Lumber News Archives: December 2013

Lumber News Archives: December 2013

Industrial Biomaterials Programs ; Logging Truck Accidents ; Housing Starts, Canada ; US Home Foreclosures, FHA Budget Shortfall US Construction, Housing ; Madison’s Timber Preview ; State of Canada’s Forests Report 2013 ; Japan Housing Starts ; Sawmill Fire Quickly Contained ; Canada Building Permits ; Trade Surplus, Canada EUTR Update ; Madison’s Announces . . . ; USW and IFLRA Settle in BC’s South Interior ; PNW Lumber and Log Exports: 3Q 2013 ; Illegal Timber Harvest Arrests ; Proposed Bill Doubles Oregon’s Timber Harvest ; Timber Theft by Russian Official ; Quebec Forests ; Madison’s Timber Preview ; China Begins Lumber Futures Trading ; US Home Foreclosure Inventory ; Timber Market, UK ; Sinclar’s Lakeland Stud Mill Rebuild ; US Construction Labour Market ; US Producer Price Index

December 23, 2013

Industrial Biomaterials Programs

A couple of recent announcements in Canada bode well for the future of biomass projects, whether materials or fuel.

The Industrial Biomaterials program, a new initiative that will help create more fuel-efficient vehicles and greener construction materials, is a $55-million, five-year initiative launched in Canada in November to encourage firms to transform agricultural and forestry by-products into new materials.

Bioresins, biofibres, and biocomposites made from Canadian non-food biomass such as wood, lignin, grain husks, flax, and hemp stems will be developed as part of the programme, which is receiving a $30 million investment from the National Research Council (NRC), along with an additional $25 million generated through collaborative projects with industry, academic institutions and other government departments.

“Agricultural and forestry by-products will be integrated into new materials, which will ultimately reduce the use of petroleum-based polymers,” said John McDougall, President of the NRC.

The programme will also help Canada’s transportation and construction industries remain competitive in global markets by ensuring that automotive parts manufacturers and green building material suppliers can adopt these technologies.

One excellent result of this funding is progress in the manufacturing of the structural insulated panel, or SIP, a wooden building material that could be used instead of wood studs + batt insulation in home construction.

Globally

Armand Langlois, head of Enerlab, the Quebec company developing the lignin structural panels, believes Canadian companies, especially small firms like his 12-employee shop, could never take on such projects without help from institutions such as the NRC and Montreal’s École Polytechnique.
Well before the formal launch of the biomaterials program, Enerlab was working with the NRC to overcome such obstacles as lignin’s variability between species, and even between regions. Now the company is seeking patents and hopes to begin sales next spring of insulated boards containing up to 25 per cent lignin. Production of SIPs and spray foam will follow.

Enerlab is part of a group of manufacturers working with the NRC and the Alberta government to develop a technical guide for SIPs that should ease the concerns of building code authorities.

SIPs are a high performance building system for residential and light commercial construction. The panels consist of an insulating foam core sandwiched between two structural facings, typically OSB. SIPs are manufactured under factory controlled conditions and can be fabricated to fit nearly any building design. The result is a building system that is extremely strong, energy efficient and cost effective.

SIPs can be used for exterior walls, foundations, frost walls, roofs, and floors.

The brown wafers at top and bottom are oriented strand board. The creamy filling, uninterrupted by the 2x4s and 2x6s that act as energy-robbing thermal bridges in traditional walls, is polyurethane foam, a plastic made from petrochemicals and lignin.

Lignin is the substance that binds fibres and cells in trees and other plants. After cellulose, it’s the most abundant organic polymer on earth. That makes it the world’s second-most common renewable carbon source.

Environmentally, SIPs offer benefits in reducing the need for petrochemicals as base ingredients. And since products made from biomaterials can be lighter than traditional plastics, there are further energy savings in their installation and use.

“These biomaterials promise to be as safe as the materials currently in use by industry, inexpensive to produce, and the ideal lightweight technology for the automotive and construction sectors,” said McDougall in announcing the project.

Economically, they can open new markets for sectors such as forestry, which is an $80 billion-yearly industry in Canada.

Durability of the panels is currently the key focus. Tests will be set up to mimic the effects of years of humidity changes, vibration, and other forces. Within six months, frames will be in place to allow the testing of full SIPs sandwiches, and not just the bite-sized pieces being assessed now.

Elsewhere, the US Department of Agriculture late last year awarded US$120 million worth of grants for cellulosic biofuels and high value applications for lignin in plastics. Wood is roughly 15-35 per cent lignin depending on species, with the rest being cellulose and hemicellulose.

One hundred billion lb/year of lignin is separated globally as a byproduct of wood pulping, according to Plastics Engineering November 12, 2012. Only 2 per cent of that is sold commercially, however, for things like stabilizers in asphalt and dispersants in concrete and textile dyes; 98 per cent is burned internally by pulp mills for energy. An infinitesimally small amount of the commercial 2 per cent is used in plastic, mostly thermosets and adhesives.
Recently, however, three new lignin-content plastic technologies have appeared. Two are thermoplastic; one is thermoset. Two are going commercial, which is astonishing given the difficulties and limited supply of usable lignin, said Plastics Engineering.

Not to be left behind, a consortium of European companies is researching and developing forest-based biocomposites as alternatives to traditional construction materials, announced PlastEurope November 19. The Osirys Project will develop products for facades and interior partitions that can be used in new builds or retrofitted. The four-year project will work with new eco-friendly building materials to develop a holistic solution to the emissions challenges currently facing the construction industry. Indoor air quality and emissions have presented a major challenge in recent decades for scientists, industry, and consumers as conventional materials contribute to contaminants, such as volatile organic chemicals (VOCs), formaldehyde, says PlastEurope. The new materials are to improve air quality by eliminating microorganisms, increasing thermal and acoustic insulation and controlling breathability.

