Hardwood Exports; New Content ; North America Cedar Log Supply ; Japan Plywood Situation ; China Wood and Paper Statistics ;Storms, US
; Labour Talks Continue ; Federated Cooperative Mill Sale Mountain Pine Beetle ; Madison’s Timber Preview ; Japan Housing Starts ; Housing Starts Canada ; Ontario Tenure Reform Meeting Fiasco ; Pinnacle Pellet Explosion ; West Fraser Sells ; Labour Talks to Resume US Mortgages ; Supply Constraints ; British Columbia Trade Mission to China ; Japan Emergency Rebuilding Update ; BC Labour Update The Issue of Logs ; Madison’s Timber Preview ; US Home Sales ; Japan Wood Operations and Infrastructure Damage ; Tolko’s Creekside Sawmill May Reopen
April 18 , 2011
Wood imports from the United States into India and the Middle East are increasing to a greater degree than they are into China. Of course the absolute figures are much smaller by current comparison, but the level of growth is more than double, particularly for finished wood products. The difference between these newest customers and the emerging Chinese market is that the South Asian customers are looking for high quality grades and shop lumber, as opposed to utility and low grades. While it is true that transportation presents a challenge, between higher cargo costs and a lack of material to fill returning containers — therefore added costs to North American exporters with deadheading — the significantly higher valued products should more than make up this difference in profit margins.
Dubai serves as a hub for Middle Eastern wood importers. In 2007, wood imports to the United Arab Emerates topped 8.5 billion AE dollars, from 5.2 billion AE dollars in 2005, or US$1.45 at the time, according to statistics from the Dubai Ports, Customs and Free Zone Corporation. Overall, the market registered 25-30 per cent growth annually, with certain segments registering higher growth rates. Please refer to the June 5, 2009 issue of your Madison’s Lumber Reporter for more information.
US Census figures show that in 2010, exports of wood products from the US into the UAE jumped by 48 per cent compared to 2006, while furniture exports grew by 54 per cent. US wood products destined for India increased by 69 per cent from 2006 to 2010, while furniture exports jumped by 57 per cent. Meanwhile, China’s import of wood products from the US grew by 27 per cent from 2006 to 2010, and furniture increased by 34 per cent.
Imports of US forestry products grew by approximately the same amount for all three regions from 2006 to 2010, between 71 and 76 per cent.
Certainly the volume of wood imports into China are much higher than into the middle east or India, US$526 million worth of wood products into China for 2010 compared to US$23.5 million into UAE, but the rate of growth can not be ignored.
Similar levels of growth are expected for buying from Canada now that an unfortunate bureaucratic oversight has been corrected. Until January 2011 the Canadian Spruce-Pine-Fir mix had been omitted from the list of allowed species entering India without cost-prohibitive fumigating in addition to heat treatment was rectified.
According to the United States Department of Agriculture, the value of American hardwood exports in 2010 grew to a record-breaking US$72.7 million, a 46 per cent increase over 2009. To date, Egypt remains the top destination for American hardwood lumber and veneers. Underlining the increase in exports of American hardwood logs, lumber, veneer and flooring across the Middle East region, are key figures that show an 82 per cent increase in exports of American hardwood flooring in 2010. During this period, there was also a 38.5 per cent growth in the shipments of red oak lumber to the Middle East and north Africa region. The USDA also reports that veneer exports to Turkey and Lebanon have increased by 108 per cent amounting to US$3.75 million and by 86 per cent amounting to US$3.33 million respectively in 2010.
“Exports of American hardwoods to the Middle East and North African region (MENA) have shown an increase that has almost doubled from the figures of the previous year,” said Roderick Wiles, Director for Africa, Middle East, India and Oceania, of the American Hardwood Export Council (AHEC), in an agency press release. “Architects, consultants, interior designers and developers in the Middle East are increasingly aware of the key benefits of American hardwoods, which makes it a primary choice across the region.
“The MENA construction development industry, along with its complementing interiors segment, has also reported an increase in construction activity, both from stalled projects that have resumed construction and new projects that have just been recently launched. The US hardwood industry hopes to capitalize on this upturn and make sure that American hardwood products are available to be used in these projects throughout the region,” said Wiles in the press release.
