Lumber News Archives: June 2011

Lumber News Archives: June 2011

India – Canadian Lumber Imports; Madison’s Timber Preview ; Housing Starts, US ; Alberta Wildfires ; Softwood Lumber Check-Off Approved ;Nanotechnology ; Madison’s Investment Rx ; Canada Housing Starts ; Housing Starts, Japan ; Early Wildfire Season ; Wilkins Cables Leaked ;First Nations ; Madison’s Timber Preview ; Japan Reconstruction Update ; US Construction Spending ; Wood Framed Six Storey Construction;Biomass Fuel ; Statistics Canada Correction ; US Pending Home Sales, Economic Indicators ; Canada Manufacturing Jobs, Economic Growth ; Finland Paper Strike Settled ;

June 27, 2011

India

Arbitrary phytosanitary restrictions on Canadian woodcoming into India were removed in January, eliminating the requirement for fumigation in addition to heat-treatment for Spruce-Pine-Fir. As expected, now that the hungry wood market in India is as available to Canadian producers as it always has been to Americans, the volume and value of British Columbia’s lumber exports to that country have skyrocketed. Please see the January 14, 2011 issue of your Madison’s Lumber Reporter for details on the bureaucratic simplification.

Trade With Canada

The Canadian and Indian governments have been working hard this year to open bilateral trade between the two countries. With its population projected to reach 1.5 to 1.8 billion by 2050, the importance of India as a global customer of goods can not be discounted. Ed Fast, Minister of International Trade and Minister for the Asia-Pacific Gateway, Monday underscored the Canadian federal government’s aim to complete free trade negotiations with India in 2013. In November, Canada and India launched the first round of negotiations toward a comprehensive economic partnership agreement.

In 2010, bilateral trade between Canada and India increased by 73 per cent since 2004, to a total of $4.2 billion. Last year, two-way direct investment between these countries was more than $7 billion. Canadian exports to India increased by 142 per cent over this period, reaching nearly $2.1 billion in 2010. A recent Canada-India joint study estimated that a free trade agreement between the two countries has the potential to boost Canada’s economy by $6 billion-$15 billion annually.

In confirmation of these general merchandise statistics, the value of BC’s lumber exports to India for January through April 2011 increased by almost 80 per cent over the same time period in 2010. In 2011, BC shipped $3.37 million in lumber to India through April, while in 2010 these shipments were only $682,000, according to the latest figures available from Forest Innovation Investment. For the same time period in 2010, the volume of BC’s lumber exports to India grew by more than 81 per cent. BC exported 3,295 cubic metres of lumber to India from January through April 2011, and 17,923 cubic metres for the same time period this year.

While these figures may seem small, it is important to examine not the volumes but the rate of increase. This is the same as the situation that unfolded when BC lumber started flowing into China. At first the volumes were tiny compared to former quantities of lumber moving into the US, but three short years later China is the second-biggest importer of Canadian wood by volume.

The difference between the now-established Chinese lumber market for BC wood and the newly-forming Indian one is that the Chinese are value buyers who are generally looking for the least processed components. Logs are preferred, and if not available Chinese customers will take bare 2×4’s in the lowest grades possible, to be used in wood framing to a certain degree, a lot of which is for concrete forming and infill walls so aesthetics are not relevant. Otherwise the lumber is destined for pallet and crate making, or is remanufactured down into secondary components.

Indian customers, on the other hand, are not at all interested in wood framing. India does not have a wood-building culture to speak of. Neither did China at first, but India is not in a similar residential building growth-spurt as is China, In addition, China made significant changes to its building codes after the 2008 earthquake. Concrete roofs are out, currently being replaced by peaked wood roofs made from trusses using BC wood. Indian customers, on the other hand, demand wood for trims and finishing. The highest grades are preferred.

Shop lumber, mouldings, flooring, panelling and siding are all what is most desired in India. Customers are demanding quality, and are not satisfied with laminates. Indian importers are indicating they prefer the wood to be finished. Sanded and planed of course, that is normal, but also stained and otherwise with an improved aesthetic.

What this means is, that while the quantity of BC lumber imported into India may not as quickly reach the levels currently going to China, the value of that wood however will be much higher. Rather than #3/Utility grade WSPF 2×4’s at about US$200 mfbm, customers in India desire good looking real wood finishing worth more than double that.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines recent changes to the state of TimberWest Forest Corp, problems with Sino-Forest’s corporate reputation, and glowing 2010 year-end reports by four of Japan’s major building products companies.

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Housing Starts, US

US housing starts rose 3.5 per cent to a seasonally adjusted rate of 560,000 from an upwardly revised 541,000 in April, the US Census Bureau said Thursday. Permits, an indicator of future construction, hit their highest level since December, rising 8.7 per cent to 612,000.

Housing starts were 3.4 per cent below their level of May 2010, and the monthly increase was still less than half the steep drop seen from March to April, in a sign that the glut of foreclosed homes continues to discourage building.
On Wednesday, a survey from the National Association of Home Builders showed confidence in the housing market fell to its lowest level in nine months.

Home Building, US

Meanwhile US homebuilder confidence has seen a notable deterioration in the month of June, according to a report released by the National Association of Home Builders on Wednesday, with the homebuilder confidence index falling to a nine-month low.

The report said the NAHB/Wells Fargo Housing Market Index fell to a reading of 13 in June from a reading of 16 in May. The 3-point drop by the index came as a surprise to economists, who had expected the index to remain unchanged at 16.