According to Osirys, thermoset epoxy resins based in forest wastes and thermoplastic lignin-base polymer will be reinforced with natural fibres such as wood, flax, and hemp. In addition, cork granules will be used for insulation performance. The project has now launched a website which hosts information and news on developments throughout its lifespan. Chris Hare, technical manager at UK-based NetComposites, one of the consortium members, says: “We anticipate many interesting discussions between partners and the public across many platforms, and look forward to results which will benefit industry and users alike.”

The research has received funding from the European Community’s “Seventh Framework Programme”. The consortium comprises 18 companies from the UK, Spain, Germany, Sweden, Finland, Hungary, the Netherlands, Poland, Italy, and Portugal.

Logging Truck Accidents

A sudden flurry of accidents involving log trucks on Canadian and US highways this week prompts Madison’s to remind readers that safety is ALWAYS the priority.

In British Columbia, Highway 16 was reduced to single-lane alternating at Upper Fraser Road, 20 kilometres east of Prince George, BC, December 6 where a logging truck spilled its load. No one was injured in the mishap.

Williams Lake, BC, RCMP were dispatched Monday to a complaint a logging truck had lost its trailers on Highway 20 at South Lakeside Drive.

“Officers attended and found a tractor trailer parked in the outside lane of the highway,” said Insp. Warren Brown. “The logging truck trailers had detached from the power unit and were blocking the lane of traffic.”

Brown said the trailers had detached during motion.

A tow truck was used to lift the trailers and re-attach them to the truck.

The damage is estimated at $700 to $800 because two metal supports were bent.

Police said no other vehicles were involved in the incident and there were no injuries.

Log Truck Accidents, Fatalities

An accident involving a logging truck and a pick up shut down the highway south of Nelson. BC, Thursday morning.
The accident happened when an elderly woman was pulling out of a side road onto the highway. It’s not sure whether the woman did not see the loaded logging truck or thought there was more time to get ahead of the 18-wheeler.

However, the logging truck driver, realizing his rig would collide with the woman’s vehicle, went into evasive mode before clipping the pickup truck and landing in the ditch.

Nelson Fire Department reports “luckily there were no injuries” in the incident that caused significant damage to the pick-up truck and saw the logging truck completely blocking both lanes of Highway 6.

In the US, a support bunk snapped on a logging truck belonging to M&M Transport of Chehalis, WA, Tuesday, losing its entire cargo of logs.
The accident is under investigation by the Olympia, WA, Police Department, spokesperson Laura Wohl said.

An officer at the scene said no other vehicles besides the M&M Transport truck were involved, and no one was hurt.

The officer noted that the entire load of logs was still chained together, so that logs were not loose or in danger of rolling. The support bunk on the truck bed was snapped to one side, however, which appeared to be the cause of the accident.

A Georgetown, SC, man died in a head-on crash with a logging truck in just before noon Wednesday.

The incident happened when a 1990 Chevrolet pick-up truck was heading north on the road and crossed the center line, said Cpl. Sonny Collins of the SC Highway Patrol.

A 2000 International truck that was hauling a full load of logs was heading south and the two vehicles collided head on, Collins said.
The logging truck driver was transported to MUSC in Charleston, SC, for treatment.

No charges are anticipated against the driver of the logging truck, Collins said.

A Windsor, NH, man was airlifted with serious injuries Wednesday morning after his vehicle collided with a logging truck on Route 202 in Bennington, NH.

Christopher Davies, 32, was driving his 2003 Ford F250 southbound when police believe he drifted into the northbound lane and struck a 1998 West Star logging truck.

Police did not say why they believed Davies may have drifted into Kimball’s lane, though they did say road conditions were slick Wednesday morning.
Kimball was not injured in the crash. Kimball’s truck sustained minor damage to the wheel area of the driver’s side of his vehicle and Davies truck was a total loss.

Back on the west coast, Eugene-Springfield firefighter medics in Oregon responded Wednesday evening to a logging accident in a remote area off Quartz Creek Road, south of Highway 126.

The unidentified patient is an adult male who sustained a lower leg fracture, officials said.

No additional information was immediately available.

Housing Starts, Canada

Canada Mortgage and Housing Corp said Monday housing starts declined to an annualized rate of 192,235 in November, 3 per cent lower than October’s result and about 3,000 fewer than economists expected.

Most of the weakness was concentrated in Ontario, which saw a drop of 16.6 per cent, and in Atlantic Canada, where starts fell by a whopping 24.8 per cent. But condo building in British Columbia drove starts there up 12.5 per cent and the Prairies and Quebec saw gains of 9.1 per cent and 0.8 per cent respectively.

Canada Housing Starts

Nationally, November’s pullback was evenly distributed between single family homes, down 3.1 per cent to 111,036 units last month, and multiples which declined 3.5 per cent to 60,311 units.

In raw numbers, not annualized, there were 17,153 actual starts in November, down from 18,173 in November 2012.
Urban starts decreased by 3.4 per cent on a seasonally adjusted annual rate, while rural starts were flat.

US Home Foreclosures, FHA Budget Shortfall

The number of US homes entering the path to foreclosure or winding up repossessed by lenders has fallen to levels not seen in more than six years. The trend is the latest sign foreclosures are becoming less of a national factor on the housing recovery and more of a state and metropolitan-area concern.

Lenders initiated foreclosure action against 52,826 US homes in November, down 10 per cent from the previous month, and a drop of 32 per cent from November last year, according to new data from foreclosure listing firm RealtyTrac Thursday.

