipe once we put it into the ladle, but, other than that, it maintains it is strength over and over again. The car you drive home tonight could have been a bridge in the past.
Today's steel in North America is 80 per cent to 90 per cent recycled content. We do not scrape the earth, we cleanse the earth; we do not put our steel in landfills; in fact we hunt down used tractors in the farm fields and make beams out of them.
We had a steel conference a couple of years ago in the United States where they actually brought an old Chevrolet and for a dollar, you got a whack at it with a sledge hammer. They pounded it down to a small block and sent it away to the steel mill and it came back as a beam before the conference was over.
My father built many of the unique structures of Expo 86 in Vancouver. Some of those structures are still standing and some have been torn down and reused elsewhere because of the ability to take steel apart and put it back together again. There was a moratorium on construction in Vancouver for six months during Expo 86. The city did not want a bunch of guys making a mess while everyone was visiting Vancouver, so we had to find a new market. We had nothing to do, this is where we did all our work, and so we went south. We built a skyscraper in San Francisco and that became a stepping stone for us to build a relationship with other American customers. They liked what we did; they liked Canadians coming down and the quality we brought with us.
We opened up a small plant in Seattle and, feeding it from the market capacity we had in Canada that was not being used, we became the second-largest steel erector in Washington State. The U.S.A. put up trade barriers to prevent us from growing that market, so we built relationships with import specialists in both Washington State and Washington, D.C., until we knew all the loopholes and found a way to get our steel down there.
Then the market dried up in the U.S.A. and the Canadian dollar strengthened to the point of making us uncompetitive in America, so we closed that operation, hunkered down, and came back to our roots in British Columbia. I am trying to paint the picture that we have to move where the market goes. The story goes on but I will leave it there.
My point is that when I put my steel man's hat on, we have never expected you to solve our problems. When the market moves, we need to move. We would love you to legislate that all structures in earthquake zones are made out of steel because that is the best at resisting catastrophic failure and loss of life, but that is not the function of government.
Our Steel Structures Education Foundation, of which I am the chair and have been for the last 10 years, recently held a biannual conference. We flew in 55 university professors from all over the country, in the fields of architecture and engineering, to bring them up to speed on the latest steel innovations and discuss the ``knows'' and the ``don't knows'' of our building material and promote opportunities available from the steel industry in the form of research and development grants.
Each year we devote over $100,000 to research, which comes from the industry, my competitors and I, so that we can have research done on our building material as to what can make it more efficient and more competitive. We do not need to be competitive against each other but against other building materials such as concrete and wood, and masonry to some extent but very little.
The wood industry should do this. Speaking with my steel hat on I do not want the wood industry to do this, but this is said with my helpful hat on. This approach is very effective. The educators are thankful for this opportunity and feel they come away from it with a much higher knowledge of our product and how things are done. We take them to projects; we take them to our plants and show them how it is done. They are better professors for it.
We spend thousands of dollars on design courses so that the consulting industry — the engineers and architects — know how to design in our material. The results are stronger, lighter structures and more innovative, earthquake resisting steel connections. The wood industry could do that too.
My message is that I do not support legislation that favours one structural material over another. I do not support government intervention where the competitive marketplace forces the best to be successful.
I have given you some handouts, which I will speak about. I did not put any writing so I can do the talking. Of course, the pictures, as usual, say a thousand words. I would like to discuss some of the projects and experiences we have had with composite steel and wood structures.
We first started building with wood and steel composite structures when Vancouver put in the original SkyTrain stations. There are 16 stations, of which five or six are made of wood. They are glulams, which is wood glued together to make a large beam incorporated into the roof structures. Those were earmarked for higher volume, bigger feature stations. The feature stations feature local, beautiful, more expensive building material. The rest are built from steel and concrete, which is cheaper, stronger, more bang for your buck, and are set up by more large, commercial contractors set up that are ready to go and know how to do that. In the feature stations, since B.C. is known for its wood, it was decided to put in some wood and show off the product that grows out of the ground.
For example, I built an all-steel cabin at Whistler. I tore down my old place and I built a cabin made completely out of steel. It is a post-and-beam style, with the steel exposed on the interior of the building. Then it is framed with steel studs, a steel roof, steel siding, steel stairs, steel rails, and the beds are even made out of steel. I even have a front door that is stainless steel. It has a little superman emblem on the window and it has a ``T'' for Third instead of ``S'' for superman. Because I sleep, breathe this stuff, my children call me the man of steel and that is why there is superman stuff all over the cabin.
I built this cabin to show off the product my company makes. It is exposed and every piece, nut, bolt and connection can be seen. I made special connections that are not normal in the marketplace in order to show the kind of things steel could do. Would I do it again? Yes, for myself. Is that structural steel a commercially viable product? No.
It is difficult to build something like that compared to the standard two-by-four construction. I had trouble finding a contractor to help me build it. I only do a portion of that work and then I have to marry everything else to it, including the concrete floors, the drywall, electrical, et cetera. I had to find a commercial contractor to build it, not a house builder, because the house builders said this was not what they were used to building.
I do have some wood background in that before I started in my father's business I framed houses for two years. I have owned four houses and on every one of them, I have done major construction work. I love wood, it is great and for the average homeowner it is the best. I love working with it, it is cheap, it is light, it is easy, and if you make a mistake you can buy another piece in the lumberyard, of which there are many. For residential construction, I do not think it can be beat, and I would not build my house out of steel studs if I had the chance.
I will now return to the SkyTrain stations. The signature stations for the line were Brentwood and Commercial stations. They were two of the largest stations and the ones they wanted to show off the most. The Brentwood station features composite steel and wood arches.
The steel made the strong connection between the concrete deck surface and the wood. It is a sort of column section. You can see it on slide 15, I believe. There is a white section of steel there. That is the making of the connection of the concrete to the wood.
Then the wood is the span from the steel column section to a truss that we put in, like a zipper type truss in the centre. Repeat that 40 times and you have the structural ribs of a significant and elegant structure.
