Lumber News Archives: Mar 2012

Lumber News Archives: Mar 2012

WWPA AGM; Hampton to Rebuild Babine Mill ; Tembec to invest $190 million in Temiscaming Mill ; Canadian Industrial Capacity Utilization Rates ; Wildfire Season Declared ; Carrot River Producing ;Remote Sensing ; Madison’s Timber Preview ; Kruger Cuts 187 Workers ; Canada Housing Starts, Building Permits ; Housing Starts, Japan ; Decker Lake Fire ; Canadian International Merchandise ;Art of Forestry ; Madison’s Investment Rx ; RockTenn Closes Matane ; US Storms, Canada Wildfire Warnings ; Containerboard Prices, Forecast ; Centurion Announces . . . ;Business in China ; Madison’s Timber Preview ; Resolute Battles for Fibrek ; US Existing and New Home Sales, Housing Supply ; Canada’s Rejoinder to US SLA Rebuttal ; BC’s Budget for Forestry ; Bowater Mersey Says No Local Forestry Contractors ;

March 28, 2012

WWPA AGM

The Western Wood Products Association (WWPA) held its annual meeting at the beginning of this week in Portland, OR. On March 11 and 12 the group hosted lumber producers and exporters, log harvesters, association members, and equipment suppliers, for two days of meetings and networking sessions. Always an excellent source of data, forecasts, and information on the latest movements in the business of lumber on the west coast, the WWPA’s presentations and those of invited speakers provided a worthwhile snapshot of the current state of the log and lumber markets, as well as some projections.

At breakfast, WWPA President and CEO Kevin Binam gave an update on the west coast forest industry, and forecast to 2015.
“Total US lumber production in 2011 was 26,713 million board feet,” Binam said, “with 11,867 million in the west. We see total US production at 32,002 million board feet in 2015; 14,234 million in the west and 16,096 million in the south.

“For US housing,” continued Binam, “we project 662,000 single family and 282,000 multi-family starts in 2015, for a total of 944,000 new housing starts that year.”

Annual Meeting

The morning committee meetings started with a recap by the Softwood Export Council of that group’s latest trip, to Japan.
“There is a growing trend toward building longer lasting homes in Japan,” explained Frank Stewart of the WWPA. “Since the real value is in the land, houses in Japan have traditionally been built for a 30-year life span. Everyone wants to move into a new home. There is a push, in part by the government, to re-educate people into passing their house on to their kids. New lumber production technology and building styles now offer 100 year guarantees on homes.”

Craig Larsen, SEC President, then provided an update on west coast log and lumber exports.

“In 2011, Douglas fir log exports are up 71 per cent over 2009,” began Larsen. “In 2010, total US lumber exports rose 44 per cent compared to the previous year, to US$844 million. US$1.3 billion in lumber was exported in 2011, a 23 per cent increase over 2009. To China alone, total US softwood lumber exports rose 144 per cent in 2011 compared to 2009. To India, US lumber exports were up 501 per cent in 2011 compared to two years earlier, but this of course is off a very small base.”

Then followed a long discussion about Proposition 65, an absurd California legislation, which could only ever pass in that state, requiring producers and suppliers to list any chemical in a product that the World Health Organization has said can cause cancer. This means that all treated lumber must display a warning. Logistically this law is causing all kinds of problems because often mills don’t know if their wood is going to eventually end up in California and they are reluctant to place a cancer warning on their products unnecessarily.

In the afternoon, Sierra Pacific’s George Emmerson, who is also Director of the Softwood Lumber Program, described the latest developments in the Check-Off Program. Please refer to Page 6 for details.

Then Paul Jannke of Forest Economic Advisors, and Lynn Michaelis of RISI, spoke about lumber markets and gave specifics on exports.

“US lumber exports have grown 60 to 80 per cent since 2008,” said Jannke, “with most wood going either to the Caribbean or to Asia. On the Caribbean side, 88 per cent of that market is served by Southern Yellow Pine, while to Asia, 70 to 75 per cent of the wood comes from the west. Customers in Japan prefer Douglas fir while in China the Hem/Fir mix is in big demand.

“Wood in China is used for concrete forming, furring strips, packaging and crating, framing lumber, and furniture. Sixty per cent of existing housing stock in China is too small, too old and not what people currently want. The Chinese government has mandated 25 million new affordable housing units to be built by 2015, and only 7 million are completed to date,” Jannke detailed.

“There was a huge slowdown in North American lumber exports to China by 4Q 2011,” continued Jannke. “There are large inventories of lumber in China, and there are also a lot of logs. But we are talking about a slowing of growth, not a decline in North American lumber exports.

“Meanwhile, demand from within the US will pick up significantly. There will need to be 1.5 million new housing starts, annualized, to serve the US population,” Jannke concluded.

Next, Michaelis got immediately to the guts of the issue, “When discussing the northwest log market, we still have to talk about lumber-log competition. In Asia, log buying is still small compared to that of lumber. But for west coast mills, log prices have outstripped their lumber price equivalent, putting a squeeze on lumber producers in the west.

“Looking domestically, the California housing market crash hit Douglas fir mills especially hard, further precipitating low Douglas fir lumber prices,” said Michaelis. “Still though, the lions share of west coast log volume does go to the sawmills. Even with log exports increasing, domestic production is still the king in terms of west coast log usage. As US housing recovers and demand for finished lumber increases, customers in China will no longer be able to afford west coast logs.

“At the same time, however, the value of North American lumber exported to China, on an equivalent basis, is actually cheaper that that of logs,” Michaelis warned. “China’s appetite for resources will continue to grow. Given that lumber imports in China have increased more than have log imports, I see most of the future growth in China coming from the lumber side.

“So far, Canada has the lumber play in terms of exporting to China,” summed up Michaelis.

