Lumber News Archives: Apr 2012

Lumber News Archives: Apr 2012

Government Managed Timberlands ; Storms, Wildfires ; Housing Starts, Canada ; Japan Housing Starts ; Sawmill Fire US Mortgage Regulations ; Madison’s Timber Preview; Canadian Building Permits ; US Employment Figures ; Texas Tornadoes ; Centurion Announces North America 2012 Transportation Statistics; Madison’s Investment Rx ; Burns Lake Timber Supply ; Recent Dry Weather Sparks Wildfires ; Sino-Forest Files ; China Timber Imports ; Eacom Financing
Home Building and Sales; Madison’s Timber Preview; US Housing Starts, Home Sales ; Fibrek Battle Continues ; CN Buys Rail Cars ; US Tornadoes Reduced Timber Supply ;

April 25, 2012

Government Managed Timberlands

Recent suggestions by British Columbian Members of the Legislative Assembly about opening up previously protected forest resources in the Lakes District timber supply area have prompted many responses. The loss of a major sawmill in Burns Lake, BC, to fire has caused an immediate employment crisis in that small town. Babine Forest Products owner Hampton Affiliates, out of Salem, OR, has indicated a desire to rebuild a mill, depending on the outcome of an insurance investigation and on the future timber supply.
It is not only in BC that questions are being raised, and demands are being made, about management of the publicly-owned forest resource base.

In the US, at the State level, a series of formal demands that the federal government hand over title to tens of millions of acres of forests, ranges and other public lands have been issued. If the federal government fails to comply by the end of 2014, the States say they will begin sending property-tax bills to Washington, according to USA Today on March 27. Supporters of the push say federal agencies have mismanaged the land and blocked access to natural resources, depriving the States of jobs and revenue from businesses ready to develop those resources. With individual states in control, the backers say, loggers could return to forests where endangered species halted work decades ago.

US and Canada

But States are ill-prepared to oversee so much land with the roads, recreation areas, and management needs that go along with it, critics charge.

Utah Governor Gary Herbert, Republican, signed a package of bills March 23 spelling out his state’s intent to reclaim the land, and members of Utah’s congressional delegation have pledged support for the battle in Washington.

In Arizona, a nearly identical bill passed the state Senate and awaits final action in the House. Lawmakers also are weighing several other proposals that attempt to undercut federal influence in land management.

Arizona Senator Al Melvin, Republican, said Washington has done a terrible job managing public lands, resulting in damage to industries such as ranching, farming, timber, and mining. Melvin and other supporters also blame the federal government for over-regulating Arizona’s public lands, leading to overgrown forests that helped fuel last year’s Wallow, AZ, fire, which burned more than 538,000 acres.

“We can’t wait any longer,” said Utah Representative Ken Ivory, also a Republican, to USA Today. “We value these open lands and open spaces, but certainly we’re able to manage the multiple use for a sustained yield of natural resources. Utah will show the nation what it means to be self-reliant.”

Legal experts say the States’ demands of the federal government lack legal merit, partly because the States were allowed to join the Union on the condition that the federal government would control some land.
Meanwhile, the US Department of Agriculture on April 6 announced the Forest Service is reversing a lengthy period of inaction in the arena of forest management, making changes to existing guidelines which date to the Reagan administration. The USDA will finalize important and long overdue rules for the management of 155 national forests covering nearly 200 million acres, according to an agency press release. The rules will guide individual forest managers as they decide which parts of the forest can safely be opened to logging, mining, and recreation, and which parts must be set aside to protect wildlife and the health of the forest.

The clear focus is on conservation and restoration. Science will be respected, streams will be protected (the national forests supply one-fifth of the nation’s drinking water), excessive logging and other environmental abuses will be prohibited, says the press release.

Agriculture Secretary Tom Vilsack in the statement announced that the US Forest Service will dedicate US$40.6 million for 27 exceptional land acquisition projects in 15 states that will help safeguard clean water, provide recreational access, preserve wildlife habitat, enhance scenic vistas, and protect historic and wilderness areas.

Twenty-eight different purchases from North Carolina to Oregon will protect clean water and fish and wildlife habitat, absorb private inholdings within wilderness areas, and support outdoor recreation spending, that contributes US$14.5 billion annually to the economy.
The money comes from the Land and Water Conservation Fund, which was created in 1964. The fund receives the majority of its money through royalty payments from offshore oil and gas revenues to mitigate the environmental impacts of those activities. The fund is capped at US$900 million a year, and other federal agencies besides the Forest Service use it.

In a further complication, since 2000, timber counties across the US have been getting a subsidy from the federal government to make up for timber revenues that plummeted when logging on federal lands was cut more than 80 per cent to protect habitat for the northern spotted owl and for salmon. But those subsidies have run out.

On the west coast, a proposal to increase logging on certain federal lands in Oregon to help struggling timber counties is before a vote, but the idea’s future in Congress remains uncertain.