Drilling down to specific products, US wood flooring exports to the Middle East increased 119 per cent from January through September 2010, according to Hardwood Floors Magazine. The rise is part of a larger trend of increasing American hardwood exports—also including logs, lumber and veneer—to that region, says Hardwood Floors.
Building upon demand in the region, AHEC has already started to implement and launch strategic initiatives and programs that are aimed at complementing the predicted growth, according to AMEinfo.com. To increase awareness on the importance of using quality American hardwood products, AHEC has organized seminars and lectures in different parts of the region, particularly targeting potential customers and industry professionals. AHEC has also announced its investment into what is probably the largest Life Cycle Assessment study ever undertaken in the international hardwood sector, thereby ensuring appropriate and fair recognition for the environmental profile of American hardwoods. The study will provide data for sawn lumber and veneers of a selection of American hardwood species, as well as product groups such as flooring, doors and furniture, comparing them with products manufactured in alternative materials.
Since 1999, eastern US hardwood production has dropped by almost 45.2 per cent led by massive reductions in demand from furniture, millwork, cabinetry and flooring markets, according to an April 1, 2011 article by Industrial Reporting, Inc. The industry is looking hard at growing new export markets to make up for the drop in domestic demand. Generally, most people in the hardwood sector agree that the industry needs to do a better job of promotion, says Industrial Reporting.
In that article, Jim Howard of Atlanta Hardwood Corp stated, “When I started in the industry, MDF panels, veneer-wrapped mouldings, bamboo flooring didn’t exist. Today, the world is flat, wood is sourced worldwide and numerous synthetic and composite products have replaced wood. It’s also vital we confront the US public’s belief we’re running out of trees. Bamboo flooring is perceived by architects as a green product and often substituted for superior American solid hardwood flooring which is manufactured in the US from sustainable managed forests. American forest product manufacturers inject billions into the country’s economy.”
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The release of news, data, and statistics on the North American forest products’ industry is increasing at such a rate that we are finding it difficult to include everything in your weekly Madison’s Lumber Reporter within our traditional eight-page format.
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Log supply continues to be the area to watch in all species. In cedar, a couple of the largest forest companies own the rights to the majority of the cedar timberlands. As the woods open up when the rains slow and the forest floor dries, there will still be little help for remans and smaller producers who need to buy logs. Spring logging usually starts at the end of February and is in full swing by mid March. This year, nobody is out in the woods yet due to weather.
The delayed start to logging on the coast means that only those who have the falling crews sewed up and own the logs will determine who gets materials to run. Smaller makers, wholesalers and remans are already shopping and will soon be begging for materials.
Those who own the logs say they will reserve the quality fibre for their own use and for their long term, key customers.
In the four weeks following the earthquakes and tsunami in Japan, wood producers in that country are taking a “wait and see” attitude, according to the Japan Lumber Journal.
Soon after the earthquake the Japan Plywood Manufacturers’ Association made an announcement that it would try to compensate for a loss in production at damaged factories in the northeast by increasing production volume at unaffected factories. In April, some of manufacturers started taking orders again, so products currently in short supply are expected to be available in the market in a while, says the Journal.
Though the inventories of plywood and insulating materials had been scant since before the earthquake, distribution stopped completely immediately after the disaster and many factories are left incapable of shipping their products, says the Japan Lumber Journal.
Especially in building materials, plywood is outstandingly scarce. One of the leading manufacturers on the Pacific coast of the Tohoku region was so badly affected by the disaster that it has no prospect for restarting operation. Factories of housing members in the Tohoku and the Kanto regions also have no prospect of reopening.
On March 27, the Japan Forestry Agency released figures on forestry-related damage, in national and private forests in Miyagi and other prefectures damaged by the Great Eastern Japan Earthquake. These include: 182 forest devastations, 44 soil conservation facilities, 498 forest road facilities, and more. The damage total is of 1,029 places valued at ¥17.3 billion, according to the Journal.
The National Federation of Forest Owners’ Co-operative Association and the National Federation of Log Producers’ Co-operative Association have agreed to prepare a stable supply domestic cedar and larch to plywood factories so that they can smoothly increase production to build temporary houses and assist the rehabilitation and reconstruction.