We won awards for that. The architect and engineer won awards, and to this day it is a beautiful structure. A customer came from China and liked it so much he wanted a structure the same in China only half the size. He hired me and the engineer to build one and send it to China. We built exactly the same thing, only half as large. We built all the parts, had to marry everything together, take it apart again, put it into a container and send it to China with one of our guys to help them make it. They said they only wanted one and they would supply the labour. They asked how many people they would need to put the structure up, and I said four or five. My foreman arrived on the job site in China and phoned me and said there were 45 people there. It was lost in translation. He asked what to do. I said there are four bolts in every column, so put one guy on each bolt and keep going. He said he could almost send the crane away because there were enough people to pick the steel up. He was supposed to be there for three weeks. It took him a week to put it together, and then I told him to go see the Great Wall of China and have a good time. It was a successful project and an interesting way to put it up. If we had that many people, we would do that type of work here as well.
To go back to that project, it could have been done cheaper and faster and simpler, all steel. We put a piece of wood in the middle of the steel because the wood is beautiful and has nice characteristics and I love the look of it. It probably would not have been award winning and not as beautiful, but beauty is in the eye of the beholder. I have an all-steel cabin, and I think it looks hot.
The Commercial Drive SkyTrain Station featured something I did not really like, which was glulam facades bolted to the side of steel plates. We had steel plates that spanned from columns that went out on either side. Most of these stations are more or less rain shields or weather shields. The steel was strong enough to hold the rain and snow off the people below, but they wanted to put wood on it. Instead of having a beam with a flange on the top and bottom, they put a piece of wood on either side of our steel plate. The steel took up the load vertically, but laterally it was waving around. We put a piece of wood on either side to give it strength in that direction. We were really putting a facade of wood on either side of it. Clearly wood is being used for its organic beauty and not efficiently as a building material.
In slides 11 and 12, you will see one project we recently completed at Vancouver airport. There is a trend here. The first two projects were done 10 or 15 years ago, and this one was built 10 or 15 months ago. You get an idea of curved wood, glulam, sitting on a steel structure with steel connections holding it together. Wood needs steel. Concrete needs steel. Sorry, I live and breathe this stuff. I have rust in my veins.
The most recent landmark is the 2010 Richmond Olympic Oval. British Columbia has many trees. I am surprised there is no one here from B.C. There is no one from west of Manitoba, I do not think. I thought they would be larger stakeholders in this argument.
They received lots of backing from the B.C. Wood Council and received a great deal of political support from Premier Gordon Campbell. The premier describes the project to all that will listen as made of B.C. wood. I will give you some statistics: There is $37 million worth of concrete in that building, $15 million worth of steel, and $8 million worth of wood, and probably 50 per cent of the wood came from the U.S.
Senator Segal: Why is that?
Mr. Third: It is cheaper.
Senator Segal: In this station?
Mr. Third: In the speed skating oval. All the wood in the ceiling and panels, I would say, is from B.C., but much of the wood for the glulam beams was bought from the States. I know that because I talked to the guy that makes the stuff. In that project, there is 9 per cent wood, but it is deemed as a feature for wood. I am not complaining; I am just letting you know.
This is another award winning, non-residential structure. It is a large commercial structure. It has won awards all over the world for its architecture and engineering. It is a specialized building. It is the best-looking structure I have ever been involved with. It is hard to see the steel as the majority of it is purposely hidden by the wood. As you look through the pictures, you can see all the wood and you can see steel because of the some of the angles I have taken. On page 2, you can see the wood in the top, as that is taken from up by the ceiling, but you cannot see from down below.
Steel's unsurpassed strength-to-weight ratio makes it slender and sparse in the structure. The wood, with much bigger pieces to gain the same amount of strength, is prevalent in the structure. The wood is doing lots of heavy lifting in this design. This is not a facade, and it is doing lots of work here, but they could not come to close to considering the span of this structure without the steel. The steel is doing a lot of work.
The roof could have been made entirely of steel, and normally it would have been. Because it is a feature, the City of Richmond and Government of British Columbia decided they wanted to expose the wood and promote the wood. There is an interesting wood ceiling in that building that is not really structural. I can answer questions about that if you like, but I have not brought it into my presentation.
As the contract was written and executed, the steel fabricator/erector was responsible to accept the curved glulam pieces in their finished state into the steel fabrication plant and be responsible to marry these pieces of wood to the steel strengthening members. The steel fabricator is required to fabricate, fit, weld, bolt the steel, glue and screw the wood parts into 15, 320-foot long hybrid arches, deliver them to the site and erect them without harming or marring the architectural finish of the wood panels. This scared off every other fabricator in the country but me. That project was so off the dial, off the normal path, that no one else came to the party to bid that job.
I will read you something from the submission that won the Canadian Institute of Steel Construction award. This project, which is deemed as a wood project, won the Canadian Institute of Steel's award for the best building built in 2009 in British Columbia. It just won the national award for the best one in Canada. It won an award in an international contest in Europe over the Bird's Nest Stadium in China. It is an extravagant, beautiful building. If you have not been in it, you have not seen it. It has a wow factor as you walk inside, because it has a huge span and is an interesting building. I will read what the engineer said about the building:
The arches in the Olympic Oval are the longest spanning hybrid steel wood arches in the world. They are also the most unique arches ever designed and constructed. A fully coordinated and dedicated effort to making them work was required by the team, which consisted of the architect, structural engineer, steel fabricator and mechanical and glulam trades. At tender close, only one steel fabricator was willing to tackle the enormous, unprecedented challenge of receiving large slabs of glulam wood into his steel shop, assembling all steel components with the wood, coordinating mechanical ducts, installation in the shop and finally erecting and splicing the arch segments on the site. The complete building has received world-wide accolades. In many respects, the unsung hero has been George Third & Son, who performed the unprecedented task of assembling and erecting the unusual hybrid arches. The building has often been cast as a design featuring pine beetle wood. However, the key to spanning the enormous hundred metre spans was their willingness to fabricate outside their normal comfort zone and combine steel and wood to create a stunning and striking architecture.
My point is not that I am a good guy because I did it, but that not many people will do it. It was a daunting task. It was a scary thing to bring in wood that looks about as nice as this table into my fabrication shop. You can see from some of the pictures what my fabrication shop looks like. We can take the steel and drag it on the ground all week, and it does not hurt it. We have to be very careful with this wood. We did not want to set it on fire, either.
With my George Third & Son hat on, my firm is making hay for the wood and steel marriage. We have become experts in it, and have done enough of such projects to be considered the guys to go to. I am in favour of wood and steel; I will chase every one of those projects to the ground.
If you look at the last page, there is a bit of a tongue in cheek marketing there in terms of wide flange, one of the most efficient shapes ever made. I will make some wide flange and put wood grain on the outside.
