BC’s Forests: The Next Four Years ; Madison’s Timber Preview ; Wildfires; US Existing and New Home Sales ; Pine Beetle in Alberta ;Alberta Lumber Shipments into the US ; Madison’s Timber Preview ; US Real Estate ; Canadian Wholesale Trade in July, the Loonie ; AbitibiBowater Suspends Operations ;BC’s 39th Legislative Session ; Two-Month Increase in Canada’s Export Trade ; Canadian Housing Starts ; Japanese Home Building ; Tembec Gets Funding ;New Developments in Biomass Fuel Research ; Madison’s Announces . . . ; Bioenergy Funding ; Ontario’s Adjustment to Forest Tenure ; Tembec Locks Out ; AbitibiBowater Sells Timberland
October 04 , 2009
BC’s Forests: The Next Four Years
A recent speech by Pat Bell, British Columbia’s Minister of Forests and Range/Minister Responsible for the Integrated Land Management Bureau, has caused some strong reactions by both the lumber industry and environmental groups.
In a talk entitled “Generating More Value From BC’s Forests: The Next Four Years”, Bell told The Vancouver Board of Trade on Monday what the BC government will do over the next four years to strengthen the forest sector and help it reach new markets and new heights.
Biomass Fuel
Specifically the Minister intends to work with industry and communities to dramatically expand trade with China, foster bioenergy, harness more economic gains from growing trees, and dramatically increase the demand for wood in commercial, institutional and industrial applications.
Pat Bell explained in Madison’s Lumber Reporter Sept. 11, 2009 issue that his vision for a commercial forest reserve is centered around “planning for land use, mapping, and First Nations’ input to find areas best suited for intensive forest management, in order to extract significant timber values and manage the remaining land.” Bell detailed the plan, which will be looking for pilot projects over the next two years at tree farm licenses, wood lots and/or community forests with extended tenures, to take a “small section of land as an intensive forest management zone to gain maximum recovery from the land base, research shorter rotation timber, and invest in silviculture.” In his interview with Madison’s, Bell said the commercial forest reserve will be “meaningfully different to the forest industry.”
While we wait for this plan to be set into motion, the troubling issue of excessive fibre supply in the form of long-dead beetle-kill trees, both standing and already cut, remains. There is an enormous volume of timber in British Columbia that has been dead for over ten years, which has no hope of being used for any kind of solid wood or wood pulp product. The best viable use for this brittle, dry timber is as biomass fuel. If this tinder dry wood is not removed from the forests, it will serve as an ever greater fire hazard in the future.
In his speech to the Vancouver Board of Trade Monday, Bell did mention bioenergy as part of his four year plan.
In Madison’s conversations with individuals in the North American forest industry, the topic of biomass fuel is often dismissed with discouraging comments like, “But there is no market for this.” That is simply not true. There has been significant progress in the past year alone in both research and investment into biomass fuel. Apparently this fact has escaped the attention of the forest industry.
The largest customer for biomass fuel, in various forms, will be Europe, without a doubt. Specifically, Germany and the Scandinavian countries are making great strides in converting industrial, residential and transportation users to sustainable fuel sources. The US is looking very closely at the subject and liking what it sees, both on a federal and regional level. Asia is not far behind in seeing the viability of biomass as a sustainable fuel source. An impending shortage of trees and fossil fuels may ultimately encourage the well-forested, resource rich industrialized nations to search for less wasteful, more efficient energy sources.
A report released in August, 2009 by EUBIONET III, which is part of the European Commission, titled “Biomass Fuel Trade in Germany” states that “The German National Biomass Action Plan was published in April 2009 [ . . . ] The Biomass Action Plan states that the share of bioenergy in primary energy demand has to rise significantly by 2020.” By enacting the Renewable Energies Heat Act, Germany has legislated that “New buildings have to use a defined share of renewable energies for heating”, thereby increasing the share of renewable energy for heating from 9.7 per cent in 2007 to 14 per cent by 2012. Use of renewable energy for electricity and fuels are similarly legislated to increase. The report features tables with extensive information on current and potential use of solid biomass, bioenergy trade, and biomass use in new industries. View the entire report, and a similar report titled “Market of Biomass Fuels in Finland”, here: http://www.eubionet.net/default.asp?SivuID=25484 .
Even without this legislation Germany is making great strides forward in converting to biomass fuels; according to the German bioethanol association, bioethanol consumption leapt to 453,000 tonnes in the first half of 2009, up 61 per cent on the year-earlier period. Imports of feedstock continued to take a major share of Germany’s bioethanol market. Germany’s bioethanol production did not rise as high its rate of consumption, at 48 per cent. to 261,000 tonnes.
Elsewhere, the Asia Biomass Office out of Japan states that the “Japanese government has set a goal for domestic production/consumption of bioethanol, that will replace gasoline in the future, as: 50,000 KL in 2010; 1,000,000 KL in 2020; and 3,800,000 KL in 2030.” See more details here: http://www.asiabiomass.jp/english/topics/0907_03.html .
Not to be left behind, the US Department of Energy has launched an ambitious program to quadruple that nation’s annual use of ethanol, to 36 billion gallons, by 2022. The vast majority of feedstock for this project is expected to be cellulostic biofuel (see graph). The US program has the added bonus of creating jobs. In 2007, production and construction in the ethanol industry supported the creation of about 240,000 jobs in all sectors of the economy. For full details go here: http://www1.eere.energy.gov/biomass/pdfs/green_jobs_factsheet2.pdf .