Oregon Representatives Peter DeFazio, Greg Walden, and Kurt Schrader have pushed a proposal to help Oregon counties that set up a special trust to allow increased logging of some of the 3 million acres overseen by the US Bureau of Land Management in western Oregon.

DeFazio has been trying to attach the proposal to a bill offered by House Resources Chair Doc Hastings, a Republican in Washington State, which requires the Forest Service to sell enough timber to generate US$500 million for timber counties and gives the secretary of agriculture the power to ignore environmental laws to do it. If the bill passes, the US Forest Service and Bureau of Land Management would have to sell 33.2 billion board feet per year and send the money back to the counties.

However, there has been no official estimate on how much money the federal government would have to spend to hold timber sales that would generate that much revenue. Counties with national forests within their borders get 5 per cent of the revenues from selling timber off those lands.

At a Town Hall meeting in Medford, OR, Tuesday, Oregon Senator Wyden, Democrat, said, “I think we’re going to lose Oregon communities in parts of this state. In rural communities we’re going to see school three days a week. It’s just that serious.”
According to the Senator, it could happen if Washington doesn’t act quick.

“The first and foremost thing that has to happen is the House of Representatives has to pass the Senate transportation bill.”

That piece of legislation would extend federal timber payments for one year. If passed, Senator Wyden said Oregon would get US$102 million.

The senator said his three goals are to extend timber payments, get people back to work in the woods thinning forests, and pass an agriculture bill allowing Oregon produce into schools.

Industry sources say that what’s driving rural US timber-dependent county officials to the brink of bankruptcy is they no longer have the ability to harvest federal timber.

No timber sales means fewer jobs, which leads to congressional handouts. Which themselves are not exactly brimming with excess funds.

DeFazio is proposing a similar measure, offering long-term leases on up to 1 million acres of federal timber land in western Oregon managed by the Bureau of Land Management.

Back in British Columbia, there are similar issues of long underfunded forest management practices, potential massive wildfire hazards, and a lack of revenue to the province from lowered stumpage rates in the race to harvest the mountain pine beetle killed trees before they completely degrade.

Each side of the border can learn lessons from the other, despite the differences in political systems.

Storms, Wildfires

More disturbing evidence that extreme weather conditions may become the norm materialized this week in unseasonably early wildfires and another round of severe storms across the US.

In Canada, the government of Alberta has already begun prescribed burns in an effort to stave off a potentially dangerous wildfire season. The province has already seen 15 wildfires since the beginning of this year, which have burned slightly more than 16 hectares, said Geoffrey Driscoll, spokesperson for Alberta Sustainable Resource Development.

Parts of California were hit by a huge hailstorm Thursday that caused damage to many crops – mainly in Tulare and King’s Counties. The hail was part of two cold late season storms.

Weather forecasters Friday warned of a very robust and strong storm system in the western US that will push eastward Friday and Saturday to produce a possible tornado outbreak across the Great Plains in the states of Oklahoma, Kansas, and Nebraska.

Wildfires scorched Tennessee as blazes in New Jersey and on New York’s Long Island were largely brought under control and some were investigated as possible arson, said Reuters Wednesday.

In Florida, most of which is in drought, 89 wildfires were burning as of Tuesday, according to the Florida Forest Service.
Eighteen fires were larger than 100 acres and the largest, a lightning-sparked blaze in the Osceola National Forest near the border with Georgia, more than doubled on Tuesday to 25,000 acres burned.

Five large wildfires and several small ones were burning more than 14,000 acres across Virginia Friday.

North American Storms and Wildfires

Weather conditions favour strong thunderstorms in Kansas and Oklahoma Saturday, with a few “supercell” storms with rotating updrafts, Steve Weiss, science support branch chief for the National Storm Prediction Center told MSNBC Friday.

“The potential is that some of the supercells could be long-lived, so if they produce tornadoes they could be on the ground for a while,” explained Weiss.

In California, San Joaquin Valley growers and agriculture officials on Thursday said damage from a punishing storm that dropped half-inch sized hail on the region was more severe than expected — and financial losses could reach into the millions of dollars. Among the hardest hit were farmers in the Traver area near Highway 99 south of Kingsburg, where hail blanketed the ground after nearly a 20-minute downpour.

The Tulare County Agriculture Commissioner’s office said that 500 to 800 acres of tree fruit received some sort of damage ranging from 20 to 80 per cent of the fruit. One 200-acre block of tree fruit, north of Avenue 360 and west of Highway 99, suffered at least 80 per cent damage.

There also are about 150 acres of lettuce in Huron that received 75 per cent damage from the hail. Some damage also is likely among processing tomatoes.

A second storm is forecast for today that could bring rain and possibly more hail to the Valley.

Twenty-five states, all east of the Rockies, posted their warmest January-March periods on record, and many Northeastern states have had their driest starts ever.

