Lumber News Archives: Feb 2012

Lumber News Archives: Feb 2012

US Real Estate and Economy ; BC Auditor General’s Report; Housing Starts, US ; Quarterly Reports ; Western Invests ; Interfor Announces . . . ; British Columbia Silviculture Practices ; Madison’s Timber Preview ; Canada Housing Starts, Building Permits ; Housing Starts, Japan ; Mercer Swoops in on Fibrek ; Burns Lake Sawmill to Reopen ;Timberland Investment Summit ; Madison’s Timber Preview ; BC Logger Dies ; China’s Conifer Wood Market ; North American Timber to Japan – 2011 and 2012 ; Conifex $25 Million Financing ; Hampton May Rebuild ; Domtar Sells Quebec Mill to Fortress Paper for $1 Softwood Lumber Agreement ; 2006 Softwood Lumber Agreement Extended ; Sawmill Fires ; Japan Housing Starts ; US Home Sales, Mortgage Applications ; BC Forest Conversation ;Truck Logger AGM ; US Forest Service Grant ; Housing Starts, US ; BC Lumber Export Statistics to China ; Wholesale Trade, US ; CN Derailment

February 29, 2012

US Real Estate and Economy

New figures released Thursday by the US Commerce Department show a recovering US home building industry. While it is still in the early stages, three consecutive months of rising new housing starts and permits point to sustained improvement in that critical sector. The US National Association of Home Builders (NAHB) estimates that for each new single-family home built, three jobs are created. The US National Association of Realtors (NAR) estimates that for every two homes sold, a job is created. It is not a great stretch of logic then, when analysts repeat that healthy real estate and home building markets are vital to the US economy.

Since November 2011, the increase in new housing starts has been led by multi-family units, or apartments, which is the direct result of the ongoing foreclosures in the US. As distressed properties are taken over by banks, and eventually sold, more and more people will be moving into rental properties. Expectations are that this process will take two years, and the large US home builders are responding accordingly by breaking ground on multi-family units rather than on detached homes.

US new home construction in January increased 1.5 per cent to a seasonally adjusted annual rate of 699,000 from December. Last month’s increase was driven by an 8.5 per cent gain in multifamily homes with at least two units, a volatile part of the market. Construction of single-family homes, which made up about 73 per cent of housing starts, fell by one per cent. December’s figures, meanwhile, were adjusted upward, with a 12 per cent gain for the vital single-family sector.

Housing Starts, Jobs, Manufacturing, Retail Sales

The data also showed newly issued building permits rose by 0.7 per cent in January from a month earlier to an annual rate of 676,000.
“Homebuilders seem to have concluded that the bottom for construction activity is in,” Teunis Brosens, Senior Economist at ING Bank, said in a statement. “Further rises in housing starts and sales should be ahead.

“These bring with them more jobs and positive contributions to GDP growth,” he added. “Let’s hope homebuilders are right on this one.”

Homebuilder confidence increased for the fifth consecutive month in February, according to a report released by the NAHB on Wednesday, with the index of homebuilder confidence jumping to its highest level in more than four years. The report showed that the NAHB/Wells Fargo Housing Market Index surged up to a reading of 29 in February, from a reading of 25 in January.

The sharp increase of the housing market index reflected continued increases in each of the three component indexes, which also improved for the fifth consecutive month. The component measuring traffic of prospective buyers edged up to 22 in February from 21 in January, while the component measuring sales expectations for the next six months jumped to 34 from 29. The component measuring current sales also surged up to 30 from 25.

Sales of previously occupied homes rose for three straight months at the end of 2011. The glut of houses on the market is diminishing; down to 2.4 million previously owned homes on the market in December, which is 21.2 per cent lower than the same time one year earlier, and down from 3.8 million in June.

NAR’s national Housing Affordability Index rose to a record high of 184.5 in 2011 since record keeping began in 1970. This index is based on the relationship between median home price, median family income, and average mortgage interest rate. The higher the index, the greater the household purchasing power.

The iShares Dow Jones US Home Construction Index Fund Wednesday was up 20 per cent for the year and was 2.8 per cent higher than it was a year ago. That is compared to the S&P 500 Index, which Wednesday was up nearly 8 per cent year-to-date was and 1.6 per cent higher than it was a year ago.

Share prices of major US home builders are reflecting this upswing in market conditions. Recently, the last of the major home builders crossed a bullish technical level known as the “golden cross,” when a stock’s 50-day moving average rises above its 200-day moving average, according to the Wall Street Journal (WSJ) Thursday.

Shares of D.R. Horton are up 74 per cent since an industry low-water mark on October 3, 2011. This company caters mostly to low-end buyers and builds homes in 26 states.

Lennar sits poised to reap major economic gains from an eventual rebound in housing, with lean construction practices, a healthy balance sheet and other strengths, continues the WSJ. Its revenue was up 12.5 per cent and orders were up 21 per cent in 4Q 2011, its highest growth in several years. The company recently created a distressed real estate unit, Rialto, that allows it to obtain land more cheaply than competitors. Its backlog of orders is 36 per cent higher than a year ago, leaving it in good shape to wait for a future surge in sales. The stock is up 88 per cent since early October.

Toll Brothers builds higher-priced homes in urban markets with job growth, particularly in the Northeast. It also has a distressed investment arm, Gibraltar, that helps it lock in land at bargain prices in marquee locations. This company has modest net debt of just $400 million. Toll Brothers shares are up 74 per cent since early October.

The exchange-traded fund of SPDR S&P HOMEBUILDERS includes seven of the largest homebuilders. It also owns shares of companies that sell building materials or furniture and other items for the home. Many of the homebuilders are sitting on large piles of cash, which will allow them to expand in the coming years. The fund has an expense ratio of 0.35 per cent, versus 0.47 per cent for iShares Dow Jones US Home Construction.

Meanwhile, analysts applaud the latest drop in new US jobless claims. Filings fell by 13,000, to 348,000 for the week of February 11. Claims have not been below 350,000 since March 2008. About 9 per cent of the nation’s jobs are in manufacturing, according to the Boston Globe. In 2011, factories added 13 per cent of new jobs. And this January, about one-fifth of the 243,000 net jobs the economy created were in manufacturing. Factory growth has also helped to increase hiring in other industries such as shipping, warehousing, department store sales, and auto sales.

Elsewhere, US industrial production was unchanged in January, as a gain of 0.7 per cent in manufacturing was offset by declines in mining and utilities, the Federal Reserve reported Wednesday. Within manufacturing, the index for motor vehicles and parts jumped 6.8 per cent and the index for other manufacturing industries increased 0.3 per cent. The output of utilities fell 2.5 per cent, as demand for heating was held down by temperatures that moved further above seasonal norms. The output of mines declined 1.8 per cent.
At 95.9 per cent of its 2007 average, total US industrial production in January was 3.4 per cent above its level of a year earlier. The capacity utilization rate for all industries decreased to 78.5 per cent, a rate of 1.8 percentage points below its long-run average, of 1972 to 2011.