In addition, US Department of Energy Secretary Steven Chu announced August 31, 2009 that up to US$21 million will be made available for the selection of five projects that will develop supply systems to handle and deliver high tonnage biomass feedstocks for cellulosic biofuels production. The awards announced are part of the department’s ongoing efforts to reduce US dependence on foreign oil, spur the creation of the domestic bio-industry and provide new jobs in many rural areas of the country.
It is generally acknowledged by these regions that are promoting renewable energy sources globally, a fair portion of feedstock is going to have to be imported, with Canada often the first choice as supplier. For British Columbia specifically, the large volume of beetle-kill – which already closely matches the required low moisture content for biofuels of various kinds – will be an excellent way to capitalize on what some regard as a liability.
Madison’s Timber Preview
This week’s issue of Madison’s Timber Preview examines recent mechanizations at Domtar Corp. The company’s stock has risen dramatically this quarter due to some very specific reasons. Contact us any time for a subscription.
Wildfires
A new forest fire was sparked in British Columbia this week. as California continued to battle in a persistant forest fire season.
A raging wildfire in the British Columbia Interior sparked the evacuation of approximately 75 residents, and local officials have declared a state of emergency as flames sweep within one kilometre of nearby homes. The evacuation order was put in place when the Hihium Lake fire, near the town of Clinton northwest of Kamloops, grew from 40 hectares Wednesday afternoon to 600 hectares Wednesday night.
California Wildfires
Crews planned heavy air attacks Thursday at daybreak to halt the spread of a Southern California wildfire that has chewed through more than 25 square miles (645 square kilometres) of bone dry brush, threatening hundreds of homes as well as a multimillion dollar agriculture industry and valuable oil production fields.
California firefighters focused Thursday on the fire’s eastern and western flanks just north of Moorpark, about 40 miles (64 kilometres) northwest of downtown Los Angeles. The fire was 40 per cent contained late Wednesday.
Firefighters were also concerned about five major electrical transmission lines, a 36-inch (91-centimetre) natural gas pipeline and oil production fields at the top of a ridge.
The blaze was the largest of several that erupted in Southern California on Tuesday as Santa Ana winds blew in from the northeast, pushing back the normal flow of cool and moist ocean air. The weather pattern weakened Wednesday but is expected to continue through Friday with triple-digit heat in inland valleys.
Fire officials said the blaze began near an agricultural mulch pile, but the cause remained under investigation. The Sheriff’s Department earlier said it was apparently caused by spontaneous combustion in a pile of manure at a ranch. When manure breaks down it emits volatile gases which, when combined with the late summer heat and sunshine, can explode and catch fire.
Another brushfire quickly burned through 200 acres (81 hectares) of grass Wednesday afternoon in San Bernardino County near Yucaipa, and crested a ridge and could threaten the community of Mentone.
US Existing and New Home Sales
Sales of previously owned homes in the US unexpectedly fell for the first time in four months in August, indicating a less vigorous pace of economic recovery from a deep recession. The US National Association of Realtors reported this week that existing home sales in August fell 2.7 per cent to 5.10 million units. Total sales up 3.4 per cent in year over year comparisons. Single family sales fell 2.8 per cent compared to July, to 4.48 million. Single family home sales up 2.5 per cent in year over year comparisons.
The US Commerce department this week released August new home sales at 429,000, up 0.7 per cent. Homes sales have been boosted by an $8,000 tax credit for first-time buyers and the lowest house prices and mortgage rates in decades. With the tax credit expiring at the end of November, there are concerns that sales could slip and stall the housing market’s recovery from a three-year slump.
July new home sales were downwardly revised from 433K to 426K. August new home ales were off 3.4 per cent in year over year comparisons. Median prices of new homes were off 9.5 per cent in year over year comparisons to $195,200.
US Real Estate
Another report from the US Labour Department showed new claims for unemployment benefits unexpectedly fell 21,000 to a seasonally adjusted 530,000 last week.
The median price of existing homes fell 2.1 per cent to $177,700 from July’s revised $181,500. Median prices off 12.5 per cent against year ago levels. Inventories fell to 3.622 million from 4.062 million units. Despite the fall in sales, inventories eased to 8.5 months from 9.3 months in July.
A top White House economic adviser, Christina Romer, said on Thursday the US economy was “back from the brink”, but warned policy-makers against removing fiscal and monetary stimulus too quickly.
Unsold inventories of new homes continued to fall and were off 2.9 per cent to 262,000 units. Inventories dropped to 7.3 months supply at the current sales pace. Regionally, sales rose 12.1 per cent in the West and were unchanged in the South. Sales off 5.8 per cent Midwest and 16.3 per cent in the Northeast.
Pine Beetle in Alberta
Mountain pine beetles–the single biggest threat to Alberta forests–are pushing eastward. Trees in the area are reacting quickly and already changing colour. It has prompted the government to delay its aerial surveys by three weeks so officials can gauge how much devastation the new wave of pests will wreak, and formulate a counterattack.
Beetle-fighters may pull back to new front lines and give up on trying to save trees in western Alberta. Officials would also focus their attention on pure pine stands, with fewer spruce trees, to minimize damage to long-term timber supplies.