“Those two factors, and recent wind, is a perfect recipe for fire” in the eastern US, Weather Channel meteorologist Mike Seidel told NBC News Wednesday.

Humidity also also been low, and there’s lots of fuel in the form of brush to burn.

On Wednesday, the immediate threat shifted west as “red flag warnings” advising of severe fire potential were posted for parts of Arizona, Colorado, New Mexico, Utah and Wyoming.

The Tennessee, New York, and New Jersey wildfires follow an unusually dry winter and what the National Oceanic and Atmospheric Administration said was the warmest March in the contiguous United States since records began in 1895.

Ted Dailey, district forester for the Tennessee forestry division, said that efforts to control the fire, on English Mountain near the resort communities of Sevierville, Gatlinburg and Pigeon Forge, were being hampered by the steepness of the burning slopes that prevented the use of bulldozers to clear out fire lines to prevent the fire spreading further.

On New York’s Long Island, two brush fires merged into one that consumed three homes and nine business properties across 1,000 acres before firefighters got the upper hand.

In the southern New Jersey fires, there were no injuries or damage to property reported. Authorities were investigating whether the fires were started deliberately.

Housing Starts, Canada

Canada Mortgage and Housing Corporation said Wednesday that housing starts rose to 215,600 units, or 5 per cent, on a seasonally adjusted annualized basis in March, up from 205,300 units in February.

The upward movement in March was largely due to an increase in multiple starts, particularly in Ontario and the Prairies.

Canadian Housing Starts

Urban starts rose 4.2 per cent to 192,100 units in March, driven largely by an 8.3 per cent jump in multiple urban starts, while single starts were up a more modest 2.4 per cent, the CMHC said.

Unusually mild weather in March likely played into that rise.

The insanely hot condominium market in Toronto, ON, is largely responsible for the increase in multi-family starts.

Japan Housing Starts

In February, Japan’s housing starts were 66,928 units, up 7.5 per cent from the same month in a year earlier, and total floor area was 5,940,000 square meters, up 6.8 per cent, the first increase in six months for both measures.

Housing Starts, Japan

The easonally adjusted annual rate for Japan housing starts in February was 917,000 units, according to the Japan Lumber Reports and Japan Lumber Journal.

This measure has exceeded the 900,000 unit mark for the first time since August 2011.

Condominium starts rose by almost 20 per cent, and are espected to keep up that pace for the next two years. New building of rental units also increased, for two straight months.

In the earthquake damaged prefectures of Iwate and Miyagi, new building figures jumped by 27 per cent and 69 per cent respectively.

Of all new units, wood-based buildings were 35,565, or a 53 per cent share of the total. This is a 6.1 per cent increase over January.

Sawmill Fire

A massive fire on April 8 caused about $2 million in damage at the Cedar Creek Sawmill and Tree Farm just east of Sarnia, Ontario. No injuries were reported in the Sunday evening blaze.

Although investigators said an electrical problem could be to blame in both incidents, North Dumfries, ON, fire Chief Robert Shantz said a definitive cause may never be known for either fire, according to TheRecord.com.

At least a dozen fire trucks and about 35 firefighters from three departments — North Dumfries, Cambridge and Wilmot — responded, says Metro.

April 18, 2012

US Mortgage Regulations

Between 2008 and 2011, US banks completed 3.2 million foreclosures, and half again as many may currently lurk in a ‘shadow inventory.’ These homes are often vacant and sell for about one-third less than similar properties, on average.

About 11 million US homeowners are ‘underwater’ — meaning they owe more on their mortgage than their home is worth — and borrowers have lost about US$7 trillion in wealth since the housing bubble began to burst in 2006, says economist Celia Chen at Moody’s Economy.com. By 2013, the number of distressed sales will still be high, but their share of total home sales will decline, allowing home prices to rise. The speed of this recovery depends on how big a market share distressed properties represent.

Online foreclosure marketplace RealtyTrac estimates that while foreclosures dropped slightly nationwide in February from January 2012, and from February 2011, they rose in 21 states and jumped sharply in cities like Tampa and Miami, FL, up 64 per cent and 53 per cent respectively, and Chicago, IL, up 43 per cent.

RealtyTrac CEO Brandon Moore said the “numbers point to a gradually rising foreclosure tide as some of the barriers that have been holding back foreclosures are removed.”

Real estate company Zillow Inc expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

Ongoing Battle

“The hangover from this crisis will far outlast the party of the boom years,” said Zillow chief economist Stan Humphries.
According to leading broker dealer Amherst Securities, some 9.5 million homes are still at risk of default and in February Amherst said it expected to see the uptick in foreclosures start to hit in March and April.

From the start of October, the US Federal Reserve began to use funds from principal mortgage payments on agency debt and agency mortgage-backed securities (MBS) it holds, to reinvest in agency MBS in an effort to hold down mortgage interest rates and support the US housing market.

