Lumber News Archives: Oct 2009

Lumber News Archives: Oct 2009

North American Transportation ; Madison’s Timber Preview ; BC Labour Issues ; US Housing Starts ; Wildfires ; Grant Takeover ; Paragon Reopens Mill ;Canadians Bolster US Real Estate Market ; US Biofuel Subsidy; Forest Fires; Catalyst CFO Resigns
; Global Forest Industry ; Madison’s Timber Preview ; Western Forest Products Land Sale ; Mills Restart ; Pulp Mills to Receive Funds New Uses for Beetle Kill; International Tribunal Rules on Arbitration ; Global Real Estate Markets; US Economic Indicators ;

October 30, 2009

North American Transportation

Recent figures out of the US Bureau of Transportation Statistics show that the volume of goods moving by surface transportation between the US and Canada and Mexico have showed steady improvement since the beginning of 2009.
Based on new orders, share prices of a major US rail car manufacturer have risen sharply since August.

Transportation Volumes, 2009

Railways and freight transporters have been releasing third quarter 2009 results over the past week, generally lower than the same time last year. However there are indications that the worst of the down cycle is behind us. Most notably pointing to a brighter future is the share price of FreightCar America, a major US manufacturer of railcars, up $8.12 since September 02, 2009, from $18.22 to $26.34. This improvement was due mostly to strong 2Q 2009 results, but was also helped by a positive restatement of 1Q 2009 financial statement to correct a $12.3 million accounts payable overstatement. Despite poor returns this year, rail companies are clearly ordering more cars.

Canadian National Railway Co. said Tuesday its profit for the quarter ended September 30 amounted to 97 cents per share compared with a profit of $1.16 a year ago, when net income totalled $552 million. Revenue fell 18 per cent to $1.85 billion, from $2.26 billion a year ago. The Montreal-based company said the quarter was challenging with significant weakness across markets, affecting its freight volumes. Operating expenses, which fell by 18 per cent to reflect lower fuel prices and cost-containment efforts, acted as a cushion to lower traffic. During the third quarter, all commodity group transport saw lower revenue, with metals and minerals falling 32 per cent, automotive 25 per cent, forest products 24 per cent, intermodal 20 per cent, petroleum and chemicals 11 per cent, coal nine per cent, and grain and fertilizers nine per cent from the same time period one year ago.

Outgoing CN CEO Hunter Harrison said the railway’s strong results will continue to create opportunities for it to generate record numbers in 2010 and 2011. The railway believes currently depressed freight volumes should be on the upswing in the coming quarter, recovering from the recession that led to a 16.4 per cent drop in third-quarter profits to $461 million.

Across the border, Nebraska’s Union Pacific Corporation reported Thursday a 3Q 2009 net income of $517 million, or $1.02 per diluted share, compared to $703 million, or $1.38 per diluted share in the third quarter 2008. Operating income totaled $967 million, down 20 per cent.

“Union Pacific`s third quarter results were clearly affected by the global recession and related decline in our rail traffic,” said Jim Young, Union Pacific chair and CEO. Business volumes, as measured by total revenue carloads, were down 15 per cent versus 3Q 2008. Reflecting lower volumes, year-over-year freight revenues declined 25 per cent to $3.5 billion in 3Q 2009.

Also reporting Thursday, Texas-based Burlington Northern Santa Fe Corp. posted 3Q 2009 earnings of $488 million, or $1.42 a share, down from $695 million, or $1.99 a share, a year earlier. The latest results included a 6-cent gain due to a coal rate case adjustment. Total freight revenue decreased 27 per cent, as volume, measured by rail car units, slid 18 per cent.

Even as demand remained sluggish, some on Wall Street are striking a more positive tone on sequential improvements. For example, Florida’s Ryder System, Inc, a provider of transportation and supply chain management solutions, reported Thursday on earnings from continuing operations for 3Q 2009 were $28.5 million, compared to $72.8 million in the year-earlier period, beating analyst expectations. A comparison of Ryder’s 13.5 per cent projected earnings-per-share growth rate for the next five years with the Rental & Leasing Services industry’s projected EPS growth rate of 11.4 per cent for that same time frame, shows that analysts expect Ryder to outperform the industry in the future.

Indeed, Arizona truckload carriers J.B. Hunt Transport Services Inc. and Nebraska’s Werner Enterprises posted better-than-expected quarterly results Monday, and said they were seeing signs of stabilization in demand.
The Federal Reserve said Wednesday that transportation services activity in most US regions declined in the six weeks through mid-October, except in Chicago, where trucking shipments reportedly increased, and Cleveland, where contacts also cited an uptick in freight transport volume in recent weeks. Again, the bright side is that reports of economic activity gains generally outnumbered declines. However, virtually all references to improvement were qualified as either small or scattered, indicating that full economic recovery has yet to gain speed.