There is hope for forestry in the pursuit of innovations, including the use of wood fibre to to make products such as insulation and interior car parts. Alberta has three wood-pellet plants, and a fourth has been proposed.
“We expect to see six gasification plants built in Alberta over the next two years to produce syngas, electricity and liquid transportation fuels like syndiesel,” said Ted Morton, Alberta’s Sustainable Resource Minister.
September 27, 2009
Alberta Lumber Shipments into the US
Due to a sharp reduction in lumber exports out of Quebec and Ontario, the quota level of volume allowance for Canadian lumber shipments into the US has dropped. According to the 2006 SLA, provinces must remain within their quota levels or pay a surge penalty on any excess lumber.
The next time the SLA is opened for discussion, Alberta needs to be given a greater market share, according to Brady Whittaker, President and CEO of the Alberta Forest Products Association.
Alberta Lumber Market Share
There has been a fundamental shift recently in Canadian lumber shipments into the US. Alberta is now Canada’s second largest lumber exporter to that country, after British Columbia. This change has occurred not due to increased lumber production in Alberta per se, rather it is the result of sharp reductions in lumber exports out of Quebec and to some degree Ontario.
As Option B provinces, the eastern region is subject to lower duties but must remain below quotas determined by lumber production levels in the US. If volumes shipped exceed the quotas, the US has the right to demand a penalty from Canadian producers, as happened earlier this year. Option B provinces, which also include Saskatchewan and Manitoba, were charged a US$68 million penalty by the LCIA panel. Canada has disputed this figure and both sides are currently awaiting a tribunal ruling on the matter.
As an Option A province, Alberta, like BC, pays a higher duty but may ship an unlimited amount of lumber into the US, as long as the volume does not exceed certain monthly levels. These monthly levels are posted on the Foreign Affairs and International Trade Department of the Federal Government website here, http://www.international.gc.ca/controls-controles/softwood-bois_oeuvre/index.aspx?menu_id=19&menu=R
A quick walk through the past three months of figures shows that Alberta has been consistently exceeding this monthly level. According to the terms of the 2006 Softwood Lumber Agreement, as surge protection against flooding the US market, whenever an Option A region ships a greater volume than posted on the DFAIT website, producers must pay 7 per cent additional duty on every 1 per cent of excess volume. For June 2009, Alberta shipments were at 109.8 per cent of their allowed limit, in July shipments were at 116.2 per cent, and in August Alberta’s monthly shipments were at 112.6 per cent of their allowed limit.
This week, Madison’s contacted Brady Whittaker, President and CEO, of the Alberta Forest Products Association to find out how these over-shipments by Alberta were possible. Whittaker explained that, “since Canada’s total market share is going down, what Alberta is able to ship according to the 2006 SLA is also being reduced.” He said that lumber producers in Alberta are trying to get right up to the limit, but that the information provided on the DFAIT site has been lagging. So when the next lumber shipment is already headed for the border, the website figures are updated and producers find they are over the limit. Whittaker said that he “lets his members know on the 25th of every month” where they stand. He was quick to point out that not all lumber producers in Alberta are members of the AFPA, however Madison’s suspects that large volume producers are, therefore they receive this information regularly.
The most recent release on Alberta’s forest shipments and volumes from the AFPA was on June 17, 2009. The agency is currently working on the next quarter’s data, however Whittaker was able to tell Madison’s that shipments for 2Q 2009 will be higher. It appears that Alberta lumber producers are indeed caught in the unenviable position of having to guess what their quota level will be each month.
A contact at the media relations department of Alberta’s Ministry of Sustainable Resource Development, of which Forests is a part, confirmed Whittaker’s statements to Madison’s. Alexander Duncan MacDonnell, Public Affairs Officer, said that “because Quebec’s production is down, the total exports allowed out of Canada is down, thus Alberta is making up more of the total proportion” which is causing that province to exceed its allowed limit. MacDonnell explained that the province of Alberta is in “ongoing conversations with the lumber industry, and the 2006 SLA is a constant topic” and that Alberta is also “in regular contact with Federal Government channels” about the 2006 SLA. The problem, said MacDonnell, is that “there is a delicate balance to match output over the course of a month.”
At Madison’s request, MacDonnell provided specific information about the nature of these discussions with the Federal Government. In an email, he explained that “our Forest Economics branch staff responsible for SLA advised me that we have had conversations with the [Canadian] federal government about improving the information provided on the [DFAIT] website. At our specific request, for example, they have increased the number of updates from once daily to three times per day. Ottawa also has a Business Advisory council to refer to on matters such as this, and one of the members of that council is a representative of the Alberta lumber industry, so there is producer input into the process as well.”
These recent efforts seem to be paying off, because the DFAIT website puts Alberta’s shipments into the US for September at only 67.4 per cent of the allowed volume.
Madison’s had intended to delve deeply into this topic with DFAIT, but found that federal department extremely slow in responding. An email with specific questions sent Monday morning was answered Thursday afternoon after two reminder phone calls. According to DFAIT’s media relations department, “Export levels are updated three times daily, based on permit information received from exporters.” Madison’s immediately replied asking for further clarification about this process in gathering permit information, but did not receive a reply by press time the next day.