Total US industrial production for December was upwardly revised to 1.0 per cent from an initial estimate of a 0.4 per cent increase.

Lastly, US January retail industry sales, excluding automobiles, gas stations and restaurants, increased 0.9 per cent seasonally adjusted from December, and 4 per cent unadjusted year-over-year, according to the National Retail Federation Monday. January retail sales data, released by the US Department of Commerce, showed total retail sales increased by 5.6 per cent unadjusted year-over-year, and increased by 0.4 per cent seasonally adjusted month-to-month.

BC Auditor General’s Report

After an entire year of regularly featuring stories about possible issues with BC’s timber inventory and the lack of data on Not Sufficiently Restocked forestland, Madison’s was pleased to see Thursday that British Columbia’s Auditor General released an audit titled, “BC Ministry of Forests. Lands, and Natural Resource Operations’ Management of Timber”.

Much ballyhooed Friday in the mainstream media, Auditor General John Doyle declares, “While not legally obligated to reforest damaged areas, this should not prevent government from acting in the public interest by actively managing these areas. In general, we expected to find the ministry’s stewardship activities to be guided by its immediate and long-term timber objectives, and to be aligned with its established silviculture needs. Because the ministry does not have clear timber objectives and outcomes at the provincial level, it cannot demonstrate that it is applying sufficient strategies and programs to achieve these objectives and outcomes.”

BC Timber Management

In drafting its report, the Auditor General’s office concluded that:

• The Ministry of Forests, Lands and Natural Resource Operations has not clearly defined its timber objectives, thus the ministry cannot ensure that its management practices are effective.

• Existing management practices are insufficient to offset a trend toward future forests having a lower timber supply and less species diversity in some areas.

•The ministry does not appropriately monitor and report its timber results against its timber objectives.

The report recommends that the ministry:

1) develop a plan for directing forest stewardship that establishes clearly defined timber objectives and stewardship principles to guide decision-making, actions, and assessment of results.

2) ensure that its investments in silviculture are sufficient to achieve long-term timber objectives, and that they align with stewardship principles.

3) ensure that restocking activities result in the establishment of forests that are consistent with its long-term timber objectives.

4) ensure that its information systems reflect actual forest conditions in priority management areas.

5) ensure that the collective and individual components of its oversight framework are sufficient to ensure the achievement of long-term timber objectives.

6) develop and implement appropriate performance measures to demonstrate progress towards achieving long-term timber objectives and report publicly on the results.

BC’s Auditor General will follow up on the status of the implementation of these recommendations in its April 2013 report.

Housing Starts, US

The US Commerce Department said Thursday that builders broke ground on a seasonally adjusted annual rate of 699,000 homes in January. That’s up 1.5 per cent from December and the highest level since October 2008. Construction began on 508,000 single-family homes last month. That’s a 1-per-cent drop from December and the first decline in four months.

Apartment building, a more volatile category, jumped 14.4 per cent. Single-family home construction rose in each of the final three months of last year, bringing the pace of those starts to the highest level since April 2010.

Building permits rose 0.7 per cent.

Authorisations for single-family homes in January were at a rate of 445,000; this is 0.9 per cent above the revised December figure of 441,000. Authorizations of units in buildings with five units or more were at a rate of 208,000 in January.

US Housing

The number of homes in the foreclosure inventory, meanwhile, stood at 1.4 million at the end of 2011, down 8.4 per cent from a year earlier, according to a report from data firm CoreLogic released February 8. The 2011 level represents 3.4 per cent of all homes with a mortgage.

For the month of December, the number of completed foreclosures fell to 55,000, from 57,000 in November. The share of borrowers nationally who were 90 days or more delinquent on their mortgage payments slipped to 7.3 per cent in December, from 7.8 per cent in the same month in 2010.

“This is the first time in a year that REO sales [of properties owned by a lender] have outpaced completed foreclosures and part of the reason for the decrease in the foreclosure inventory,” said Mark Fleming, chief economist with Corelogic. There have been about 3.2 million completed foreclosures since the start of the financial crisis in September 2008.

Quarterly Reports

West Fraser Timber Thursday reported earnings after discontinued operations of $6 million on sales of $650 million in 4Q 2011, and earnings after discontinued operations of $73 million, on sales of $2,762 million for 2011. In 4Q, West Fraser Timber reported an operating loss of $30 million in its lumber operations due to weaker prices for lower-grade SPF lumber and wider-dimension SYP lumber and reduced shipments.

Universal Forest Products reported net sales Wednesday of US$422.0 million for 4Q 2011, up 11.4 per cent over 4Q 2010 net sales of US$378.7 million.

Financial Results

For 4Q 2011, Universal saw a loss of US$1.7 million, compared to 2010 4Q earnings of US$124,000.

Western Invests

Vancouver, BC’s, Western Forest Products announced Thursday the first project in its capital plan; a $16 million investment in the Saltair Sawmill in Duncan, BC, on Vancouver Island.

Saltair, built in 1972, converts coastal mid-size logs into high value specialized lumber products in Hemlock, Douglas fir and Western Red Cedar. This capital project will make Saltair the largest single line sawmill on the coast of BC and will provide upgrades to the edgers, stacker and sorters, says the company statement. The upgrades will increase production by approximately 15 per cent, lowering the per unit cost of production, and improving competitiveness with global producers.

Interfor Announces . . .

International Forest Products, based in Vancouver, BC, announced Wednesday that Sandy Fulton, Senior VP, COO, has decided to retire from the Company effective February 1, 2012. He will continue to work with the Company on a consulting basis to oversee capital projects including the rebuild of the Grand Forks, BC, mill which is currently underway. Mr. Fulton joined Interfor in 2004 as Senior VP, US Operations and was promoted in 2007 to his present position.

February 22, 2012

British Columbia Silviculture Practices

A posting on the News and Media page of the Western Silviculture Contractor’s Association (WSCA) website dated December 23, 2011, describes that agency’s annual conference as “WSCA 2012 Conference Promises Content and Controversy.” Controversy was indeed had, with commentary flying wild and free at various media outlets this week.

Held in Kamloops, BC, February 1 to 3, the conference covered a wide range of topics, including: provincial silviculture costs and rates; silviculture workers’ opinions on unionizing; updates from BC’s Minister of Jobs, Tourism and Innovation, Pat Bell; the latest news about China; and a speech by provincial NDP leader Adrian Dix. There was also an update on the Forest Practices Board’s (FPB) special report on the Not Sufficiently Restocked (NSR) forestlands of BC.

Please refer to the May 6, 2011, and July 29, 2011, issues of your Madison’s Lumber Reporter for background on this extremely complex issue.

Due to increasing levels of noise in the mainstream media about BC’s NSR, its definitions, and what the timber inventory numbers actually are, the FPB in September announced it was preparing a special report on the issue.

Continuing from a previous investigation, released in November and revised in December, 2011, under the title “Reporting the Results of Forestry Activities”, the Board concluded that, “we do not have confidence that the forest ministry can adequately describe the current condition of the managed forest or track changes in its condition into the future.”