The structures we build are unusual, and there is an unusual thing that comes through our plant. They are not inexpensive solutions. They are landmarks for customers that want to show off. With my taxpayer hat on, should we be doing this with taxpayer money for construction, repair, maintenance, public works and federal and removable real property? However, with my Canadian hat on, if it increases the economy by showing the beauty of wood and the innovations of Canadian design engineers and the craftsmanship of carpenters in Canada, that is for you to decide.
I hear the ``Beauty of wood'' phrase often. I read it in some of the things you talked about earlier. Someone asked if wood is more beautiful. Yes, it is. Even as a steel guy, I think wood is more beautiful. It has its limitations and I think the wood industry has some things to overcome. I think it is good that you are helpful.
As a steel person, I am concerned you will try to legislate or come up with the idea that public buildings should be wood first or where possible, et cetera. The architects and engineers then have to go through a costly process to analyze that and see if they can make something out of wood when they know they can make it out of steel or concrete. Do they, or do they not?
It goes back to where they started. If they say yes, sometimes there will be an up charge for that. They are trying to make something that they normally would make out of a different product. When they have a customer with extra beans, that is when they will say let us try to use the beauty of wood.
The promotion of companies like ours, StructureCraft, Fast + Epp and Busby Perkins and Will, people who have those systems on the go, would help. We could do some presentations to people to show them how to do it. On the one hand, I do not want to give away my competitive knowledge, yet, on the other hand, if we want to find ways to put these things together, there are people like the group I already mentioned who already know how to put wood and steel together.
That is my presentation.
[Translation]
The Chair: Mr. Third, thank you very much. We now have a few senators who would like to ask questions. Senator Robichaud, followed by Senators Rivard and Plett.
Senator Robichaud: Thank you, Mr. Chairman. Mr. Verreault, how did you manage to become competitive with the wood you are using? You are using tree tops which, in most forestry operations, are left to rot on the ground.
Mr. Verreault: You have just put your finger on the key element, when we are discussing wood processing, which is competitiveness. Often, we are discussing productivity and when we talk about industrial development, regardless of what the economic sector is, we will be talking about productivity. I have participated in many different events around the world where we were discussing the forestry industry, and the critical thing is competitiveness.
If you compare our very highly digitized processing activities that are very advanced technologically-speaking in this country, versus the Russian model which is the polar opposite of the industrial reality that you are aware of here, we can see that the Russians are able to bring the client the softwood product at the cheapest price, therefore more competitive. And so they are able to make their way better than we can do with our factories here.
And yet, they use dozens of people to carry out an operation that in Canada, or in Quebec, would take only one.
The key component is indeed competitiveness. One possible explanation is that it comes from an obsession. It also comes from a characteristic of an entrepreneur here at home, pride.
I will give you an example. We have three lines in the sawmill. In order to explain the competitiveness, the key element is really — I spoke a lot about raw materials in my introduction, but the main raw material of value added wood is softwood. And often, when we are talking about redefinition of the forestry sector, we think about the end use, we think about high tech products, engineered wood products. We lose sight of the fact that the primary value of this value-added product is the softwood product.
A great deal of attention must be paid to the initial processing at the sawmill as these projects unfold. In our case, if we did not have a sawmill that was getting good results, we would never have been able to generate a single dollar in profit at a time when we were doing only that in order to be able to invest in our engineered wood complex. If we did not have a sawmill that was productive, competitive, and profitable, we could never have counted on the raw material that was providing us with a competitive advantage to be able to assemble a value-added finished product.
We achieve that with the help of a highly-skilled team with an obsession for output. I will give you a quick example. I said there were three sawing lines. For two of these sawing lines, the equipment we purchased was designed to process 320 feet of wood per minute. That is not a negligible amount. What explains our survival, on the one hand, and how we got to where we are, on the other hand, is that we brought the equipment that we purchased with a 100 per cent capacity of 320 feet per minute up to 600 and 630 feet per minute, for each of the two sawing lines. When the manufacturers we bought this equipment from came back to see us several years later and saw what we had done with this initial technology, just how far we had taken it, they were utterly shocked and that is how we can explain that at some point in the 1990s we generated profits. We also had the capital to invest in this shift. Because I must say, to date, this change has cost some $100 million in investments in complex engineering equipment, and that was entirely funded by the corporation itself, which is not on the stock exchange, and without any government grants or loans.
So it was really because of an obsession to be competitive and highly productive in primary processing that we were able to generate capital, that we could use raw material for a value-added project which is itself competitive.
Senator Robichaud: And marketing?
Mr. Verreault: That is very interesting. Before answering, if I may, on the issue of primary processing and milling, I learned about that initially in our reading, the forest products industry in Canada is very different from one coast to the other. I mean that in Quebec specifically, Government of Canada measures are being adopted to go along with the much-needed redefinition of the wood industry. The Government of Quebec intends to develop a redeployment strategy for the wood industry which would be based on increased productivity in primary processing.
So if this strategy comes to be, I will speak strongly in favour of it, as if, at the end of the day, we want productivity and a competitive product, that is what we need.
On the issue of marketing, since 1961 our company has been selling lumber products. For those who are familiar with the selling of lumber products, you know that it means someone in the organization on the telephone selling loads of wood. That is the jargon we use: ``I will sell you a load, I will give it to you for so many bucks for 1,000 feet, it will leave next week, it is a deal.'' We earn the loyalty of our clients with strategies for stable prices, which are just and equitable and honest. We earn their loyalty with quality of service, in other words, just-in-time delivery, for all manufactured products.
That is the marketing reality we lived with until the late 1990s, early 2000. Our company is called Chantiers Chibougamau; so in English, and you can take off your earpieces, Chantiers Chibougamau is pronounced —
[English]
We sell engineered wood products from Chantiers Chibougamau.
[Translation]
The first challenge we faced was a linguistic one, so we introduced the brand ``Nordique bois d'ingénierie'' which translated more easily into ``Nordic Engineered Wood.''
That was the starting point for a marketing strategy for these value-added products.
In terms of corporate culture, going from a guy on salary using a phone and fax, as everything was done with fax technology, and a marketing team deployed throughout the North American continent, with a salesman in Atlanta, one in New York State, one in Toronto, another at sales headquarters in Montreal, with a distribution point in Liverpool for the European market and a partner for the French market represented in that regard a fundamental change. We must be open, but we also need capital. By funding this marketing machine versus one fellow on the phone, our marketing costs exploded.