Principal reduction involves reducing the amount borrowers owe in order to make a loan modification affordable for struggling homeowners. Republicans and the FHFA oppose principal reduction due to the risk of ‘moral hazard’– that homeowners who do not need help will seek to abuse largesse and have their mortgages reduced as well.

This week Reuters reported that Federal Housing Finance Agency Acting Director Edward DeMarco blocked Fannie and Freddie from reducing principal on the mortgages they hold, saying it would drive up the cost of a taxpayer bailout that has topped US$150 billion. The housing regulator overseeing Fannie Mae and Freddie Mac Wednesday said a final decision is expected later this month on whether or not it will implement an Obama administration plan that forces the two companies to reduce the principal value of mortgages they hold.
FHFA is not yet convinced principal reductions are the best answer, DeMarco said, in part because the agency still must examine how offering loan writedowns would affect the behavior of underwater borrowers who are still making their payments on time.

The mortgage regulatory agency is considering financial incentives offered by the White House to help offset any increased costs Fannie Mae and Freddie Mac might face if they wrote off debt on homes that have lost value. The US Treasury Department’s financial bailout would be applied to those costs, and the loan forgiveness would be carried out under the administration’s signature Home Affordable Mortgage Program (HAMP).

Some insiders question the method of this reduction process, especially concerning homeowners who may have taken out a second mortgage.

Treasury official Michael Stegman issued a statement in response to critics, saying, “Of course, not all underwater government-sponsored loans have second liens. But if they do, under HAMP, where a first lien mortgage is modified, then the holder of an eligible second lien must modify that lien proportionately if they are a participant in the Second Lien Modification Program (2MP). Most major servicers are participants in 2MP, so most will be obligated. Thus, any HAMP modification that includes principal reduction would trigger an obligation on the part of a participating second lien holder to write an eligible second down to the same degree. It is also worth noting that Treasury-paid incentives to first lien holders apply to matched second liens, though those incentives are less than the ones for first lien modifications, in light of their subordinated status.”

David Dayen, of FireDogLake, rightly points out, “This represents anything but a violation of accepted lien hierarchy. The seconds are supposed to take the full hit before the firsts get touched. That’s why they are considered junior liens in the first place.”

Meanwhile, non-profits across the US are intensifying calls for the FHFA to drop its opposition to allowing the government-backed mortgage giants Fannie Mae and Freddie Mac it regulates to reduce principal for underwater homeowners.

Empowering & Strengthening Ohio’s People (ESOP) hands letters to Chase bank mangers — the group says Chase is one of the least accommodating major bank when it comes to working with struggling homeowners — calling on chief executive Jamie Dimon to lobby DeMarco for principal reductions.

A Chase spokesperson said the bank has made “extensive efforts” to work with homeowners, helping 775,000 borrowers stay in their homes since early 2009, avoiding foreclosure “more than twice as often as we have had to foreclose.”

Housing groups like ESOP maintain, as they have throughout the housing crisis, that unless the FHFA embraces widespread principal reduction, many more underwater borrowers face losing their homes.

“Until banks engage in meaningful principal reduction as a matter of course,” ESOP’s Mark Seifert said after a recent protest at a Chase branch in Cleveland, “this crisis will not end.”

The FHFA will release its final decision on this thorny issue later in April.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview looks at unexpected movement in home improvement suppliers’ share prices. A casual statement by a Director of one company has resulted in a lot of rumours, and significant share price increases of another.

Contact us any time for a subscripton.

Canadian Building Permits

The total value of permits rose 7.5 per cent to $6.5 billion in February, following an 11.4 per cent decline in January, Statistics Canada said Thursday. The advance in February was the result of an increase in the non-residential sector, which offset the decrease in the residential sector.

In the non-residential sector, the value of permits increased 36.2 per cent to $2.5 billion, after decreasing 20.6 per cent in January. The increase resulted from higher non-residential construction intentions in seven provinces. British Columbia, Quebec and Alberta were largely responsible for the advance.

In contrast, the value of residential permits declined to $3.9 billion, 5.3 per cent less than in January.

Canada Building Permits

After three consecutive monthly declines, the value of permits in the industrial component rose 151.1 per cent to $714 million in February, the highest level since February 2011, said StatsCan Thursday.

In the institutional component, the value of permits grew 64.8 per cent to $517 million. The advance followed three consecutive monthly declines. February’s increase was the result of higher construction intentions for a variety of structures in several provinces, including government buildings, educational institutions and medical buildings.

The value of commercial building permits rose 3.4 per cent to $1.3 billion, following a 19.7 per cent decline in January.
Contractors took out $2.3 billion worth of building permits for single-family dwellings in February, down 6.7 per cent from January and the second consecutive monthly decline.

Construction intentions for multi-family dwellings fell 3.3 per cent to $1.6 billion in February.