Madison’s Timber Preview
Our most recent issue of Madison’s Timber Preview looks at PricewaterhouseCoopers’ 2Q 2009 forest and paper sector report. Pulp production and sales to the end of August, as well as newsprint, containerboard and more are also covered. Contact us any time for a subscription.
US Real Estate
Housing starts and building permits in the US rose to their highest levels in nine months in August, but the gains were led by multifamily and apartment construction. Housing starts for single-family homes fell 3 per cent. Total housing starts rose 1.5 per cent to an annual rate of 598,000. Building permits rose 2.7 per cent in August.
“Home building has been slowly creeping up from a deep bottom for the last eight months,” said economist Celia Chen of Moody’s Economy.com. And that’s a plus for an economy “struggling to escape from the recession,” she said. Instead of being a drag on overall economic growth, housing is becoming a net contributor again. KB Home will resume building new houses in the Washington, DC, area for the first time since 2007. This week, the Los Angeles-based builder said it will cautiously ramp up its work force and get back into the market, but with smaller, cheaper and greener homes.
Torsten Slok, Senior Economist with Deutsche Bank, said “The housing market continues its stabilization but we are still worried about the mountain of foreclosures we have ahead of us. The downward trend in housing has been broken. Looking ahead our main worries are the 1.5 million excess inventory of homes and the 2 million foreclosures that we expect to see over the coming year. Foreclosures and the excess inventory are likely to be depressants for home prices for the rest of 2009.”
US Housing
Builders may be reluctant to further increase the supply of homes amid uncertainty over whether the Obama administration’s $8,000 tax credit for first-time buyers will be extended beyond November. The incentive, plus foreclosure-driven declines in prices, has helped stabilize the housing market in recent months. “We may be in for a period of consolidation, given the apparent end of the tax credit” said Stephen Stanley, chief economist at RBS Securities Inc. “We’re certainly going to see, over time, housing starts rise.” Combined sales of new and existing homes rose in the last four months though July.
A report Wednesday showed gains in sales and buyer traffic pushed builder confidence this month to its highest level since May 2008.
Luxury builder Toll Brothers Inc. is among companies that see demand improving, even as losses mount. “In the last six months, we see a pretty significant change in some markets,” Chief Executive Officer Robert Toll said in an interview Aug. 27 with Bloomberg. “People are now concerned with missing the market.”
Canadian Wholesale Trade in July, the Loonie
The pace the Canadian economy set in July could produce one of the biggest monthly gains in a half-dozen years and set the country apart from its industrialized peers, says Derek Holt, vice-president of economics at Scotia Capital. The Canadian economy might have grown “north of 1 per cent,” based on the data that has emerged in recent weeks, he said .
Meanwhile, the Canadian dollar broke through US94¢ on Thursday to its highest level since markets collapsed last September, leading some observers to declare the currency is “grinding” its way to parity.
Canadian Trade, Dollar
Mr. Holt’s call for 1 per cent growth in July came hours following the release of data related to wholesale trade. Statistics Canada reported that wholesales posted a 2.8 per cent month-over-month gain in July, the second straight monthly gain. The gains were broad-based (excluding autos, the gain was 0.9 per cent) and the increase was triple the consensus expectation on Bay Street.
The last time the economy grew by at least 1 per cent on a monthly basis was in March of 2004. That just trailed the performance in September 2003, when the economy expanded 1.2 per cent.
Meanwhile, factors pushing up the Canadian dollar were the overall weakness in the US currency and lower levels of risk aversion among investors, who believe a recovery — and perhaps a robust one — is underway. Currency analysts say the US94¢ benchmark represents a key level for the Canadian dollar, which has gained roughly 22 per cent from lows hit this year in March.
AbitibiBowater Suspends Operations
AbitibiBowater announced Thursday that it will suspend production indefinitely, beginning October 31, at several mills in a corporate streamlining that will affect about 1,500 Canadian workers, as it undergoes restructuring efforts under the bankruptcy protection laws in Canada and the US.
The company will completely shut down operations at a digital printing paper plant in Beaupre, QC, leaving 340 workers without jobs.
The company will also shut one of two newsprint machines in Clermont, QC, and lay off another 120 workers In Fort Frances, ON, a commercial printing paper machine will close leaving 75 people without work.
In Brooklyn, NS., AbitibiBowater announced it will cut production in half at its newsprint plant, meaning 300 employees will work reduced hours. And in Coosa Pines, AB, the company will interrupt production and lay off 85 people.
Pierre Choquette, a spokesman for the forestry company, said “We’re talking about a 30 per cent drop in demand in newsprint since the beginning of the year and for digital printing, like in Beaupre, we’re talking 20 per cent.”
Choquette added that it’s unclear when operations would resume at the installations.
September 20, 2009
BC’s 39th Legislative Session
Re-elected Minister of Forests and Range Pat Bell took time out of a busy new legislative session to talk to Madison’s about recent developments at the Ministry of Forests and plans for future direction. BC’s lumber exports to China have increased more than expected in 2009, and projections for the near future show further growth.
BC’s 2009 Legislative Session
Madison’s caught up with re-elected Minister of Forest and Range, Pat Bell, this week after the busy first sitting of British Columbia’s 39th Parliament, which started August 25. Topics covered include costs to the province of the recent forest fires, a continued focus on lumber exports to China, the liquidation of Forest & Marine, and recent grandstanding during a sawmill tour by the US lumber lobby.