Since 2010, the total amount of China’s wood, pulp, and paper imports decreased. However, the value of China’s forest products’ imports during January to November 2010 increased by one third due to the average international prices increase according to the latest statistics announced by State Customs , says China Wood.
China’s wood pulp, waste paper and paperboard imports reached 31.05 million metric tonnes in 2010, a 15.4 per cent decrease compared with 2009, according to China Wood.
Newsprint imports, however, increased, by 127.51 per cent from January to November 2010 compared to 2009, to 36.18 thousand metric tonnes. Newsprint import value during January to November 2010 amounted to US$18 million, a 100 per cent increase compared with 2009.
The total import value of wood pulp, waste paper, and paperboard soared to US$12 billion, a 32 per cent increase compared with 2009.
A volatile storm season looms for the United States this year announced US forecasters in a week that saw massive hailstorms, floods, wildfires, and tornadoes in large parts of the country.
At least five major hurricanes with winds of more than 111 miles per hour are expected to develop in the Atlantic during the 2011 storm season, Colorado State University forecasters said April 5, according to Bloomberg.
There is a 72 per cent chance that one of the major storms will strike the US coast, above the 52 per cent average for the past century, the forecasters said.
Earlier this week tornadoes hit north Iowa, hailstones the size of baseballs rained down in Indiana, there was flooding Tennessee, North Carolina, and Colorado, while Texas saw some of the worst wildfires in its history.
The National Weather Service said at least 10 tornadoes struck the central and southern plains regions of the US on Thursday. The storm system, which killed nine people in Oklahoma and Arkansas Thursday, was headed toward the Carolinas Friday morning. Severe weather associated with the system will unfold Saturday morning into the early afternoon.
“This has the potential to produce some really severe weather for us early Saturday morning,” said Chief Meteorologist Brad Panovich, to WCN.com.
The Storm Predication Center puts the Charlotte area under a moderate risk for severe weather Saturday, which means there’s a high chance for thunderstorms and isolated tornadoes.
This system will track through the deep south and Tennessee Valley today with more destruction and damage. This is a classic spring storm set up. Warm air is surging north out of the Gulf coast region along with plenty of moisture directly from the Gulf of Mexico ahead of this storm, said ABC News meteorologists.
As of publication Friday morning the United Steelworkers and Interior Forest Labour Relations Association, representing forestry employers in the south interior of British Columbia, were still at the bargaining table.
Darrell Embley, VP of forest products at Federated Cooperative, has confirmed the Canoe, BC, sawmill is seeing prospective buyers coming through, according to BCLocalNews.com.
He said buyers are interested in the plywood plant, particularly because it’s made huge gains over the last year and a quarter. Currently, the Japanese earthquakes and tsunami are prompting a large demand for plywood.
Prospective buyers have been given information on the Canoe operation’s timber supply and other details to review, Embley said.
He said Federated is not being motivated to sell by the need for money, but whether they want forest products to be central to the rest of the business.
April 26 , 2011
A new report this week proving the long-held suspicion that mountain pine beetles have jumped from Lodgepole pine tree species to Canada’s Jack pine boreal forest set off alarm bells across the country. And well it should. When the pesky beetles crossed the Rocky Mountains from British Columbia into Alberta a few years ago, scientists and foresters gasped in horror as there is no other natural barrier preventing the beetles’ march to the east coast. The Government of Alberta, in conjunction with the University of Alberta and Natural Resources Canada, has been waging a vigilant battle to not only prevent the beetle from crossing into Saskatchewan, but to halt the march from the Lodgepole pine forests in the west of Alberta to the east.
It is the eastern portion of Alberta that is largely populated by the newly threatened Jack Pine. Central Alberta’s hybrid Lodgepole/Jack pine stands were in part a focus of Catherine Cullingham’s research report released Tuesday titled “Mountain Pine Beetle Host-Range Expansion Threatens the Boreal Forest“.
The University of Alberta Postdoctoral Fellow in Biological Sciences spoke to Madison’s this week.
Cullingham explained, “We use population genetics to analyze wildlife management. In this study we applied gene markers in DNA to tree species.” “We will be able to isolate differences within a tree species, and between species, to determine the population structure of the trees.