On September 30, 2009 the US Bureau of Transportation Statistics released a report showing trade using surface transportation between the US with Canada and Mexico was 28 per cent lower in July 2009 than in July 2008, dropping to $51.5 billion, with a year-to-year decline of greater than 27 per cent. The Bureau also reported that the value of US surface transportation trade with Canada and Mexico rose 1.6 per cent in July 2009 from June 2009. Digging deeper, the report also states that the value of US surface transportation trade with Canada and Mexico in July 2009 was up 7.2 per cent compared to July 2004, and up 38.1 per cent compared to July 1999.

On October 15, 2009 the Bureau reported the Freight Transportation Services Index (TSI) rose 0.7 per cent in August from its July level, the second consecutive monthly increase, and the first four month period without a decline in the index since 2002. The Freight TSI measures the month-to-month changes in freight shipments in ton-miles, which are then combined into one index.

A glance at the table on this page shows that, while transportation figures are still lower when compared to the previous two years, there has been a steady, albeit slow, rise since January 2009. When this data is combined with other positive indicators, like rail car orders, it seems likely that the worst of the drop is behind us.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the recent movement of solid wood, pulp and paper prices, as well as some 3Q 2009 results for relevant companies. Various changes in the industry dymanic, including company takeovers and mill buyouts are also explained.

Contact us any time for a subscription.

British Columbia Labour Issues

Talks between the United Steelworkers and the CONIFER employer group, originally scheduled to go all week, once again broke off on Monday. At issue is shift scheduling/hours of work. Both sides explained to Madison’s that they are significantly far apart on this subject.

CONIFER is looking for similar scheduling terms enjoyed by the Southern Interior in the 2003 Collective Agreement. The union has expressed no interest in granting any of the employer groups these conditions for the 2009 Agreement.

Although there is no resumption of talks scheduled yet, both sides are firm in saying they are ready to go back to the table at any time and that no other kind of action is currently being contemplated.

Meanwhile, 250 workers at the Tembec mill in Pine Falls, MB, have been locked out since September 1st. Mediation talks have broken off again between Tembec and the United Steelworkers union. The union said they have agreed to some concessions, but Tembec is not willing to budge from cuts of 35 per cent in wage and benefits.

US Housing Starts

US housing starts rose by 0.5 per cent in September compared to August, to an adjusted annual rate of 590,000 commerce department figures showed on Tuesday. This is a slower growth than August’s 1.5 per cent, compared to July.

As usual for this time of year, when building activity slows down, US building permits were down compared to August, by 1.2 per cent.

US Home Building

Home construction has made a sharp turnaround since April when new construction fell to a 50-year low since surging by 23 per cent. Many economists see the revival as a mixed blessing, as greater housing activity is a sign of economic health but also extends the overhang of supply.

Multi-family home construction was a drag on the overall figures, falling by 23.5 per cent from August to September. Single-family housing starts continued to show strength, however, rising by 3.9 per cent.

In spite of the rise in home construction in recent months, homebuilders have been feeling increasingly anxious about the housing market, with the first-time homebuyer tax credit set to expire next month.

The NAR reporting that existing home sales in September rose 9.4 per cent to 5.57 million units, beating analysts estimates for 5.35 million. Total sales up 9.2 per cent in year over year comparisons.

The median price fell 1.4 per cent to $174,900 from August’s revised $177,300. Median prices off 8.5 per cent against year ago levels. Inventories fell to 3.630 million from 3.924 million units. At the higher sales pace inventories fell to 7.8 months from 9.3 months in August.

Wildfires

Vast forest fires have hit a large part of central North Korea this week, sending plumes of smoke over most of the country’s central and eastern regions.
NASA, the US space agency, said multiple fires had been burning in the state since mid-October, with several hot spots located in a mountainous region in the centre of the country.

Forest Fires

Multiple fires broke out in the northeastern part of North Korea recently, sending a plume of smoke to the East Sea between the North and Japan.

“We are still trying to analyse it,” a South Korean official told Yonhap news agency. “They are probably a result of fires being intentionally lit to reclaim farmland.”

Meanwhile Australian Prime Minister Kevin Rudd warned the nation on Wednesday to brace for a severe bushfire season as fire crews battled intense blazes stoking memories of infernos earlier this year which killed 173 people.

Authorities have warned the current fire season could rival “Black Saturday” blazes in February which scorched through southern Victoria state.

Householders in Rockhampton on Australia’s east coast were Monday warned to leave or prepare to fight the forest fires bearing down on them.