The last time the tally of monthly foreclosure starts was lower was in December 2005, the firm said. Foreclosure starts increased last month on an annual basis in 15 states, including Pennsylvania, Delaware, Maryland and Oregon.

While fewer homes entered the foreclosure pipeline in November, the number of homes completing the foreclosure process also declined.

Home Foreclosures, US

All told, lenders took back 30,461 homes last month, down 19 per cent from October and a decline of 48% from November last year, RealtyTrac said.

Overall, completed foreclosures sank to the lowest level since July 2007, the firm said.

The number of homes repossessed by banks increased on an annual basis in only five states: Delaware, Maryland, Connecticut, Maine and Iowa — all states where the courts must sign off on foreclosures, a factor that typically draws out the process.

Some of the decline in foreclosure activity last month was due to a seasonal slowdown as the end of the year draws near.

Meanwhile, The Federal Housing Administration, which recently received an infusion of funds from the U.S. Treasury to cover projected losses, still faces a US$1.3 billion capital shortfall, an independent audit released on Friday found.

The annual analysis calculates the solvency of the FHA’s mortgage insurance fund under a range of economic assumptions.

The government mortgage insurer received a US$1.7 billion infusion from the Treasury in September, marking the first time in its 79-year history it has needed aid.

December 18, 2013

US Construction, Housing

Permits for future US home construction rose to their highest in nearly 5-1/2 years in October and prices for single-family homes notched big gains in September, new data revealed Tuesday.

US building permits jumped 6.2 per cent to a seasonally adjusted annual rate of 1.03 million units, the highest since June 2008. Permits, which lead housing starts by at least a month, increased 5.2 per cent in September and were up 13.9 per cent from a year ago.

A separate report showed the S&P/Case Shiller composite index of 20 metropolitan areas increased 13.3 per cent in September from a year ago, the strongest gain since February 2006. Prices were up 0.7 per cent in August.

Meanwhile, US new home sales recorded their largest monthly increase in more than 33 years in October, pointing to housing market volatility in response to a rise in mortgage interest rates in recent months.

Sales surged 25.4 per cent to a seasonally adjusted annual rate of 444,000 units, according to Commerce Department data on Wednesday, surpassing expectations of 425,000. Compared with October last year, new home sales were up 21.6 per cent.

Despite double-digit gains in new home sales across the country in the month, economists expect the numbers to be revised lower, particularly given the volatile nature of this data series.

Sales in September fell 6.6 per cent to 354,000 – the lowest level since April 2012 – from a downwardly revised 379,000 in August. The previous two months were also lower than initially reported.

2013 Trends

One factor curbing sales is the tight stock of new home inventories. The month’s supply of homes for sale fell to 4.9 in October, down 23.4 per cent from September. Even as supplies remain tight, the median price of a new home ticked 0.6 per cent lower from a year ago.

Among those calling for caution when examining these latest figures is Dave Kranzler, who wrote on Seeking Alpha Wednesday, “a careful analysis of today’s report reveals serious weakness in new homes sales, beginning in July, and it shows fundamental problems with how the Census Bureau (CB) estimates monthly new home sales.”

Kranzler points out that the number published for August – originally said to be 421,000 and a 14.1 per cent sequential increase over July – was revised down massively to 379,000. With this revision, the original report that showed an increase from July to August has now become a 2.9 per cent decline from the original July revision. But July’s revised number was once again revised lower from 390,000 to 373,000.

Kranzler maintains that data for both August and September will similarly be revised downward, citing the average 25 per cent cancellation rate between the time new intentions are announced and actual sales are completed.

For his part, Nicholas Pardini of Nomadic Capital Partners maintained Tuesday, “Since the middle of 2011, the US housing market made an intermediate bottom and started to rally again. However, this rally has very little fundamental backdrop, and was due to Quantitative Easing related pressure to hold down rates.”

Pardini points to sellers increasingly needing to lower their asking prices in order to close a home sale.

However, according to Redfin November 6, the latest data reveals that, for the first time in seven months, price drops became less common in October, with price drops occurring on only 24 per cent of active listings. This marks a clear end to the seven-month rise in price drops, said the real estate market information provider. As home prices are now increasing at a less dramatic rate, sellers and agents are better able to price homes accurately without having to make adjustments later. Redfin analysts also expect price drops to be less common heading into autumn and winter months as home sellers tend to be in less of a rush at this time of year.

Elsewhere, total private residential construction spending in the US decreased slightly from the revised August and newly released September figures to a seasonally adjusted annual rate of US$326.9 billion in October 2013 according to Census estimates released Monday. The current reading is a 0.6 per cent decrease from the prior month and 17.8 per cent higher than a year ago.

Monday’s release included September and October data for construction put in place. The September data release was delayed by the government shutdown. The September reading was a 1.7 per cent increase from August and 10.3 per cent higher than a year ago.

Total private residential construction spending was at a market low point of US$228.5 billion in June 2009. Although spending improved for all categories, the figures are well below their respective peaks. Since market low points, total private residential construction spending is up 43.1 per cent, single-family 86.9 per cent, multifamily 163.6 per cent, and improvement-related spending 17.1 per cent.

Single-family spending registered a decrease of 0.6 per cent for the month. The home improvement category saw a decrease of 1.2 per cent for the month. The multi-family category saw a healthy increase of 2.2 per cent.

Madison’s Timber Preview

The British Columbia government has just signed a new type of timber supply aggreement with the Westbank First Nation, near Kelowna, BC. This week’s issue of Madison’s Timber Preview examines the latest changes and developments with access to the land base in BC.

Contact us any time to subscribe to this worthwhile and timely information!