Continuing Discussions of NSR

On page 12, that report lists a series of recommendations for the RESULTS (REporting Silviculture Updates and Land status Tracking System) database, that:

1) the BC government immediately implement a reporting system on roads outside of cutblocks;

2) the forest ministry should study and re-design the current status of reporting under section 86 of FPPR;

3) the forest ministry should find less expensive ways to develop and maintain the reporting system, and;

4) until recommendations 2 and 3 are acted upon, the forest ministry should implement a comprehensive quality control system for reports filed.

The RESULTS database is the most recent incarnation of a decades-old system for reporting information about silvicultural activities and obligations, and changes in land status resulting from forest management, according to the FPB. The forests ministry uses the RESULTS database to derive net NSR area.

Madison’s spoke to Marvin Eng, Manager, Special Investigations, at the Forest Practices Board, who gave a presentation at the WSCA conference, to provide a progress report on the current project.

“We are nearly finished the first phase of a project that we expect to complete in spring,” explained Eng in a phone interview. “In this first phase the FPB focussed on getting the facts, specifically: What is NSR?, and How much do we know about the amount that is out there? Once that is done, in phase 2, we will move on to examining the strategic issues around the topic.

“One issue is that we are working with definitions and types of NSR that were very fitting 25 years ago, when it was a common forest industry practice to cut down trees but not replant. The RESULTS database keeps track of industry’s obligations. The problem now is that there is an enormous and rapid increase in the amount of trees that have been killed [by natural disturbance], and keeping track of that is very difficult. We can only roughly estimate the amount of net NSR land, and that it might be approximately 2 million hectares.”

Eng detailed further, “It is not officially NSR until someone has gone out to do surveys, and declares it so. What we do know is the existing 500,000 hectares of rolling NSR that the industry has a legal obligation to reforest. We also know there is another 220,000 hectares of land that the ministry has surveyed and declared as actual NSR. But when it comes to what potentially could be NSR, due to things like recent beetle and fire damage, the province has not gotten around to surveying most of it. If that work were done, we would know how much would be NSR.

“We want to make clear old definitions and identify poor information of the past so the province can move on with getting a clear idea of what is out there,” concluded Eng.

While encouraging, the pace of work seems maddeningly slow when — with each passing year — provincial data on this very important natural resource gets increasingly inaccurate. What is the forest products industry meant to do a year from now when lumber demand recovers to 2004 levels and logging resumes in earnest, but the government itself does not know how much merchantable timber is out there?

Madison’s enlisted the help of Anthony Britneff, retired BC forester and outspoken advocate of immediate and accurate assessment of BC’s NSR for more information.

“From the perspective of the public, the owners of 55 million hectares of forested land, the debate needs to move on from estimating the extent of net NSR to issues of public policy addressing what is to be done about it,” explained Britneff to Madison’s in a phone interview and by email. “The fact is that the present order of magnitude of the net NSR area [the approximately 2 million hectares estimated by the FPB – ed] may be approximately three times the net NSR figure reported for TSAs by the ministry in 1984 when it stood at 738,000 hectares. The size of that area was so large that it precipitated a crisis in forest management and a forest policy challenge of the first order. The federal government responded with funding for tree planting: $457 million from 1985 to 1995. In response to the present challenge, having cut reforestation funding by 90 per cent in 2002, the only provincial government response has been to restore funding for reforestation to half of what was available before 2002.

“In its annual reports, the ministry reported on gross NSR up to and including fiscal year 2000/01 when it stood at 2.762 million hectares. In 1984 the comparable gross NSR figure reported by the ministry was 3.387 million hectares. Today I estimate that the gross NSR are may be as much as 9 million hectares. Net NSR speaks to the sustainability of the timber resource but not to the forest as a whole. Gross NSR speaks to the sustainability of the whole forested land base, all those forested areas that conserve and protect other forest values than timber.

“Third-party certification of BC’s public forests for sustainable forest management is over 53 million hectares, not just the 23 million hectares of the timber harvesting land base. Therefore to have the full extent of NSR (meaning: gross NSR) is an important indicator not only of sustainability but also of the availability of future timber supply.”

It seems the crux of the problem is that the province really doesn’t have the inventory at the appropriate level in either area surveyed or its timeliness to generate useful figures. What we do have is a lot of estimates based on surmises compounded on assumptions derived from inferences, and so on.

What Madison’s wants to know, and surely the BC forest industry does as well, is: how long is it going to take to conclude discussions about how bad the numbers actually are, and to settle on definitions and to reach agreement on how inaccurate the scope of data currently available is? Let’s just agree that its bad and get on with things!

In speaking with these various agencies and government departments, Madison’s is getting an increasingly uncomfortable feeling that the conversation is more about counting the pretty trees than in making sure the right amounts of the most viable of these trees are available for harvest. Of course we need to count the pretty trees, but it is not the act of counting that is important. The need rests on the information which will be used by the forest industry to harvest the timber both sustainably and in a way that is most fiscally rewarding to the forest companies.

They are in the business of making and selling lumber after all. Agencies and government departments exist to streamline and facilitate that primary process. Matters of who is right, what do we mean by that, how do we count that, and so on, should be resolved in the quickest way possible so the actual work can finally be done.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview takes a look at the latest financial results for US west coast timber companies with both timberland holdings and some manner to solid wood production. 2011 log export statistics for Washington State, Oregon, and British Columbia are also examined.

Contact us any time for a subscription.

Canada Housing Starts, Building Permits

Housing starts in Canada decreased by 1 per cent in January 2012 to an annualized pace of 197,900 units from the unrevised 199,900 pace reported in December 2011, according to the Canadian Mortgage and Housing Corporation Wednesday.

The overall decline in housing starts was due to a 7.8 per cent decrease in the urban singles component, to 64,900 annualized units, a complete reversal of gains seen in the previous two months. Urban multiple-unit starts followed December’s outsized 13.9 per cent surge with a more modest 0.4 per cent increase, to 111,700 annualized units, while rural starts jumped 16.4 per cent in the month to 21,300.

Housing Starts, Canada

The CMHC report showed the seasonally adjusted annual rate of urban starts fell by 2.8 per cent to 176.600 units. Multiple-unit urban starts, which include condominiums, eked out a 0.4 per cent gain to 111,700 units.

Other data, released by Statistics Canada on Tuesday, showed the value of building permits taken out by contractors in December soared to a 4-1/2 year high thanks to a hot condo market in Ontario.

Canadian builders finished the year strongly, with their permits values up 11 per cent in December from November, said StatsCan.
The total building permit value of $6.8 billion for the month, was the highest level since June 2007.

Housing Starts, Japan

Japan’s December housing starts were at 69,069 units, a 7.3 per cent drop compared to December 2010, according to the Japan Lumber Reports.

December’s seasonally adjusted annual starts were 783,000 units, 5 per cent less than in November.

Japan Housing Starts

Total Japan housing starts for 2011 are also in, acording to the Ministry of Land, Infrastructure and Transport, says the Japan Lumber Reports.