Hampton to Rebuild Babine Mill

Hampton Affiliates are now in the process of planning for a new sawmill to be built at the Babine Forest Products site in Burns Lake, BC, according to the Burns Lake District News Wednesday. Hampton CEO Steve Zika said sawmill plans and drawings are being worked on, as well as discussions about what type of machinery will be installed.

Forest Lands and Natural Resources Operations Minister Steve Thomson said he had the chance to meet with First Nations stakeholders, Hampton Affiliates chief executive officer Steve Zika, Mayor Luke Strimbold and officials at the Regional District of Bulkley Nechako during his one day visit to Burns Lake last week.

“We just can’t sit back and wait, we have to be proactive in this,” Zika said.

“Business is good,” Zika said, reiterating that he remains optimistic the sawmill will be rebuilt.

Tembec to invest $190 million in Temiscaming Mill

Tembec Inc, out of Montréal, QC, announced Friday it plans to invest $190 million to install a boiler and electricity turbine in its specialty cellulose manufacturing facility at Temiscaming, which is on the Quebec side of the Ottawa River about 60 kilometres northeast of North Bay, ON.

That $190 million is the first of a two-phase project.

Temiscaming Upgrades

Under a contract with Hydro Quebec, Tembec will produce electricity for $106 per Megawatt hour. The price will rise to keep pace with the consumer price index over the life of the 25-year contract.

The new boiler and turbine will also let Tembec increase production at Temiscaming from 160,000 metric tonnes of specialty cellulose per year to 195,000. The overall project will increase Tembec’s annual production capacity of specialty cellulose from the current 310,000 metric tonnes to 345,000 metric tonnes. Tembec also produces specialty cellulose in Tartas, France. It is a component of products in the pharmaceuticals, food, cosmetics, personal care, construction and electronics industries.

Canadian Industrial Capacity Utilization Rates

Canada’s industries operated at 80.5 per cent of their production capacity in 4Q 2011, up slightly from the 80 per cent posted in 3Q, said Statistics Canada Friday. The increase would have been greater if not for the slight decline in the non-manufacturing sector.
With the exception of 2Q 2011, which saw a decrease in the capacity utilization rate, the rate has increased steadily since 2Q 2009. However, the rate of 80.5 per cnet was below that of 83.4 per cent posted in the first quarter of 2007.

The gain of 1.4 percentage points in 4Q for all manufacturing industries was offset by the slight decline posted by the non-manufacturing sector, said StatsCan.

Capacity Utilization, Canada

The manufacturing industry operated at 80.4 per cent of its capacity in 4Q 2011, up 1.4 percentage points from 79 per cent in the previous quarter. The upward trend continued, but the rate reached in 4Q was below the 84.3 per cent rate recorded in 1Q 2007.
The capacity utilization rate rose in 4Q in 12 of the 21 major manufacturing industries, declined in seven and remained relatively stable in two.

Higher production of agricultural, construction, and mining and oil and gas field machinery drove up the capacity use rate in the machinery industry by 3.7 percentage points to 82.3 per cent.

Lower production in pulp, paper and paperboard mills reduced capacity use in the paper manufacturing industry from 89.9 per cent to 86.4 per cent from 3Q to 4Q 2011.

Wildfire Season Declared

Wisconsin’s Department of Natural Resources Wildfire Prevention Department declared Thursday that a burning permit is required to burn outside, but even if people have permits, they need to call daily to check on burning restrictions in their area.
Small wildfires broke out this week in Saskatchewan, California, and Colorado.

Early Wildfire Season

A fire north of Maple Creek, KS, caused an estimated $1 million of damage overnight Tuesday.

Fanned by winds of 70 kilometres per hour, flames completely levelled two abandoned farmhouses, destroying farming equipment, feed lots, miles of fencing and bale stacks, and licking at the back doors of two occupied homes.

Maple Creek Mayor Barry Rudd said the fire started about four kilometres east of Hatton and ended about 10 km north of Maple Creek — not far from where a grass fire ripped through the area on January 5.

Maple Creek-area rancher Calvin Siegle lost farm equipment, grass, fences and close to 1,000 hay bales in the fire.

Saskatchewan Fire Commissioner Duane McKay headed to Maple Creek on Thursday afternoon to assess the damage, according to the Regina Leader-Post.

A second fire started in the region on Thursday afternoon near Paipot, about 35 kilometres east of Maple Creek.

Firefighters contained a brushfire in San Bernardino, CA, early Thursday after the blaze scorched about 21 acres, fire officials said.

The fire briefly threatened five homes but there were no evacuations or injuries. The blaze started just after 5 pm Wednesday along Bannock Trail in Yucca Valley. About 100 firefighters battled the flames and contained the fire by 6 am Thursday morning, said San Bernardino County fire spokesperson Tracey Martinez.

With high winds expected, Martinez said firefighters will stay on scene all day. “We want to make sure there are no flare-ups,” she said. The cause of the fire has not been determined, she said.

The second significant grass fire near Fort Collins, CO, in as many days sent up a large column of smoke visible to evening commuters, says the Coloradoan.

The fire burned several acres of a field and a horse trailer being used for storage on Wednesday evening.

Poudre Fire Authority officials late Wednesday night determined the fire was caused by an illegal ditch burn that got out of control.

Wednesday night, Crews have contained a wildfire that burned about 300 acres in Larimer County near the Cobb Lake State Wildlife Area, also in Colorado, according to the Craig Daily News.

Carrot River Producing

Saskatchewan’s Carrot River Sawmill, which was formerly owned by Weyerhaeuser then purchased by EdgeWood Forest Products, is entering its second month of production.

“It’s been going very well. Start up was quicker than expected,” said Plant Manager Andy Borsa to the Nipawin Journal.

He said that because the mill was closed for so long, they didn’t know what to expect when they got back into the mill and began getting ready to open.