Grant Takeover

Atlanta’s Georgia-Pacific is rumoured to be one of the companies interested in taking over bankrupt Grant Forest Products of northen Ontario.

Local residents oppose foreign takeover of the family-owned company, which went bankrupt earlier this year.
A court appointed monitor is reviewing the bids, and must release a recommendation by December 01, 2009.

Paragon Reopens Mill

Paragon Wood Products reopened its mill in Lumby, BC, this week after a year-long closure. The company plans to shift operations away from Cedar, to SPF dimension lumber, and away from North American customers, to Asia.

At one time Paragon, a family-owned company, ran five mills in BC but most of them have been closed, including in Lavington and Grindrod. Its Lake Country operation remains open.

October 23, 2009

Canadians Bolster US Real Estate Market

With the Canadian economy seeming to be on the way toward recovery, and Canadian real estate activity returning to former high levels, savvy investors are taking advantage of the weak US dollar to buy distressed properties in the US.
Foreign investment into US real estate jumped significantly in 2009, according to the US National Association of Realtors, while domestic property demand continues to lag.

Canadians Buying In

Realtors in the US are starting to see houses moving out of the market, but from an unlikely source. Due to the high Canadian dollar, middle-aged Canadians are looking to the US for investment in a second property. Apart from the increasingly favourable exchange rate, rising home values in most regions of Canada are driving potential buyers south for properties still available at a discount.

According to the US National Association of Realtors, “The top five countries of origin for foreign home buyers, in rank order, were Canada, the United Kingdom, Mexico, India and China. [ . . . ] Sixty-nine percent of REALTORS® reported that their international clients bought a single-family home. Condominiums were also popular, accounting for 18 percent of foreign purchases. [ . . . ] The most popular states where international buyers purchased homes were Florida, California, Texas. and Arizona.” These four sunbelt states reported that their international business actually increased 35 to 45 per cent.

In May 2009, with currency exchange ranges fluctuating, the average US home price was US$218,300, compared with US$278,100 in Canada and US$237,900 in Britain, according to the association’s data. In addition, the number of Canadian buyers who used cash to pay for US properties jumped to 81 per cent in 2009 from 47 per cent in 2007. A recent report found that risk-averse Canadian households are sitting on up to $1-trillion in cash and near-cash holdings. With the Canadian dollar currently near par, and threatening to overtake the US dollar, the depressed US real estate market is a good place for Canadians to invest.

“Cottages have become prohibitively expensive in Canada – a Florida condo is far more affordable,” says Caroline Nalbantoglu, a financial planner with PWL Advisors Inc. out of Montreal.

In an amusing twist, the jump in buyers from Manitoba and Saskatchewan can be credited to a former Winnipeg police officer who moved to Phoenix, AR, in the late 1990’s to become a realtor. Diane Olson of HomeSmart has been holding seminars across central Canada, and is signing up new home buyers in droves.
The Canadian Real Estate Association said Thursday that in real terms, sales of existing homes within the country have never been stronger than in the just-completed third quarter. The association says over 135,000 units were sold in the July-to-September period, which is 18 per cent higher than the corresponding period last year before the recession hit. Average prices gained 11 per cent to $327,736.

Tannis Dawson, who works for Investors Group in Winnipeg, points to one couple she works with who just scooped up an ocean-front condo with a shared pool in Naples, FL, for US$90,000. Two years ago, it was selling for US$234,000. While some of these formerly hot real estate markets, like Florida, California and Arizona, may not recover property values to 2006 levels, they most assuredly will see real estate prices rise as the US economy continues to recover.

“Property values aren’t going to go up 50 per cent in the next month or two, so there’s a great opportunity,” said Diane Olson. Houses in Phoenix worth $170,000 US in 2004, which ballooned to $260,000 US in 2006, are now selling for $110,000 US, she said. In 2006, the Canadian dollar was averaging about US$0.88.
September real estate sales in Sarasota, FL, soared 35 per cent in September 2009 over the same period in 2008 as savvy buyers took advantage of dramatically lower prices. Sales totaled 554 units versus 409 sales in September 2008, according to the Sarasota real estate board. This city on the Gulf coast of Florida recently ranked Number 5 in the ‘2009 Top 10 Undervalued Home Markets’ by US News and World Report, as well as the Number 1 spot in the ‘10 Biggest Housing Markets on Sale’ according to Barbara Corcoran, Real Estate Expert for the Today Show.

According to a respected financial blog called Dr. Housing Bubble, “The US Treasury and Federal Reserve are doing everything they can to damage the dollar. In fact, the only reason real estate isn’t correcting faster is because of the artificial money being pumped into the system. [ . . . ] Banks are now making good dough on the difference between what they borrow and what they lend even with historically low mortgage rates. Thanks to the trillions in taxpayer subsidies, banks are able to borrow for virtually zero and lend out at much higher rates.” http://www.doctorhousingbubble.com See graph for projection and historical difference between US Federal lending rates and mortgage interest rates.