Canadian municipalities approved the construction of 17,259 new dwellings in February, down 2 per cent from January. The decrease was attributable to single-family dwellings, which declined 6.9 per cent to 6,922 units. Multi-family dwellings, however, rose 1.6 per cent to 10,337 units.

The total value of permits was up in 23 of the 34 census metropolitan areas.

US Employment Figures

Claims for US unemployment benefits dropped last week to the lowest level in four years, adding to recent reports showing signs of health in the economy.

Jobless claims fell 6,000 to 357,000 in the week ended March 31, the fewest since April 2008, the Labor Department reported Thursday in Washington.

The number of people on unemployment benefit rolls also fell, by 16,000 in the week ended March 24, to 3.34 million. while those getting extended payments increased.

The previous week was revised up to 354,000 from 351,000.

Employment, US

US Companies are retaining workers and hiring amid robust sales and growing consumer confidence. Manufacturing expanded at a faster pace in March from a month earlier, the Institute for Supply Management reported this week, and a measure of employment rose to the highest level since June. Cars and light trucks sold at a 14.3 million annual rate in March, capping the strongest quarter in four years.

In addition to the jobless claims, the number of Americans receiving extended benefits under federal programs increased by about 17,000 to 3.26 million in the week ended March 17.

The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 2.6 per cent, today’s report showed.

Twenty-six states and territories reported a decline in claims, while 27 reported an increase.

Texas Tornadoes

At least two tornadoes tore through the Dallas-Fort Worth metropolitan area in Texas on Tuesday, ripping apart buildings, tossing tractor trailer trucks into the air and grounding planes in the region.

There were no reports of deaths or serious injuries, according to police Tuesday, although the storm was still active at the time.

National Weather Service meteorologist Amber Elliott confirmed that two separate tornadoes had touched down, one in Arlington, Texas and another in Dallas. Nine separate tornado warnings have been issued by the weather service for the Dallas area so far on Tuesday, she said.

More US Storms

The US tornado season has started early this year. Tornadoes have been blamed for 57 deaths so far in 2012 in the Midwest and South, raising concerns that this year would be a repeat of 2011, the deadliest year in nearly a century for the unpredictable storms.
In 2011, there were 550 tornado deaths with 316 lives lost on April 27 in five southern states, and a massive tornado that killed 161 people in Joplin, Missouri on May 22.

Tuesday’s tornadoes in Texas could prove more costly than a hailstorm nearly a year ago in the Dallas area that caused more than US$100 million in insured losses. That April 15, 2011, storm was less damaging in terms of hail and winds.

Centurion Announces

Ralph Dawson has joined Centurion Lumber Manufacturing (1983) Ltd. asManager Plywood Sales. Ralph will be responsible for the sales and marketing functions of Thompson River Veneer Products Ltd. and will operate from a newly opened office in Vernon, BC.

April 11 , 2012

North America 2012 Transportation Statistics

The Bureau of Transportation Statistics, part of the US Department of Transportation, released figures March 21 which show that the value of surface transportation trade
between the US and Canada and Mexico increased by 14.3 per cent, to a record US$904
billion, in 2011. This is the third largest year-to-year percentage increase since NAFTA
took effect in 1994.

Surface Transport Data

US surface trade with Canada in-creased 14 per cent, to US$537 billion,
while surface trade with Mexico rose
14.6 per cent, to
US$367.1 billion.
In 2011, 85.5
per cent of US merchandise trade by value
with Canada and Mexico moved on land.

Total North American surface transportation trade is up by 42 per cent since the
recent low in 2009.
In 2009, US-NAFTA trade had dropped
by 23.3 per cent from the previous year.
US-Canada land trade had declined 28.1
per cent in 2009 from 2008, then increased
by 39.2 per cent in the next two years to
reach a level in 2011 that was virtually unchanged from 2008.

For the first eleven weeks of 2012, US
railroads reported cumulative volume of
3.1 million carloads, down 1.8 per cent
from last year, and 2.6 million trailers and
containers, up 2.3 per cent from last year.
Combined North American rail volume
for the first eleven weeks of 2012 on 13
reporting US, Canadian and Mexican railroads totalled 4.1 million carloads, down
0.4 per cent compared with last year, and
3.1 million trailers and containers, up 3.4
per cent compared with last year.

For the first eleven weeks of 2012, Canadian railroads reported cumulative volume of 828,787 carloads in the US, up 6.4
per cent from the same point last year, and
528,452 trailers and containers, up 6.1 per
cent from last year.

In terms of truck transportation, a key
indicator of US trucking activity rose 0.5
per cent in February from January, signaling truck freight volumes are rising after
a post-holiday decline, new data released
Tuesday shows. The American Trucking
Associations For-Hire Truck Tonnage Index rose 5.5 per cent year-over-year last
month.

In January, seasonally adjusted truck
tonnage dropped 4.6 per cent after surging
a 6.4 per cent in December, the strongest
month-to-month gain since 2005. A sustained increase in US manufacturing output is driving truck tonnage higher, said
ATA Chief Economist Bob Costello, putting wheels under the recovery.