The mill was closed for five years, with their first shift being January 2, 2012.

The mill is currently running at half capacity, with one 12 hour shift. the mill is producing in metric sizes. None of those products have actually made it to the consumer in the Middle East or China, and Borsa said that is something that takes a month or two to accomplish.

EdgeWood, which is a division of C&C Wood Products, purchased the facility two years ago, and spent that time putting together a marketing package so they could facilitate the startup of the mill.

The forestry industry looks positive throughout the province with the Prince Albert Pulp Mill expected to re-open in 2Q of 2012, says the Nipawin Journal.

March 22, 2012

Remote Sensing

Further to Madison’s coverage of the Association of British Columbia Forest Professional’s Annual General Meeting in last week’s issue, is an update this week on the latest developments in LiDar and its current uses.

Albert Nussbaum, Director of the Forest Analysis and Inventory Branch at British Columbia Public Service, and Taylor Davis, LiDAR applications specialist with Terra Remote Sensing, gave presentations for a session titled, “From Pixels to Trees: The Art of Remote Sensing in the Digital Age“. Nussbaum’s work is focussed on allowable annual cut determinations in support of policy development, while Davis is involved in researching and developing new environmental applications of integrated remote sensing.

Light detection and ranging (LiDAR) data has come into favour recently as one method to determine forest characterization. LiDAR can be a valuable tool in the inventory process, when combined with all the measured and derived attributes required to complete a forest inventory. At the moment, however, the most-used application for the data that comes out of a LiDAR survey is for engineering purposes. LiDAR elevation data is accurate, and processing algorithms are increasingly robust and standardized.

New Applications of LiDAR

To find out more about this exciting technology, Madison’s contacted Nussbaum at the BC Ministry of Forests, Lands, and Natural Resource Operations.

“The extremely detailed data gathered from a LiDAR survey is enriched with other data, some taken from ground sampling with GPS and more coming from visual data layers like aerial photography or satellite imagery,” explained Nussbaum in a phone interview. “LiDAR is complementary to existing data. The latest improvements in this technology have been in the area a survey can cover, and in the data that is returned. The planes can now fly higher, covering more ground, without losing resolution. In fact there is so much data gathered, that a tremendous amount of energy is used in the data processing. There is an army of people right now looking at LiDAR data.
“The application of LiDAR so far in BC is localized,” Nussbaum continued. “For example; in municipal areas, this survey is used on a small scale as an intense application.”

When asked about using LiDAR to survey BC’s merchantable timberland, Nussbaum replied, “In the future, areas that are being managed intensely, where there is a lot of competition, and where the fibre is scarce, are where LiDAR data could be very useful. Of course this would be in combination with existing data, and with surveys on the ground which use GPS. But where there is no timber harvesting or population pressure, in less dense areas, deploying LiDAR to survey BC’s forests would probably be too costly.”

Using LiDAR, Terra Remote Sensing offers geospatial data captured using advanced remote sensing techniques, and specializes in providing data solutions for CADD software, enterprise applications and custom GIS programs.

Vegetation mapping through the use of advanced remote sensing technology enables researchers to quantify and qualify the amount and health of vegetation. Recently, using high-resolution hyperspectral imagery provided by Terra, researchers at the University of Victoria made breakthroughs identifying forest stands under ‘green attack’ by the mountain pine beetle. Having the ability to detect tree stands affected by the mountain pine beetle years before tree mortality occurs is the first step towards stemming the tide of extensive damage in conifer forests caused by the beetle.

Terra’s Taylor Davis explained further, also in a phone interview, “At this moment the technology is still advancing The more people there are working with the data, the more algorithms there are, the greater our understanding of the land.

“When using LiDAR to survey beetle kill and tree health, each surface reflects a different colour, absorbing and releasing different parts of the electromagnetic spectrum. Together with our partner research group, the LiDAR and Hyperspectral Research Group at the University of Victoria, we look at the individual bands of light, for example with a beetle-infected tree that is still very much alive, we look at how the spectral signature is different than a healthy tree. So we can identify trees under green attack, and trees in distress. From a provincial standpoint, we can identify the extent of beetle infection and how it is spreading through a timber stand. This gives forest companies a three-year jump on knowing when the trees will get to the red stage.”

Davis and Nussbaum agree that the expense in using LiDAR, especially in surveys that return very dense data, is in the analysis.
“Data acquisition is not the expensive part,” said Nussbaum. “In terms of using LiDAR to identify tree stands prior to the timber degrading following pine beetle infestation, processing that data can take a year.”

However, using LiDAR to measure fuel loads on the ground once the trees are dead is very useful to assess forest fire risk, indicated both Nussbaum and Davis.

“LiDAR can measure plant chlorophyll levels and soil moisture, plus timber volumes. In combination with slope and aspect of the ground, that data can be used to make fire models, to determine fire spread and behaviour.”

Nussbaum detailed, “LiDAR bounces off the ground, off objects, it doesn’t penetrate anything. So it can be very useful to measure fuel load.”

All this talk of terrain and forest inventory surveys reminded Madison’s that more Canadian groups are working with LiDAR for other purposes.

Jack MacDonald is Program Leader in Harvesting Operations for FPInnovations in Vancouver.

“We are developing a method to use LiDAR for the BC Forest Safety Council steep slope risk assessment,” MacDonald explained to Madison’s in a phone interview. “We prepare a map to identify areas with the most potential for safety concerns, in terms of the timber harvesting machines operating on the slopes. Information on slope, roughness, length of slope, and soil, are combined to provide a assessment that will help layout people focus their efforts to determine where is the highest risk for machine instability.
“FPInnovations is working on a prototype, to be ready this spring, using LiDAR data supplied by a coastal member company. We will then expand on the initial area surveyed, to build a tool that can be applied anywhere. It will provide much greater detail than has previously been available.”