The NAHB noted that all three components of the housing market index decreased in June, contributing to the unexpected drop.
The component gauging current sales conditions fell to 13 in June from 15 in May, while the component gauging traffic of prospective buyers fell to 12 from 14.

Additionally, the component gauging sales expectations in the next six months fell to 15 in June from 19 in the previous month, matching its record low.

Alberta Wildfires

A massive wildfire in northern Alberta is proving to be maddeningly resilient. As of Friday morning, the blaze covered almost 600,000 hectares.

While rains have doused some of the Richardson back-country blaze near Fort McMurray, another edge of the fire has grown. Crews are doing whatever they can to contain the fire. A DC-10 jet tanker from California is being used to drop 45,000 litre loads of fire retardant. And ground crews using bulldozers are beefing up the fire guard to protect a telephone communications site that provides service to Fort Chipewyan.

Stubborn fires are also buring in New Mexico, Colorado, Arizona, and Florida.

More Wildfires

The Alberta The wildfire continued raging Friday morning in the Richardson backcountry, about 60 kilometres north of Fort McMurray. It started on May 15 and has grown to the size of Prince Edward Island. A second firefighting crew from Nova Scotia is heading to northern Alberta to help with the battle.

Also as of Friday morning, winds were expected to gust to 35 mph Along the New Mexico-Colorado border in the afternoon, pushing flames from one blaze toward breaks carved into the rugged landscape by bulldozers. Fire officials said the wind might prevent water-dropping helicopters and air tankers from helping ground crews.

The fire has raced across more than 27,000 acres along the New Mexico-Colorado border, burning eight homes and six other structures and forcing the evacuation of several hundred people in the mountains near Raton, NM. Most of the residents have been allowed to return home with the exception of those near the eastern flank and some to the northwest of Raton.

More than 800 firefighters were assigned to the blaze. In addition to the winds, they were bracing for a hot and dry weekend.
In eastern Arizona and western New Mexico, thousands of firefighters continued to battle what is the largest wildfire in Arizona’s recorded history. The Wallow fire has consumed 773 square miles, or 495,016 acres.

Containment on the Wallow fire remained at 33 per cent Friday, but more winds were predicted through the weekend, with gusts of 50 mph possible.

About 2,400 people remain evacuated from Alpine and Greer, AZ, and smaller vacation enclaves after about 300 were allowed to return to Nutrioso, AZ, on Wednesday.

This blaze became the largest in Arizona history Wednesday, exceeding a 2002 fire that burned 732 square miles, or 469,000 acres, and destroyed 491 buildings.

In southern Arizona, winds were expected to pick up Friday and possibly ground the aircraft that have been helping battle the Monument fire near Sierra Vista. The blaze has burned 18,580 acres, or 29 square miles, and containment dropped overnight from 17 per cent to 15 per cent.

A fifth wildfire ignited Thursday in Florida’s Big Cypress National Preserve and is being fought Friday on the ground and from the air, the National Park Service says.

The Corral Fire flared up south of Interstate 75, near the Oil Pad Fire. Three other fires are burning north of the interstate. As of Wednesday, they had burned some 10,000 acres.

Lightning started the first four fires Monday.

Softwood Lumber Check-Off Approved

A strong majority of the US softwood lumber industry voted to approve the creation of a check-off to fund a unified softwood lumber promotion program in USDA’s referendum, which concluded on June 10.

The program aims to increase the share for softwood lumber in key building markets such as non-residential construction and overseas markets, and facilitate the development of innovative technologies such as cross-laminated timber.

Softwood Lumber
Promotion

This first-ever US national forest industry check-off takes advantage of a provision in the 1996 Farm Bill that provides the opportunity for a fair, unified, binational North American check-off program with cross-border equity with respect to financial contributions, process, and governance. Funds collected through the check-off will be used to create a promotion program targeting building industry professionals and key influencers.

The Blue Ribbon Commission for Check-off a working committee of 21 North American softwood lumber industry leaders, first met more than two years ago to ascertain the viability of a check-off program. Several factors led to the decision to pursue the option today, including eroding market share, the existence of untapped markets, and the pervasiveness of misinformation from competing products throughout the marketplace.

The research, marketing and communications program elements are expected to include clear and consistent messaging, pro-wood environmental marketing and a focus on the natural strengths, affordability and practicality of softwood lumber.

June 20, 2011

Nanotechnology

Bone grafts, food packaging material, hybrid plastics, drug delivery agents, military body armour, acetate, and gin-based edible cocktail napkins are but a few of the newest uses for nanocrystalline cellulose (NCC). Corporations, universities, and agencies around the world have made significant ground-breaking research this year on innovative uses for wood. Please refer to the December 3, 2010 issue of your Madison’s Lumber Reporter for the latest updates on cellulostic nanotechnology.

NCC offers a way of harnessing the waste products from agriculture and forestry, and can be used in development of new bioproducts to replace or supplement petrochemical supplies. By replacing just two per cent of the polymers that are now made from petrochemicals, the carbon footprint of these bioproducts can be significantly reduced. In addition to its strength and durability NCC reflects light, which makes it suitable for use in optically reflective films found on passports, credit cards and paper money. Since this material is biodegradable, carboxylated NCC can be used for targetted drug delivery by hooking its carboxyl handle to a drug.

Using Cellulose

Sappi Europe, a global producer of coated woodfree paper with a head office in Belgium, announced May 30 at the 2011 PRIMA Conference for the European paper industry that it is actively pursuing research in this developing field. “Chemical cellulose from trees, and its different forms – viscose, microcrystalline (MCC), carboxymethyl and acetate – can be used to produce everything from food and drink products, through medicines and personal care products, to the clothes we wear. Trees could well be the renewable future we are looking for – and Sappi is working toward this future through renewable forests and extensive scientific research,” said CEO Berry Wiersum.