“Since bottoming out in the summer of
2009, (for-hire truck) tonnage is up a very
robust 18.2 percent,” Costello said in a video released Wednesday. “I’m still expect-ing continued truck tonnage growth going
forward,” Costello said.

“We’ve also seen
some signs of life in the housing sector.”

February’s rise in the seasonally adjusted index was the sixth increase in seventh months, Costello said. Year-to-date,
the index is up 4.3 per cent year-over-year.

Meanwhile, in Canada, railways carried 24.9 million tonnes of freight in January, up 7.3 per cent from January 2011,
according to a Statistics Canada release
Thursday. That gain was the result of increases in both domestic and international
cargo loadings. On the domestic front, the
railway industry’s core transportation systems, non-intermodal and intermodal, saw
their combined freight loadings rise 5.2
per cent, to 21.9 million tonnes, over the
same 12-month period.

Non-intermodal cargo loadings, which
are typically carried in bulk or loaded in
box cars, advanced 4.9 per cent, to 19.6
million tonnes. The gain was the result of
increased traffic in more than half of the
commodity classifications carried by the
railways.

Intermodal freight loadings of containers and trailers loaded onto flat cars grew
8 per cent, to 2.2 million tonnes. The increase occurred solely on the strength of
containerized cargo shipments as trailers
loaded onto flat cars declined.

Total rail freight traffic received from
the US to Canada experienced a 25.4 per
cent gain, to 3 million tonnes. This increase was driven by both non-intermodal
and intermodal traffic.

Taking a look at indices, the Baltic
Exchange’s main sea freight index, which

tracks rates for ships carrying dry commodities, rose on Wednesday as the capesize index turned positive after 20 straight
sessions.

The main index, which gauges the cost
of shipping commodities such as iron ore,
cement, grain, coal and fertiliser, rose 5
points, or 0.55 per cent, to 922 points.
The Baltic’s capesize index rose 0.52
per cent, to 1,361 points, as expectations of
demand recovery in top consumer China
aided sentiment.

Shipments of iron ore, a raw material for
steel, account for around a third of seaborne
volumes on the larger capesizes.

The Baltic Exchange index rose further
on Thursday as rates for large capesize vessels stayed firm on strength in iron ore activity in the Atlantic basin.
The overall index rose 8 points, or 0.87
per cent, to 930 points Thursday.

“Most of the rise has been in the rates
in the Atlantic, particularly, the Brazil-China
rates,” said Peter Norfolk, research dire
tor at freight broker FIS, to Reuters.

The Baltic’s capesize index climbed for a
second straight day, rising 1.84 per cent, to
1,386 points, helped by higher demand for
iron ore from China.

In Canada, TransCore’s Canadian freight
index recorded its second best February
spot market freight volume in 11 years,
surpassed only by last year’s peak in February loads. Month-over-month the index
increased by 1 per cent. Intra-Canada loads
accounted for 28 per cent of the month’s
volume.

Equipment postings in February also
increased by 1 per cent from the previous
month, while year-over-year capacity was
up 16 per cent from February 2011.

TransCore’s Loadlink freight-matching database constitutes the largest Canadian network of carriers, owner operators,
freight brokers and intermediaries and has
been available to Canadian subscribers
since its inception in 1990.

Given the improvements begun in 2011,
the US railroad industry is planning to
spend roughly US$13 billion for infrastruc-ture improvements this year, with much of
it targeted to support a shift in commercial
shipping from long-haul trucking to intermodal services that often include freight
train transportation, according to Standard
& Poor’s Ratings Services.

In addition to the investments by railroad companies, infrastructure projects also
will receive funding through a combination
of grants, subsidies and tax breaks from the
US or local governments, S&P said in an
article titled “Infrastructure Spending Keeps
Rails And Trucks Moving In The US
,” published Monday on RatingsDirect.

Spending on track and facility updates
will continue to account for a substantial
portion of capital investments, said S&P.

Madison’s Investment Rx

This month’s issue of Madison’s Investment Rx takes a deep look at burgeoning issues of sawmill inventory levels and log supply before the critical 2012 spring season for the North American forest products industry begins in earnest.

Contact us any time for a subscripton.

Burns Lake Timber Supply

BC Liberal MLA John Rustad said Wednesday that the province’s Burns Lake recovery task force, which began analyzing the timber supply weeks ago, is coming up against some hard numbers, according to the Houston Today.

In three to ten years, Rustad said the pine-beetle infestation in the Lakes District timber supply area could drop the allowable cut from 2 million to just 550,000 cubic metres a year. Rustad said the province is taking a hard looking at several forestry rules to free up unallocated timber.

If the province does relax those rules, Rustad said an extra one to three million cubic metres of timber could be freed up along the Smithers to Prince George corridor.