“We will then create a distribution map across Alberta for Lodgepole and Jack pine, and for hybrid, or blended, trees,” said Cullingham.
Alberta’s concerted efforts have been doing well to pinpoint locations of more concentrated beetle populations, which has lead to good success in tree culls to prevent further beetle spread.
“If we find genes in Jack pines showing selection, which might be related to certain characteristics, these could be manipulated. Seedlings would then be bred so the next generation of Jack pine to be replanted may be beetle-resistant,” detailed Cullingham.
When asked about the transference of this research to British Columbia’s Lodgepole pine forests, Cullingham said that may be possible but it’s too early to tell right now.
Cullingham’s molecular ecology work is part of a greater research team effort called the Tria Project. It consists of scientists from the University of Alberta, the University of British Columbia, the University of Northern British Columbia, and Natural Resources Canada.
In late January, Tria Project researchers issued a report detailing the discovery that the fungus dwelling in symbiosis with the pine beetle is actually what protects the beetle against a tree’s natural defenses. It is this fungus, not the beetle, which is responsible for the blue stain left behind in the wood of a tree. Project researchers identified, within the fungus genome, a specific gene cluster that activates in response to a pine tree’s chemical defenses, detoxifying them and allowing the fungus — and thus the beetle on which it lives — to survive in an environment toxic to most microorganisms. The finding will help ecologists better understand the interactions among the beetle, the fungus and the pine tree, and could lead to more precise ecological forecasting models to predict the potential range and extent of the current infestation.
Forestry genomics, molecular and chemical ecology, host pathogen interactions, spatial dynamics of insect populations and more. Who knew, back in the 1980’s when the pine beetle population in BC’s Tweedsmuir Provincial Park grew to alarming levels, that it would come to this?
Meanwhile, the province of Alberta announced February 15 that it had awarded another 30 contracts for extensive detection and removal work in a region roughly bounded by Grande Prairie in the northwest, Hinton in the southwest and Slave Lake to the east. The work involves approximately 600 contract employees and is expected to result in removal of about 170,000 infested trees. Most of the contract workers were deployed by mid-January and are expected to complete their work by the end of March.
That is in addition to the 150,000 trees that were removed and burned in 2010, and 73,000 in 2009.
Duncan MacDonnell, Public Affairs Officer at Alberta Sustainable Resource Development, explained to Madison’s in a phone interview Thursday that Cullingham’s report about the pine beetle attacking Jack pine proves what has already been long suspected.
“The western side of Alberta is pure Lodgepole pine while the eastern side is pure Jack pine,” said MacDonnell. “The central region of the province is a hybrid zone. It is no surprise to those of us on the ground that the beetle is also infesting Jack pine, and now we have proof.
“The next stage of our fight begins in April. Our workers will survey the 250 locales with temperature sensors, to monitor the overwinter beetle mortality rate. It will take three or four weeks to complete that survey. Once we know where the concentration of beetle population is currently, we will focus tree culling efforts there this summer,” explained MacDonnell.
Although there was a massive beetle inflight into Alberta from BC in 2009, there was no measurable inflight in 2010. Combined with the net results of Alberta’s control work, and another harsh winter, Alberta’s battle against the pine beetle offers hope that there will not be a similar level of devastation as is experienced by BC, said MacDonnell.
Provincial efforts focus on Alberta’s ‘fibre basket’, while forestry companies are using similar techniques to manage the beetle population on their cut blocks. When approaching their harvest, Alberta’s forest products companies are heavily co-operating with Alberta’s policy of first taking out green, still useful, beetle-kill. While such selective logging may be more costly, the temporary expense pales in comparison to the loss of value of forestland decimated by ravaging pine beetle population, as has already taken place in BC.
Growing regions of the US real estate market may be showing signs of life. This week’s issue of Madison’s Timber Preview examines dropping foreclosure figures in counties across the country, as well as looking at various reasons for that quickly-changing statistic. The latest developments in US mortgages and government home-lending policies are also explained.
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Total housing starts in Japan for February were 62,252, a 10 per cent drop from one year ago, according to the Japan Lumber Reports. Seasonally adjusted annual starts were 872,000m up 3 per cent from January.