2011 housing starts for Japan were 834,117 units, a 2.6 per cent increase over 2010. Total floor space rose by 3.4 per cent, to 75,355,000 square metres. New condominium building in the Tokyo metropolitan region, which increased by 17,500 units, was largely responsible for the increase.

Total condominium starts for 2011 in Japan were 116,755 units, a 28.9 per cent increase over 2010. Detached units built for sale were 116,789, 5.8 per cent more than 2010 and a two-year consecutive increase.

New construction of wood-based units were at 464,837, a 1 per cent jump over 2010 and representing 55.7 per cent of all new building.

New 2×4 units were 98,248, 2.2 per cent more than in 2010.

Although total starts increased for two straight years, new owners units remained the same as in 2010 and new rental units fell. Rental unit building dropped by 4.1 per cent compared to the previous year, three consecutive years’ decline.

Japan’s Ministry of Land said the housing start increase in July and August 2011 occured due to government incentives like the eco point system. In the following months, home building dropped, says the Reports.

Mercer Swoops in on Fibrek

In a deal announced Friday, Vancouver, BC’s, Mercer International has entered into a support agreement to acquire all of the issued and outstanding common shares of Fibrek by way of take-over bid.

The agreement terms are for an offer price of $1.30 per Fibrek common share payable in cash, Mercer common stock, or a combination of cash and Mercer common stock. This offer represents an 81 per cent premium over the closing price the day before the announcement of the unsolicited bid of Resolute Forest Products (formerly AbitibiBowater Inc) and a 30 per cent premium over Abitibi’s unsolicited bid.

Mercer’s Fibrek Offer

The deal would value the kraft pulp producer at about $170 million, compared to Resolute’s $130 million.

Fibrek’s Board of Directors has unanimously determined that it would be in the best interests of Fibrek.

Mercer’s $1.30 a share offer represents a 15 per cent premium to Fibrek share prices at Thursday’s close, and will give Mercer access to three mills with a combined annual production capacity of 760,000 tons, helping it raise its output capacity by 50 per cent.
Fibrek shares ran up 18 cents, or almost 16 per cent, to $1.31 in early Friday trading on the Toronto stock market, while Resolute shares were up six cents at $15.19. Mercer shares were down 24 cents to US$8.01 on the Nasdaq.

Fibrek’s shareholders can choose to opt for an all cash deal, a stock deal to get 0.0903 of a Mercer share for every one Fibrek share, or a cash-and-stock deal where they could get 54 cents in cash and 0.0903 of a Mercer share in stock for every share they hold.

Burns Lake Sawmill to Reopen

Sheraton Holdings, a subsidiary of Comfor Management Services based in Burns Lake, British Columbia, will resume sawmilling operations at its facility east of Burns Lake next month.

The sawmill, which produces a variety of specialty products for domestic and foreign markets, is slated to reopen in March after being closed for more than a year due to poor market conditions. The resumption of milling operations will create between seven and nine full-time positions in a community hit hard by the recent fire at Hampton Affiliates’ Babine Forest Products operation.

“Our decision to reopen Sheraton was based on sound business principles,” explained President Quinten Beach in a company statement. “Improved demand for some of Sheraton’s traditional products, coupled with some other developments in the industry, have made if feasible to reopen the company at this time.”

“Community Futures Nadina has provided Sheraton with a low interest loan to cover anticipated cash flow shortages during the start-up phase, and Hampton Affiliates has offered to sell Sheraton the profile of log required for its operations,” Beach said. ”

February 15, 2012

Timberland Investment Summit

A west coaster travelling to New York City at the end of January usually has to reach into the deep, dark recesses of their closet for that generally unused big winter coat, hat, scarf, boots etc. Not this year! Mild, balmy, spring-like weather blessed the attendees of IQPC’s 10th Timberland Investment Summit. Dare it be said; the weather was beautiful.

Having grown up in Ottawa, ON, Madison’s feels compelled to point out that there is no such thing as no winter in the east of North America. This mild winter season weather so far can only mean a slam of truly cold temperatures and snow, possibly snowstorms, before spring arrives. But, for now, all are just enjoying the warm sun while it stays around.

Conference attendees from around the US and the globe, plus a few Canadian representatives, immersed themselves deeply in topics like timberland investment return rates, log values and prices, US housing starts, timber supply and demand globally, and medium-term projections for North American lumber and panel prices. This latter insight was provided by Madison’s.

IQPC 10th

Due to constraints of space, the focus today in your Madison’s Lumber Reporter will be on the US housing market, homes-for-sale inventories, and projections for future new home building. Subscribers to the bi-weekly Madison’s Timber Preview are updated on recent movements and short-term future expectations of US TIMOs and REITs.

As moderator of the first panel discussion, US Housing Market Dynamics, Jack Lutz of Forest Research Group introduced that topic by saying, “Housing is important right now because home values are dropping. A house represents a significant portion of wealth for the average US citizen. US home building consumes 20 per cent of the world’s softwood lumber, and another 10 per cent goes to other US uses for wood.”

Danielle DiMartino-Booth of the Dallas Federal Reserve insisted that her comments be off the record, unfortunately. Booth provided some very sobering statistics and analysis at the IQPC 9th Summit in Vancouver, BC, in June, 2011. In summary, while DiMartino’s analysis this year was somewhat less negative than last, it was by far the least encouraging of all speakers in terms of the recovery of US home building numbers and the scope of that recovery when it does occur.

The next speaker, Joseph Bench of IDB Bank, explained that the near-term forecast for new building in the US is all about multi-family units.

“Home ownership rates are at 66 per cent, and rents continue to rise. Rental rates are currently responsible for the 40 per cent increase of US CPI.

“However, iShares of the home construction industry, a leading indicator of housing starts, hit bottom last year and have since rallied significantly. They now show an improvement in home building traffic.”

“The collapse in housing cost the US two million jobs, which makes the unemployment rate 8.5 per cent rather than 6.5 per cent,” explained Bench. “This, keep in mind, is with a population growth of two million per year.

“The current down trend in household formation will reverse when young people start getting work,” continued Bench. “Our latest figures, for August through December 2011, in our establishment survey — meaning business new hiring or intentions to hire — show new job growth of 670,000. And our household survey shows 1,340,000 people have become employed in that time frame.

“At the moment, while multi-unit starts are up and that increased demand is justified by higher rental rates, eventually there will be a substitution effect in favour of home buyers,” concluded Bench.

Alvery Bartlett of the Alvery Bartlett Group had a rather gloomy outlook for US macro economics.

“In terms of risk, what sits below the surface of the US economy terrifies me,” Bartlett said by way of introduction. “There is a titanic struggle between deflation and inflation, and deflation will rule. There is so much deleveraging that needs to take place, the US Federal Reserves have had the world on life support.

“Why is it so wrong to let an asset price itself?” exclaimed Bartlett.

This sentiment was echoed by analysts and economists throughout the conference, including DiMartino. Differences on the details were put aside as everyone agreed that the longer Washington tries to forestall the foreclosure process and artificially prop up the US housing market, the longer it is going to take for the US real estate market to come back to life.