On Friday McGraw-Hill Construction released its 2010 Construction Outlook, which is which forecasts an increase in overall US construction starts for next year. Due to improvement for housing from extremely low levels and broader expansion for public works, the level of construction starts in 2010 is expected to climb 11 per cent to $466.2 billion, following the 25 per cent decline predicted for 2009.

Given these circumstances, it seems likely that Canadians will continue buying into the US real estate market into 2010, potentially propping up home sales activity. Eventually the US economy will recover, particularly in terms of employment, and the percentage of domestic home buyers will rise. Whether foreign interest in US property will be enough to drive home prices upward remains to be seen.

US Biofuel Subsidy

The announcement out of the US this week of funding for a biomass assistance program is causing waves is dismay in the Canadian forest products industry.

The US Farm Service Agency website explains the funding as, “Biomass Crop Assistance Program provides financial assistance to producers or entities that deliver eligible biomass material to designated biomass conversion facilities for use as heat, power, biobased products or biofuels.”

The first matching payments under the Program went to Show Me Energy Cooperative of Missouri on September 1. The Show Me Energy plant produces fuel pellets from agricultural waste products that are used to heat houses and livestock facilities.

Canada’s Natural Resources website states, “expectations are that annual subsidies to the US forest sector will range from US$700 million to US$1 billion. The Program will encourage significant expansion of production in parts of the US forest sector, notably lumber and pellets.”

While some may try to deny it, biofuels – especially those made from forest residue – are the way of the future. A forward-looking program like this is sorely needed in Canada. Cellulostic biofuel is going to be a major source of energy in Europe within the next five years. Refer to the August 14th of your Madison’s Reporter for statistics and data on European, Asian and US demand for biofuels made from residual cellulose.

Japan’s Economic Recovery

The Bank of Japan said Thursday in its monthly report that export and production have been rising along with increasing public investment. The bank added that the drop in business fixed investment is moderating, while housing investment has decreased amid high unemployment and low income levels.
The bank added that the economy is likely to improve gradually, while it expected domestic and private demand to remain weak along with weak corporate earnings and increasing unemployment. Yet, the financial sector is showing sings of improvements, the Bank of Japan said.

Japan’s Economy

Japan’s central bank mainly saw positives in general improvements in the global economy, however on the domestic front the Bank of Japan said that it did not see many signs of improvement.
The report noted that Japanese companies are now borrowing less money as many have managed over the last few months to return to liquidity.

“In these circumstances, firms’ financial positions, although many firms, mainly small ones, still see them as weak, have continued to improve as a whole,” it said.

The report comes on the back of two months of generally positive data on the Japanese economy and business sentiment across the nation.

The report will be a cause for concern for the newly-elected Democratic Party of Japan, however, which has said it hoped Japan to become a two-tier economy, in which domestic demand plays as big a part as exports. In its election manifesto it stated that it aims to “change the Japanese economy into one centered on domestic demand.”

Meanwhile, Japan’s new government announced Friday it would freeze spending of about US$33 billion from the previous administration’s extra budget.

Prime Minister Yukio Hatoyama’s cabinet approved the suspension of spending of about 2.93 trillion yen out of a supplementary budget of 14.7 trillion yen for the year to March 2010.

“In a way, this is the start of new politics,” said Hatoyama.

Forest Fires

California and Greece continue to battle stubborn fires in a year which saw high wildfire activity across the globe. Meanwhile, Australia is bracing for what is expected to be a very active fire season.

Wildfires

A wildfire that blackened more than 11 square miles of California brush and timber in a popular resort area about 70 miles northeast of Los Angeles, and destroyed at least five structures on the weekend, is now under control.

US Forest Service spokesman John Miller said firefighters gained full control of the Sheep Fire on Saturday night.

More than 60 firefighters battled a blaze in a fir tree forest on the Greek island of Evia on Tuesday, using 23 fire engines and 11 eight aircraft. There were no reports of injuries.

Meanwhile Australia has begun preparing more than 1,000 fire refuges and will recast its national alert system to warn of “catastrophic” bushfires as a new fire season threatens to eclipse blazes this year which killed 173 people.

With the new fire season just two weeks away and authorities warning it could rival “Black Saturday” blazes in February which destroyed more than 2,000 homes, authorities said they were preparing “neighbourhood safer places” to be ready by November.