State of Canada’s Forests Report 2013

The State of Canada’s Forests Report 2013 was tabled by Parliamentary Secretary Kelly Block, MP, in the House of Commons Wednesday. The report highlights the tangible results achieved through the Government of Canada’s support for the forest sector, creating innovative products and technologies and expanding markets for existing and new products.

“This year’s report confirms that Canada’s forest sector is emerging from the economic downturn more diversified and energized than ever before. Canada’s forest sector is providing exciting new products for the domestic and international markets, providing jobs for 234,000 Canadian workers and contributing $19 billion to our nation’s economy” said Joe Oliver, Canada’s Minister of Natural Resources, in a statement.

“Our government has worked with industry and other governments to remove barriers to accessing new markets and to find innovative ways of using Canadian wood products. [ . . .] The result of these combined efforts to expand markets will be felt throughout the entire forest sector and lead to more jobs.”

State of Canada’s Forests, 2013

Canada’s forest industry, while enjoying thriving and growing markets in Asia and a rebound in US housing construction, could see its long-term supplies jeopardized, according to 2013 edition of Natural Resources Canada’s annual report, The State of Canada’s Forests, released Thursday.

“Canada’s forests are undergoing significant changes as a result of a changing climate, including more frequent fire, drought, and disease and insect attacks,” the report states.

“This increase in disturbances … could impact Canada’s supply of quality fibre in the long run, posing some risks to both industry transformation and sector competitiveness. Innovative, science-based policy solutions, mitigation strategies and forest management approaches will therefore be needed to help decision-makers at every level navigate the way forward.”

Japan Housing Starts

October housing starts in Japan were at 90,226 units, a 7.1 per cent increast over October 2012, according to the Japan Lumber Reports Friday. Housing starts have been on the increase for 14 consecutive months, and this is the first time monthly starts in Japan passed 90,000 units since October 2008.

Housing Starts, Japan

On a seasonally adjusted basis, Japan housing starts were at 1.037 million units in October, says the Reports.

New building of owner’s units maintained the 30,000 level for five consecutive months. Wood based building was at 53,217 units, an 8.3 per cent improvement over October of last year. Of those wood framed units, 11,680 were 2×4 construction, a 4.7 per cent increase over one year ago.
Japan’s Ministry of Land, Infrastructure and Transport commented that builders continue to have steady building plans for the future.

Sawmill Fire Quickly Contained

A fire that broke out at the Spearfish Forest Products sawmill in Spearfish, SD, Monday evening was contained to the planer building and an adjacent shavings bin but did not cause a significant amount of damage.
Firefighters responded in the afternoon to a report of a fire.

Sawmill Fire

Tom Shaffer, general manager at Spearfish Forest Products said to the Black Fish Pioneer Tuesday morning, “We’re still not 100 per cent sure on how or where the fire started.

Shaffer said the mill’s employees responded quickly and the sprinkler system kicked in as it was supposed to. It still took firefighters about an hour to bring the fire under control, said Wallace White, the chief of the Spearfish Volunteer Fire Department.

“The part that was a little bit dicey was when (the fire) went up the blow pipe and to the shaving bins,” Shaffer said.

The blow pipe takes shavings away from the planer and to a bin where they can be loaded into trucks.

The planer that was damaged was about 30 years old.

First Assistant Fire Chief Eric Herdt said to the Rapid City Journal Tuesday, “Once on scene, we found fire on the outside of the planer building. ”
Herdt said the department responded with three chiefs, four engines, one ladder truck, one rescue unit, two water tenders and 25 firefighters. The fire started in a blower inside the planer building, then spread to sawdust bins on the exterior of the building, he said.

Spearfish Forest Products is owned by Neiman Enterprises Inc. of Hulett, WY. About 200 people are employed at that sawmill.

Canada Building Permits

Canadian municipalities issued building permits worth $7.2 billion in October, up 7.4 per cent from September, Statistics Canada said Thursday. This followed a 4.1 per cent rise in the previous month. The total value of permits showed a slight upward trend on the strength of eight monthly increases since the beginning of the year.

The increase in October resulted from higher construction intentions for both the residential and non-residential sectors, principally in Ontario.
Construction intentions in the residential sector posted their second straight monthly increase, rising 6.4 per cent to $4.4 billion, the highest level since May 2013.

In the non-residential sector, the value of permits rose 9 per cent to $2.8 billion, the sixth monthly increase since the beginning of the year.

Trade Surplus, Canada

Canada posted its first trade surplus in almost two years in October, although analysts were quick to note that the surprise reversal after a string of 22 consecutive deficits did not signal a long-awaited turnaround in the export sector.

The tiny $75 million surplus, from a revised $303 million deficit in September, was achieved primarily because of a 1.2 per cent decline in imports, Statistics Canada said Wednesday.

In fact, exports continued to struggle, dropping 0.3 per cent — 0.6 per cent in volume terms — during the month, as shipments of energy products, motor vehicles and parts, metal and non-metallic mineral products and aircraft and other transportation equipment and parts all fell.

Overall, exports dipped to $40.5 billion in October and imports to $40.4 billion.

The report came out on the same day that the Bank of Canada cited the weak performance of the Canadian export sector, along with low inflationary pressures, for its gloomy view that the economy won’t return to full production capacity until the latter half of 2015.


Madison’s Investment Rx

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December 12, 2013

EUTR Update

It seems the EU Timber Regulation (EUTR), enacted in March 2013, continues to cause confusion about compliance and other bureaucratic issues with both suppliers globally and importers locally in Europe.

At the International Wood Products Association (IWPA) AGM this April in Vancouver, BC, hardwood exporters from Sawarak in particular expressed frustration at the cumbersome paperwork and auditing process required by the new EUTR regulations.