“If the US economy were indeed in recovery, the GDP should be at 5.1 per cent, not 2 per cent as it is right now. This is a pathetic recovery,” continued Bartlett. “As long as there is something beneath the system, as long as the system is subject to price intervention, we really don’t know what is out there. And when interest rates are at 0 per cent, the dollar is not king anymore. Right now, cash flow is king.”

In terms of a forward-looking indicator, the entire panel agreed — and this is a very important point — that all anyone needs to do is, “watch US home builders move through their plots of land and start buying more. They are right now consciously working through their capital and will start buying more land. When that happens you will know the recovery is upon us.”

Of all the other speeches and presentations, the most worthwhile and timely for Reporter subscribers was that of Dennis Neilson, Director of DANA. Neilson, operating out of New Zealand, spoke about China’s Timber Demand Trends.

“In just one part of China right now they are building a new subdivision for 4 million people,” Neilson started off his speech with a bang. “Since 1995 China’s timber supply deficit has been more than 17 per cent, compared to GDP growth of 10 per cent. That amounts to a 160 million cubic metre shortfall in China’s timber supply annually.

“China’s log imports rose to more than 35 million cubic metres in 2010, from 17 million cubic metres in 2001. If the log export volumes of all the timber exporting counties were added together, the total would still leave a timber supply deficit in China starting in 2016.

“There has been a shift in the method of timber and lumber importing into China. Previously, players would use Chinese government agencies and simply act as representatives. Now, those same agencies are using existing successful private companies in China as a front, giving them unlimited funds but acting under their own names rather than the government’s name.

“For example,” concluded Neilson, “Through this process a large private Chinese company now holds a 19 per cent ownership stake in Conifex.”

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines a fundamental shift which is about to occur in the US between TIMOs, Timberland Investment Management Organizations, and REITs, Real Estate Investment Trusts, both of which are methods of investing in timber or in timberland.

Contact us any time for a subscription.

BC Logger Dies

Yet more bad news about safety issues for the Canadian forest products industry, after huge fires at two sawmills recently, came out this week with the death of a faller in British Columbia.

BC’s first casualty in the woods came far too early in 2012 with the death of an experienced logger Monday while falling hemlock and fir 60 km southeast of Terrace, BC.

Arthur (Art) Loring, 56, died when a tree fell on him. Loring was performing contract work for Long Shot Holdings on the day he died and was the sole faller in a work crew of four.

China’s Conifer Wood Market

Domestic demand for conifer wood in China grew rapidly during the financial crisis in 2008 despite reduced exports of manufacctured wood products, according to the Japan Lumber Journal by way of the China Wood Monthly Market Report.

The demand for conifer timber rose remarkably due to the Chinese government’s 4,000 billion RMB economic stimulus toward developments in infrastructure.

In the last five years, total imports of conifer logs to China reached 106 million m3, with the record high, of 24.27million m3, in 2010. Conifer log imports accounted for 70.6 per cent of the total log import volume into China in 2010, compared to 61 per cent in 2006.

Wood Imports, China

In terms of lumber, total conifer lumber imports to China in the past five years reached 24.27 million m3, with 9.37million m3 imported in 2010, also a record high, says the Japan Lumber Journal. Conifer lumber imports accounted for 63.7 per cent of total lumber import volumes in 2010, compared to 34.7 per cent in 2006.

Russia was previously the main supplier of the conifer logs to China, with exports to China reaching a peak of 25.39 million m3 in 2007. Russia’s log exports were seriously restricted by the 20 per cent tariff, so volumes subsequently dropped 45 per cent to 14.03 million m3 in 2010.

Meanwhile, logs imports from New Zealand, US, Canada and Australia increased substantially, says the Journal. Please see table on Page 5.

North American Timber to Japan – 2011 and 2012

At the Keihin chapter of the Japan North American Lumber Conference held January 12, Chair Mr. Enokido predicted that Japan’s timber demand will increase with the full-scale reconstruction efforts in disaster-hit areas this year, according to the Japan Lumber Journal. He specifically expressed his expectation of the use of timber for buildings that accommodate a large number of people such as schools, community centres, and public offices.

Japan Timber Demand

As for the trend for the North American lumber in 2012, Enokido predicted that the arrival and shipment would be stable compared to 2011, says the Japan Lumber Journal.

However, he urged participants to take precautions, saying that there is a possibility that there might be an impact from the decline in demands in China and decline in prices of European lumber.

The supply-demand balance for North American lumber products shows no signs of fluctuating, and the market remains stable.
In other news, the Japan Foreign Timber General Supply & Demand Liaison Conference, whose membership includes Japan Lumber Importers’ Association, Japan North American Lumber Conference, Japan Southsea Lumber Conference, Japan Russian Wood Products Association, and Japan New Zealand and Chilean Lumber Conference, has announced demand (shipping) forecasts for major imported timber for full-year 2012, according to the Journal.

According to the report, demand for logs in 2012 is estimated to be 4,557,000 cubic meters, which is lower than the estimated shipping volume for 2011, of 4,569,000 cubic meters, by 0.3 per cent.

Demand for lumber was estimated to be 6,857,000 cubic meters, which is lower than the estimated shipping volume for 2011, of 6,957,000 cubic meters, by 1.4 per cent.

Total demand for imported logs and lumber in 2012 was expected to decrease 1 per cent from the previous year to 11,414,000 cubic meters. The demand was estimated to level off or slightly decrease, though the housing starts are expected to increase.

Conifex $25 Million Financing

Conifex Timber Inc is close to raising $25 million, the company announced Thursday.

Underwriters has agreed to purchase $23.5 million worth of shares, with a further $1.5 million to be raised through a non-brokered private placement.

Both transactions are expected to close on February 16 and are subject to regulatory and stock exchange approval.

The money will “fund capital expenditures and for general corporate purposes,” Conifex said in a statement. The company is in the process of building a a $50-million bioenergy plant in Mackenzie, 186 kilometres north of Prince George, BC.

Hampton May Rebuild

A week after the Babine Forest Products sawmill in Burns Lake, BC, was destroyed in an explosion, its owners expressed interest in rebuilding, said Pat Bell, BC’s Minister of Jobs, Tourism and Innovation, to the Prince George Citizen.

Speaking in a telephone press conference, Bell said Oregon-based Hampton Affiliates, which has a 90 per cent stake in the mill, must first gain confidence in the timber supply before determining whether to start anew.

Hampton CEO Steve Zika has not disclosed the minimum amount of fibre that would be required, Bell said, and added the key is to avoid sacrificing one mill for another.

Babine milled mostly beetle-killed pine, but Bell expected a new mill could process other species.

“It would be the best of the best, and certainly be capable of running green wood,” Bell said.

Asked what may happen if Hampton decides not to rebuild, Bell said he’s “quite optimistic” that won’t be a problem, and he’s sure other entrepreneurs would step forward, according to the Citizen.