Getting straight to the point, Madison’s asked about the announcement out of Ottawa of aid for BC to offset the high costs of fighting fires this year. Bell said that we will find out “how much is coming in the next month.” Bell explained that budgeting for forest fires is tricky, that for five out of the past ten years forest firefighting costs have ranged from $28 million to $53 million, while in 2003 the Kelowna fires cost the province $372 million. To date for 2009, the Ministry of Forests has spent $320 million of the total $408 million budgeted for that Ministry for 2009. Bell expects the fire budget will have to increase, given the amount of fuel littering the Interior pursuant to the ravages of the mountain pine beetle.
Bell went on to explain that there are “specific constraints on how the forest fire budget can be spent. Any unused funds can’t just be taken out for any purpose”, like job creation. In addition, said Bell, despite most of the forest fire danger now having passed with the recent rains, there are still expenses for “restoration of burned off land” to come.
In terms of markets, although the volume of BC lumber going to China in no way matches what is exported to the US when home building there is at normal levels, the rate of increase points to a solid future customer. According to Bell, expectations for 2009 are at 1.5 billion board feet of lumber going to the Chinese market. “They are taking all the economy and utility grades the province can produce” right now, said Bell. “They have started moving into #2 and some high line grades as well.” If this pace continues, Bell explained, China could be importing 4 billion board feet annually from BC in the near future. While the “biggest single end use is still forming for concrete, there is increased demand for remanufactured products to make furniture, and penetration into wood-framed home building in China,” said Bell.
Chinese lumber imports have been ranging from 50 million to 100 million board feet per month, said Bell, however several major importers have recently increased their storage space by “five times.” When asked about the perception in North America that China is simply stocking up on lumber now because prices are depressed, and that Chinese demand may die off once lumber prices rebound, Bell stated that actually “the reverse is true. The Chinese are concerned that we will flee. They want to create long term investment and contractual agreements.” Bell said the most common question he hears from Chinese lumber importers is whether Canadian producers will turn their backs the Chinese market when US demand returns.
Bell encourages BC companies to take China seriously, and he hopes that the BC lumber industry has learned to diversify. “The US is a ways from coming back,” said Bell. “Probably not until 2011 will we see one million new homes built monthly in the US, and they will be smaller in size. In order for stability, rather than boom and bust cycles, BC needs to foster the Chinese market.” There is another trip to promote BC wood in China coming up in November, and Bell actively invites all manner of BC lumber companies, of any size and product range, to join him.
The difference between China and, for example Japan, which is an established market used to building homes from wood, is that China is just emerging as a global customer for lumber. Bell explained that it is “critical to be the first one in, selling wood to China, in order to establish a stable market within even eight or ten years.”
Madison’s noted the posturing of powerful US Senator Max Baucus, Chair of the Senate Finance Committee, and newly appointed US Trade Representative Kirk in the previous week. The two men embarked on a highly visible tour of mills in Montana, Baucus’ home state, where statements such as “we will hold Canada’s feet to the fire” to ensure compliance to the 2006 Softwood Lumber Agreement, and declarations that “Canada keeps finding sneaky ways to get around the SLA” by both men seems to indicate a renewed round of arbitration coming out of the US soon.
“This is vintage Baucus,” said Bell. “He is a noted protectionist, and will do whatever is necessary to keep Canadian lumber exports out of the US.”
“BC has carefully investigated its operations to make sure there are no breaches of the 2006 SLA, and has created a market pricing system,” Bell said, adding that he is “confident the system is defensible. I am happy to go to arbitration” with the system BC currently has in place. When asked about the timing of the Baucus/Kirk mill tour, the week before Congress resumed, Bell said he believes this “politically positions him as a supporter of the domestic lumber industry, but it’s not a big deal.”
Madison’s hopes that the Minister’s confidence is not misplaced. The US Coalition for Fair Lumber Imports puts perceived BC infractions high on its list of grievances. Most recently added is a claim of a July 2009 reduction in benchmark sawtimber costs in the BC Interior from $7.50 to $1 per cubic meter. The Coalition’s list of “Hot Issues” was updated September 2009, and can be viewed here http://www.uslumbercoalition.org/doc/violations_summary.pdf
When reviewing the various arbitrations between the US and Canada, going back further than the 2006 SLA, back before the Conservatives took power in Ottawa, Madison’s can only view with dismay how seldom Canada has won these challenges. Whether the problem is actual infractions on the part of the Canadian industry, or simply a series of poor responses on the part of the national government, remains to be seen. From what Madison’s can determine the federal government, particularly since the 2006 SLA was signed, has been so relaxed in its approach to defending Canadian industry against continued US complaints as to be ineffectual.
Two-Month Increase in Canada’s Export Trade
Canada recorded a $1.4 billion trade deficit with the rest of the world in July as imports rose faster than exports, Statistics Canada said Thursday. For the first time this year, export volumes made consecutive monthly advances, the agency reported. July’s 3.3 per cent jump in exports (to $30.3 billion) was attributable to a 5.9 per cent increase in volumes, thanks mainly to higher machinery and automotive products, as prices declined 2.4 per cent. Declines in exports of energy products tempered the gain.