During the course of these conversations, all parties mentioned that Madison’s must speak to Roger Whitehead, research silviculturalist with the Canadian Wood Fibre Centre of Natural Resources Canada, to get a federal perspective. Unfortunately Whitehead was out of the office on business in Ottawa. Instead, Mike Wulder, senior research scientist at the Canadian Forest Service was available to take Madison’s call.

“LiDAR provides a very good model for elevations,” Wulder began. “This elevation data can identify where the riparian areas are, where the streams are, so companies can determine where to put roads. On the other hand, we can also measure many attributes required for forest inventory and management planning. LiDAR provides forest inventory-like information, the technology and applications in this regard is are actually quite mature. LiDAR survey data can augment current programs which have existing data. As an example, we can use the height information from LiDAR with species recorded in an inventory to make up-to-date estimates of stand volume.”

“LiDAR has proven itself to be an increasingly reliable means to incorporate into existing forest management practice,” Wulder continued. “Considering all the applications the data can be used for, the process is not that expensive. Creating multiple uses for the data is where economies emerge, from engineering through to harvest block layout. At the stand level, LiDAR can now routinely produce a wide-range of forest inventory attributes, including stand heights, canopy cover, and volume. We are building a suite of information from LiDAR, we are building a sampling strategy, to catalogue tree health. For example, with the beetle kill, the laser shows how big the tree was when it was infected, which is then combined with other data.

“Federally, our interest is in characterizing larger areas with sampling rather than trying to fly a wall-to-wall coverage of Canada,” said Wulder. “For example, we can fly samples over the boreal forest, or a particular forest management unit, and produce estimates of the forest resources of that area, then identify statistically justified locations [for forest management]. Sampling theory is well established and rapidly developing insights on how to utilize LiDAR. Through sampling we can report on large areas with statistically robust estimates.”

With so many different groups and agencies, not to mention private companies working on spec, involved in gathering critical data on Canada’s land base, one has to wonder if there is cooperation across departments and regions.

“We are already sharing data,” replied Wulder to Madison’s question. “The Canadian Forest Service, Canadian Wood Fibre Centre, and FPInnovations all have differing expertise, and we work to ensure that we all know what the other groups are doing. In fact, a key part of the work that Roger Whitehead does with the Canadian Wood Fibre Centre is to bring these groups, and industry, together to collaborate and focus on common objectives.”

While it will obviously still be some time in the future, Madison’s anticipates seeing an astonishingly detailed map of Canada’s merchantable timberlands, and the terrain on which it grows.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the latest developments in US mortgage lending, and looks at real estate sales figures released this week.
Contact us any time for a subscription.

Contact us any time for a subscription.

Kruger Cuts 187 Workers

Montreal, QC-based, tissue manufacturer Kruger Products announced this week it will lay off 187 of its nearly 600 employees at its New Westminster, BC, mill.

The job losses, effective August 31, come as the company looks to focus on its “core” business of consumer and commercial tissue production and distribution, said Chuck Stewart, the mill’s general manager.

Canada Housing Starts, Building Permits

Canadian housing starts were up more than expected in February, Canada Mortgage and Housing Corp. said Thursday. New home construction started at an annual rate of 201,100 units last month, up 1.5 per cent from an upwardly revised 198,100 in January.

Home Building, Canada

Canadian housing starts in urban areas were up 3.4 per cent to an annualized rate of 182,800, while rural starts were down 14.1 per cent to 18,300.

By province, urban starts were up 49.8 per cent in Quebec, 10.2 per cent in the Prairies and 9.6 per cent in B.C. They were down 16.9 per cent in Ontario and 15.5 per cent in the Atlantic.

The value of building permits issued in Canada fell by 12.3 per cent in January, following a 10.5 per cent rise the month before, said Statistics Canada Thursday.

Contractors took out a total of $6 billion worth of permits in January, down from the $6.8 billion in December.

Statistics Canada said the decline came from decreases in both the residential and non-residential sectors.

Lower construction plans for multi-family dwellings in Ontario drove the total lower. The value of building permits for multi-family dwellings fell 12.4 per cent to $1.7 billion in January, following a 30.8 per cent advance in December.

Also Thursday, Statistics Canada said its new-housing price index was up 0.1 per cent for January, marking the 10th straight month this measure has risen.

Housing Starts, Japan

Japan’s housing starts rose 5 per cent in January over December, to 822,000 seasonally adjusted units, according to the Japan Lumber Reports.

Japan Housing Starts

January housing starts fell in Japan on a year-over-year basis, however, by 1.1 per cent compared to 2011, says the Reports.

New owner’s units declined by 2.7 per cent in January compared to that month a year ealier. Condominium starts, while more than 10,000 units seasonally adjusted, were lower than in January 2011.

The share of wood-based units also fell, by 5.5 points to 53.2 per cent, for a total of 35,117.

Decker Lake Fire

The community of Burns Lake, British Columbia, just can’t catch a break. A fire started at the planer mill of Decker Lake Forest Products Tuesday morning.

Approximately 50 employees were on site who helped fight the fire before the Burns Lake Fire Department and other emergency crews arrived on scene.

“The fire was contained by the mill employees and due to their quick response and training they were able to prevent the fire from spreading and causing further damage to the mill “stated S/Sgt. Grant MacDonald, Commander of the Burns Lake Detachment, according to Opinion250.

Canadian International Merchandise

Trade
Canada’s merchandise exports declined 2.3 per cent and imports edged down 0.6 per cent in January, according to Statistics Canada Friday. As a result, Canada’s trade surplus narrowed from $2.9 billion in December 2011 to $2.1 billion in January 2012. This was the third consecutive monthly trade surplus.

Exports decreased to $41.4 billion in January, as prices fell 2.2 per cent. Lower exports of precious metals and alloys as well as aircraft, engines and parts largely contributed to the decline in value. Higher exports of crude petroleum partially offset the decrease in exports.