Housing Starts, Japan
Total floor space of new homes built was 5.6 million square metres, a 12-months increase and 12 per cent more than February last year, says the Reports.
Wood based units were 33,532, up 4.4 per cent from January, and having a 53.6 per cent share of total new homes built. Wood framed building figures for February do not include the tsunami-hit prefectures of Iwate, Miyagi, and Fukushima.
Japan government and forest agency officials estimate 32,000 cubic metres, or 36,000 square feet, of plywood will be needed for the 30,000 temporary and emergency shelters currently on order. Of those, 415 have been started.
Temporary housing in earthquake and tsumani damaged areas will not be included in housing start statistics going forward, according to the Reports.
Canada Mortgage and Housing Corp said Friday the seasonally adjusted annual rate for all types of housing rose to 188,800 units nationally in March, up from February’s seasonally adjusted rate of 183,700 units.
Construction of multiple-dwelling units in urban areas accounted for 101,400 of the seasonally adjusted units, up 6.6 per cent from 95,100 in February. Construction of single housing units was down by 8.3 per cent in urban areas, falling to a seasonally adjusted rate of 62,100 units.
Canadian municipalities issued building permits worth $5.8-billion in February, up 9.9 per cent from January, according to Statistics Canada Thursday.
Canada Housing Starts
In total, the value of non-residential permits totalled $2.8-billion in February, up nearly 73 per cent from January. In contrast, Statistics Canada says the value of residential building permits fell by 18.3 per cent to $3-billion in February.
Gains in the non-residential sector in Alberta and Ontario were the main reason for the increase, while the biggest declines in residential permits were in Ontario and Quebec.
March’s seasonally adjusted annual rate of urban starts decreased by 23.4 per cent in British Columbia and by 19.3 per cent in the Prairies. Urban starts increased by 13.6 per cent in Ontario, by 11.5 per cent in the Atlantic region and by 8.6 per cent in Québec.
Municipal government officials and forest industry officials in northern Ontario are outraged that previously scheduled consultations on Ontario’s forest reform in the north of that province were on Thursday abruptly moved to Toronto.
“This is not minor legislation. This is not tinkering. This will fundamentally change who can get access to forest resources and who can’t,” said Kenora-Rainy River Member of Provincial Pariliament, Howard Hampton, to the Kenora Miner & News Thursday.
Ontario Forest Tenure Reform
Bill 151, the Forest Tenure Modernization Act, was formally introduced in March after a year of consultation. On Thursday, Algoma-Manitoulin MPP Mike Brown moved the General Government Committee strike the travel dates to the North, focusing its final consultations solely on Toronto.
Northwestern Ontario Municipal Association President, Ron Nelson, said if two days of consultations are to be held, one should be in Thunder Bay and another in Timmins or Sudbury so Northerners can express their views, according to the Miner & Times. Though there are some interests in Southern Ontario who will be impacted by the legislation, the travel costs for Northern mayors to attend would be prohibitive. He pondered whether the government has already decided to pass the legislation as written and has deliberately excluded the North from negotiations to avoid dissent.
The final vote to cancel Northern hearings will take place on Monday. Scott Jackson, of the Ontario Forestry Industries Association, encouraged chamber of commerce members and municipal representatives to contact their Member of Provincial Parliament. about the scheduling change.
An explosion occurred at Pinnacle Pellet in Armstrong, British Columbia on Saturday night.
The explosion at the pellet plant, which wood shavings into pellets, caused a fire that quickly spread through the basement and into the attic. Two workers who were on shift at the time of the incident were able to get out safely.
With the building full of combustibles, the Armstrong Fire Department called for extra help from the BX Swan Lake Fire Department and Enderby Fire Department.
Pumps are working to remove the thousands of gallons of water from the building’s basement.
West Fraser Timber has entered an agreement to sell its Skeena Sawmills Division to ROC Holdings Ltd.
The Skeena Sawmills Division includes the Terrace sawmill and related Crown timber tenures. The Terrace sawmill has a single shift capacity of 90 million board feet per year.
The sale is expected to be completed in 2011, but the sale price has not been disclosed.
In other company news, West Fraser’s attempt to recover a $500,000 deposit following a failed attempt to buy Stuart Lake Lumber Co. Ltd. has been rebuffed by a BC Supreme Court Justice.