From there, all of the technical services became inextricably linked to the marketing strategy for forest products as we know them. For residential products, we had a technical team, as well as guides with technical abilities; on the non- residential side, Mr. Third alluded to the challenges in designing hybrid or wood structures. We deal with these challenges in our day-to-day life for the buildings that you saw.
Now, in order to ensure that clients who choose to use wood have an experience that is as simple and robust in terms of cost control as if you were building with more conventional materials like steel and concrete, we set up a technical services team that accompanies engineers and architects to the project, to ensure that there are no additional costs and delays associated with carrying out the project.
To date, we have organized the marketing of these products around these services. So focusing on the non- residential side, we cannot expect a fundamental change in culture in the non-residential construction industry in Canada overnight. There are significant technical and mechanical issues as well as costs and security issues for buildings. And that cannot be developed without a basis of confidence.
For that, we need promoters with great leadership skills and an interest in innovation to create the climate of confidence. And once we have an initial project to go on, we can prove that non-residential wood buildings are competitive in terms of cost and that no one is doing charity work or building with wood out of pity or to be philanthropic. If promoters, primarily in the private sector, make informed business decisions to build with wood, it is because, first and foremost, we are offering them a competitive cost solution.
Then, if we want to expand use based on confidence, we must offer something more, service, expertise so that deadlines on the construction site are respected. Industrially speaking, we must organize ourselves to ensure that there are no delays in delivering the products. We must ensure that the products are of the utmost quality so that on the building site, if, for example, the hole on a prefab part for installing the bolt for connection is eight millimetres too far to the right, there will be no major problems on the work site, because there are cranes and teams of workers.
We must do our homework to have a robust and high-quality product. From there on, we can hope to deploy it all. I was waiting to hear Mr. Third's point of view. I told you that we did not have clients who are using wood out of pity for the wood industry. People's perspective is that the wood industry is in its current situation because it neglected to modernize when times were good and because the dividends to shareholders were too high.
That is essentially what people think when they look on our current crisis from the outside. They are not inclined to show pity or solidarity or to be philanthropic by choosing wood. Aspects of competitiveness exist: Yes, we must have simple and robust products in terms of deadlines and costs, and then a decision on whether or not to use wood also involves considering the aesthetic aspect of it. Other factors include, in order, the environmental nature of the material in terms of environmental impacts and the impact of greenhouse gas emissions. Ultimately, in making an informed business decision, a promoter will take all of these realities into account. We must not hide things or avoid telling it like it is. This is the reality we are facing and we base our marketing on that.
[English]
Senator Robichaud: Mr. Third, you mentioned the structure for a telescope. Will that be erected in Hawaii or in Chile?
Mr. Third: It looks like it will be Hawaii. Chile is more or less well known as the best place. It has the clearest sky and the least amount of clouds and noise in the air, but Hawaii is closer for everything and it is a better choice. There is easier access and it is cheaper to construct there. The Chilean place is quite hard to get to. The other factor is the volume of money that the U.S.A. puts into it. They will put more money into the telescope if it is located in the United States than in Chile.
Senator Robichaud: Is the structure that you are responsible for the structure to hold the mirror in place?
Mr. Third: It is both. We would build the steel structure that holds the mirrors and directs the telescope. It is an intense and critical structure. We will also build the enclosure that has the opening.
[Translation]
Senator Rivard: Thank you for your presentation. Is your mill meeting client demand?
Mr. Verreault: We are currently on the work-sharing program.
Senator Rivard: So —
Mr. Verreault: We are taking advantage of the work-sharing program offered by Human Resources and Skills Development Canada under employment insurance. So we are not in a special bubble. And we must put things into perspective. The impression, especially for the eastern Canadian market, is that Chantiers Chibougamau is the main player in non-residential wood construction. Our position in that market is not negligible. But overall, you must bear in mind that Chantiers Chibougamau revenues generated by sales in the non-residential sector, thanks to lovely office towers and sports facilities represented roughly 10 per cent of our sales in 2009.
Our greatest sales came from lumber; we quadrupled our sales for engineered wood products in residential construction in North America, more than doubled our revenues for wood chips last year versus what the non- residential sector generated. These things must be put in perspective. The impression is that we are being carried along on a wave and that is not at all the case. It might be the start of a wave, but it is certainly not a storm.
As regards production capacity, we made major investments last year; we expanded our facilities, and we integrated digital technology for milling, with leading-edge technology robots, and as a result we can do the milling eight times faster than in the past. That led to productivity gains, as the equipment that is currently being used for one shift could be used for three, five days a week instead of four at present. So we have considerable room to increase volume.
Senator Rivard: In the short and intermediate term, are you afraid of not having enough of your raw materials?
Your region is close to the tundra, and the spruce are not on top of each other. Are you afraid of not having enough? If your raw materials come from further away, this could cost you more money, thereby making you less competitive?
Mr. Verreault: There is a broad debate about the stewardship of the public forest because, in our case, our supply comes from public forests. This debate falls under the Government of Quebec, which is responsible for managing public woodlots and it remains a very sensitive subject in terms of the vocation and the relationship with have with the forest.
Do we look at the forest as a source of royalties, pure and simple, or as a starting point with which to create significant wealth in various regions? Do we look at it as a starting point for the production of construction products — and this has been supported and demonstrated dozens of times — which have environmental benefits? There is that, but that is a separate debate.
The issue about the quantity is indeed the starting point. Is the quantity of our quality resource adequate? With regard to quality, it is important to know the cost of acquiring the raw materials in sufficient quantities. It is all a matter of volume and speed when you go to the mills. Depending on the quality of the wood, approximately 750,000 cubic metres of wood are processed in our primary processing facility. This means that seven or eight million trees per year pass through this facility. It is all a matter of volume in order to ensure our competitiveness. There has been a decrease in the amount of wood available in Quebec, and this is a concern.
Now in terms of how far north we are, just how far can we go? There is a commercial potential to the taiga that goes far beyond the northern limits that are currently in place for the harvesting of wood. At this point, there are some dilemmas in relation to consolidation issues, but it is not as much how far north as opposed to allocation choices.
Senator Rivard: This is a family-owned company, so it has closely-held capital; is there a union?
Mr. Verreault: Absolutely, it has existed for decades and we are currently renewing the collective agreement with it.
Senator Rivard: Have you ever experienced a strike?
Mr. Verreault: In the company's modern lifetime, no.
[English]
Senator Plett: I thank you both for your presentations, which I found very informative.