But in the Lakes timber supply area alone, he said the same move would only free up 100,000 cubic metres.

The Burns Lake Community Forest, sat 92,326 intensively managed hectares, has an annual allowable cut of 260,000 cubic meters per year until 2013, said manager Dawn Stronstad to the Burns Lake District News Tuesday.

Recent Dry Weather Sparks Wildfires

A 4,140-acre fire in Colarado remains at 45 per cent containment Friday morning, but with 600 firefighters on the ground, five helicopters above and slight winds forecasted, fire officials plan today to make further progress on fire lines and battling hot spots within the perimeter, said Mark Techmeyer, a Jefferson County Sheriff’s Office spokesperson.

Wildfires Globally

While the situation has improved enough that some families are returning to their homes southwest of Denver, CO, 180 residences remain evacuated, authorities said.

At the height of the fire threat, residents of about 900 homes were told to flee.

Wisconsin’s forestry and emergency response teams are getting ready for what they say could be the most dangerous wildfire season that state has seen in years.

Dry, tall grass is standing up due to the lack of snow this winter. Added to a quarter-million acres of downed timber in six counties from a severe windstorm in July, and Department of Natural Resources St. Croix Area Forestry Leader Steve Runstrom says conditions are perfect for devastating fires.

The Texas Forest Service is holding Wildfire Preparedness Seminars hosted by Bandera County and Kendall County Fire Marshall’s departments, and assisted by and local volunteer fire departments and emergency agencies.

Several fires broke out in the UK this week. About 40 firefighters were at the scene with six fire engines, two all-terrain vehicles, four supporting Land Rovers and two large water tankers, at a 17 acre fire at Britain’s largest cemetery, Brookwood Cemetery, near Woking, in Surrey.

In just over a week, Scotland’s Highlands and Islands Fire and Rescue Service said crews have been called to deal with 107 wildfires most of them caused by muir burning which has got out of control.

In Wales, fire crews received 219 calls about grass fires across the region this week. Since Monday, crews have been tackling “numerous” blazes, according to Mid and West Wales Fire and Rescue Service.

UK fire service officialsissued warnings of more wildfires as dry weather continues.

Sino-Forest Files

Chinese timber grower listed on the Toronto Stock Exchange, Sino-Forest Products, said it will file for bankruptcy protection as part of a plan that may see the company sold to bondholders.

Sino-Forest agreed with the holders to a sale of the company or a restructuring under which they would acquire substantially all of its assets. The company is initiating proceedings Friday in Ontario Superior Court.

China Timber Imports

According to customs statistics, Manchuria customs imported 7.14 million cubic metres of logs in 2011, up by 14.9 per cent, says China Wood Market Monthly Report, according to the Japan Lumber Journal.

The value of imports reached US$ 1.02 billion, an increase of 29.4 per cent.

China Business Information Network data shows that, in 2011, China imported 42.33 million cubic metres of logs in total, an increase of 23.2 per cent. The total value of imports reached US$8.27 billion, a 36.2 per cent increase. December log imports were 3.23 million cubic metres with the value is $ 625 million.

Eacom Financing

EACOM Timber Corp entered into a binding agreement Wednesday for a $40 million secured debenture financing.
$33 million of the financing is backed by Fairfax Holdings Limited.

$7 million will be acquired by Lansdowne UK Strategic Investment Master Fund Limited.

Before the closing of the transaction, on or before April 11, 2012, Fairfax may assign a portion of their offering to other purchasers.

EACOM Timber will use the net proceeds for general corporate purposes.

April 05 , 2012

Home Building and Sales

Beware of carefully crafted media stories written to present data in a certain light. This week the US Commerce Department and the National Association of Realtors (NAR) released February data on US home building and home sales respectively, while the Federal Housing Finance Agency (FHFA) released its housing price index. To read the headlines one would think everything is down, and the US housing market is still a far way from recovery.

US Home Sales Disappoint Markets“, exclaims the National Post. While existing home sales did fall 0.9 per cent over upwardly adjusted figures for January, this winter’s sales pace was the best of the past five years winters.

US Builders Began Work on Fewer Homes in February“, proclaims the Toronto Star.

At least the Globe and Mail got it right, “US Housing Starts Dip, Building Permits Surge“.

Anyone not paying close attention, anyone accustomed to reading the same old bad news for the past five years, wouldn’t notice that serious improvements are actually at hand.

The reality is that February new housing starts in the US were down by 1.1 per cent from again upwardly adjusted January figures. Is anyone else starting to see a pattern here? Meanwhile, permits were up a whopping 5.1 per cent, to 717,000, the highest figures since October 2008. To be sure, wholesalers, retailers, and home builders are already calling around to lumber mills inquiring about commodity price levels.