Domtar Sells Quebec Mill to Fortress Paper for $1

Domtar Corp announced Tuesday that it has signed a definitive agreement with Fortress Global Cellulose Ltd, and with a subsidiary of the Government of Québec, for the sale of its Lebel-sur-Quévillon, QC, assets. The transaction is expected to close in the second quarter of 2012.

As per the agreement, all pulp and sawmilling assets including the buildings and equipment will be sold to Fortress for the nominal sum of $1.00 and all lands related to the facilities will be sold to a subsidiary of the Government of Québec for the nominal sum of $1.00.

February 07, 2012

Softwood Lumber Agreement

The US rebuttal to Canada’s defense at the most recent arbitration under the 2006 Softwood Lumber Agreement, initially filed on December 23, has been made public. At 145 pages it is no more light reading than any of the other legal documents filed at the LCIA, the international tribunal charged with settling 2006 SLA disputes. In the rebuttal, the US Trade Representative’s Office strengthens its case against the Interior Region of British Columbia for alleged subsidies to stumpage fees in that province’s effort to harvest as much of the mountain pine beetle-killed timber as possible before its degrades beyond usefulness for lumber. The US rebuttal also answers Canada’s defense against the initial US claim and the expert witnesses report.

Please see the August 26 issue of your Madison’s Lumber Reporter for a summary of the US claim, and the September 16 issue for a summary of the expert witness report. Also please see the December 2 issue for a breakdown of Canada’s defense.

BC Arbitration Update

British Columbia’s lumber industry is awaiting the eventual LCIA ruling in large part due to the vast sums the US is requesting. In its statement of case, the US laid out a claim for penalties to be charged to BC under the 2006 SLA to a total of US$499 million.

As most people know, the 2006 SLA ended much of the softwood lumber litigation between Canada and the US but replaced the potentially refundable export duties collected by the US with a non-refundable export tax that is collected by the Canada Revenue Agency and stays in Canada.

At the Truck Loggers AGM in Victoria, BC, last week, Russ Cameron of the BC Independent Wood Processors Association (formerly the Independent Lumber Remanufacturers Association) spoke for his members and the difficulties remanufacturers face in having to pay export tax on their products despite not being tenure-holders.

Madison’s caught up with Cameron this week for further explanation.

“This trade dispute is about the adminstrative pricing of public timber harvested by tenured companies. Our members companies do not have tenure,” explained Cameron in a phone interview. “We are buying our wood fibre on the open market in competition with the Americans and everyone else in the world, yet if we have British Columbians process our home grown fibre in British Columbia, we have to pay a 15 per cent Canadian imposed Border tax when we ship our products to the US.”

It was Cameron who pointed out to Madison’s that the US request for penalty seems to have changed, to US$303.6 million from the $499 million made in the initial US claim.

“Is this a ‘back-up’ claim?” Cameron asked Madison’s. “Or has the US reduced the requested penalty?”

Yes, it turns out that they have.

In Canada’s defense the federal government claimed that if BC’s Grade 4 logs were indeed misgraded, buyers would bid more for timber stands with a significant proportion of low quality timber. Canada put forth the argument that there is no misgrading in BC and no breach of the 2006 SLA because if there were the bids for stands with a lot of Grade 4 timber would actually have been higher.

It seems the US went back to BC Timber Sales to test this notion and found it was actually true.

“BC may be recapturing some of the revenue loss from excessive Grade 4 through Grades 1 and 2 prices that are higher than they would otherwise be, due to the misgrading,” explained Zoltan van Heyningen to Madison’s in an email. “If so, the Tribunal would probably want to offset the penalty with any amount that BC recaptured through higher BCTS prices.”

So in essence the US is deducting what appears to be artificially high #1 and #2 sawlog prices from the total penalty request rather than risk having the LCIA tribunal make that calculation.

Using fictitious numbers by way of illustration, van Heyningen explained further in a phone interview with Madison’s Friday morning, “Let’s say a timber stand is 20 per cent Grade 4, which is worth $0.25 on BCTS, and a bidder would pay $5 per cubic metre for the 80 per cent Grade 1 and 2 sawlogs in that stand. So let’s say the bid for that stand would be $30,000. But actually the stand contains 40 per cent Grade 4, with no change to the quality, the bidder still pays $30,000 so in effect bid $6 or $7 per cubic metre for the remaining 60 per cent #1 and #2 sawlogs.

“The penalty should be the difference between that $6 or $7 and the $0.25 for the Grade 4 logs. If Canada was not misgrading logs the bid would have stayed at $5 per cubic metre.”

The US maintains that such a scenario could only happen if much of the Grade 4 would make the 50-50 rule. In other words, the US is alleging that those #1 and #2 sawlogs sold for $200 million more than they should have, if the Grade 4 timber had not been misgraded. That bidders knew the timber graded at $0.25 was worth more than that, and were looking for margins on the timber sale in its entirety.

Pat Bell, BC’s Minister of Jobs, Tourism and Innovation, which is also responsible for trade issues, explained to Madison’s in a phone interview, “This latest filing substantiates that the US claim is very weak. The reduction in request for damages is a function of a weak case. No one in their right mind is going to think that a party will reduce its claim if it believes it has a strong case.

“This is typical US behaviour in such matters. They start out huffing and puffing, then they ask for less as more information comes out. When they lose, the US will probably come up with more claims that they hadn’t mentioned yet.”

“This is the first time that the US is defending their softwood lumber trade claims in an international tribunal. During the softwood lumber dispute the hearings were held in US courts. Even then Canada won several times. I am very confident that Canada will win this arbitration and there will be no penalty charged against BC.”

Canada has until February 3, 2012 to file its rebuttal of this latest US document. Hearings at the LCIA in London, UK, take place in March.

2006 Softwood Lumber Agreement Extended

As expected, the United States and Canada have agreed to extend the 2006 Softwood Lumber Agreement for a period of two years. The SLA will now remain in effect through October 2015.

Sawmill Fires

Massive fires destroyed two Canadian sawmills this week. Portland, OR’s, Hampton Affiliates’ Babine Forest Products sawmill in Burns Lake, BC, was completely destroyed in a violent explosion that killed two workers and injured 19 others.

Eacom Timber’s McChesney lumber mill in Timmins, ON, was burned after a stubborn fire on the roof could not be effectively put out by fire fighters due to the close proximity of a lake on the side of the mill that was burning. There were no reports of injuries and no fatalities at this mill.

Eacom has already pledged to rebuild the Timmins mill, while Hampton is considering its options in view of the diminishing timber supply in the wake of the mountain pine beetle infestation surrounding Burns Lake.

These latest events serve to only further illustrate the importance of safety and a need for the highest vigilance on issues with sawmill environments that might cause damage or injury.

Japan Housing Starts

November housing starts in Japan were at 72,635 new units, a 0.3 per cent drop from one year ago, according to the Japan Lumber Reports.

Seasonally adjusted starts were 845,000 units, a 9.2 per cent increase over October, and the first time in three months the figure has passed 800,000.

Housing Starts, Japan

Japan’s new housing units built for sale and condominiums increased, but units built for owners and rental units declined for the third straight month, says the Japan Lumber Reports.