My first question is for both of you. The United Kingdom's building code allows for wood frame construction of more than six storeys, I believe, whereas it is four storeys in Canada. If we allowed such buildings to be made of wood, what would be the economic impact on the Canadian forest industry and on the steel industry?
I am probably fairly close to you, Mr. Third, as far as government involvement, regulations and legislation on what we should do. However, we clearly want to promote our natural resources in this country and do whatever we can.
I am from Manitoba and involved in agriculture and forestry, so I want to promote what we have in Canada. I want to know what the economic impact would be on either one of your industries.
Mr. Third: I would say there would be a possibility of more competition in the steel industry in a six- or eight-storey structure than there is now. Presently, it is between two building materials: Steel or concrete. Now it is steel, wood or concrete.
Senator Plett: The competition is good, is it not?
Mr. Third: Competition is good.
[Translation]
Mr. Verreault: The first thing you need to know, if we pick the wood, as Mr. Third said so well in his introduction, is that these materials complement each other. That is why there is a dogmatic approach whereby people say that wood is not good for anyone, but this does not reflect an industrial construction reality that is, in our view, rigorous. Whether people use one material or another, if you have a concrete foundation, so, a multi-storey building, seven or eight storeys high, all three materials can be found.
Now, it is difficult to determine what market share wood could have. In Quebec, non-residential projects in wood have been in the works for the past six years, we have begun a three-storey construction project. We built a six-storey building that you visited and another four-storey building in Mississauga, on the outskirts of Toronto. That is about it.
We are really starting from scratch and, like with anything, before you can run, you need to learn how to walk. We are still at the initial stages where we are starting to take the first few steps. It is so hypothetical that it is difficult to say what kind of impact this could have. It is impossible in our view to answer that question.
[English]
Senator Plett: Regarding the Richmond Olympic Oval, you spoke a bit about the beams. You have wood inside of the steel. The purpose of that is for strength, is it not? It is obviously not for aesthetics. Before you answer, we visited an arena in Quebec City, along with this other building. They had the same type of beams, though it was a much smaller building. Nevertheless, they had the same type of format. They had these same types of beams, which I believe are glue-laminated or cross-laminated beams that did not have the steel on either side. What is the reason for the steel here?
Mr. Third: It is due to the enormity of the building.
Senator Plett: So it is to give it more strength.
Mr. Third: Yes, it is for more strength. The steel could not span that length. It is 100 metres, or 320 feet, so it is a huge facility; it is much bigger than a hockey arena. On slide 5, you get a look of it in our plant. There are two pieces of wood and some steel on the top. It is not finished there but steel is being added to the top and to the bottom on page 4. You see the large steel V on the bottom. You are pulling two pieces of wood together to make to get them to react, strength wise, as two pieces and you need that attachment of steel on the bottom and top to do that.
Senator Plett: The wood there is laminated, is that correct?
Mr. Third: Yes, that is a series of two-by-sixes that have been glued together. They are curved, and then they are made in a length as long as they can make them, for which there is a restriction. The main restriction there is that one can only put so much glue and so many pieces together in time to then put it in a press and squeeze it before the glue starts to dry before you have finished putting all the pieces together. They pull it together and leave it for a day and then open it up again.
It can only be made in certain length. They made it in four pieces. They are the ones who determine the length. We could make our pieces longer, but they made theirs like this. It took four of those to make one span.
Senator Plett: Speaking of strength, is there a danger in the glue letting loose?
Mr. Third: No.
Senator Plett: Would the glue always hold?
Mr. Third: They developed this years and years ago. They have it right and know what they are doing.
Senator Plett: Are there fire issues with the glue?
Mr. Third: If the glue is flammable, it is probably more flammable than the wood. The wood is flammable. However, they have engineers that deal with that, who figure that out and figure out the issues. The building is such a volume that the biggest concern would be smoke, not the fire. It is not that the building will come down, but rather the smoke. People cannot get out. They spend extra money to evacuate the smoke out of the building, because they have so much wood in there. Other than that, it would be hard for us to get the fire to that because it is so far away from everything else. It is the roof structure.
Senator Plett: I am disappointed in the fact that we had to go outside of Canada to get as much of the wood as you say we had to do. I am not sure whether that speaks poorly to our supply. Does it speak to cost?
Mr. Third: It is cost, yes, which is unfortunate. It is the same reason why our glass and everything is probably made in China. There are people here who can do it. People here can fabricate steel. We are under pressure these days to do it cheaper. Our cost is probably $35 an hour for a steel fabricator, and I can buy steel from China where their cost is $8 an hour.
Senator Plett: You are right. I have to admit that I just furnished an apartment here in Ottawa with furniture mostly from China. I am a little ashamed of myself.
Senator Eaton: Mr. Third, you have made an excellent point. The steel industry and the concrete industry have spent a lot of money in research and educating architects and designers. The wood industry could learn from you. Several of our witnesses have made the point that I think Mr. Verreault has tried to make several times, which is that wood, concrete and steel all have their place in a building.
[Translation]
Earlier this week, our committee heard from Mr. Bourassa, a Quebec architect. He told us several times that more major projects were not needed but rather, in order to encourage the use of wood, that we need to target the residential construction industry.
In terms of your value-added lumber market, have you thought about turning to the residential construction market? Can your products be used in the residential construction market?
Mr. Verreault: The difficulty with regard to value added products, is that already in 90 per cent of residential construction, wood is being used. Mr. Third said it well.
Senator Eaton: These are two-by-fours and two-by-sixes. These products are not the same as yours. Is there no application in the residential construction market?
Mr. Verreault: You are correct with regard to glue-laminated wood. It is unusual to see homes framed with large visible glue-laminated wood beams. However, all floors are now made with engineered wood. I just built my own house using glue-laminated wood beams. I did not want to be the exception to the rule, it has glue-laminated wood beams supporting the floor joists, but they are not visible.
Today more glue-laminated wood is being sold for residential applications, particularly in Canada where you cannot see the wood, rather than in large buildings where the frame is visible. The use is already fairly extensive. LVL products made across Canada are being used increasingly for that purpose in residential buildings. Already, much of the market share is taken up by these kinds of value added projects in the residential building sector.
Senator Eaton: If we were to recommend that the government encourage the use of wood, let us say 3 or 4 per cent in non-residential building, would this help in the manufacturing of value-added wood products?