The EUTR follows the lead of the Lacey Act in the US, and Australia’s Illegal Logging Act, in prohibiting the import of timber products without proving sustainable chain-of-custody requirements.

EUTR prohibits the use of illegally harvested timber in the EU market, and came into force under British law in March 2013. Any business or individual that imports such timber or timber products into this market must for the first time implement a due-diligence system. This means they must assess the risk that the timber may have come from an illegal source, which must happen before the timber is made into any product and before it is treated and certified.

The regulations set out the components of the due-diligence system. The bulk of these regulations apply to the person or business that first places the timber on the EU market, referred to as the operator. The operator should not place any order for timber until he has been through the due-diligence procedures.

Timber Harvest Regulations

A trader is anyone who buys timber or a timber product once it has been placed on the EU market. The regulations state that the trader has to keep records for at least five years on timber purchases. These must specify the operator or trader from whom the timber was bought and the trader to whom the timber or timber products were sold.

Apparently its not just Sawarak and other exotic, or tropical, hardwood exporting nations that are having trouble navigating the bureaucracy of EUTR.
The UK’s National Measurement Office (NMO), gave the initial results of EUTR enforcement to more than 50 hardwood traders during a London Hardwood Club meeting in central London, UK, according to Timber Trades Journal November 12. Michael Kearney, enforcement project manager at the NMO, also addressed a 187-strong audience at the Plywood Luncheon Club’s Shippers Luncheon in mid-November.

Kearney said the NMO had seen excellent examples of due diligence in action, a strong performance in information gathering, and supply chain transparency. But also highlighted “shortcomings” due to either misinterpretation or misapplication of the legislation, says Timber Trades Journal. He emphasised the NMO was working with companies to aid compliance and had gathered practical experience, examined industry best practice, and identified specific products for scientific analysis.

Some of the shortcomings the NMO found include over-reliance on documentation, some cursory risk assessments, and issues with presentation of due diligence.

Kearney said third-party certification was a valuable tool but due diligence was still needed on certified timber products. He does not see prospects for certification being given a “green lane” for EUTR compliance.

In the medium to long-term the NMO will start to be more demanding on due diligence. “There has to be that deterrent, people have to know that we will take meaningful action,” Kearney detailed.

Also in mid-November, John Park, Canada Wood Director of the UK Office and Market Access Coordinator, wrote in a blog post that The EUTR’s requirement for due diligence is misunderstood by some operators.

Park explained that there were “mutterings around Canada that it would hinder Canadian timber coming into the EU. It now seems that they were right as the sad reality is that it has, whereas it should be doing just the opposite!”

But it is not the EUTR per se that is the problem, said Park, – it is the ‘operators’, or rather some of the operators, who are. They have failed completely to understand ‘due diligence’ and are, as a consequence, treating all their suppliers, regardless of country of harvest, in exactly the same way. Which means, in some cases, equally incorrectly.

Park offers some main points for Canadian operators, and importers of Canadian wood products into Europe and the UK:

– Operators practising appropriate due diligence can easily ascertain that Canada is a negligible risk country under the conditions as outlined in the EUTR; and,

– When negligible risk is ascertained at country level, the operator does not need to obtain documents from the supplier indicating compliance with applicable legislation. For wood harvested in Canada, compliance is embedded in the provincial legislation, which the operator has access to (and for appropriate due diligence has only to indicate that access) via various Canadian web portals.

As Park correctly points out, “The EUTR was put in place to address illegal logging, most particularly in tropical countries, first of all by assessment of risk. Operators are adding enormous complexity and unnecessary burden both for themselves and their Canadian suppliers – by failing to grasp this.”

Park offers an ‘Operator 8-Point Plan’ and further excellent points :

http://www.ttjonline.com/blog/canadian-timber-stymied-by-european-regulations-and-operators/

Navigating the various legal requirements can get tricky, as Lumber Liquidators learned at the end of September.
US federal officials executed search warrants on September 26 at the company’s offices in Toano, VI.

The searches by US Immigration and Customs Enforcement and the Fish and Wildlife Service were related to importation of wood-flooring products made from protected timber in Siberian tiger habitat. The wood originates in Russia and is processed in China, and US government agents suspect it was declared as coming from other countries.

Lumber Liquidators, which sells hardwood flooring at more than 305 stores in the US and Canada, said in a statement at the time, “The company takes its sourcing and compliance very seriously, and is cooperating with authorities to provide them with requested information.”

It said it is subject to a range of international and domestic regulations and that it sources its products from about 110 domestic and international mills and has policies and procedures designed to comply with regulations, with more than 60 people performing and monitoring its compliance and regulatory work.

The US Fish and Wildlife Service is charged with enforcing the provisions of the Lacey Act, which aims to curb trafficking in wildlife, fish, and plant products, including illegally obtained timber.

The retailer’s share prices were down 9 per cent, at US$102.87, in midday trading when the fact of the search was broadcast by mainstream media. Shares recovered to US$119.44 on November 15.

Adding further fuel to a possibly phantom fire, speaking at the Robin Hood Investors Conference in New York City on Friday, hedge fund manager Whitney Tilson, founder of Kase Capital Management, alleged that Lumber Liquidators’ recent jump in profits could be attributed to the company’s allegedly sourcing illegal timber from Russia, according to the Wall Street Journal.

Lumber Liquidators responded to Tilson in a statement, noting that he did not contact the company prior his presentation. “We have never met with him to discuss our business. Mr. Tilson’s presentation is based entirely on his own speculation and the contents of a report released almost two months ago, which we had previously stated contained numerous inaccuracies and unsubstantiated claims.”