Exports to the United States edged up 0.3 per cent to $30.6 billion in January, largely on the strength of crude petroleum.

March 15, 2012

Art of Forestry

The Association of British Columbia Forest Professional’s 64th Forestry Conference and Annual General Meeting was held in Victoria, BC, with approximately 300 delegates attending at the Fairmont Empress Hotel, on February 22-24, 2012.

A jam-packed list of speakers discussed topics such as: developments in forestry education programs across the province; new definitions of forest professionals; safety in the forest; the new economics of forestry; forest inventory, NSR, and non-statutory expectations on forest professionals; sustainability; and First Nations in forestry. There were also some exciting presentations on the latest developments in LiDar and LandSat which Madison’s will cover in a separate edition.

Speakers also included representatives from corporate citizens, including; Interfor, Tolko, Western Forest Products, Island Timberlands, and TimberWest.

A forester’s professional scope of practice in the new reality of harvesting and processing timber in this emerging world economy was a subject much discussed at the ABCFP conference.

ABCFP’s AGM

Rick Monchak of Interfor gave a presentation titled, “The Art of Forestry: Things I Didn’t Learn at School“. Monchak broke down this art into four categories; the art of growing trees, the art of staying connected, the art of making decisions, and the art of building relationships. The first of these, as an example, has gone from three regulatory requirements in a culture of growing, expanding business, to 19 individual government requirements. A forester must now consider pressures from the Forest Act to stocking standards to professional reliance, from the RESULTS database to forest safety to invasive species, and everything in between.

In the meantime, however, “Nothing has changed in the basics of how trees grow,” said Monchak. It is the current business reality that makes things more difficult.

Bob Craven, also of Interfor, and John Dunford, from Tolko, talked about the unwritten rules of non-statutory expectations and how they become part of the professional’s decision framework.

Craven examined “Maintaining The Right to Practice” from the forest professional’s point of view.

“Non –Statutory Expectation is defined as a reflection of both social values, or public expectations, and professional values, or personal and peer expectations, not found in legislation,” said Craven.

In terms of managing the publicly owned forest base, government legislation is meant to lead forester’s decisions. Craven’s presentation screamed, “It’s supposed to be so simple under FRPA!”, but then asked, what if the government only “sort of” speaks to an issue? Using the Northern Gosehawk as an example, Craven explained how the forestry legislation can be read in different ways. The most obvious understanding of the Species at Risk Act is that it is an offense to molest or destroy the nest of a bird ……… when the nest is occupied by a bird or its nest. While FPPPR states that licensees must write results/strategies around breeding habitat and THLB impacts.

Craven underlined the fact that, when considering protection of the public interest and practicing good stewardship, a forester would have to avoid up to 70 per cent of 9,800 hectares surrounding that nest site as breading and hunting habitat. He then pointed to work the ABCFP have been doing on this important subject since 2009, and that there is a series of five papers being published on the Association’s website explaining member findings.

Dunford, on the other hand, talked about, “Maintaining The Social License to Operate” from the perspective of the BC forest industry. Apart from the standard statutory obligations, a forester will do well to keep other interests in mind when thinking about accountability, such as: societal expectations, and how they impact stakeholder rights and sustainability; global customer demands, especially in the scope of reputational concerns and a sustainable supply chain; and, shareholder needs in view of capital investment certainty. On an encouraging note, Dunford demonstrated that as of year-end 2011, 151 million hectares of Canadian forests are third-party certified, compared to 49 million hectares in the US and 30 million hectares in Russia. Provincially, BC has the largest area of independent forest certification with 54 million hectares, and Quebec is second with 32 million hectares.

Another informative session was the panel discussion on “Big Industry’s New Forestry“. The participants were Ric Slaco, VP and Chief Forester of Interfor, Kerry McGourlick, Chief Forester of Western Forest Products, Bill Waugh, Director of Planning and Forestry at Island Timberlands. Discussion revolved around the balance that industrial Chief Foresters must strike between stewardship and the product market decisions of the company, and what innovative approaches companies have been taking to keep afloat in the tides of recession, especially in the face of mill closures and alternative wood product markets.

Slaco’s presentation was titled, “The Art of Finding New Opportunities and Pursuing New Products“, in which he explained that the art of forestry grows uniquely in each individual professional as experience is gained and challenged attendees to critically look at how they cultivate and maintain their own personal ‘Art of Forestry‘. As a leading global supplier with one of the most diversified lines of lumber products in the world, Interfor directly employs 1,400 people, said Slaco, 65 of which are forest professionals in BC. Slaco’s presentation ended with the declaration of “Help Wanted: managers of renewable resources”.

McGourlick then explained that, while at present WFP is the largest coastal licensee and lumber producer, the company is still a small fish in a global pond. It is very interesting to note that in 2010, WFP sold 26 per cent of its product to each of Canada, China, and Japan, while customers in the US only bought only 14 per cent.

Island Timberlands was relatively successful during the recent economic meltdown, said Waugh, because the company has; flexibility to operate on an amazing land base, well defined safety and EMS systems, integrated and stable planning platforms, an engaged and motivated workforce, and good planning, good execution and good luck.

As with anything, there must be a dissenting opinion. In the case of the ABCFP conference, that dissent came in the form of Bruce Fraser, Honourary Association Member and Ben Parfitt of the Canadian Centre for Policy Alternatives. Given the topic, “Transition Between Two Economies,” these speakers examined two economies; one fading and one emerging. The fading economy of exploitation is slowing and heading towards environmental collapse, while the emerging sustainable economy is taking over. The participants talked about the threats, imperatives and initiatives that can help make the leap.