Finland’s Stora Enso announced June 2 that it is taking a significant step forward in renewable materials innovation by building a pre-commercial plant at Imatra in Finland for the production of microfibrillated cellulose (MFC) to be used in new unique fibre-based paper and board products, barrier materials, and other potential future applications. The MFC technology project, including the Imatra pre-commercial plant, is estimated to cost approximately EUR 10 million, and is scheduled to start production by the end of 2011.

“Stora Enso’s is committed to accelerating the development of the next generation of renewable materials. With MFC we will be able to develop lighter, stronger renewable packaging materials, a lot more with a lot less. The applications of this renewable material may well extend to replacing today’s fossil-based materials such as plastics and some speciality chemicals, and aluminium – revolution instead of evolution,” explained Stora Enso CEO Jouko Karvinen.

TAPPI, a professional organization dedicated to the pulp and paper industries based in Georgia, on May 10 initiated an International Nanotechnology Division. This Division, comprised of producers, academia, government, consulting companies, and suppliers to the industry will concentrate on developments for traditional forest-based products like pulp, paper and building materials, as well as applications such as coatings, digital displays, medical implants, and more.

“When TAPPI volunteers suggested we take our nanotechnology efforts to the next level, we jumped at the opportunity to help the industry capitalize on this promising sector,” said Larry Montague, President and CEO of TAPPI. “We see the new division as a platform for helping the industry respond to the rapidly changing field of nanotechnology, especially as commercialization develops in this fast-growing sector.”

On May 31 the Wisconsin Institute for Sustainable Technology (WIST) formed a 12-member advisory board comprised of leaders from industry, business development groups and research organizations to further its existing research to make more sustainable use of natural resources. WIST is well underway on biofuels research aimed at developing a biorefinery that can be implemented in pulp and paper mills, producing renewable fuels and renewably-sourced industrial chemicals from waste sludge. The project could thus generate additional revenue and add jobs in the industry. The institute’s lab services division provides testing, analytical and research and development services to the pulp and paper industry.

In Canada, on May 30 FPInnovations inaugurated of its new nanocrystalline cellulose (NCC) research facilities for the Québec City laboratory and two new research laboratories located at Pointe-Claire, QC. The pilot plant, with an NCC production capacity of 3 kilograms per day, contains equipment based on leading edge technology that ensures a rapid transfer of research results into industrial-scale production.

Separately, CelluForce, a partnership between Domtar and FPInnovations to manufacture nanocrystalline cellulose, on June 6 announced plans to open a plant in early 2012 to make tree-based bioplastic raw materials at Domtar’s pulp and paper mill in Windsor, QC. Nanocrystalline cellulose will be produced in a large-scale commercial demonstration plant using cutting-edge technology. Please see the July, 30, 2010 issue of your Madison’s Lumber Reporter for details on this partnership.

“This small pilot plant will be producing the largest quantity of NCC in the world. We are building the future of the forest industry by focussing on the research and development of new applications, innovative products and new markets,” declared Pierre Lapointe, President and CEO of FPInnovations. “The CelluForce team will benefit from a nanomaterial of high quality, which is stable, abundant and unique in the world. With the combined strengths of FPInnovations researchers and Domtar staff, CelluForce will continue to develop new commercial applications and new market areas for NCC.”

Cellulose has a long history of use in the pharmaceutical industry in the form of MCC for advanced pelleting systems in the delivery of drugs to specific areas of the body. Now research is being carried out on NCC crystallites, which have a very high surface to volume ratio. The large surface area and negative charge of NCC suggests that large amounts of drugs might be bound to the surface of this material, with the potential for high payloads and optimal control of dosing.

Another medical use for NCC, this one brand new, is as a replacement for pins in complicated bone fractures. Lead researcher Dr Raed Hashaikeh, an assistant professor in materials science and engineering at the Masdar Institute in United Arab Emirates, is developing bone grafts using NCC. Due to the tiny crystalline particles extracted from long chains of cellulose, which gives wood its remarkable strength, NCC bone grafts would be hundreds of times stronger than materials currently available. NCC contains calcium, phosphorous, magnesium, strontium, zinc and other ions, mimicking the composition of bone. Once set in place in the patient, the material hosts new bone cells, which have access to nutrients carried in blood flowing freely through the porous material. The new bone begins to grow within a month. After three months, the [biodegradable] scaffolding will be almost entirely dissolved, leaving new bone in its place. There is also evidence that blood vessels could form around the material as well.

Hashaikeh’s research builds on work done in bone-like scaffolding currently being developed by Dr Hala Zreiqat from the University of Sydney’s biomedical engineering department.

“This is a three-dimensional structure that not only acts as a support structure to mechanically hold loads of weight applied, but it is able to mimic native bone well enough that new bone and cells will actually grow on it,” said Dr Zreiquat. “This is something that no one in the world has done before.”

Madison’s Investment Rx

The June issue of Madison’s Investment Rx examines the softening of lumber prices through May and uses the latest solid wood production and shipment figures to assess likely movement in lumber prices this summer.

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Canada Housing Starts

Housing starts in Canada went up 2.7 per cent in May, according to figures released Wednesday by the Canada Mortgage and Housing Corporation. Canadians began building homes at an annual rate of 183,000 units in May, up from 178,700 units in April, seasonally adjusted. The growth came from an increase in multiple starts. Single starts, on the other hand, decreased.