The incrementally decreased February new housing starts figures will be adjusted — in all likelihood up — next month. Indeed, single-family starts were up 34.7 per cent from February last year, the biggest year-on-year rise since April 2010. The most important thing, though, is that groundbreaking for multi-family housing projects, which will lead total new building in the US for the next two years, soared 21.1 per cent compared to one year ago. This segment is benefiting from rising demand for rental apartments as falling house prices discourage some Americans from owning a home.

United States

For existing home sales, the revised 4.63 million sold in January was the highest level since May 2010. The decline in real-estate prices has slowed its pace, making Americans less cautious about spending and potentially more disposed to buy a home. For the first time since 2005, investment in residential real-estate, including home building and renovation, has contributed to US economic output for the past three quarters, said the Wall Street Journal Wednesday.

Compared with February last year, sales were up 8.8 per cent and according to JPMorgan economist Daniel Silver. The gains were tracking a seasonally adjusted annualized rate of 30 per cent so far this quarter.

The fact that 2012 is a leap year seems to have made a big difference in what February’s numbers say.

“We compared the February 2012 seasonal adjustment factor to past leap years and it appears that the seasonal adjustment was fairly aggressive,” said Ellen Zentner, an economist at Nomura Securities in New York, to Reuters. “Using last year’s seasonal adjustment factor instead of this leap year’s, existing home sales would have actually risen by 3 per cent, month-on-month, to 4.77 million units.”

The pickup in January sales encouraged prospective sellers to put their homes up on the market, January’s inventory of unsold homes on the market increased by 4.3 per cent, to 2.43 million units. This represents 6.4 months’ supply, up from 6 months in January, which was the lowest number of homes on the market since April 2006. A supply of six months generally is considered ideal, with higher readings pointing to price declines.

In terms of prices, as measured by the NAR, the median existing home price climbed to US$156,600 in February, from US$154,600 in January.

“[This is the] largest year-on-year gain in existing home prices since July 2010,” said Jonathan Basile, director of economics at Credit Suisse, to the Financial Times Thursday. “The trend has been persistently negative since the homebuyers’ tax credit expired in 2010. Today’s print is the first sign of stabilisation.”

All-cash sales, where investors account for the bulk of transactions, rose to 33 per cent of transactions in February, from 31 per cent in January.

Another worthwhile indicator, the FHFA’s US House Price Index, was released Thursday. That index was roughly the same as the February 2004 level and 19.2 per cent below its April 2007 peak. The year-over-year decline in January was the smallest since November 2009, when prices fell 0.6 per cent.

On Thursday, Bank of America-Merrill Lynch mortgage strategists and economists boosted their forecast to say that home prices will rise 0.5 per cent this year, a reversal of the bank’s older forecast of a 3.5 per cent fall in prices for 2012. However, they’ve cut their 2013 price-gain forecast to 0.3 per cent, from 1.3 per cent, and slashed their 2014 forecast to a gain of just 2.8 per cent, from 8.1 percent previously.

Elsewhere, Frank Blake, CEO of home-improvement retailer Home Depot, told analysts last month that investment in residential homes “had a slight uptick” from November to January relative to the size of the US economy, according to Nasdaq.com Thursday.

“The performance of our business, particularly in the back half of 2011, would suggest a strengthening market,” he said.
For years, Home Depot executives have seen demand from customers seeking to remodel and repair their homes. But in recent months, the retailer saw a 3 per cent jump in transactions of US$900 or more, compared with a 1.3 per cent rise in purchases totaling US$50 or less. That suggests consumers are spending more on bigger items and could be outfitting homes with an eye to sell, said Nasdaq.com.

On the flip side, Dan Amoss, managing editor for Strategic Investment, wrote a warning about high-end home values Thursday for WhiskeyandGunpowder.com.

“The disappearance of the move-up buyer is important, especially because Wall Street is now under the mistaken belief that in early 2012, housing is in the early stages of a strong recovery,” explained Amoss.

“In many areas of the US, low-end home prices are competitive with rentals. Mortgage rates are near all-time lows, and prices have already crashed. But high-end home prices will continue to drop for years to come. One’s primary residence is increasingly being viewed as a slowly consumed durable good, rather than an ‘investment.’ Financing for more expensive houses is also scarce. Banks aren’t interested in writing jumbo mortgages; even if they were, the traditional ‘move up’ buyer is hard to find. If they can’t sell their existing house, they likely won’t have the down payment for a larger, more expensive house.

“The next phase to the US housing crisis is house price compression,” Amoss quotes another contrarian, Mark Hanson. “The upper price bands [will compress] on the lower. It’s already happening. The data we watch closely every day are clear. This adds an entirely new dimension to the US housing crisis, one that pushes out an ultimate ‘recovery’ a lot further into the future than anybody is forecasting, or can model.”

“The excess supply of housing — especially at the middle and higher end of the market — will take several more years to clear,” maintains Amoss, again in his own words. “Prices will fall as this unfolds. After slowing foreclosure activity in 2011, most banks are set to accelerate sales of repossessed houses in 2012.”

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