Fraser explained further, “The economy that we must develop underneath this dominant one is the self-sufficient and locally focussed economy that is based on the internal market place of our small province and its nearest neighbours. The hallmark will be maintenance of ecosystem integrity. The derived outcomes will be regional self-sufficiency in food supply, water and soil resources, materials, energy supply, and gainful employment.”

Five threats to this potential economy are; climate and financial volatility, social inequity, energy limits, and chemical pollution. And five enabling forestry initiatives to pursue are; shared jurisdiction over Crown land, forest stewardship to communities, community owned conversion facilities, regional marketing and transport networks, and the ultimate integration of agriculture and forestry.

In his turn, Parfitt maintained that “we are still mired in the old economy, especially when one considers our provincial government’s fixation on rushing British Columbia’s finite fossil fuel resources for export to Asian markets.”

“The need to change how we manage our publicly owned natural assets is obvious when you look at the stresses and strains that our northern forests, water resources and water-derived hydroelectricity sources are under as natural gas developments in the northeast of the province accelerate,” continued Parfitt. “The most necessary changes lie in ratcheting down how much we extract and paying a lot more attention to our critically important water resources, which are the foundation of a healthy environment and economy.”

Parfitt then spent the rest of his time discussing the BC governments latest moves in the oil and gas sector, a topic best left for a different forum.

Madison’s Investment Rx

This month’s issue of Madison’s Investment Rx went out to subscribers at the end of last week. North American solid wood producer capacity, inventories, and order files are examined. As well, timber costs in various regions globally are looked at. Madison’s analysis that this mild winter season will bring severe storms in spring has already been borne out this week, earlier even than Madison’s expected.

Contact us any time for a subscription.

RockTenn Closes Matane

Packaging and paper company RockTenn, out of Norcross, GA, said it will close its containerboard mill at Matane, QC to cut costs. The mill, which RockTenn acquired in May 2011 as part of the Smurfit Stone takeover, had 176,000 tons per year of recycled corrugated medium production capacity, the company said.

RockTenn ceased production at the mill in late January. The company expects annual savings of about US$16 million from the closure, and plans to take about US$29 million in pretax charges, US$23 million in the current quarter.

US Storms, Canada Wildfire Warnings

A tornado was spawned Wednesday morning by a strong line of storms that rumbled across portions of Kentucky. The US Weather Service issued a series of tornado warnings across portions of central Kentucky.

Another pre-dawn twister flattened entire blocks of homes in a small Illinois town Wednesday as violent storms ravaged the Midwest and South, killing 13 people in three states.

US Weather, Canada Fires

Late Wednesday, Illinois state officials revised the death toll from a severe storm in southern Illinois, saying six people have been confirmed dead.

The tornado destroyed the Harrisburg Water Department building in the Feazel Street area, several businesses, a shopping centre, and many homes and an apartment complex.

Wednesday’s storms spawned at least 16 tornados reported Wednesday from Nebraska and Kansas across southern Missouri to Illinois and Kentucky. The dead included one killed in the Missouri town of Buffalo and two dead in the state’s Cassville and Puxico areas. A Harveyville, KS, man suffered fatal injuries after his home collapsed on him, and three more people were killed in eastern Tennessee.
The National Weather Service listed Wednesday’s twister as an EF4, the second-highest rating given to twisters based on damage. Scientists said it was 200 yards wide with winds up to 170 mph.

Residents in many states across the Midwest and South were urged Thursday to seek shelter as a new string of tornadoes reportedly hit the ground.

An Oklahoma meteorologist had warned that by Friday,both regions would again be “right in the bull’s eye.” But the National Weather Service’s Jayson Wilson in Paducah, KY, softened that dire outlook Thursday night, saying the likelihood of southern Illinois seeing another supercell — the kind that spawns a twister — Friday “is looking less and less.”

Meanwhile, the province of Alberta Thursday declared an early start to the wild fire season because forest conditions are drier than usual after a mild winter. The early declaration gives the province a head start for the year after last year’s destructive season.
Wildfires last year, including the fires that ravaged the Town of Slave Lake, burned a total of 950,000 hectares – 12 times more than the average from 2006 to 2010.

Elsewhere, the second wildfire in under a week broke out in a western North Carolina national forest Friday, but firefighters say both blazes are under control.

The US Forest Service says a 50-acre wildfire was discovered Wednesday in the Nantahala National Forest, four days after a much larger blaze began elsewhere in the region.

The earlier fire burned more than 725 acres.

A controlled burn Friday sent plumes of smoke wafting across the Garden State Parkway in New Jersey.

Steve Maurer, a warden with the Forest Fire Service, said nearly 15,000 acres had been treated since October.
New Jersey’s prime forest-fire season starts in late March or early April. In 2007, a forest fire burned nearly 17,000 acres of the Pinelands, one of the largest fires in recent history.

Containerboard Prices, Forecast

February containerboard prices were flat compared to January, said Mark Wilde of Deutsche Bank in a report Wednesday. Estimated linerboard prices were at US$640 per ton. Wilde’s market research team says producers have done a remarkable job of keeping prices relatively stable in the face of sluggish domestic demand and seasonal weakness, weak export demand, and a rapid decline in old corrugated container prices during 4Q 2011.

Packaging Material Prices

Given relatively stable prices, Deutsche Bank analysts are recalibrating their 2012 and 2013 containerboard price estimates. They’ve boosted their 2012 linerboard & corrugating medium estimates by US$21 per ton, to US$629 and US$599, respectively. They are also boosting their 2013 estimates by US$10 perton, to US$650 and US$620, respectively. However, they note that with energy costs rising rapidly, a good deal of upside is apt to be eaten-up by increased costs.

Chip Dillon at Vertical Partners released a report saying his team learned Wednesday evening that the price of recyclable old corrugated containers (OCC) in the Southeast US increased for March by nearly double the US$13 per ton average increase seen from February to March over the prior 10 years. At US$135 per ton, Southeast OCC is 42 per cent above the 10-year March average and 7 per cent above the 5-year March average, said Dillon.