Canada Home Building

April Canadian housing starts were revised slightly lower to 178,700 units from 179,000 units, the CMHC said.
May starts increased modestly due to an increase in multi-unit construction in most provinces and higher starts in rural areas.

This was partly offset by fewer new single-family homes, which typically have a bigger economic impact. Urban multiple starts were up by 4 per cent from a month earlier to 100,000 units, single urban starts decreased by 4.1 per cent to 61,000 units. Rural starts were estimated at 22,600 units.

Regionally, urban starts increased by 33.3 per cent in British Columbia, 13.5 per cent in Quebec, 11 per cent in the Atlantic region, and by 10 per cent in the Prairies. Ontario posted a decrease of 22.9 per cent.

Scotia Capital economists Derek Holt and Karen Cordes Woods said in a note to clients that the figures provide “some support to economic growth. However, all of the strength was in the multi-family segment as single starts declined on the month suggesting that the lift to growth will be modest. The trend remains pointed downwards as tighter mortgage regulations, record high prices and high levels of homeownership continue to limit demand for new homes, likely resulting in a more moderate pace of growth for home prices.”

Housing Starts, Japan

New figures released by the Ministry of Land, Infrastructure and Transport show that total new Japanese homes started in April were 66,757, a 0.3 per cent increase over April 2010. Seasonally adjusted rates, however, dropped to 789,000 units, according to the Japan Lumber Reports.

New condominium building rose by 11.8 per cent, and detached home building increased by 12.6 per cent, a 14 consecutive months rise.
The Ministry stated that housing starts in the areas affected by the March earthquake and tsunami were obviously impacted, specifically in the three prefectures of Iwate, Miyagi, and Fukushima, where starts fell 33.3 per cent in April after a 19.2 drop in March, says the Reports.

Japan New Homes April

In the most populated regions of Tokyo, Nagoya and Osaka, Japanese housing starts dropped by 3 per cent, 7.9 per cent, and 4.9 per cent respectively.
New wood based housing units increased by 2.5 per cent, says the Reports.

Early Wildfire Season

Fast on the heels of unprecedented tornadoes, many US states are now battling fires. Currently major wildfires raging in Arizona, Florida, Colorado, Georgia, Alabama and Alberta do not bode well for this year’s wildfire season.

Fire officials said Friday morning the 603-square-mile, or 386,000-acre, blaze in Arizona’s eastern mountains was 5 per cent contained, after helicopters and a large air tanker dropped fire retardant and ground crews lit blazes to burn up combustible materials nearby. They said among the buildings destroyed so far were 22 homes in the resort community of Greer, and five others were damaged.

Also as of Friday morning, the biggest forest fire in Alberta in sixty years, the Richardson back country blaze, is holding at 415,000 hecatres .

Wildfires

In response to the large fires burning in Arizona, the US Forest Service has deployed more than 2,500 interagency firefighters Monday to protect lives and property through a joint incident command system, and are coordinating the resources available at local, state and federal levels.

Approximately 60,000 acres are currently burning in various areas of Colorado, most of it unicorporated land, and all of it less than 40 per cent contained.

One large Florida fire west of Miami began Sunday, burned almost 30,000 acres but as of Thursday night no homes are threatened. It is about 25 per cent contained.

About 500 firefighters near the Georgia-Florida line continued Thursday to make progress keeping a massive 160,234-acre fire confined to the interior of the Okefenokee National Wildlife Refuge. That fire was 80 per cent contained as of Friday morning.

Another blaze that started near the Okefenokee’s northern edge was 70 per cent contained Thursday after burning 7,883 acres, or 12 square miles.

As of Thursday morning, Alabama Forestry Commission officials were cautiously optimistic that a wildfire that has consumed over 2,943 acres in Jefferson County is partially contained.

The fire in Alaska, north of Fairbanks, was officially sized as 17, 624 acres Wednesday, but “it’s safe to say that the fire is bigger than that,” said Pete Buist, lead information officer, to the NewsMiner Wednesday. The East Volkmar Fire near Delta Junction was listed as covering 46,880 acres but is also expected to increase.

Wilkins Cables Leaked

An embassy cable written by former US Ambassador to Canada, David Wilkins, the day the Conservatives

were first elected in 2006 has been released by WikiLeaks.The cable reads, in part, “the socially liberal core values of the opposition are more in line with most Canadians than the minority Conservatives, weakening their mandate even further. Given a relatively weak mandate and tenuous hold on power, Harper will move deliberately but cautiously to get a few successes under his belt before doing anything even remotely bold. [ . . . ]

I see a real opportunity for us to advance our agenda with the new government. I recommend early on that we look for an opportunity to give Harper a bilateral success story by resolving an irritant such as the Devil’s Lake filter system or entering into good faith negotiations to reach a solution on softwood lumber. Early success on a bilateral issue will bolster Harper and allow him to take a more pro-American position publicly without as much political risk.”

Former Cabinet Minister David Emerson, who crossed the floor to the Tories to implement the softwood lumber deal a week after he was elected as a Liberal in Vancouver, BC, is mentioned in a second Wilkins cable just after the deal was signed with then-USTR Ambassador Susan Schwab eight months later.

“I look forward to helping connect the dots with the new government so we can effectively advance our agenda,” Wilkins is quoted as saying.

After retiring from public service in 2008, Emerson now enjoys positions as co-Chair of the Prime Minister’s Advisory Committee on the Public Service and is a member of the International Advisory Council of the Chinese sovereign wealth fund China Investment Corporation.