Imports, meanwhile, were up 8.3 per cent to $31.7 billion, halting four consecutive months of decline. As a result, Canada registered a trade deficit of $1.4 billion in July compared with a trade sur plus of $37 million in June.
“Two-way trade picked up significantly in July, attesting to the fact that demand is picking up on both sides of the 49th parallel,” said CIBC World Market’s Krishen Rangasamy in a commentary.
BMO Nesbitt Burns economist Douglas Porter agreed.
“This is no bad news story,” he said. “The broad-based gain in export and import volumes is another sign the Canadian recovery is indeed taking hold.”
Canadian Housing Starts
Canada’s housing sector continued on the comeback trail in August as home starts for the month jumped more than 12 per cent, according to new figures released Wednesday. Canada Mortgage and Housing Corp. said construction companies started work on 14,177 new homes in August, for a seasonally adjusted annual rate of 150,400. The August jump represented a 12 per cent increase versus July and reinforced CMHC’s belief that the housing sector is seeing a sharp rise in activity.
Home Building in Canada
The seasonally adjusted annual rate of urban starts increased by 14 per cent to 131,800 units in August. Starts for single family homes rose 2.5 per cent to 54,200 units, while new construction for multiple dwellings such as condos and apartment buildings increased by 23.8 per cent to 77,600 units.
“The rebound in residential construction activity in August is further evidence that the Canadian housing sector is in recovery mode,” said Robert Kavcic, an economist at BMO Capital Markets.
Home ownership in Canada became more affordable for a fifth straight month but will probably level off as prices have risen in many areas, a study by RBC Economics showed on Wednesday.
“The leveling off of home affordability is not expected to stop the impressive resurgence in the housing market,” said Robert Hogue, senior economist at RBC. “Supply of properties for sale is dropping as demand bounces back, which is working to heat up prices again in many parts of the country.”
Recent data has shown a stunning rebound in resales of homes, prompting the Canadian Real Estate Association to revise up its 2009 forecast for sales of previously owned homes and average home price.
Japanese Home Building
Housing starts in Japan were down again in July, for the eighth month in a row. 65,974 new homes were build, which is 32 per cent less than July 2008, making that month the lowest July starts since 1965.
The newly elected Democratic Party of Japan recently won a landslide victory, breaking the Liberal Party’s 50 year reign. The new government of Japan will be puting a focus on forest management, biomass fuel and the revitilization of mountain villages. The government intends to raise Japan’s self-sufficiency of wood to 50 per cent from the current 24 per cent.
Japan Housing Starts, New Government
Seasonally adjusted annual housing starts in Japan were 746,000 units in July. The year-to-date total was 452,864, a 28 per cent drop over July 2008. The share of wood-framed home building was 57 per cent, down 1.5 points from June.
Building permits were down 20 per cent in July, to 46,041 units.
The new government of Japan has announced plans to introduce a direct payment system for forest management and environmental preserveation, according to the Japan Lumber Report.
The objective is to achieve levels of forest absorption of carbon dioxide set by the Kyoto Protocol. Forest owners will be under the obligation to perform proper management of the forest such as thinning, with the expenses paid directly by the government. The government will assist the promotion of groups like forest co-operatives and loggers, as opposed to timber owners.
Highly efficient machinery and the well-programmed maintenance of logging roads are planned. In other news, a long-term newly built home-insurance takes effect in Japan on October 1, 2009. Builders will have to insure new homes against any defect for ten years.
Tembec Gets Funding
Struggling Quebec-based forest-products giant Tembec Inc. is getting a $12 million cash infusion from the province’s Société générale de financement. The SGF said last week it is buying Tembec’s interest in Tembec Forest Products (Temrex), one of the biggest softwood lumber producers in the Gaspé region, for $12 million. While the forest-products industry, especially lumber, is going through a very difficult period due to the US recession, the sector is important for regional development, said SGF president Pierre Shedleur. The SGF will own 100 per cent of Temrex.
Temrex’s sawmills have annual capacity of 150 million board feet of balsam and spruce lumber products. Tembec is a full-range forest products company operating in Quebec, Ontario, Western Canada and also Europe. It sells its specialty pulp on world markets and also makes packaging materials and newsprint.
September 13, 2009
New Developments in Biomass Fuel Research
A major conference at the University of British Columbia in Vancouver last week drew speakers from around the world to discuss new research and developments in making fuel from forest residue. A significant amount of time was devoted to issues of commercalization and marketing of biomass fuel globally.
New Developments
Research and development into making fuel from biomass residue is growing at such a rate that even Madison’s has trouble keeping up with it all. A major conference last week at the University of British Columbia gave researchers and innovators from around the globe a chance to share ideas. The IEA Bioenergy-sponsored conference titled, “Biofuels and Bioenergy, A Changing Climate” was held August 23-29, 2009 at UBC in Vancouver, BC.
The conference provided resource managers, technology developers, policy makers, equipment manufacturers, energy users, educators, and academics a chance to learn and discuss research and commercialization efforts in the rapidly growing biofuel and bioenergy sectors. Topics covered of specific interest to the forest products industry included: the future role in forestry, agriculture, & energy industries; long-term feedstock management strategies for adapting to climate change; bioenergy use in existing industries, including biogas upgrading, co-firing, & biorefineries; and contrasting gasification, pyrolysis, and combustion.