Pulp, paper, and recovered paper price tracker FOEX reported Tuesday that US January box shipments rose 2.3 per cent compared to one year earlier, while exports dropped by 4 per cent resulting in a 0.5 per cent decline in US capacity.

Centurion Announces . . .

Centurion Lumber Manufacturing (1983) Ltd. is pleased to announce that Brian Crossley has joined their staff in Chemainus, BC.
Brian will be responsible for the development of export and import business for lumber, panel and veneer products. Brian can be contacted at 250-246-4791.

March 07, 2012

Business in China

Financial analysts and the business media were all abuzz Thursday about a new report expected next Monday, titled “China 2030”. Jointly prepared by the Development Research Center of the State Council of China and the World Bank, this report addresses some of China’s most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it. The report findings indicate that China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms.

“China 2030” comes fast on the heels of a three-step plan published by the Chinese central bank Wednesday. It is the most detailed public proposal yet for loosening the government’s strict capital controls. If implemented as envisaged, the global economic landscape will undergo sweeping changes in the next ten years. The once-a-decade change to China’s leadership, slated for later this year, is prompting changes but could also slow shifts in that county’s policies.

The Next 15 Years

China’s central bank suggestions include: over the next three years, China should clear the path for much more outbound investment, as “the shrinkage of western banks and companies has vacated space for Chinese investments”; in three to five years, lending of the renminbi in international markets should be allowed to take off; and, in five to ten years, foreigners should be given more freedom to invest in Chinese stocks, bonds and property.

At present, foreign institutions are restricted to relatively small quotas that are subject to a slow approval process.

China’s central bank would like foreign investors to be much bigger players in Chinese stock and bond markets. Despite this desire, the wording of the proposal was cautious. Its author was Sheng Songcheng, head of the bank’s statistics department, rather than the bank’s governor, and it was printed in a newspaper managed by Xinhua, the state news agency, rather than on the bank’s own website.
Foreigners would be given far greater access to the Chinese stock and bond markets within a decade under a three-phase plan to liberalise investment flows into and out of the country. The central bank said the plan would also allow Chinese companies to take advantage of a “strategic opportunity” to buy cheap foreign assets and help transform the renminbi into an important international currency.

The report – a policy proposal – could yet meet opposition from more conservative officials who worry that financial stability is at risk.

Regarding the “China 2030” report, some prescriptions it offers have been made public in advance of Monday’s release, when World Bank Group President Robert Zoellick will be visiting China for several days to help present that major joint report.

Details released so far indicate that the authors consider China has a “strategic opportunity” now to relax restrictions on capital flows to take advantage of lower values of Western companies and elevate the yuan’s role in international trade. China’s capital account, together with the current account, are two primary components of a country’s balance of payments. It reflects the net change of public and private international investments flowing in and out of a country. China’s capital account is partially convertible, and the country has recently been relaxing its regulations governing the field.

Opening the capital account would ease overseas investment by Chinese companies and their purchases of technology and resources. The risks now are relatively small.

“The right time window for opening the capital account may not arrive at all” if China waits until changes to the interest-rate and exchange-rate systems are made and the “conditions for yuan internationalization are ripe,” the report said.

The facts that the country’s short-term external debt balance only takes a small share of total, and that debts and hazards posed by its property and capital markets are controllable also help mitigate the risk, the government could take one to three years to relax restrictions on outbound direct investments and three to five years to loosen controls on commercial credits.

To build the financial market, the government could in turn open its real estate sector, stock market and bond market in five to ten years, since it’s hard to identify speculation and investment demands on these markets. China has been partially relaxing its capital account regulations by reforming its exchange rate formation mechanism and pushing for wider use of the yuan in cross-border trade settlement and investment.

Meanwhile, some analysts have raised concerns that the increased funding activity offshore, while helping foster use of the yuan outside China, also could add to the liquidity squeeze within China’s borders.

Six increases in bank-reserves requirements were initiated by the People’s Bank of China last year, in a bid to bring down inflation spurred by Beijing’s massive stimulus package launched during the global financial crisis. The tightened reserve rules, which the central bank has been reversing since November, have limited Chinese banks’ ability to lend. At the same time, these banks have also seen what analysts call unprecedented erosion in their deposit base as Chinese savers increasingly shift their money from traditional savings accounts toward higher-yielding investment products. These products total about 5 trillion yuan, according to economists at Standard Chartered, representing 14.2 per cent of all household deposits.

Analysts estimate that about 65 billion yuan of credit-default swaps (CDs) issued by Chinese banks will mature in the next 10 months. The recent move by Hong Kong regulators to boost liquidity in the offshore yuan market could help ease the funding pressure for the banks.

The new marketing campaigns seem to be working. Depositors bought 16.5 trillion yuan of what banks call wealth management products in 2011, more than double the amount a year earlier, according to Benefit Wealth, a Chengdu-based data supplier that tracks the market. At the same time, deposit growth at Chinese banks last year slowed to 12.7 per cent, after rising 20 per cent in 2010, central bank data show. In January depositors pulled 800 billion yuan from savings accounts, about 1 per cent of the total, the central bank reported. It was the largest monthly decline in at least 12 years, according to data compiled by Bloomberg.

The popularity of wealth management accounts may undermine the stability of the US$1.8 trillion banking system, say analysts including Charlene Chu, a Beijing-based senior director at Fitch Ratings. Banks generally lose money on the accounts, since they pay above-market rates.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines new analyses, and forecasts, for the strength and growth potential of India’s economy.

Contact us any time for a subscription.

Resolute Battles for Fibrek

Quebec regulators are allowing a friendly takeover bid for Fibrek Inc by Vancouver, BC-based Mercer International to proceed, but have halted trading in 32.3 million special warrants issued by Fibrek for the purchase of its stock.