June 13, 2011

First Nations

The difficult proposition of First Nations across Canada embarking on self-government is well underway. This reality differs wildly from one ground to the next, mainly due to varying levels of government recognized status in different regions. Significant numbers of First Nations groups in Ontario and Quebec signed treaties that are now historically binding, while in British Columbia there is a large number of First Nations that never signed away entitlement to land and the resources within it.

The move to self-government has been slow for various reasons, the most important of which is the requirement of investment by the First Nation in order to be able to capitalize on the land base. With no more funds forthcoming from the federal government, careful deliberation is necessary to determine how best to proceed with resource management and potential revenue.

And Forestry

One encouraging sign recently is partnerships being formed, not only between various First Nations but with established industry. Forestry and mining companies in particular are working together with First Nations to implement projects on traditional lands that will generate revenue for all involved far into the future.

In a new world of consultation and cooperation, toes can get stepped on. This week, central Canadian First Nations groups are holding the inaugural event of the Canadian Boreal Initiative (CBI) national speaking tour, following recent UNESCO tours of eastern Manitoba’s boreal region. On May 27, influential environmentalists and philanthropists including 39 conservation scientists, dignitaries and major media from Toronto, Chicago, New York, and Winnipeg embarked on a two-day tour of Manitoba’s boreal forest as part of the provincial government’s nomination process for a UNESCO heritage designation.

The current Canadian Boreal Forest Agreement (CBFA) covers more than 76 million hectares of public forests. Signed a year ago, this Agreement exists between forest companies with operations in the area and non-government organizations. Important First Nations stakeholders were not included when discussion for the formation of this Agreement were taking place.

When the CBFA was signed a year ago, Madison’s spoke with David Harper, Grand Chief of Manitoba Keewatinowi Okimakanak, an organization representing 30 First Nations in northern Manitoba. At that time, the aboriginal leader was disgusted that discussions for the Agreement were carried out with “no invitation to First Nations for dialogue.”

“Aboriginal people were shut out of those talks, there was no consultation. This shows total disregard, especially considering such consultation is a treaty requirement. In some cases our land and operations are affected, so to First Nations in northern Manitoba this Agreement has no teeth. All First Nations are encouraged to halt this Agreement,” Harper declared.

Independently of the CBFA, the First Nations’ CBI campaign aims to have an area the size of Denmark, some 43,000 square kilometres from Lake Winnipeg east past the Manitoba-Ontario border, preserved under UNESCO. At a recent media junket, Sophia Rabliauskas, spokesperson for Pimachiowin Aki, the corporation of five Manitoba East Side First Nations, expressed a sense of urgency about a key element of the provincial bid. In advance of a provincial election to be held this autumn, Manitoba Progressive Conservatives vow to scrap Manitoba Hydro’s $2.2 billion plan, under the current NDP government, to build a power line from northern dams along the west side of Lake Winnipeg. The Conservatives want to build the power line down the east side of the lake, through the boreal region.

This Thursday evening, Aki members pushing for UNESCO protection of the boreal forest on the east side of Lake Winnipeg will speak at the University of Manitoba’s University Centre. Rabliauskas, activist and winner of the Goldman Environmental Prize, Stephen Kakfwi, former premier of the Northwest Territories and President of the Dene Nation, and others, will speak about the challenges and opportunities for First Nations working to conserve and develop their boreal homelands.

Concerns raised by these voices should be heeded. Also this week the Wet’suwet’en Nation of British Columbia won an important injunction in BC Supreme Court to stop Canfor’s timber harvesting activities within a portion of its territory.

In 2009 a native roadblock was erected to stop Canfor from logging in an area near Topley, northwest of Prince George. The company said it has a permit to log beetle-killed timber in the region, but the First Nation claimed the logging would destroy an important part of its traditional territory. Canfor went to court to get an injunction against the blockade while the First Nation responded with an application for its own injunction to stop the logging. The Court Monday granted an injunction to the Wet’suwet’en members, saying more harm could come to them than to the company if the logging were to proceed, and that the Crown was negligent in fulfilling its consultation obligations according to the 2001 agreement with First Nations.

There is a 30 day window for this ruling to be appealed.

Also announced this week, and in the wake of significant changes to Ontario’s regulatory regime for forestry and forest tenure, Ontario’s Lac Seul First Nation remains committed to the rebuilding of the region’s foundering forestry-based economy. Please see the May 20 issue of your Madison’s Lumber Reporter for more information on Ontario’s recent tenure reform.

The Lac Seul’s former timber license, held by Greenforest Management Inc, a subsidiary of the Buchanan Forest Products which is now in receivership, was subject to the recent wood allocation process conducted by the government of Ontario. This allocation, comprising approximately 500,000 cubic metres of softwood annually, was formally offered to, and accepted by, Domtar for use in their Dryden pulp operations.

This leaves the First Nation’s existing allowable short-term, or 40 year, harvest of 19,000 cubic metres of softwood. The new license draws on fibre from both reserve land and two parcels of Crown land isolated from the rest of the Lac Seul Forest by a reservoir but contiguous to the reserve. This First Nation is actively working on bringing business opportunities to Northwestern Ontario by developing partnerships and agreements with both government and industry, and stresses that access to approximately 250,000 cubic metres would be required.

As the forest industry forges ahead to a new future, the scope of which is not yet well understood, agreements and partnerships that include First Nations will be essential. This is most true in the burgeoning field of biomass fuels, where long term access to fibre is critical to energy companies looking for areas to invest but where government salvage licenses generally extend only as far as five years out.