Mr. Verreault: This would be a way of stimulating the demand. The approach we favour goes back to the comment that you just made regarding investments and the development of knowledge by architects and engineers.
The situation we are experiencing is that as we are facing this challenge of educating professionals in wood products, and the lumber industry that should be doing this work is experiencing a crisis. So, in this time of crisis, we are mobilizing in order to save the situation. So, educating these professionals — which is further down the added value chain or further down on our list of concerns than productivity gains in the mills, or development or going to find new work — is unfortunately not being done, and we have very few people willing to invest in that sense. We have invested several hundreds of thousands of dollars in the past few years on an annual basis on education. We are pretty much alone in bearing this message and spreading the word. But there is an axis of intervention. I cannot say for all of Canada, but in Quebec at least, few engineering departments provide their students with curriculum on wood design. This is where we could help to ensure that there is a fair balance for the right reasons, on a solid foundation. A number of initiatives in various areas need to be considered.
[English]
Senator Plett: Further to what Senator Eaton said about the percentage of wood in a building, what percentage of wood would there now be in a typical 10, 15 or 20-storey building? Do either of you have any idea of the percentage of wood in most buildings?
Mr. Third: In a building of that size, there would be very little. It would be architectural wood. It would be the wood that is like this type of wood in building of that height, because they do not build buildings that high out of wood.
Senator Plett: But even using architectural wood and cabinetry. I am thinking that if government made a recommendation that you need to use 4 per cent wood, then they would consider things like this into that 4 per cent.
Mr. Third: I guess so. I think what we are talking about is the structure. I am talking about the structure or the framework and how it would be made out of wood. It would be a steel or concrete building with a feature canopy in the front or lobby to accent the wood, but it would be an architectural feature rather than a structural feature, I would hesitate to guess.
[Translation]
Mr. Verreault: We have talked a number of times about the quantities that need to be integrated and what would be preferable. As a manufacturer of forestry products, we are not in favour of legislation or incentives saying that there needs to be a minimum amount used in all new public or private construction projects, be it in Quebec or Canada, no matter what the legislation, strictly in order to introduce wood because an industry is experiencing a crisis.
We must ignore the current crisis and if we want to introduce wood, the French model is quite eloquent. The French issue, which transcends a single industrial crisis, is to say that they want to reduce the environmental impact of construction in their country and that in order to do this — and this is very well documented in France — they estimate that by using more wood, not by setting aside other materials, they will be able to achieve 17 per cent of their Kyoto targets for France. That is their motivation. If we look beyond the current crisis, we have a much more important collective issue and in order to achieve that objective, we are moving forward with the increased use of wood. We believe that we must rely on elements like this instead of on a crisis. The day when the steel or concrete industry experiences a crisis, we will be able to say that we are going to give an opportunity to those industries. If we really want to impact the structure, we need to rely on more fundamental elements.
[English]
Senator Segal: I will ask a brief question to each one of our guests this morning and then a question I might ask them both to respond to in writing.
[Translation]
Mr. Verreault, could you tell us the role of subsidies from the federal or provincial governments, not so much for your company, but generally speaking for the lumber industry? Are they targeted? Are they doing something positive or is there something that is not so serious about them?
[English]
Mr. Third, as I understand from the designs you have shown us and the way you describe your company, others would decide on the specifications. The architect or the general contractor would say, ``We need some expert structural steel solutions to respond to certain specs,'' which you would do in competitions with others, and you would be selected for a host of reasons.
In that process or in recent experience, are architects or general contractors saying they would like you to give them some sense of the sustainability or carbon footprint or any of those sorts of things for some of the solutions you might recommend for the specific parts of the design?
The question I ask both our witnesses to reflect on is the complementarity of the two materials. In this particular case, we are talking about steel and wood. The steel industry makes its case, as it should.
[Translation]
The lumber industry defends its own cause, as it should.
[English]
Is enough work being done, in your view, on the complementarity issues? You said some of these design interaction questions are complex and need to be carefully thought out, and you have to be sure that the net result is of value to the client as opposed to being an excessive cost that cannot be justified.
[Translation]
And you said yourself that complementarity is very important for the lumber industry.
My question is as follows: In your opinion, has enough research been done on the issue of the complementary nature of the different materials?
[English]
Is enough work being done at that particular point? It strikes me that the world being the way it works, steel is for steel, wood is for wood, concrete is for concrete, and probably there is not a lot of incentive for folks to get into that complementarity area. It strikes me in terms of the sorts of technical issues we might look at as a committee that understanding that better would be of great assistance to us. I am in your hands.
[Translation]
Mr. Verreault: With regard to government assistance, the programs we use are mainly programs that were deployed on the ground. We are in Chibougamau — our headquarters and our management team is there. The programs that exist and to which we have access are quite simply the ones to which we can have recourse.
Recently, I referred to an employment insurance program that ensures stability within our staff; it is unfortunate that this program needs to exist, however, it is the federal program we have had recourse to in recent years.
With regard to provincial government assistance, I referred to the European market development of residential products. The development of the required certifications in order to penetrate that new European market has been done with the financial assistance of the Department of Economic Development, Innovation and Exports. Much of the expenses were paid by a Quebec departmental program.
With regard to the challenge of finding the necessary skills to do designs and drawings for wood, as there is no university offering any programs on wood, at least not in Quebec, we carried out this development of knowledge and of skills entirely on our own, at our own cost. Very fortunately, this need is coming up at a time when employment assistance is available. I know that with the Canada-Quebec agreement, the Canadian government contributes a great deal to the budget that is spent in the province, and for us this was a key element: on the one hand, for skills development — for all technologies, factory robots et cetera — and, on the other hand, for the entire design team, the technical team — bringing in European specialists to train these people in their working environments.
These are the measures that we are taking. I can tell you that they are adequate and that they meet our needs. If we look at the issue from a broader angle, I come back to the very beginning of the value-added chain, and this has to do with the concern with the fact that there is wood from the United States in this iconic Canadian building, namely the Olympic Oval; this reflects on our competitivity as concerns raw materials. We have often forgotten to stimulate silviculture, the productivity of our forests. The intervention should have been 10 or 20 years ago, but it is not too late to try to catch up, although we have lost time. If we succeed, we will have more productive, more dense, more concentrated raw material and that is when we will really be able to generate a maximum of positive fall-out for wood processing in Canada.