Owners units were there at the third lowest level and rental units were at the second lowest in record for November.

US Home Sales, Mortgage Applications

The Commerce Department said Thursday that sales of new homes in the US unexpectedly fell in December, putting the brakes on three months of increases. New home sales fell 2.2 per cent from the prior month to a rate of 307,000 annualized. The total in 2010 was 323,000, the lowest amount since record keeping began in 1963.

Meanwhile, The National Association of Realtors’ index of pending home sales, which tracks sales of previously owned homes based on contract signings, fell a seasonally adjusted 3.5 per cent in December from the previous month. The decline partly reflects a strong November, when sales hit a 19-month high.

December existing sales rose 5.6 per cent from a year ago.

US Real Estate

Still, sales of new homes rose in the final quarter of 2011, supporting other signs of a slow turnaround that began at the end of the year.

Though new-home sales represent less than 10 per cent of the housing market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to the National Association of Home Builders.

The median sales price for new homes dropped in December to US$210,300., and there was a 6.1-month supply of homes at the current rate of sales. Builders continued to slash prices to stay competitive in the depressed market.

The National Association of Realtors affordability index was at 194.5 in November, second only to the prior month’s level as the highest on record. A reading of 100 means a household earning the median income can afford a median-priced home at current lending rates.

Sales of homes in foreclosure comprised 20 per cent of all US residential sales during the third quarter, according to a RealtyTrac release Thursday.

That share is a significant decline from the same period in 2010, when foreclosed homes made up 30 per cent of residential sales, but it’s still a far cry from levels seen during healthier housing markets when foreclosures comprised less than 5 per cent of sales.
In total, 221,536 distressed properties were purchased during the quarter, down 11 per cent from the previous quarter and 5 per cent lower than the same quarter a year earlier, RealtyTrac said.

BC Forest Conversation

The Healthy Forests-Healthy Communities: A conversation on BC forests is a non-partisan, volunteer supported initiative to provide an opportunity for experts, communities and concerned citizens to inform decision-makers of their views and concerns regarding management of BC forests.

The results from expert papers on current and future forest management, and of Community Dialogue Sessions identifying community issues and suggested actions have just been released.

The report summarizing the results, conclusions and recommendations generated from input of 37 experts on aspects of future of BC forests and the views communities provided through 20 Community Dialogue Sessions has been posted on the HFHC website http://bcforestconversation.com

The report concluded:

    • Communities, experts and professionals are concerned about the future of BC forest lands
    • The concerns are shared by a wide range of stakeholders and First Nations across the Province, including a move away from a current short-term forest industry economic focus to long-term stewardship practices directed at meeting community needs
    • Community issues are consistent throughout BC and communities want:

      o More influence on local forest lands decisions
      o More information on the status of local forest lands
      o More diverse economic development opportunities from forest lands

      o More sustainable integrated resource management

o Better monitoring and assessment of forest lands management
o A high level of stewardship on private forest lands

  • A forest lands vision and an evaluation framework are required to guide forest management
    related legislation, regulation, policies, practices and plans
  • Experts are of the opinion more needs to be done in forest management to achieve the draft BC
    forest lands vision and deliver on the needs of communities over the long-term
  • Innovative solutions to twelve (12) key challenges arising from the expert opinions are needed.

The report recommends that political parties engage in dialogue with communities and concerned citizens, and that government review legislation and adopt the requirement for a forest lands vision to guide policy .

February 02, 2012

Truck Logger AGM

The always raucous Annual General Meeting of British Columbia’s Truck Loggers Association took place over three days this week in Victoria, BC. Attendees included coastal lumber producers, log harvesters, log haulers, equipment suppliers, agencies, and high-ranking government officials, TLA presentations and exhibitors, all of whom never fail to impress.

This year’s speakers included: Patrick Moore, a founder of Greenpeace; BC’s Minister of Jobs, Tourism and Innovation, Pat Bell; Don Demens, CEO of Western Forest Products; Peter Lister, Manager of Lumber Manufacturing Technology FPInnovations; BC’s Chief Forester, Jim Snetsinger; Rick Jeffery, CEO of the Coast Forest Products Association, and more.

Kicking off the first session after lunch on Wednesday was Moore with a great speech on global sustainability. Madison’s asked those nearby what they thought would have happened 15 years ago if an organization such as the TLA had invited a staunch environmentalist as keynote speaker. Much rolling of eyes and guffaws ensued. How things have changed, and in a good way!

69th Annual

Moore broke down the political climate in North America in regard to ecology issues, and explained some of the hurdles and successes experienced by various industries. He laid out the distinction between terms like ‘sustainable’, ‘clean’, ‘renewable’, and ‘green’ and the level of importance of each to the environment. The last of these, it turns out, “has no definition, is purely a marketing term” explained Moore. The others certainly have their place, with ‘sustainable’ being the most relevant to the forest industry.

“Forestry is the most sustainable of all industries,” said Moore, “that supply us with what we need every day. There is the same amount of forests in North America today as there was 100 years ago.”

A question from the floor about what the forest industry can do to offset the deliberate campaign by environmental groups to brand all use of wood, and all timber harvesting, as bad, prompted Moore to declare, “You need to spend more money on education. The forest industry is not operating in a retail mentality, its a wholesale environment. Does General Motors spend 0.01 per cent of its revenue on branding? The forest industry needs to invest in marketing and advertising to change that image.”

Pat Bell revealed the latest lumber exports statistics from BC to China, which — at 4.28 billion board feet and $1 billion to November 2011 — have surpassed levels for all of 2010. Bell also referred to “a major China company coming to set up a head office here in BC,” stating that details will be forthcoming in about three months.

Otherwise, the main new information provided by Bell was his assertion that the Jobs Ministry would like to see more use of “the fibre resource coming from north-central Vancouver Island”, that there is potential for a “high speed second growth mill.”
In his own speech the next day, Rick Jeffery responded to this suggestion with, “it is unrealistic to expect that log costs will be reduced” in order to allow such a mill in Courtenay-Comox to be productive.

Don Demens released details of some very exciting plans for Western Forest Products.

“Western’s business strategy is to be globally competitive in forest products,” said Demens. “We have a $220 million investment plan for the next two years, $125 million of which will be in new capital or mill upgrades. We will be getting all eight of our mills reopened, with three of those becoming Hemlock mills. We are going to improve the operating efficiencies of our existing mills and put our employees back to work.”

Due to the many challenges of running a lumber business on the coast, from difficult terrain to transport costs to the fibre basket and others, Demens said, “we must have critical mass, scale is important. Western has to produce sufficient volumes to mean something to our customers.”

Demens went on to explain that 55 to 60 per cent of Western’s product goes offshore as breakbulk, that 40 per cent of log sales go to domestic buyers and that 10 per cent of log sales are “. . . exported offshore to capture margin.

We harvest our entire profile, and export 1 cubic metre of logs for every more than 2 cubic metres that go to our mills.”
Demens also said that 5 or 8 per cent of Western’s Cedar volume now is sent to China, which ordered no cedar at all just a few years ago.