Madison’s Timber Preview

This week’ issue of Madison’s Timber Preview examines the latest figures out of the Western Wood Products Association, Japan’s finalized 2010 wood import data, and the increase in wood costs globally in 2010.

Contact us any time for a subscription.

Japan Reconstruction Update

On May 26 Japan’s Ministry of Land, Infrastructure and Transport held a meeting to explain the new standard of wood use in government buildings, says the Japan Lumber Reports.

Techniques of durability, fire resistance, and structural calculation were detailed. The Ministry target is for wooden structures, wooden interiors, wooden office furniture, and utilization of wood biomsass.
The new plan is to take effect for five years, through 2015, and should be revised from time to time. The lumber used must conform to JAS or be designated by the Minister, according to the Reports.

Meanwhile, Sekisui House, Japan’s largest home builder, reported April orders for detached units rose by 6 per cent compared to the previous year, and for apartments orders were up 5 per cent over the same time period.

However units built for sale dropped by 24 per cent and orderes for condominiums fell by 52 per cent.

Another major home builder in Japan, Daiwa House, reported that April orders for detached homes declined by 4 per cent compared to one year ago, while units built for sale rose by 8 per cent, and multi-family unit orders rose by 15 per cent.

Sumitomo Forestry declared April sales grew by 11 per cent over the same month last year, while orders for new units were up by 4 per cent.

Japan Rebuilding, Plywood Demand

Materials needed to build temporary shelters in Japan, such as panel, piling, structural steel farming and house equipment, as well as wood products, are moving well to the damaged areas, according to the Japan Lumber Reports.

Sheathing for roofs have been delivered so demand is tapering off and prices are falling.

The number of temporary housing needed for Iwate, Miyagi, and Fukushima prefectures was cut down to 52,200 units, explains the Japan Lumber Journal.

In the disaster area, more people are moving into rental condominiums.

The supply shortage of softwood plywood is expected to continue for a while. As for imported plywood, prices of logs appear to be hitting the ceiling in producing areas. Domestic log supply problems are starting calming down.

Manufacturers of domestic softwood plywood not damaged by the earthquake and tsunami have ramped up to full-scale production. However, products delivered to wholesalers are immediately selling out, so further price rises for thick products are likely in May, according to the Journal.

Imports of plywood are expected to increase, and substitutes such as OSB, MDF, PB, and Chinese plywood are scheduled to arrive.
The Japan Forestry Agency said on April 19 that the Great Eastern Japan Earthquake caused a 30 per cent halt in production at factories of domestic plywood, according to the Journal.

US Construction Spending

A US Commerce Department construction report Wednesday showed spending rose in April more than expected, up 0.4 per cent. But outlays in March were revised way down. Year over year, construction spending was down 9.3 per cent.

Also released this week, the S&P Case-Shiller home-price indexes showed US home prices fell 4.2 per cent in 1Q 2011. Over the course of the housing sector bust in the past five years, stock-market prices of builders have plunged.

Another report indicated growth in manufacturing slowed in May. The Institute for Supply Management said its manufacturing gauge fell to 53.5 per cent from 60.4 per cent in April, the biggest one-month drop since 1984.

US Economic Growth

US manufacturing activity expanded in May at the slowest pace in 20 months, the latest sign that a sharp rise in energy prices is hampering economic growth.

Any reading above 50 indicates growth in manufacturing. May marked the 22nd straight month of expansion in what’s been one of the few sources of strength for the economy since the recession ended nearly two years ago.

Meanwhile, economic activity in the non-manufacturing sector grew in May for the 18th consecutive month, says the latest Non-Manufacturing ISM Report On Business, released Friday.

The NMI registered 54.6 per cent in May, 1.8 percentage points higher than April, and indicating continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.1 percentage point to 53.6 per cent, reflecting growth for the 22nd consecutive month, but at a slightly slower rate than in April. The New Orders Index increased by 4.1 percentage points to 56.8 per cent. The Employment Index increased 2.1 percentage points to 54 per cent, indicating growth in employment for the ninth consecutive month and at a faster rate.

ISM’s Non-Manufacturing Inventories Index registered 55 per cent in May, 0.5 percentage point lower than the reading that was reported in April, March and February.

The eight industries reporting an increase in inventories in May — listed in order — are: Real Estate, Rental & Leasing; Agriculture, Forestry, plus others, with Construction listed last.

Wood-Framed Six Storey Construction

The recent massive fire at the construction site of a wood framed building in Richmond, BC, has once again ignited local debate over the fire safety of taller wood buildings. The claims of detractors are mystifying, as several counties have already completed such constructions, specifically a senior’s centre in Germany and an eight story subsidiized housing unit in London.

Japan, a country with some of the strictest building safety standards in the world, including earthquake and fire safety, has launched a new campaign called Forests of Wooden Buildings in Cities.

The Japan Laminated Wood Products Association hosted 80 people in Tokyo on May 30, including architects and representatives from major construction companies and universities, according to the Japan Lumber Journal.

The development status of woody hybrid laminated lumber was explained and the usage of the prototypes was demonstrated. Topics discussed included; “Challenges of Fire-Prevention in Promoting Wooden Buildings,” “Development and the Present Situation of Woody Hybrid Laminated Lumber,” and “A Suggestion of a Woody Hybrid Fire-resistant Building using the Prototype.”

This building material has accepted the related minister’s certification for its one-hour-fire-resistance and is expected to be used in three- or four- storied office buildings and official residences in fire-resisting divisions, and also in three- or four-storied schools, preschools and four-storied apartment buildings which are required to be fireproof, says the Journal.