[English]
Mr. Third: As far as sustainability and carbon footprint, yes, every project now is a lead project, and everyone wants to know what is good, what is bad or whatever. Although this has been going on for 10 years, none of us have the numbers right yet, and everyone has their numbers skewed in their own favour. I like to think that we have 1,000 points on everyone because our stuff is recycled, but the wood industry has 1,000 points because it grows out of the ground. It is different. There are good points and bad points. You might be able to say our product would last longer and therefore you do not have to build two buildings in 100 years, whereas with the wood you might have to build two buildings. There are all kinds of ways to run those numbers and it becomes a statistical argument, and I do not have all the numbers for that argument.
With respect to government assistance, as far as anything that we have done or I have seen in research, I would say that the research comes from the competitive market. Innovative designers and engineers like Busby Perkins and Will Architects and Fast + Epp Engineers, and spend the time doing the research, and they get together with their people and come up with these designs.
They will then contact me and the wood industry people, and say, ``We are thinking about building this speed skating oval and putting it together like this. Do you agree that will work?'' We then meld those ideas together. That is the research.
Senator Segal: It is project specific.
Mr. Third: Yes. The research has been done in a competitive environment. You ask the customer what he thinks of this building, and he picks it because it has that wow factor. The only way any of us might have received some government assistance from that is we can apply for research and development credits, saying, ``We invested $20,000 in that building before we knew we were even going to get it, so could we have money back?''
[Translation]
Mr. Verreault: For research and development, we have a fantastic tool in Canada, it is FPInnovation and its research branch, called Forintek, for forestry products. We have been working together with Forintek in research and development for the past three or four years, on hybrid farms, with wood and steel. Even before we had any projects, we undertook to explore various alternatives with this reliable tool.
Regarding R & D, I think that we must go further than that; there are composite materials, and we must try to take the initiative. There is also aluminum, which we have forgotten, but which also wants to have a place and that potentially should have a role to play in non-residential construction. On the Université du Québec à Chicoutimi campus, a hybrid arena was built in wood and aluminum. It is very light, which makes the cost of the foundations cheaper. This involves performance. We must really open up the horizons as widely as possible. We are also doing R & D on combinations of wood and aluminum. In this respect, some good work has already been done and we already have good tools that we can rely upon.
Senator Meighen: Mr. Verreault, I think that you answered a part of my question that had to do with the development of markets abroad, and you alluded, if I am not mistaken, to the help provided by the Quebec government in this field. It seems to me that for a long time now, even the federal government has been trying to convince the Japanese and the British to build their houses in wood. To what extent have we succeeded and what is the potential of this idea and of these markets?
Mr. Verreault: You mention Japan, I cannot avoid mentioning that when we are dealing with the durability of materials, there are actually in Japan wooden buildings that date back to the 11th and the 12th centuries. I think that this is a sign of good durability.
Senator Meighen: Perhaps, I chose the wrong country.
Mr. Verreault: We have been discussing durability for a few moments. I was very eager to raise this matter and I am taking this opportunity to emphasize it.
With regard to market development, we must always be pragmatic. A large piece of framing such as the one that you can find in an indoor soccer stadium, where once assembled, clear spans of over 200 feet are made, and pieces that are more than 230 feet long, are difficult things to ship to build infrastructure in Japan from Chibougamau, as we try to be competitive at the bottom line with other, more regional forestry producers. Japan often gets its forestry products from New Zealand. China processes a great deal of wood from the New Zealand forests which are very productive and come to maturity in about 40 years.
There are some unavoidable things against which we cannot fight to preserve competitivity and to serve the client efficiently. We must always keep that in mind. Now, there is money to be made in residential construction. That is where we can get our share of the market. The market is receptive, especially in Europe, to a greater use of wood in residential construction. In Canada, we use 15 per cent of our wood in non-residential construction and 85 per cent in residential construction; these proportions are often inverted in several European jurisdictions. And there is a fad for using more wood in those European countries. That is an opening for us. We know that products that are not tailor- made for residential construction can be stocked in a yard and be quickly deployed. The logistics are consistent, precise and doable. That gives us some factors that we can rely upon. At least, we think of our work in those terms. But even then, in non-residential construction, Germany is a most exceptional leader, as is Austria, and we are learning from both of them.
We are not about to table a project before Economic Development Canada or Export and Development Canada to ask you to come with us, because we want to invest $5 million this year to develop our market in Austria. We are currently learning from them, they are more competitive than we are today. With all the requirements of delivery, when dealing with tailor-made products, there are always delays in the construction of buildings, and we know that there are some things that we cannot really do logistically.
We must be aware of these limitations. Nonetheless, value-added products for residential use in Latin America have a great deal of potential. In the United States as a whole, there are many sectors that have not been developed and that are open to such opportunities; and in Europe, there are natural markets to develop.
Senator Meighen: Basically, and I do not mean to criticize, are there no government measures in the field of the export of Canadian wood to Europe, for instance, that you would like to have implemented this very afternoon?
Mr. Verreault: We could be receptive to new measures of this kind because we have had help from development programs from the Quebec government. If there are any new measures that would answer to the needs that we may have, we do not know what they are. Is this our fault? I do not think that we are there to point fingers. The truth of the matter is, we do not know what they are. This morning, Chantiers Chibougamau is not aware of these programs implemented by the Canadian government to increase exports on the European markets, for certifications, for all the costs associated with what we call a new market. If there is such a thing and if we are told about this tomorrow morning and that it does not cost us any more to run the subsidies program than what we receive in direct aid, we will be very pleased to resort to such programs. This is what we must keep in mind. If it is more costly to administer that help than what the help contributes financially, we will not resort to that kind of help.
[English]
Senator Meighen: Mr. Third, I think I share your view. Senator Plett said the same thing: Governments can sometimes be more of a hindrance than help when they get into the regulation business.
Would like to see more government involvement in any specific area? I am referring to trade fairs, et cetera.
Mr. Third: Nothing comes to mind. I think the promotion of ``buy Canadian'' is good but I am not really for the regulation of it. I have trouble with the ``buy American'' clauses that prevent me from going south. Now, there is an extremely large capacity of steel fabrication in Canada that has been dependent for the last 50 years on going south of the border. They are now prevented from doing that easily. We are trying to find ways to get there.
At the same time, I think a ``buy Canadian'' attitude is maybe what we should have. It would be great if there could be an incentive to stay Canadian. It is more or less a sales pitch.
I remember speaking to an uncle who is an American in California and he could not believe that I did not drive a North-American-built car at the time. ``It is built in North America. That is why I bought it.'' They have that attitude down there and we do not have here.