Catalyst CFO Resigns

Catalyst Paper said Tuesday its Chief Financial Officer David Smales will leave the company effective November 4 to join a Toronto-based construction and infrastructure development firm.

“The search for a successor is underway and a special committee of the board of directors will review the shortlist of suitable candidates in due course,” the pulp and paper maker said in a statement.
Smales joined Catalyst in December 2005 as the vice president, strategy and was appointed to his current role in April 2007.

October 18, 2009

Global Forest Industry

Building on his February 20, 2009 piece in Madison’s Lumber Reporter, former Doman Industries/Western Forest Products President and CEO Rick Doman gives a further update on new developments in forestry on the international stage.

Busy as President and CEO of Eacom Timber, Doman expounds on the forestry situation on the BC Coast and Interior, problems in eastern Canada, and emerging global lumber producers like New Zealand and Russia.

A Unique Perspective

Following from the February 20, 2009 issue of your Madison’s Reporter, once again we have a guest piece written by Rick Doman. The final paragraph of that issue stated, “The days of massive production levels are behind us, the world has changed very quickly and we need to adapt and change our business methods equally quickly. The Canadian industry also has to further develop global markets despite growing global competition. While the US will always be a major customer of Canadian wood products, such a heavy reliance on that market has caused a lot of the problems Canadian industry faces today.” Rick Doman expands on this statement in today’s piece, talks about recent changes in the global forest industry and explains where he sees things going in the future.

By Rick Doman

The forest sector continues to face challenges, despite an increase in US housing starts. Both new and existing home sales have increased significantly over the past several months and home inventories continue to decline. Eastern Canadian producers are operating at about 25 per cent of capacity due to higher delivered log costs, and to the recent softwood lumber ruling which put additional duties on lumber shipped into the US. Lumber quotas were exceeded due to a misunderstanding regarding what quota volumes were in the first half of 2007.

In the west log prices, in particular in BC, seem to be very low, which allows for that region to continue to produce while others, including the US, must take significant curtailments. Since BC produces about 50 per cent of all lumber shipped into the US, these lower log costs may be a concern in the future for the US market.

The US government may extend its US$8,000 tax incentive for new home buyers. If this occurs, the housing recovery will get continued help. In addition, the US may create a second stimulus program, probably different from the first one. This would stimulate that economy even further.

In Coastal BC log exports appear to be increasing as more sawmills shut down. There are fewer companies able to block log exports due to mill closures and the rationalization of Coastal timber. Log policies in the BC Interior and Coastal BC should be reviewed by an independent panel made up of scientists, environmentalists, the Opposition Party and others. The function of this panel would be to determine if stumpage issues, pine beetle issues and environmentally sustainable practices have been properly administered over the past nine years. 94 per cent of BC’s forests are an asset of the Crown. It is the government’s duty to ensure stumpage is administered fairly and equitably. These environmental and sustainability issues are especially important going forward.

It is difficult to believe that the BC A.A.C. can be sustained at current levels, due to the overharvesting that has taken place, on average, over the past decade. The BC forest industry in general has not done well, which is why a fully independent process should occur to correct that problem. For example, in 2003 the BC government said, “The Coast is broken, we are going to fix it.” In 2009 the Coastal sector, along with the BC Interior, continue to do poorly. Tens of thousands of jobs have been lost, many of which could have been preserved if forest policies, starting in 2001, had been based on a long-term perspective.

WAC Bennett helped build BC by looking decades ahead to ensure the province would benefit over the long term. It is imperative for the future of the province, for the generations to come, to ensure a healthy forest sector which can be built upon.

On a recent trip to New Zealand I was impressed by the opportunity for timber harvests there to sustainably double over the next ten years. This is due in part to the New Zealand government establishing a level playing field for the forest industry. Log harvest could increase from 15 or 20 million cubic meters per year to 35 or 40 million cubic meters per year. New Zealand is looking to attract more sawmills to help manufacture that expected increase in A.A.C. As New Zealand mostly produces Radiata Pine, a lot of that lumber goes into windows, doors and mouldings. This competition may make it difficult for Coastal BC lumber producers selling Hemlock into Japan and the US.

Russia is competitively shipping into Europe and China. Within five years, Russia could become a major threat to BC producers selling into those regions. Russia also has a competitive currency in the global marketplace.

Swedish producers have also become more competitive recently. Sweden is well located to ship into Europe, and has a competitive currency on a global basis.

In the US, due to extensive silviculture over the past 20 years and fast-growing timber, significant increases in southern timber harvests are expected over the next decade. Consequently, it is expected that lumber production will increase in the US over that time period. The US is highly motivated in this regard, not in the least because that country is trying to create more jobs. The weak US dollar also helps it compete on a global basis.