In a reasons for judgment, Justice Robert Punnett ruled Stuart Lake Lumber’s owners were entitled to retain the deposit even though they ended up selling the sawmill and forest licence to Dunkley Lumber.
According to Punnett’s ruling, shortly after the Stuart Lake Lumber sawmill in Fort St. James was shut down, West Fraser began negotiations in late 2007 to buy that company’s forest licence to strengthen its own long term log supply.
The United Steelworkers and the Interior Forest Labour Relations Association will resume contract bargaining for forestry workers in the southern interior of British Columbia on April 13.
April 10 , 2011
The Dodd–Frank Wall Street Reform and Consumer Protection Act, a product of the financial regulatory reform agenda of the current US Administration, is a federal statute that was signed into law by US President Obama in July 2010. The proposed rule was released as the Obama administration and Congress are considering plans to wind down Fannie Mae and Freddie Mac, and possibly replace them with a different entity. Dodd-Frank also foisted a mandate onto the Security Exchange Commission to conduct studies on 20 open-ended questions, including whether or not to have credit ratings on structured financial instruments such as securitized mortgage loans.
Getting Even More Complicated
Dodd-Frank was supposed to shed light on derivatives trading so that the risks and costs of these instruments would be clear to regulators and market participants. This law affected home purchase lending because sellers of loan pools that don’t consist of qualified mortgages are now required to retain some of the risk in them. That provision was meant to eliminate the perverse incentives of the mortgage boom, when packagers of loan pools were encouraged to fill said pools with toxic waste because they had little or no liability for the deals once they were sold. The use of mortgage insurance during the boom effectively encouraged lax lending. Investors who bought securities containing loans with small or no down payments were lulled into believing that they would be protected from losses associated with defaults if the loans were insured.
When loans became delinquent or sank into default, many mortgage insurers rescinded the coverage, contending that losses were a result of lending fraud or misrepresentations. When they did so, the insurers returned the premiums they had received to the investors who owned the loans. Lengthy litigation between the parties is under way but has by no means concluded. Hence the new law, which was intended to prompt the big lenders to jump-start mortgage approvals once again.
The board of the Federal Deposit Insurance Corporation was to hold an open meeting on Tuesday to discuss qualified mortgages and the risk-retention rule, but cancelled Monday with no explanation. There is to be another meeting held in mid-April.
The FDIC and the Federal Reserve then released for public comment a proposed rule Wednesday requiring lenders and bond issuers to keep as much as a five per cent stake in some home loans they securitize on mortgages whose borrowers have imperfect credit and make down payments of less than 20 per cent. This rule includes a key exemption from those standards: Lenders could avoid keeping a share in riskier mortgages if they get them insured by federal agencies or sell them to government-sponsored Fannie Mae and Freddie Mac, now under US government conservatorship.
The Government-Sponsored Enterprises and the Federal Housing Administration own or insure more than 96 per cent of home loans now being originated. Making their loans exempt from the rule would maintain the government as the main holder of mortgage-market risk, said Karen Shaw Petrou, managing partner of Federal Financial Analytics in Washington, to Bloomberg.
“If finalized as proposed, which we doubt, the regulation would memorialize US mortgage finance in the hands of Fannie, Freddie and the FHA,” Petrou said. “So much for all the talk about bringing back private capital.”
The SEC continues to pursue top executives over the financial crisis. In mid-March, Daniel Mudd, the former CEO of Fannie Mae, confirmed that he had received a Wells notice from the SEC, indicating a pending enforcement action. Richard Syron, former CEO of Freddie Mac, also got a notice, according to two people briefed on the matter.
The two government-backed mortgage giants have stayed afloat only with the help of more than US$150 billion of bailout money. Executive bonus controls are another measure mandated by the Dodd-Frank financial regulatory law.
It seems Dodd-Frank contained a big loophole: the Treasury secretary can exempt foreign-exchange swaps from the regulation.
US regulators are writing rules prohibiting an American bank from growing through deals beyond 10 per cent of the total liabilities of all US banks. Banks could exceed that cap, but only through organic growth, not through mergers and acquisitions.