June 06 , 2011

Biomass Fuel

Madison’s was excited the hear analysts and industry speak positively about the future of biomass fuel at the BC Bioenergy Conference a couple of weeks ago in Vancouver. Experts from around the globe provided the latest data and developments on the business of extracting energy and other products from biomass. Look for more information on that conference in a future issue of your Madison’s Lumber Reporter.

The European Union deserves credit, in large part, for recent increases in demand and production of biomass fuel products, specifically pellets, due to legislated requirements of 14 per cent green energy for industry and residential users by 2014. Asian countries as well have been pushing for alternative forms of energy as industrial production in that region grows. Unwilling to be left behind, Britain’s biggest coal-fired power plant, Drax, burned nearly 1 million tonnes of biomass in 2010, more than double of previous years. Eurostat data shows EU imports of wood pellets were up 42 per cent in 2010 compared to one year earlier.

The Future

Domestic UK wood fuel production, excluding recycled or waste wood, has been about 1.5 million tonnes annually, according to Forestry Commission data. Britian’s RWE npower will this year convert a coal plant near London to burn biomass. The aging plant will burn 2 million tonnes through 2015, when it is due to close, underlining a need for a global trade.

If EU wood fuel subsidies were more predictable and reliable — for example the UK support to be announced in the next few weeks — then utilities would commit to buying bigger volumes, and so motivate more supply, according to wood fuel commodity traders.

The price of pellets for industrial use in Europe came down in a limited way in March, says this week’s issue of FOEX. In April those prices headed back up, maybe in part due to the continuing chip supply problems of the new capacity in Europe. The Nordic pellet index gained €0.27 per MWh, or 0.91 per cent, and closed this week at €29.81 per MWh.

In Austria, the price of residential grades of pellets in January was €225.90 per tonne according to proPellets, 10 per cent higher than a year ago. The prices of industrial grades of pellets have also been rising, though that increase remains constrained by excess capacity.

One contrarian, Roger Samson of Resource Efficient Agricultural Production (REAP)-Canada, charged in a February 14 presentation to the Ontario Biomass Producer’s Group that US stimulus spending on plants and subsidies for wood residue utilization, at US$45/ton, are creating wood pellet glut. North American pellet production is increasing at 25-35 per cent per year, from 1.1 million tonnes in 2001 to 3.2 million tonnes in 2008, explained Samson.

Meanwhile, total US wood and forest residue demand for 2021 is projected to increase by 6.8 per cent over last year’s projection, according to Forisk Consulting’s May 25 issue of Wood Bioenergy US. Forisk uses data on production projects, both announced and operating, to make its forecast. Of these projects, Forisk projects those making pellets to comprise 61.6 per cent of the total by 2021, compared to a projection of 59 per cent one year ago.

The runup to fully utilized woody biomass production in the US is upon us. Please see graph on Page 7 for details.

Meeting government targets for renewable energy will require ever larger quantities of forest biomass to be mobilized worldwide, said John Bingham in a report released May 24 by Hawkins Wright, London-based consultants to the forest products industry. This increase in demand could potentially match the volume of wood currently used by traditional forest based industries. As a result, energy wood and wood pellets are becoming internationally traded commodities.

Over the past year, a combination of steadily growing demand for energy wood and a contraction in the supply of readily available sawmill and forest residues has underpinned biomass and wood pellet markets in Europe and North America, detailed Bingham.

Canada, which will surely become an overall exporter of biomass energy products, has several programs and incentives in place both on a provincial and federal level for this emerging industry. Global pellet export shipments into Europe continued to rise in 2010, up 21 per cent over the previous year, according to Wood Resources International.

The cornerstone of Ontario’s Green Energy Act, which is North America’s first comprehensive Feed-in-Tariff program, is that it provides a 20-year contract. The contract price for biomass is 13.8 cents per kiloWatt hour (kWh) for power under 10 MegaWatts (MW) and 13 cents per kWh for larger facilities. In June 2010 Ontario announced the award of over 2,500 MW of 20 year renewable purchase power agreements. Hydro-Québec’s Sustainability Report 2010, released May 10, details that six contracts were approved for the supply of 52.9 MW of electricity produced by biomass last year.

In an Information Bulletin released May 19, the government of British Columbia announced progress on March 29, 2010, changes to timber harvest licences. The Forest Act will be amended so that a non-lumber producer can only transfer a “receiving licence” to another non-lumber producer. The receiving licences were created to to give bioenergy companies access to low-value timber waste that companies that have regular timber rights would not normally bring out of the woods. This amendment will help maintain the intent of the woodlot licence program as it is expanded, explains the Bulletin. Woodlot licence opportunities are intended for individuals, First Nations and small companies that want to participate in small-scale forestry, thus large tenure holders will be ineligible to apply for or hold a woodlot licence.

“It’s fairly obvious why we wanted to restrict it – it’s to make sure the focus of the receiving licence is on development of the bioenergy and non-lumber part of the industry,” said Steve Thomson, Minister of Forests, Lands and Natural Resource Operations to the Prince George Citizen.

While there is still some work to do, Thomson expects the receiving licence concept will be ready to be implemented this summer.

While the burgeoning biomass fuel industry is exciting enough, it seems the most profitable future for making products out of forest residue is in biochemicals. Converting biomass into high value chemicals returns a higher profit than will combustion fuels, and converting biomass into transportation fuels provides access to a wider marketplace. More on that in a future issue of your Madison’s Lumber Reporter.