The next speaker was Peter Lister, with some great data on developments in uses for engineered wood and demand for it from the US.

“In 2006, 39 per cent of BC’s softwood lumber went into US single family housing, in 2010 that amount declined to 13 per cent,” Lister explained. “The smallest percentage goes into non-residential US construction, therefore this is where the huge opportunity is.”

Lister then provided updates on light wood frame construction for six-storey buildings, post and beam construction and its cousin glulam, cross-laminated timber (CLT) and hybrid construction. These last two are rapidly becoming very popular with countries all over the world, especially CLT because it involves “prefabricated components that can be dropped into place” which facilitates extremely fast building. The eight-storey CLT building in London, England, went up in 28 days last year.

[insert FPInnovations pie charts of US demand for BC wood 2006 – 2010]

Jim Snetsinger’s presentation also covered a lot of data. The topic that generated the biggest impact was his declaration of the “regeneration success of the coast. Over 30 per cent of the coast’s Timber Harvesting Land Base is old growth, meaning more than 250 years old. As well, there is excellent regeneration, there have been no compliance issues with operators, and there is an excellent second growth coming online. There will continue to be a transition to second growth harvest, which started in 1995, and is now about 34 per cent of the coastal harvest.”

Rick Jeffery focussed on new markets for BC wood, specifically China.

“China is now the second-largest global consumer of wood products,” said Jeffery. “In 2007 China imported 6.6 million cubic metres of wood products at a value of $170 per cubic metre, in 2011 those imports were 20 million cubic metres at $230 per cubic metre. Currently China has a wood deficit of 100 million cubic metres, by 2020 that figure will be 250 million cubic metres. Canada is China’s largest provider of wood products.”

As for India, Jeffery explained that country has the same kind of infrastructure and supply chain issues, and lack of a wood culture, as China did ten years ago.

“India has an 80 million cubic metres per year wood deficit, and growing. Canada is at a $50 per cubic metre shipping disadvantage to India compared to Australia. But with $12 billion per year in annual non-residential wood demand, or the entire production of BC in a year, there is plenty of opportunity for growth for BC wood producers.”

Jeffery also said, which has already been mentioned in Madison’s several times, that the demand for wood in India is for high value product. Shop grades, mouldings, trim, flooring, often stained and cut to size, as compared to the structural framing lumber preferred by the US and by China.

US Forest Service Grant

The US Forest Service announced Thursday that it is granting US$52.2 million for 17 conservation and working lands projects across the US in 2012.

The Forest Legacy Program has protected 2.2 million acres through public-private partnership using federal and leveraged funds of more than US$562 million. The program works with private landowners, states and conservation groups to promote sustainable, working forests.

Roughly 57 per cent of the nation’s forests are privately owned yet the country has lost 15 million acres of private working forests in the last 10 years with an additional 22 million acres projected to be at risk from development, wildfire and other threats in the next decade.

Housing Starts, US

Housing starts in the US dropped 4.1 per cent to a 657,000 annual rate last month, reflecting a slump in multifamily dwellings, Commerce Department figures showed Thursday. Building permits, a proxy for future construction, were little changed.

There were 606,900 homes started in 2011, up from the 587,000 in 2010 and reflecting gains in multifamily construction.
Permits fell 0.1 per cent to a 679,000 annual rate in December.

The results were considerably better than a year earlier, with permits up 7.8 per cent and starts spiking 24.9 per cent.

US Housing Starts

Housing starts in fell in three of four regions last month, led by a 41.2 per cent decline in the Northeast and a 17.6 per cent drop in the West.

New projects involving multiple housing units helped sustained business at the end of 2011 as foreclosures turn more Americans into renters. Work on multifamily homes, such as apartments, townhouses and condominiums, fell 20.4 per cent to 187,000 in December. For the year, multifamily starts totalled 178,300.

Construction on single-unit dwellings increased 4.4 per cent to a 470,000 rate in December from the prior month, the highest since April 2010. At the same time, demand for single-family homes has waned after three years with near 9 per cent joblessness and a pipeline of distressed properties.

The strong finish to 2011 enabled the industry to surpass 2010 totals in both starts and permits.

Homebuilders have signalled the new year will bring greater prospects than 2011.

Confidence among US homebuilders rose in January to the highest level in more than four years as sales and buyer traffic improved, according to the National Association of Home Builders. The Washington-based group’s index of sentiment rose to 25 this month, reaching the highest level since June 2007. Nonetheless, readings lower than 50 mean more respondents still said conditions were poor.
Builders are struggling to compete with deeply discounted foreclosures and short sales on foreclosed homes. The median price of a new home is about 30 per cent higher than the median price for a re-sale.

BC Lumber Export Statistics to China

British Columbia has set a new record for lumber exports sales to China. With 4.28 billion board feet as of November 2011, exports to China have already surpassed the province’s 2008 goal of exporting four billion board feet in 2011.

BC Lumber Exports, China

British Columbia’s export sales to China last year, with December still to report, are already up 74 per cent from 2010 and 200 per cent from 2009. Sales to China, now with a value of more than $1-billion, make up about 29 per cent of all BC lumber exports. Only the US, at 42 per cent of exports, is a larger market.

In 2008 BC was shipping about 700 million board feet of lumber to China. The three-way market development program between the province, federal government and industry targeting China and other growth markets for BC forest products is paying off. Since 2003, when the program started in China, BC sales have surged over 1,300 per cent and more than tripled in the last two years.

The latest trade numbers for November 2011 show BC’s softwood lumber exports to China were worth $84 million, pushing year-to-date for the year sales past $1 billion, an almost 80 per cent increase compared with the same period in 2010.

Wholesale Trade, US

Overall wholesale prices in the US slipped 0.1 per cent from November, confirming the trend of easing inflationary pressures in the second half of the year, according to data from the Labor Department.

Food and energy prices both lost 0.8 per cent in the month, while wholesale prices for all other goods pushed 0.3 per cent higher.

Year-on-year, wholesale prices were 4.8 per cent higher, down from the 7.1 per cent annual pace reached in July after a global surge in a wide range of commodity prices.

Federal Reserve data on industrial production showed an 0.4 per cent increase in December from the previous month, driven mainly by the manufacturing sector. The year-on-year expansion was 2.9 per cent.

CN Derailment

A CN Rail clean up crew was on the scene Thursday morning after 11 cars jumped the strack near Canfor’s Northwood Pulp Mill at about 8:30 pm Wednesday, according to the Prince George Citizen.

The cars were carrying lumber and pulp products and there were no injuries, CN Rail spokesperson Kelli Svendsen said.

Earlier this week, CN Rail advised customers it will be running shorter trains between Jasper and Prince George due the effects the extremely cold weather can have on train braking systems.

Svendsen neither confirmed nor denied that the weather was a factor.

“Every relevant factor will be evaluated as part of the investigation,” she said.

The road into Northwood was unaffected and the rail line was expected to reopen Thursday night.

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