The Canadian dollar was very weak for decades, up to 2005. Currencies go in cycles and the Canadian dollar is in an uptrend, along with some other global currencies.

The 2006 Softwood Lumber Agreement will continue to play havoc in the Canadian forest industry, in particular for regions where log costs are higher. Delivered log costs are one of the largest drivers under which sawmills operate, and which cause sawmills to curtail or shut. In particular when lumber demand and prices are lower than normal.

Global delivered log costs, currency rates and freight rates, will determine which regions and countries do best in the international forest industry. While many forest companies have significantly reduced production costs, a fair comparison can only be made based on delivered log costs. If these issues are examined historically, it becomes clear why certain regions outperformed while others underperformed.

Rick Doman President/CEO Eacom Timber Corporation former President/CEO Doman Industries Ltd. and Western Forest Products.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview looks at sudden interest in US home building, home finishing products, and home financing company shares.

Builders FirstSource, Lumber Liquidators and Toll Brothers are examined. Contact us any time for a subscription.

Western Forest Products Land Sale

The future of the eastern Vancouver Island waterfront and Jordan River townsite are among problems to be settled in the sprawling electoral area, where efforts are underway to find compromises for the future of 132,000 hectares that make up the rural resource lands.

Since January 2007, when the province released 12,000 hectares of Western Forest Product’s private forest land from tree farm licences on the southwest corner of Vancouver Island, a battle has raged over the future of the area. The Capital Regional District implemented a 120-hectare minimum lot size in an effort to block development not envisioned in the regional growth strategy.

WFP, which had put up 2,500 hectares for sale, contested that move. The BC Supreme Court and Court of Appeal both ruled that the CRD’s voting procedures were invalid.

Tree Farm License Sale

A potential sale of 2,500 hectares of the highest-profile land, much of it around Jordan River, led to a succession of court challenges and appeals — and in the latest step, the CRD is finalizing bylaws and an official community plan for the area.

On October 20, the bylaw will go to a CRD land-use committee — made up of directors from Juan de Fuca and the neighbouring municipalities of Sooke, Langford, Colwood and Metchosin. In November, it will be brought to the whole board for discussion, but only committee members will be able to vote.

Community groups and representatives have urged the province to buy the waterfront between Sandcut Beach and Jordan River to protect public use for future generations.

In late September, Community Development Minister Bill Bennett said the province can’t afford it.
New Western Forest Products president and CEO Steve Frasher said in a statement to the Times Colonist Thursday, “We have believed from the start of this process that the best use of these lands is a well-planned development that protects special areas, including public waterfront access and unique ecological sites, and respects the broad community interest.”

“Intensively logging these lands, which we would be allowed to do, would surely concern the community. But keeping land on our books does nothing to reinvigorate our business and secure our future.

Yes, we intend to sell these lands. We need the capital to make our mills more productive and efficient and to allow us to build a sustainable business that continues to employ hundreds of Island residents from Duncan to Port Hardy.”

Frasher went on to say that, under his leadership, WFP will engage in consultation with interested parties “to consider the best interests of the Capital Regional District and area residents.”

Mills Restart

AbitibiBowater will re-start one mill and its associated planer mill in Mackenzie, BC, to saw logs in its inventory and plane 14 million board feet of lumber that have been sitting at the mill since the January 2008 shutdown.

Interfor has struck a deal with USW Local 1-423 for a 70 day restart at its mill in Grand Forks, BC. Maintenance starts on Oct ober 13th, and the sawmill starts October 19th.

BC Mill Restarts

Brian O’Rourke, business agent for Local 1-424 of the USW, said AbitibiBowater’s Mackenzie sawmill is expected to run 70 days and the planer for 104 days. That translates into about five months of work for 60 people, he said.

The agreement with Abitibi-Bowater is to saw logs in its inventory and plane 14 million board feet of lumber.

“This is to give some potential buyers an opportunity to see how the facility would run, which would make perfectly good sense,” said O’Rourke in a statement to the Vancouver Sun.

In Grand Forks, Interfor has purchased/acquired several thousand cubic meters of logs to feed the mill, which has been curtailed since December 2008.

USW Local 1-423 agreed to some concessions, including a shifting arrangement change, and workers deferring 50 per cent of their vacation pay for a period of time. It also included giving up some union jobs –(log scalers)- and allowing the company to contract them out.

Pulp Mills to Receive Funds

An announcement is to be made at Nanaimo’s employee-owned Harmac Pacific pulp mill Friday regarding Ottawa’s $1-billion green energy fund, introduced last June to counter US pulp mill subsidies.