Statistics Canada Correction

An apparent statistical anomaly in StatsCan data sets available on the website is causing confusion with forest industry watchers and analysts. StatsCan data indicates a massive jump in Canadian imports of softwood lumber products in 2010 compared to previous years, including 2009. However US softwood export data available on the US Census site does not indicate a similar jump.

A representative for StatsCan explained to Madison’s that there might be an error with this data, and that it could take a couple of months to be examined and rectified.

US Pending Home Sales, Economic Indicators

The National Association of Realtors said Friday pending home sales plunged 11.6 per cent to 81.9 in April. Expectations were for a smaller drop, to 92 from 94.1 in March.

Reuters and the University of Michigan reported consumer sentiment rose to 74.3 in May, up from a previous reading of 72.4 in early May and 69.8 in April. One-year inflation expectations also slipped to 4.1 per cent from 4.4 per cent. The sentiment number is low, but moving in the right direction.

The Conference Board’s gauge of the outlook for the next three to six months decreased 0.3 per cent after a revised 0.7 per cent gain in March, the New York-based group said May 19.

US Real Estate, Economy

Weather likely played a role in the poor US housing data for April, given a 17 per cent drop in the South, noted David Ader of CRT Capital to the New York Times.
Flooding on the Mississippi River may continue to constrain homebuilding and sales in the region this month, Morgan Stanley economists David Greenlaw and Ted Wieseman wrote in a note to clients May 17.

Previously owned homes sold at a 5.05 million annual rate in April, down 0.8 per cent from the prior month, data from the National Association of Realtors showed May 19. All-cash deals accounted for 31 per cent of transactions, and distressed properties, including foreclosures and short sales, made up 37 per cent, the group said.

The supply of existing houses will probably remain an issue for builders and buyers alike. CoreLogic Inc. in March estimated about 1.8 million homes were more than 90 days delinquent, in foreclosure or bank-owned, a so-called “shadow inventory” set to add to the unsold supply of 3.87 million previously owned homes on the market at the end of April.

Meanwhile, consumer purchases rose 0.4 per cent in April after a revised 0.5 per cent gain the prior month that was smaller than previously estimated, Commerce Department figures showed Friday. Incomes climbed 0.4 per cent.

“We’re probably not going to see the same pace of contraction as the first quarter, but the economy certainly has throttled back a little bit,” said Charmaine Buskas, chief strategist at 4Cast Inc to Bloomberg.

Canada Manufacturing Jobs, Economic Growth

Factory work ebbed steadily from 2003 to 2008 and plunged in the recession to December, 2009, as demand fell and companies laid off workers. In fact, average job losses amounted to 14,500 a month between August, 2008 and December, 2009, Statistics Canada said Thursday.

But since then, manufacturing employment has been rising a bit, with average monthly gains of 2,400. An average weekly salary in the sector is $1,005.68 — more than the national average of $876.53.
In its spring outlook for the provincial economies, the Conference Board of Canada Wednesday concluded resource-rich provinces — notably Newfoundland and Labrador, Saskatchewan and Alberta — would have the strongest economic growth in Canada this year.

Canada Jobs, Economy

The Conference Board of Canada’s Spring 2011 Provincial Outlook Summary, released this week, indicates that economic growth will be strong in the western part of the country this year—except for British Columbia, where growth will cool following a year of fiscal and Olympic-related boosts in 2010. Growth will be more moderate in central and eastern Canada.

British Columbia’s growth will be held to two per cent as the forest industry waits for a recovery in the US housing market.

“A broad-based moderation in economic growth is expected in British Columbia this year, with the economy forecast to advance by just two per cent,” the report concluded. BC’s growth rate would also trail the national forecast of 2.6 per cent growth.

“The US housing market is still struggling to emerge from its protracted downturn, and this will weigh on BC’s forestry industry over the near term. Output in the construction sector is set to contract this year as housing starts cool and government infrastructure spending wraps up.”

Fuelled by renewed interest in developing the oil sands, Alberta will see strong economic growth in 2011–12, while Saskatchewan will benefit from tax breaks and a hot mining industry.

Manitoba will hold its own despite floods postponing seeding in many areas. Supply-chain disruptions brought on by the Japanese earthquake will hold back vehicle assembly at Toyota and Honda plants in Ontario, it predicted. Still, the board forecast Ontario would create more than 125,000 jobs this year.

Weaker construction activity will dampen New Brunswick’s real GDP growth in 2011. But Prince Edward Island will see strong gains in utilities, of 3.3 per cent, while Newfoundland and Labrador’s economy will continue to post stellar growth.

“With agricultural, energy and mineral prices heating up, provinces that have these resources in abundance will do well — despite hesitation among consumers and tightening fiscal policy,” said the board’s Marie-Christine Bernard.

“As a result, economic growth will be much stronger in parts of Atlantic Canada and in the Prairie provinces than in Central and Eastern Canada.”

Finland Paper Strike Settled

Some 4,000 members of trade union Ammattiliitto Pro held strikes against Finnish paper producers before an agreement over a second-year wage renewal was reached.

The 2011 national pay award is 1.5 per cent or €48-per-month minimum, whichever is higher, and was effective from 19 May.
The union won the across-the-board national salary increase, structured to narrow the pay gap among the clerical, technical, and front-line managerial ranks of the pulp and paper industry.

The strikes had impacted all Finnish-based companies since early April. Staff at all Stora Enso and Metsäliitto sites went on strike on 26 April, and UPM said the end of its two-week strike had resulted in a cost impact of €1m.

By last week, about 75 per cent of white-collar staff in Finland’s paper industry were on strike. Shift workers returned to their jobs on 21 May, while day workers returned May 23.

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