Presenter Jim Richardson of IEA Bioenergy’s IEA Task 31, focussed on biomass production for energy from sustainable forestry. Richardson emphasized a need to support development of careful policy decisions and management strategies. There is also a need for integration within the woodfuel supply chain and between environmental, economic and social aspects of forest management, explained Richardson.
Later, Brian Titus of Natural Resources Canada, spoke about sustainable forest biomass harvesting research in the Canadian Forest Service. Explaining that the CFS has been carrying out research on the environmental sustainability of biomass harvesting from managed forests for bioenergy since the 1970s, Titus went on to say that there are national inventory programs which include tree components that will become harvesting residue and hence potential bioenergy feedstock. In conjunction with other federal Canadian agencies, CFS research feeds into a national inventory of all biomass sources for informing policy and planning decisions, said Titus.
Shannon Berch of the BC Ministry of Forests and Range then spoke about the framework for sustainable harvest of forest biomass in BC. Berch stated that sustainable forest management is a cornerstone of all forest management, whether for traditional forest products or for the emerging bioenergy feedstock market. Scientific knowledge has been generated to address traditional concerns about harvest-related soil disturbance and erosion, site occupancy by roads and trails, biodiversity, and water quality. Removing additional biomass as feedstock for bioenergy is an increasingly common activity in BC’s forests, explained Berch. Regardless of the new challenges created by intensive harvesting practices, the principles of soil conservation remain the same. The current framework for BC’s soil conservation policy is regularly reviewed to confirm that it addresses the sustainability issues that are likely to arise with intensive biomass harvesting, Berch concluded.
Jaconette Mirck of Queens University, spoke about the challenges of improving biomass inventory for southeastern Ontario. Mirck pointed out that the ongoing credit crisis has exacerbated a long-term downward trend in the Canadian forest sector, which has resulted in the closure of many sawmills and pulp and paper facilities. This trend, combined with the Ontario government’s policy decision to phase out coal-fired electricity generators by 2014, as well as continued volatility in energy prices worldwide, has generated increased interest in the potential for forest-based bioenergy production in Ontario, said Mirck.
Adding to the above, Matt Babicki of Canada’s G4 Insights Inc., talked about that company’s process for bionatural gas production from forestry residue. Babicki detailed an advanced proprietary process to produce large quantities of competitively priced and pipeline quality bio-natural gas from forest biomass. This bio-natural gas production can be fed by sustainably removable forest biomass and create many green collar jobs, explained Babicki. Later Tom Granström of the Helsinki University of Technology, made an exciting presentation about commodity chemicals from forest biomass. Granström said that the objective of his study is to create an economic process for the production of commodity chemicals from forest biomass and recycled fibers. Tree tops, limbs, twigs, stumps and recycled papers can be used as feedstock for fermentation of butanol, ethanol and isopropanol. This mixture of solvents can be used to replace gasoline in internal combustion engines, according to Granström.
Stephanie Trottier of the Alberta Research Council, demonstrated a small scale biomass gasification for combined heat and power production. Trottier pointed out that biomass based renewable energy is of interest due to the abundance of biomass material, including pine beetle killed wood, residuals from harvesting and wastes from wood mill operations. Small scale biomass fuel combined heat and power systems would be well suited for targeted applications such as remote communities or industries with biomass based residual products, said Trottier. Other speakers gave updates on various technologies to use forest residue as a source of fuel, including: moisture management, energy density and fuel quality in forest fuel supply chains; anaerobic digestion; US efforts in fungible fuel technologies; the production of ethanol from lignocellulosic biomass; combustion and heat transfer technologies; the development of cellulosic biofuels, and; fermentation of biomass to fuel ethanol, given by speakers from around the globe. Details on these presentations, and others, can be found here, http://www.ieabioenergyconference.org/oral_sessions.html .
Answering the queston: “Is there a market for these products?”, Bo Hektor of IEA Bioenergy’s IEA Task 40, explained the future structures of bioenergy markets. He noted that future trade structures have to be created, they do not appear by themselves.
Les Edye of Australia’s Queensland University of Technology, spoke about the commercialization of biofuels in Asia-Pacific. The Asia Pacific region is diverse in terms of economic and social drivers for biofuel industry development, the capacity of nations to conduct R&D and take outcomes through commercialization, said Edye. His presentation examined liquid transportation biofuels research, demonstration and commercial deployment activity in the Asia Pacific region.
Jyrki Raitila of Finland’s VTT Technical Research Centre, focussed on two major branches of forest based bioenergy production business models typical in Finland, heat entrepreneurship and subcontracting-based large scale forest fuel procurement models.
Finally, and of special interest, Terry McIntyre of Environment Canada, presented unequivocal environmental data to support Canada’s Biofuels Agenda. McIntyre stated that it is important to have robust Canadian environmental biofuels data available so as to better inform biofuels decision makers, allow for an orderly and prior assessment of any environmental claims, avoid the environmental legacy from previous experiences with petroleum development in Canada, and to ensure a systematic, sustainable, and responsible transition towards increased use of biofuels in Canada. McIntyre provided an overview of Environment Canada’s scientific research activities and efforts now underway, to generate and validate this baseline environmental data.
Madison’s Announces . . .