Twenty-four pulp and paper mills have qualified for Canada’s version of the United States’ Highway Act.
The Pulp and Paper Green Transformation Program allows Canadian pulp and paper companies that produced black liquor – a liquid by-product of the chemical pulping process that is used to generate renewable energy – in 2009 to access this $1-billion fund.

October 11, 2009

New Uses for Beetle Kill

The latest research on potential uses for beetle kill wood have come up with some fascinating results.

Pressure-treated landscape products and cross-laminated veneers are just two new products being made from the long dead timber. A consumer survey found the blue-stained landscape items were popular, while the cross-laminated veneers passed strength tests at over 200 per cent higher than regular LVL.

Pine Beetle Research

The British Columbia Ministry of Forests and Range has recently announced that the rate of mountain pine beetle infestation in the BC Interior is slowing down, but only because the beetle is running out of trees to chew. This pronouncement prompts one to ask, “What is to be done with this massive volume of beetle-kill wood?” Current reports from BC Wood, the UBC Wood Sciences Department, and Forest Innovation Investment have developed some fascinating answers to this question.

“MPB New Product Development — Specialty Treated Landscape” was prepared for BC Wood in March of 2008 through a project funded by Forintek. The purpose of the research was to “find higher value uses (than pulp chips) for small, dimensional, blue-stained sapwood by developing products (such as privacy trellis, fencing, deck tiles) for the growing outdoor living market.” Two phases of research, one to develop and test product concept prototypes, and the other a detailed test for consumer preferences regarding colouration, were done to “mobilize the capable manufacturers to consider approaching this market.”

Using pressure treated pine as an alternative to cedar, the scope of this study was to test customer appeal to wood with blue discolouration. The researchers were surprised to find that a light stain finish, “brown/yellow colour” was the first choice of consumers, and even more surprised to find that the second choice was “no stain” finish. The researchers observed that “consumers preferred to be able to see the natural character and grain of the wood.” In buyer interviews, the researchers found that “there is a strong consumer trend for new and improved outdoor living products,” and that consumers were “also very interested in the positive environmental story that this product carries.”

The final recommendation of the report states, “it would be useful to visit 5-6 manufacturers to present this opportunity in detail.” The message seems to be ‘don’t fear it, don’t fight it.’ This 47 page report is full of information on how to market beetle-stained wood widely, rather than sticking to niche markets or trying to hide the blue-stained wood inside walls. The full report can be found here http://www.bcfii.ca/industry_resources/mpb/pdf/08-0024%20%20MPB%20Specialty%20Treated%20Landscape%20Development%20-%20Phase%202.pdf

UBC’s Wood Science Department, funded by FII, approached the problem of beetle-kill from a different angle, preferring to focus on the “Development of Cross Lamination Technology — Thick Laminated MPB Wood Plates”, published in March of 2009. The four year study, which has more tests remaining, on “box type plate configurations” before it is complete, focussed on making “a special laminated veneer lumber (LVL) product.” The study hoped to overcome the difficulty of drying checks which have formed in logs harvested from standing dead trees. “The checks are not only deep, but also spiral around the log up to 40 per cent of the time. [ . . . ] Splits/checks in lumber can reduce the structural integrity of the wood.”

An ingenious solution, which combined making panel out of 12 veneer plies and orienting certain layers of the veneers at various angles, resulted in “a significant improvement in some mechanical properties of the cross-laminated panels (CLVL) as compared to the conventional LVL.” The “strength of tension perpendicular to grain” increased by almost 207 per cent, while “bending strength” decreased by about 12 per cent over the conventional product. The researchers believe the loss of bend is acceptable in view of the massive increase in strength, and also that “these mechanical properties could further be improved by refinement of the processing technology in the near future.” Indeed, the report states that, “However, slightly lower bending strength properties of this product (CLVL) may still be acceptable if the material is used as short span header beams over windows and doors, rimboard, and column applications in low-rise commercial, multi- and single- family residential buildings.”

After trying different combinations, the team found that by orienting the third and tenth veneers at a 90 degree angle, perpendicular to the grain direction of the rest of the veneers, these significant improvements to mechanical properties were realized. Not only that, but recovery of the wood improved significantly as well. The report explains, “In this particular study, the veneer recovery factor was estimated to be 84 per cent, as reported by Ainsworth’s veneer manufacturing plant in Lillooet, BC, where the veneers were made. It is estimated that about 80 per cent of these veneers can be actually converted into the CLVL panels. Thereby, the recovery factor, from logs to CLVL panels, is about 67 per cent, which may be relatively higher than the lumber recovery factor.”

Such a simple solution to a massive problem, with the potential of a wide product range being made from the process is great news. The entire report can be found here http://www.bcfii.ca/industry_resources/mpb/pdf/09-0083%20(1)%20%20Dev.%20of%20CLT%20for%20MPB%20Eng%20Wood%20Products%20(CLT).pdf Madison’s will report on the results of the next round of tests by this research team, on box type plates, when it is available.