One of the most shocking things I said was that some of the wood came from the United States. Everyone picked up on that and did not like that. It is not that they do not like the United States but it should be coming from Canada.
I wish we had that opportunity. Things have changed around with the strong Canadian dollar and now we are facing competitive pressures from the United States, China and the rest of the world. That situation is beginning to concern us.
Senator Meighen: It seems like your uncle and other Americans might be buying more foreign cars now.
[Translation]
Mr. Verreault: With regard to the issue of a regional Canadian approach to purchasing, we still find it difficult to defend such measures when they are merely taken to upset the balance of opportunities. For someone who is very concerned about the environmental footprint, the LEED system is very clear about this, there is a preference for using regional resources. A regional resource, when it is shipped within an 800-kilometre radius earns points in the LEED system. Regional resources shipped by train or by ship within that 2,400 kilometre-radius are recognized by the LEED system. To the extent that there is a big difference in the carbon footprint of a project that uses regional resources, this is where we can go above the imbalance in the conditions and opportunities afforded to various materials according to their origin, and this is not merely protectionism, but it is because we are firmly determined to reach this objective, a most defendable objective, which is to limit our project's carbon footprint. Perhaps we can use this as a basis to work on.
[English]
Senator Hubley: Thank you. It has been a pleasure to be with your committee this morning. All of the questions have been covered admirably.
In some areas of Canada, including our Aboriginal communities, there is a need for low-income housing. Through your work with research and development and new initiatives, do you feel your industry could respond and help us in dealing with that issue?
Mr. Verreault: That is extremely interesting because we have developed a concept for cheap lodging for South American countries.
[Translation]
I will continue in French because of the technical jargon. It will be simpler. Quebeckers typically react in this way. We have developed a concept of very low cost housing for countries in South America.
We are developing that market. It is ironic to note that we have done this for countries in South America and Central America whereas in our own backyard, there are very significant needs in the aboriginal communities across the land.
Now, if we did not go any further for domestic applications in this context, honestly, it was because we did not feel that there were any tangible short-term perspectives or any worthwhile volumes. Regarding the residential application, with a visible framework of glue-laminated wood, volume is of the essence and in a small 800-square-foot low cost residence, there is very little wood. We are less interested in developing that. If we want to plan for 10 years, we can begin with 10 or 20 units and then go on to units in the following year. There is so little volume that with all the effort it takes in the present context, we have chosen to develop other parts of the market. If there were any initiatives that could support such a development, there again, that could complement the resource that we have. We are limited in our capacity to develop markets and opportunities. Clearly, this is a question that needs attention and we have a product that could be very competitive for these applications.
[English]
Mr. Third: In both wood and steel, there is a manufactured home, sort of a kit, an IKEA home, if you will. I am sure people are making that product, which arrives on a truck, and is bolted together. I am sure people are doing that in both mediums. That is something that could be explored. We could grow that industry by using it here in Canada wherever we need to. Volume will dictate whether companies will chase that work. If there is a need, the competitive market will come after it.
Senator Robichaud: Mr. Third, did any Canadian suppliers put in a bid for the wood component of the Richmond Olympic Oval?
Mr. Third: Canadian companies did all of that work. I am saying that it is my understanding that some of the wood, the raw product, came from the United States.
Senator Robichaud: The raw product?
Mr. Third: It can be two things. We ship logs to the United States. They cut those logs into two-by-fours and send them back to us, and vice versa. The lion's share of my steel comes from the United States, but there are not many steel mills left in Canada that make steel. The Americans have bought them. They close those plants and make the steel in the States. I do not want that to be too much of a red herring. Some of the wood in that product was from the United States.
Senator Robichaud: The lamination was done in Canada.
Mr. Third: Yes, it was definitely done in Canada.
Senator Robichaud: You said a Chinese company was interested in one of your buildings but wanted it built on a smaller scale. Are you looking at the potential to market this kind of wood and steel structure in China?
Mr. Third: No, I have not done that. I have not explored that market to see whether it is viable. Again it is a custom structure or a specialized piece. You have to do a lot of searching to find the right customer who wants that building. No, I have not done that.
Senator Robichaud: You have developed a special expertise of putting the two mediums together.
Mr. Third: Yes. Since we have had the Wood First initiative in British Columbia, we have been working on how to market ourselves as the wood and steel experts. So far, we have done that locally. People know us in British Columbia. We are known after 100 years. Meeting this gentleman here today is one way that I can expand my business. I might be talking my product versus his product, but when we are finished, I would be happy to get together with him to talk about how to put wood and steel together, because he might send me a project all the way from Quebec.
Senator Robichaud: There are still efforts to be made in that direction.
Mr. Third: Yes.
The Chair: Before we close, I have a few observations and a question. Is it fair to say, Mr. Third and Mr. Verreault that we still need a lot of education and research done for hybrid products, steel, metal, wood and aluminum? Mr. Third, with your hundred years of experience, how could we be better partners when we look at non-residential construction?
Mr. Third: You would have to get some of the people who have done the research, the architects and engineers, to expand their knowledge. I guess that could be a competitive concern for them, in that they have this knowledge, and it is to get them a job over some other company that does not have the previous experience or knowledge. The thing to do would be to get them to go to universities and get into projects that could expand that knowledge.
[Translation]
Mr. Verreault: In this regard, our point of view is that knowledge, skills for building in steel and concrete, the best established materials on the market, have come to their maturity. Our knowledge and our techniques for wood are at the stage of infancy. The great thing about this is that we have mobilized so as to bring our knowledge about wood into balance. There is an enormous amount of work to do and clearly, if there is a priority, which would be parallel to the priority of intervening in the forest to get the raw material, the priority is also there upstream, and it consists in intervening at the level of our knowledge because once we know how wood behaves, and how steel behaves, it is then easy to invent a hybrid application. This becomes very simple, but what really causes problems at this time is our lack of knowledge about wood.
[English]
The Chair: Mr. Third, this committee wishes your company a happy one hundredth birthday.
We have been talking about a great icon. Your Richmond Olympic Oval is the pride of Canada. Another building under construction is the Canadian Embassy in China. It will also become an icon and the pride of Canada. It will showcase hybrid products, and wood will depict the culture of Canada. I invite both of you to the Canadian Embassy in China.
We thank you for the knowledge that you have shared with us.
(The committee adjourned.)