JP Morgan & Chase CEO Jamie Dimon complained to a US Chamber of Commerce gathering in Washington, DC, Wednesday about regulation of derivatives, new debit-interchange-fee rules expected for banks, and a concentration restriction that limits JP Morgan from growing through acquisitions beyond a certain size.
Dimon took issue with the concentration limitation, pointing out that it would stop JP Morgan from buying certain US banks but wouldn’t stop a bigger foreign bank from buying the same institution.
“Concentration rules are negative for America,” Dimon said.
He told reporters later that JP Morgan would like to make acquisitions. Dimon’s complaints come as the Treasury Department is warning that the government could hit its US$14.3 trillion borrowing limit as early as April 15, 2011. The White House and both political parties on Capitol Hill are under pressure to rein in the deficit and the debt. But lawmakers are far apart on where to trim spending or increase revenue.
Sheila Bair, the Chair of the FDIC, and Elizabeth Warren, the architect of the Consumer Financial Protection Bureau, have argued that, while the law is flawed, the benefits still outweigh the positives.
“Dodd-Frank is not a perfect law,” Bair said in her speech at the Independent Community Bankers of America convention last week. “There are many things in it that I would like to change. But, on balance, it is a good law.”
“While the Dodd-Frank bill provides some protections it does not resolve the simple problem – our banking system has become a casino that now generates an exorbitant share of GDP,” wrote Cullen Roche of SeekingAlpha Thursday. “We have become too dependent on the gambling and financial engineering that spurred much of the growth over the last 20 years.
“Recessions have a very natural stabilizing component to them. Capitalism works when the losers are allowed to lose. This downturn was our market screaming that the losers should lose. But that did not happen.”
The warnings issued by Madison’s in the weeks and month of late are coming to reality, please refer to our Page 5 Cargo and Reload comment, “Wide lumber could be the first to sprint up as some buyers are splitting it to make narrow dimensions.”
Veteran lumber industry watchers immediately recognize this condition. Cutting down 2×10’s and 2×12’s to make narrows is at best a short-term solution for depleted log supply.
Newly shuffled BC Jobs, Tourism and Innovation Minister Pat Bell , formerly of the Forests, Mines and Lands portfolio, attended a previously-scheduled trade mission to China this week to coincide with the seventh annual Green Building Show in Bejing. A demonstration wood framed construction, by Suzhou Crownhomes Co. in conjuction with Green Home Canada, BC’s wood marketing strategy in China, was erected in 72 hours from SPF lumber, 500 sheets of OSB, LVL, beams, decorative cedar and some structural hemlock.
The wood used for this project came from a Crownhomes warehouse stocked with product from Tolko, Weyerhaeuser, Dunkley, Interfor and Canfor. More than 30 workers assembled the pre-fabricated sections.
BC shipped 390,000 cubic metres, or 246 million board feet, of softwood lumber to China in January 2011, more than double the volume shipped a year earlier.
BC Trade Mission, China
Moving on from Bejing, the trade mission visited the Tianjin project, which includes two four-floor apartment buildings with a combined total of 6,000 square metres. This will be the first in China to make use of new building codes allowing for four-storey wood-frame construction. The project broke ground during the autumn 2010 forestry trade mission and is expected to be completed in autumn 2011.
The Tianjin Economic Development Group is also using wood-frame systems in two multi-level commercial buildings. Canada Wood is providing quality assurance support for this separate project.
With a population of 11 million people, Tianjin is the third-largest city in China and one of five cities that reports directly to the national government.
Finally, the trade mission visited Hebei, one of the first provinces in China to start using BC lumber to manufacture its own wood products for building and housing construction. Three truss plants have opened around Hebei in the past five months, including one in Shijiazhuang that can produce trusses for 400 apartment buildings per year.
Japan’s Prefabricated Construction Suppliers & Manufacturers Association announced on March 13 that it will secure members to build temporary houses for sufferers of the Great Tohoku Earthquake in about one month and start building 4,800 units of them as soon as it is ready, according to the Japan Lumber Journal.
The Ministry of Land, Infrastructure, Transport and Tourism requested 30,000 units of temporary houses in two months. By March 15, there were requests from Fukushima, Miyagi prefectures and Iwate that they need more than 30,000 units of temporary houses. The Ministry also called for Japan Federation of Housing Organizations to build temporary houses.