Even the suggestion of impropriety can have significant financial consequences for operators on both sides of the Atlantic.

Madison’s Announces . . .

At Madison’s we continually strive to react quickly to changes in the North American lumber and panels marketplace. Readers will have noticed that we recently added ESPF Delivered Toronto prices to Page 1, and several nine-foot studs prices to Page 3. This week we have also made changes to our cedar decking and boards information on Page 10.

As always we welcome comments and suggestions for added or edited content. Please contact our office any time with your ideas!

USW and IFLRA Settle in BC’s South Interior

Just in time for press Friday, the United Steelworkers Union and IFLRA, negotiating for employers in BC’s southern interior, reached a tentative labour agreement.

PNW Lumber and Log Exports: 3Q 2013

Lumber and log exports from Washington, Oregon, northern California, and Alaska both increased dramatically in 3Q 2013, compared to this time last year, the US Forest Service’s Pacific Northwest Research Station reported Tuesday. Lumber exports grew by 50 per cent both in value and volume compared to the third quarter of 2012, while log exports increased by nearly 40 per cent in value and about 25 per cent in volume.

“Demand from China is the major reason for the increased lumber exports we saw in the third quarter,” said Xiaoping Zhou, a research economist with the station who compiled the data.

Compared to the second quarter of 2013, west coast lumber exports jumped by 21 per cent and totalled 279 million board feet. Log exports decreased by about five per cent to 514 million board feet.

Log and Lumber Exports US Northwest

The total value of lumber exported from the west coast in 3Q 2013 increased by 16 per cent to US$200 million, while the total value of logs exported from the west coast decreased about 10 percent to US$359 million, compared to the second quarter of 2013, according to the US Forest Service’s PNW Research Station.

In 3Q 2013, China imported 116 mil- lion board feet of west coast lumber, a 45 per cent increase from 2Q.

At west coast ports, 41 per cent of outgoing lumber and 64 per cent of outgoing logs were des- tined for China during the third quarter of this year.

Other highlights:

• Total U.S. lumber exports in the first nine months of 2013 increased about 10 per cent compared to the same period in 2012, while the value increased over 14 per cent;

• Total US log exports in the first nine months of 2013 increased by about 22 per cent compared to the same period in 2012, while the value increased by more than 28 per cent;

• West coast lumber exports during the first nine months of 2013 represented 30 per cent of the total US lumber export, a 2 per cent increase compared to the same period in 2012;

• West coast log exports during the first nine months of 2013 represented 60 per cent of the total US log export, a 2 per cent increase in the share compared to the same period of 2012.

Illegal Timber Harvest Arrests

In very fitting timing for today’s story in your Madison’s Lumber Reporter, two large arrests were made this week by international authorities over illegally harvested tropical timber in Africa.

German authorities seized two batches of illegal timber from the Democratic Republic of Congo, said AllAfrica.com Wednesday. The seizure is the strongest case of enforcement of an EU law banning the trade in illegally sourced timber which took effect in March 2013.

Illegal Timber, Africa

Elsewhere, international police organization Interpol said Friday it seized more than 240 kg of elephant ivory and 856 timber logs, and arrested 660 suspects during a month-long coordinated operation across southern and eastern Africa, according to Xinhu via GlobalPost Friday.

The operation which was conducted as part of Interpol’s Project Wisdom and Project Leaf, jointly targeted ivory smuggling and illegal logging, with smugglers often concealing ivory inside charcoal containers or welded chambers of trucks used to transport logs across borders. The month-long operation involved enforcement officers, forest authorities, park rangers, police, and customers officers from Tanzania, Swaziland, Zimbabwe, South Africa, and Mozambique.

Proposed Bill Doubles Oregon’s Timber Harvest

US Senator Ron Wyden, OR-D, is seeking to roughly double timber harvests on Western Oregon’s federal forest land under a much-anticipated bill unveiled Tuesday, according to the Register-Guard Wednesday.

As with a plan backed by Oregon US Representatives Peter DeFazio, OR-D, Greg Walden, OR-R, and Kurt Schrader, OR-D, that passed the House this fall, Wyden’s bill would split in half the former Oregon & California Railroad Co. lands, with half facing increased logging and the other half dedicated to conservation.

Logging of “old growth” forest stands older than 120 years old would be prohibited on all 2.1 million acres.

Unlike the House bill, however, Wyden’s plan doesn’t create a state-run trust to take over management of the land where logging would increase. The senator from Oregon, along with environmental groups, had expressed concern that such a trust would circumvent key federal protec-tions for the environment and endangered species on more than 1 million acres of Oregon forestland.

Wyden’s plan would ramp up timber production on the O&C lands to an average of between 300 million and 350 million board feet a year, well above the 150 million board feet produced on average over the past decade, but less than the estimated 400 million to 500 million board feet a year that the House bill would allow, said the Register-Guard.

Wyden’s bill would produce enough lum-ber to restore about half of the US$35 mil- lion in funding timber counties lost through the decline of the county payment program.

Timber Theft by Russian Official

Authorities in Russia’s Siberian region of Tomsk said Wednesday that they are investigating the misappropriation of almost US$1 million worth of timber by a local district official, said the Moscow Times Thursday.
The Investigative Committee said that Pervomaysk district head Mikhail Pristavka used his position in 2011 and 2012 to request that the regional forestry department cut down 9,700 cubic metres of timber, which he said would be used for municipal purposes. Instead, the federally owned timber, estimated to be worth 30 million rubles (US$911,000), was forwarded to two private companies, investigators said.
Pristavka is under investigation for three counts of abuse of authority, a charge punishable by up to seven years in prison. Pristavka said Wednesday that he was not aware of any criminal cases against him and that he was only a witness in the investigation.