The decision, announced Thursday, granted a request by hostile bidder Resolute Forest Products, out of Montreal, QC. Resolute, the former AbitibiBowater, had also argued against what it described as an improperly discounted and dilutive private placement of warrants.

Following the decision Resolute, which had also complained about what it saw as an unreasonable break fee in Fibrek-Mercer acquisition agreement, said it would extend its own bid until March 9.

Resolute is offering $1 per share in a bid that values Fibrek at $130 million, while Mercer has made what Quebec pulp producer Fibrek has described as a “significantly superior offer” of $1.30 per share.

US Existing and New Home Sales, Housing Supply

Sales of previously owned US homes rose in January to the highest level since May 2010 as investors took advantage of lower prices to buy distressed properties.

Purchases climbed 4.3 per cent to a 4.57 million annual rate, from a revised 4.38 million pace in December that was slower than previously estimated, a report from the National Association of Realtors showed Wednesday.

New single-family home sales in the United States fell in January, but an upward revision to the prior months’ data and a drop in the supply of properties on the market added to growing signs of a budding recovery in the housing sector. The Commerce Department said Friday that home sales slipped 0.9 per cent to a seasonally adjusted 321,000-unit annual rate. December’s sales pace was revised up to 324,000 units, the highest in a year, from the previously reported 307,000 units.

Real Estate, US

Distressed properties made up the largest portion of all existing home purchases since April. Almost one in four of all existing home sales transactions was made by investors. That’s helping to clear the market of unsold properties and may stabilize prices. While the threat of more foreclosures risks slowing progress, housing may get a boost from gains in employment and mortgage rates that are near record lows.

Canada’s Rejoinder to US SLA Rebuttal

In advance of its public release Friday, Madison’s has obtained Canada’s latest response to the US in the current arbitration of the 2006 Softwood Lumber Agreement.

The Rejoinder states, in part, that the US claim of “deliberate misgrading of British Columbia timber [ . . . ] is speculation and unpersuasive.”

“None of [the four “actions” claimed by the US] comes close to constituting circumvention under Article XVII,” continues Canada’s response.

Softwood Lumber
Arbitration

Canada reiterates the position it has held all along; that British Columbia’s timber harvest practices are in compliance with the 2006 Softwood Lumber Agreement.

Canada’s Rejoinder accuses the US of “constructing its own version of reality” to try to prove its case, and states, “The US has failed to demonstrate that any benefit has been provided to softwood lumber producers such that compensatory adjustments would be warranted.”

Regarding the US request for remedy, Canada references a previous arbitration under the SLA, against Ontario and Quebec for alleged government subsidies, in which the LCIA Tribunal ruled that the US “argument suffers from three fundamental flaws.” Canada maintains that the current US claim tries to use these same “flawed” arguments.

Using its own expert witness, Joseph Kalt, Ph.D, a professor of international political economy at Harvard University, to counter the expert witness report of Dr. Neuberger already filed by the US, Canada states that “the benefit associated with the quantity of Grade 4 timber [ . . . ] would be $17.5 million [ . . . ] contrasts starkly with Dr. Neuberger’s preferred benefit number of $303.6 million.”

The Rejoinder concludes by declaring that Canada has not breached the SLA, and requests the LCIA Tribunal to dismiss all US claims for relief.

All documents under this current arbitration have now been filed by both sides, the hearings will be held in Washington, DC, February 27 to March 9, 2012.

BC’s Budget for Forestry

“The budget delivered Tuesday by British Columbia’s Liberal government cuts funding for forest health by $20 million at a time when there is universal agreement our forests are in crisis. In addition, this budget completely ignores the financial impact associated with downloaded costs from the federal crime bill,” charged the NDP finance critic in the Vancouver Sun Friday.

Finance Minister Kevin Falcon released an austerity budget Tuesday. It shows total spending for the recently consolidated Ministry of Forests, Lands and Natural Resource Operations is to rise from $590 million in the current fiscal year to $602 million in 2012-13, then drop again to $555 million in 2013-14.

At the Association of BC Forest Professionals annual convention in Victoria, BC, this week, CEO Sharon Glover said, “In recent years, the mountain pine beetle epidemic, as well as several severe fire seasons, has had tremendous impact on the forests. Yet due to cutbacks, the scale of the provincial inventory program has been reduced,” according to the Northern View.

The Association’s report says 42 per cent of the province is represented by inventories completed prior to 1990, and 30 per cent of forest records date back to before 1980. The report’s top recommendation is “stable and adequate funding” for inventory work, which it estimates at $15 million per year.

The report says the budget for forest inventory research was $13.3 million four years ago, and has declined to $8.4 million for the fiscal year ending this March. Forester staff positions have gone from 40 full-time equivalents in 2006 to 27 in 2011.

Bowater Mersey Says No Local Forestry Contractors

In a disturbing development that will only become more frequent as this year goes on, Resolute Forest Products has quietly hired forestry contractors from outside Nova Scotia for the Bowater Mersey paper mill, according to the Chronicle Herald.

Less than three months after the province unveiled a $50-million deal to keep the plant running and save jobs, the Montreal-based forest products company has hired contractors from Quebec and New Brunswick.

Resolute spokesperson Pierre Choquette said the company has been actively looking for harvesting contractors in Nova Scotia for the last number of years, placing advertisements in local media and online.

Wade Turner, who operates J.A. Turner & Sons, said he understands why Resolute may have hired outside the province, given the dwindling number of forestry contractors left in Nova Scotia.

“Those guys are getting few and far between down here,” Turner said in an interview from Bridgewater. “The industry has gotten so bad a lot of those guys have pulled out and gone out west.”

Dugal Prest, co-owner of Hefler Forest Products, agrees that the industry has been “really tough,” noting that the cost of lumber is down due to sagging demand, says the Herald.

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