IQPC’s 6th Timberland Investment World Summit brings together senior executives from the entire timberlands value chain including pension funds, endowment funds, hedge funds, TIMOs, private landowners, forest management companies, law firms, and banks. Exciting innovations this year include the Pension & Endowment Fund Think Tank and an Interactive roundtable discussion on key international timberland markets. Join us to learn about forest biotechnology, high yield forestry techniques, the role of IT in the timberland appraisal process and hear C-Level perspectives on the future of the TIMO, featuring the CEOs of Timbervest, RMK, and the Campbell Group. New participating organizations, including the World Bank, the US Department of Energy, TIAA-CREF, APG, Weyerhaeuser, Potlatch Corporation, and many more! For a full list of speakers, please visit http://www.timberlandworldsummit.com/speakers.php
As a partner of this event, Madison Lumber Reporter offers you 20 per cent off the standard pricing for the event! Contact Kim Vigilia directly at 1-212-885-2753 or kim.vigilia@iqpc.com with reference code IUS_MadisonLumber_#1.
Bioenergy Funding
As if to prove the viability of biomass as a stable source of fuel long into the future, as described on Page 7 of this week’s Madison’s Reporter, funding for two projects has been announced. On August 24, 2009 Genome BC, already heavily involved in biofuel research (refer to your July 10, 2009 issue of Madison’s Reporter for details) announced that Dr. Jack Saddler, UBC’s Dean of Forestry, is leading a $1.1 million project, entitled, “Optimizing Ethanol Fermentation From Mountain Pine Beetle Killed Lodgepole Pine”.
Separately, on August 31, 2009 Nexterra Systems Corp., also previously highlighted in your Madison’s Reporter, received $7.7 million in funding from BC Bioenergy Network, Sustainable Development Technology Canada, the National Research Council, and Ethanol BC for the commercialization of high efficiency biomass power systems.
Ontario’s Adjustment to Forest Tenure
The Ontario provincial government recently released a discussion paper, entitled Ontario’s Forests, Ontario’s Future, that will guide both online public comment and a series of consultations that begin in September. “This review of our tenure and pricing system is an important step toward building a bright future for ourselves in forestry,” says Michael Gravelle, Minister of Northern Development, Mines and Forestry.
Ontario Forest Tenure
The paper deals with how the province should modernize forest tenure and pricing – the system it uses to determine how wood supplies are licensed, allocated and priced, as well as the associated legal obligations. A series of stakeholder and public consultations have been scheduled throughout the province in September and October.
In other news, the government of Ontario announced Thursday that responsibility for forestry is being realigned between the Ministry of Northern Development, Mines and Forestry and the Ministry of Natural Resources.
The Ministry of Northern Development, Mines and Forestry is now leading the business and economic aspects of forestry, including industrial strategy, forest sector competitiveness programs, softwood lumber and wood allocation, pricing and licensing.
The Ministry of Natural Resources remains responsible for sustainable forest management and stewardship, including forest management planning, forest health and science, and the provision of habitat, including the requirements under the Endangered Species Act.
A joint announcement Thursday out of both ministries states: “We are pleased to announce today that the realignment of forestry from Ministry of Natural Resources to the Ministry of Northern Development, Mines and Forestry (MNDMF) is complete. The realignment of such an important portfolio was done to help make the province more competitive, create jobs and strengthen our economy.”
Both ministries have been working closely together to ensure the delivery of the provincial forest program, transfer of staff and the realignment occur smoothly with no disruptions.
Stakeholders should continue to call the same people they have dealt with in the past.
This realignment allows MNDMF to champion the forest industry and to be a powerful voice for the industry. MNDMF’s focus will be on the economic development of the forest industry in recognition of the important role the industry plays in Ontario’s communities. The ministry is responsible for industrial strategy and relations and mills, wood supply and pricing.
MNR continues to play a critical role in ensuring forests are managed sustainably.
Tembec Locks Out
Tembec has locked out employees at its Pine Falls, Man., newsprint mill following a failure to reach a new collective agreement.
According to Tembec, it was seeking changes in the collective agreement that would have resulted in improvement in the site’s cost competitiveness.
Tembec said newsprint is in “dramatic oversupply” and low selling prices and the high Canadian dollar are making it worse for Canadian producers. Pine Falls needs “an immediate and significant reduction in labour costs to become competitive, but the USW has declined to negotiate seriously,” it said.
Steelworkers area supervisor Wayne Skrypnyk said the union is willing to continue to bargain and encourages the company to rethink the lockout plan.
“A lockout on Sept 1, after contract talks just began on Aug. 13, does not send a positive signal to workers or the community,” Skrypnyk said. “Tembec has to act responsibly.”
The Steelworkers in western Canada and the CONIFER employer group are currently not at the bargaining table, but both sides say they fully expect to get back to negotiations after next week.
AbitibiBowater Sells Timberland
AbitibiBowater announced Wednesday that it has completed the sale of approximately 121,000 hectares (300,000 acres) of private timberlands in Quebec, Canada, for C$53 million in cash.
AbitibiBowater plans to use the proceeds from this sale for general corporate purposes.
Timberlands located in the Mauricie, Charlevoix and Saguenay regions were sold to two newly formed limited partnerships held by Societe de gestion d’actifs forestiers Solifor.
Timberlands located in the Cote-Nord region were sold to Amenagements forestiers Portneuf.