December 04, 2013

Quebec Forests

In the same week that stakeholders and forest industry professionals are meeting with government officials in Quebec, two manufacturers in that province had unusual labour disruptions.
First Resolute Forest Products, based in Montreal, QC, felt it necessary to temporarily shut down operations at its Thunder Bay-area sawmill, calling it a “safety break, and sending workers home without pay, said CBC Tuesday.

Resolute’s Director of Communications said it’s not uncommon in mills where accidents are happening on the job.

“At the Thunder Bay operation this year, there have been three … incidents, two that happened in the last month,” Xavier Van Chau said.

According to Unifor, the union representing those workers, an employee had his nose broken by a falling wrench.

Marvin Pupeza, Unifor spokesperson, called the decision to send employees home without pay Tuesday morning, “bizarre.”

The company is evaluating remuneration options for the nearly 200 workers affected.

Resolute Wednesday announced plans to reopen that sawmill on Sunday night.

Elsewhere, about 100 angry trades workers blocked the gates of a mill in Miramichi, NB, Monday, saying a tender awarded to a Quebec-based company is taking jobs away from local workers, according to CTV Atlantic.

Mill owner Arbec Forest Products is shutting down for a two-week maintenance period and the company has hired a company from Quebec to do that work.

Timber and Manufacturing

A local group of welders, machinists and pipe fitters say they want the province to intervene.

“We’re here to try to put an end to it before it escalates, to let them know we’re a community here with local unemployed workers who are qualified to do the job,” says Calvin Donovan.

Last year, New Brunswick Premier David Alward gave Arbec Forest Products more than $15 million in provincial funding to reopen the mill. At the time, he promised the reopening would provide work for local people.

The demonstration ended late in the afternoon, after Arbec obtained a court injunction ordering the protesters to leave.

The mill was shut down for almost six years. It reopened last November with the help of the provincial and federal governments.

Also this week, the Quebec Forest Industry Council (QFIC) and the senior executives of six major forest companies urged the provincial government to make a priority of the issues and challenges of competitiveness facing the industry in Quebec, said the agency in a press release Wednesday.

The QFIC’s suggested steps toward “a new partnership to support the development of a green economy” would include the creation of a Strategic Forum on the competitiveness and transformation of the forest industry as well as the establishment of programs to support the transformation of the industry by using Quebec’s energy surpluses.

Key government officials are expected to be present later this week at Rendez-vous de la forêt québécoise, a forest industry gathering in St. Felicien, QC, to lay the foundations of a new partnership to support the development of a green economy. Steps in that direction would include the creation of a Strategic Forum on the competitiveness and transformation of the forest industry as well as the establishment of programs to support the transformation of the industry by using Quebec’s energy surpluses.

It is difficult for the forest-products industry to transition toward innovative and value-added products just as falling demand and rising production costs are wreaking havoc in its traditional markets. There’s a downward spiral of layoffs in Quebec, long a stronghold of newspaper pulp, where the province’s biggest newspaper chain is almost begging readers to trash their print subscriptions and switch to its free iPad edition to shed printing and distribution costs. The industry once employed more than 100,000 Quebeckers, but that’s dropped to 65,000, according to the Quebec Forest Industry Council (QFIC). Lumber sawmills are one of the few bright spots in the sector as hammers resonate once more on American construction sites.

Forest industry players are asking the Quebec government for more subsidies for plant conversions – all the while blasting the province’s environmental and sustainable development policies. The wood-allocation reforms spearheaded by the previous Liberal government have led to a 25 per cent increase in the price of fibre since 2011, forestry executives contend, and fibre accounts for roughly half of the industry’s production costs.

The industry has found a new way to approach the government for aid, eyeing reduced electricity rates. Ever since Finance Minister Nicolas Marceau said he would use Quebec’s electricity surpluses to attract new investors, companies have been lining up to demand lower rates to stay in the province. Talk about backfire. First came Alcoa, which is threatening to close its three aluminum smelters come 2015. Now it’s the forest industry’s turn.

“Before attracting new companies, why can’t we use those surpluses to support the companies that are already here so that they can transform themselves?” suggested QFIC president André Tremblay to the Globe and Mail Tuesday.

While the industry is courting the government once more, it is also threatening to invest elsewhere. Case in point: Tembec, which has to decide how it it going to allocate $80-million in investments between its Ontario and Quebec sawmills.

“It is an unfortunate truth that if you are faced as an investor with the decision on where to put your money first, it will not be in Quebec – not with this business environment, not with this fibre supply, not with the rapid rise in the cost of wood,” says Jim Lopez, President and CEO of Tembec to the Globe and Mail.

Just in time for this week’s release of your Madison’s Lumber Reporter, Premier Pauline Marois Friday morning announced a series of measures that would inject $430 million into Quebec’s forest industry.

The total includes $100 million in new money and will attempt to stem the bleeding in a sector that has seen 30,000 jobs lost since 2008, a total that represents one- third of the entire workforce.

Marois, in a speech before 200 in Saint–Félicien, Lac-Saint-Jean, QC, promised a “fresh start,” for the industry but also attempted to keep expectations down.

Another $50 million, to be spent between now and 2020, will go to create a program of residual forest biomass energy production in the aim of reducing fossil fuels and lowering greenhouse gas emissions.

Additionally, $27 million will go towards a trio of sustainable development initiatives that they hope could yield triple that amount in profits. A further $67 million will be spent over three years for various forestry management, clearing and reforestation projects.

And $10 million will go to stimulating the development of private forests through a system of property tax reimbursements that could benefit 130,000 small producers.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the resurgence of US home building levels, and the effect that is having on lumber producing company and large retailer share prices.