International Tribunal Rules on Arbitration

Canada will have to pay up for breaching the softwood lumber trade pact with the United States. The LCIA, an international tribunal, has rejected Canada’s offer to pay a reduced fine for shipping too much wood south of the border. Canada will have to pay the original $68-million as ordered last February.
International Trade Minister Stockwell Day is disappointed but says Canada will comply as there’s no further route for appeal.

The Harper government tabled, then revoked, a ways and means motion that would enable it to slap US$68 million worth of export duties on wood destined for the United States, as required by the recent international trade tribunal ruling.

More Lumber Duties

Parliament Hill was instantly abuzz with speculation that the motion was a “poison pill” – a ploy designed to allow Prime Minister Stephen Harper to orchestrate the defeat of his minority government while blaming the ensuing election on the three opposition parties.

However, government officials quickly doused any renewal of election fever. They said the government will not put the motion to a vote unless it’s certain it has the support of at least one opposition party – that is, enough to avoid defeat.

Under attack in the House due to the handling of the dispute, one of the few Canada has lost, Trade Minister Stockwell Day said Tuesday that Canada would abide by the tribunal’s ruling. The decision means Canada will have to impose export charges on softwood lumber destined for the US until the full amount of the fine has been collected.

Day says the taxes will go to the provinces affected, Ontario, Quebec, Manitoba and Saskatchewan.
Liberal critic Scott Brison and NDP critic Peter Julian both accused the Conservatives of incompetence in the handling of the dispute.

“Instead of heading off a dispute that was months in the making, they did nothing,” Brison said.

Julian noted that Canada faces another similar challenge that could again result in more penalties.

Global Real Estate Markets

There are “tentative but growing” signs that housing markets are stabilizing in Canada and internationally, says the Global Real Estate Trends report from Scotia Economics which looks at the trend in 10 developed countries.
Home prices are increasing in some countries in the second quarter, including Canada, Australia and the United States, and while they’re still falling in others — the UK, France and Spain, for example — the rate of decline is slowing, said Adrienne Warren, a senior economist with Scotia Economics.

Home Sales Globally

The Scotia Economics report came as fresh numbers released Thursday in the United States provided yet more evidence that the US real estate market is healing.

The volume of signed contracts to buy previously occupied homes in the US rose for the seventh straight month in August as buyers rushed to take advantage of a tax credit for first-time owners that expires at the end of November.

The National Association of Realtors said its seasonally adjusted index of sales agreements rose 6.4 per cent from July to 103.8. It was the highest since March 2007 and 12 per cent above a year ago.

Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer of future sales. However, new rules for home appraisals and rigid lending standards have scuttled many sales agreements recently.

A separate US government report Thursday showed construction spending rose in August as housing leaped at the fastest pace since 1993.

US Economic Indicators

The US Labor Department reported Friday that nonfarm payrolls, seen as one of the best indicators of economic momentum, was far worse than expectations for a loss of 175,000 jobs and could hurt chances of a sustainable recovery from recession.

The number of job cuts rose sharply after a revised loss of 201,000 in August. The jobless rate of 9.8 per cent was in line with expectations.

The goods-producing sector lost 116,000 jobs in September including 64,000 in manufacturing. Even worse, the services sector shed 147,000 jobs with 39,000 of those in retailing.

Since the start of the recession in December 2007, the figures showed the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8 per cent, according to the Labor Department.

Canada’s benchmark stock index fell nearly three per cent on Thursday after weak economic news from the US overshadowed an IMF announcement that Canada is expected to lead the G7 in economic growth in 2010.

US Unemployment

On Thursday, the International Monetary Fund forecast that Canada’s economy would grow 2.1 per cent next year, up from its previous forecast of 1.6 per cent. It also revised its global forecast upward, to 3.1 per cent from 2.5 per cent in July.

That wasn’t enough to overcome news from the Institute for Supply Management that indicated manufacturing in the United States fell unexpectedly in September, and a US government report that indicated there were more initial jobless claims than expected last week.

The latest official data showed the US economy contracted at a 0.7 per cent pace in the second quarter, nearly emerging from the recession that slashed output by 6.4 per cent in the first quarter.

Most economists expect growth to return in the third quarter but say the recovery could fade without job growth.

The Toronto Stock Exchange was down for a third straight day Friday, and headed for its second weekly drop.

At midday the Dow Jones industrial average was off by about five points, or 0.1 per cent. The Nasdaq composite index was down around five points, or 0.2 per cent. Overseas markets were seeing heavier losses Friday than in North America.

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