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China Begins Lumber Futures Trading

China Securities Regulatory Commission on Friday approved trade of fibrewood and plywood futures contracts at the Dalian Commodity Exchange, according to Xinhua.

China is the world’s largest producer and consumer of the two wood products. They are crucial to forestry, as well as furniture, decoration and packaging sectors.

China has sped up development of commodity futures markets to offer companies more tools to hedge risks while trying to have a bigger say in the pricing of major commodities in the global market.

With these two new futures approved, China is expected to have ten new futures in market this year, including iron ore futures which started trading on October 18 at the Dalian Commodity Exchange.

US Home Foreclosure Inventory

The foreclosure inventory rate in the US is down almost 30 per cent from last year, and 26 per cent from the beginning of 2013 as the housing market stabilizes and fewer homes fall into a state of distress, Lender Processing Services (LPS) said Friday.

The company’s First Look Mortgage Report from LPS found that the loan delinquency rate fell 2.8 per cent from the prior report to 6.28 per cent in October.

Additionally, after 18 months of continuous decline, the inventory tumbled to its lowest level since the end of 2008 and fell to 1.28 million loans, or just 2.54 per cent of currently active mortgages.

In its mortgage report, LPS took a closer look at loan level data from its database, examining 70 per cent of the overall mortgage market. Meanwhile, year-over-year delinquencies dropped 10.69 per cent from October 2012.

Home Foreclosures, US

The total foreclosure pre-sale inventory rate continued to mend and hit 2.54 per cent, declining 3.23 per cent month-over-month and 29.61 per cent year-over-year, said Lender Processing Services (LPS) Friday.

A spokesperson for LPS noted that while delinquencies are down 2.8 per cent from last month they are not quite at the lows witnessed back in April, of 6.21 per cent, May’s 6.08 per cent or August’s 6.2 per cent, but they are heading in that direction.

Furthermore, the number of properties 30 or more days past due dipped to 3.152 million, while the number of properties 90 or more days late fell slightly to 1.283 million.

As a whole, the total pipeline of delinquent loans or properties in foreclosure hit 4.43 million.

Timber Market, UK

The past 12 months has been the most active year yet for the UK forestry market, according the Forest Market Report. The report, launched on Monday by Savills, a global real estate services provider, and timber harvesting company UPM Tilhill, claims 50 per cent more coniferous forest was traded in 2013 compared with 2012.

UK Timber Market

Trade between October 2012 and September 2013 totalled £97.3m, 8.5 times the value traded in 2000, making it a record year in terms of both the value of the market and its unit price, the Savills/UPM Tilhill Forest Market Report said Monday.

The majority of this year’s sales came from Scotland – about 69 per cent by value – but there was also a significant increase in Wales, where 16 per cent of sales took place compared with just 4 per cent in 2012, said the report.

Also at record levels is the average value per stocked hectare which is now at £7,057. This has given an annualised average growth since 2002 of 15.4 per cent. The average value of a property is up 29 per cent on 2012 values to £1.23m.

Timber prices are likely to stay high, despite a recent dip.
Prices on Tuesday 19 November were at £367.

Sinclar’s Lakeland Stud Mill Rebuild

The weather in British Columbia up until last week was helping the rebuild of Lakeland Mills, according to the Prince George Citizen Thursday.
The ground on the new mill in Prince George, BC, was broken on July 22 and so far no major hiccups have occurred, as the first quarter is coming to a close on construction.

“The rebuild is going well,” said Greg Stewart, president and CEO of Sinclar Forest Products, principal owners of the Lakeland operation.

What isn’t understood yet, however, is whom will be on staff when the mill reopens. Stewart said many from the previous crew are still involved in therapy and other recovery processes that might keep them off the new crew.

More certain is the demand for Lakeland lumber. “We think there will be a very receptive market for the products that will come out of Lakeland,” Steward said to Prince George Citizen.

US Construction Labour Market

September saw another slight rise in the number of unfilled construction sector positions according to the BLS Job Openings and Labor Turnover Survey (JOLTS), released Friday. While the increase of unfilled positions in 2013 is consistent with the increase in construction sector activity, particularly for home building, the data continue to reflect only modest growth in total employment thus far.

For the construction sector, monthly gross hiring was relatively unchanged, falling from 298,000 to 295,000 from August to September. The hiring rate, as measured on a 3-month moving average basis, was also unchanged at 5.2 per cent. The pace of construction hiring has slowed since the end of 2012, and this trend has continued into autumn 2013.

US Producer Price Index

Also Monday, the Bureau of Labor Statistics (BLS) reported that the Producer Price Index (PPI) for US materials and components used in construction rose 0.4 per cent on a seasonally adjusted (SA) basis in September, according to Reed Construction Data. That was up from a 0.2 per cent increase in August. The index was up 2 per cent on a not seasonally adjusted (NSA) year-over-year basis and was 8.5 per cent higher than in September 2010.

Meanwhile, the more volatile prices for raw materials used in construction, or to produce products, used in construction shot up 1.6 per cent after falling 0.2 per cent in August. The index was up 3.3 per cent from September 2012 and was up 7.8 per cent from September 2010.

An index that measures inputs used in nonresidential construction (excluding capital equipment) was flat in September following an advance of 0.5 per cent (NSA) in August. The index was up a modest 0.1% from September 2012 and was 11.0% higher than in September 2010.

An index that measures inputs used in residential construction (excluding capital equipment) rose somewhat faster, up 0.2 per cent (NSA) in September following an increase of 0.3 per cent in August. The index was 1.2 per cent higher than in September 2012 and was 10.8 per cent higher than in September 2010.

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