The temporary houses will include single and multi-dweller units. Once started, construction is expected to finish in about three weeks, says the Journal.
Japan Wood Product Issues
The damage from the volcanic eruption at Shinmoedake located along the boarder of Kagoshima and Miyazaki Prefectures has been reported daily, and with interference in logging operations and at lumber factories due to fallen ash, serious effects have been felt in the industry in the area, acdording to the Japan Lumber Journal.
The Miyakonojo area is a large supply base for cedar products and is an area concentrated with large-scale, cedar lumber factories with an annual consumption of cedar logs at 110,000 cubic metres. The fallen ash is causing severe damage to saw blades, which now have to be replaced twice as often as usual. Along with taking more time for the maintenance of machinery and cleaning the factory, the employees must not only wear masks but also protective eyewear under these conditions.
With an increase in orders for kiln-dried cedar lumber from the second half of 2010, full operations have continued, and currently, the amount of production has been maintained. However, with the volcanic activity expected to become long term, anxiety is arising.
Also at the material production sites, there are areas in which lumbering operations cannot be conducted due to sandy ash interfering with chainsaws at the timberland, so production is also being affected, says the Journal.
As of Thursday the United Steelworkers and Interior Forest Labour Relations Association were still at the bargaining table. Talks were supposed to finish Wednesday.
The two groups are working on an agreement for the south interior of British Columbia, which affects mills in the Okanagan region. Workers have been on the job for two years with no contract.
April 03 , 2011
With new armed conflicts in the Middle East burgeoning, the effects of natural disasters elsewhere not resolved, continued abysmal US home building rates, and a seemingly languishing global economy, it is not surprising that solid wood producers are still wary of investing in increasing timber harvests and growing log decks. However the situation of chronic timber undersupply is going to catch up with conservative mill and woodlands managers as winter passes and the 2011 building season comes on.
Log, Timber, and Fibre Supply
The value of softwood logs and lumber shipped from North America to China is estimated to reach over US$1.6 billion in 2010, which is up dramatically from 2006. In 2008, total exports were valued at US$350 million, while they were only US$125 million five years ago, according to Wood Resource Quarterly. In 3Q 2010, less than 70 per cent of exported Canadian lumber was destined for the US market. On the other hand, lumber shipments from Canada to China have gone up seven-fold over the past three years and are expected to reach almost 4 million cubic metres in 2010, reports the Wood Resource Quarterly.
Brian Butler, vice-president of the Steelworkers Union Local 1-1937, which represents workers at many Island mills, explained to the Victoria Times Colonist Tuesday that Western Forest Products has informed the USW that its Alberni Pacific mill in Port Alberni, BC, and the Cowichan Bay mill will temporarily shut down next week. According to Western’s notice, these shut downs are due to low log supply.
The company’s downtown Nanaimo mill, which recently reopened with a skeleton crew of about 30 workers, “may just squeeze by” the log shortage without a shutdown. But Butler said the company’s Duke Point mill, which is only in partial operation with a planing division that employs about 30 workers, could also be impacted by the planned mill closures because there would be less residual wood waste from the mills to use in its operations.
Western’s Ladysmith mill, which reopened last autumn after a two-year closure, was shut down for four days two weeks ago due to low log inventories.
It’s not only a large snow pack and rough water that is impeding log supply to the mill. The Central Interior Logging Association has been involved in active discussions with a number of key groups, including the major mills, to work on a strategy to recruit people for logging and for truck driving.
“We have to compete with the mines that are ramping up and looking for truck drivers,” said Executive Director MaryAnne Arcand to HQ Prince George Wednesday. Arcand explained that the loss of work during the downturn pushed truckers into other booming sectors, and that, coupled with baby boomers starting to retire, has led to not enough skilled haulers.
Sexton Lumber may shut down its mill in Bloomfield, NL, for eight weeks this summer if the company can’t get its hands on enough raw material. Kevin Sexton, the mill’s owner, told the Clarenville Packet that his mill used to purchase “a lot of lumber” from Abitibi in Grand Falls-Windsor before the larger company went bankrupt. The timber rights, once owned by Abitibi-Bowater, are now owned by the province as a result of expropriation. Sexton said the mill harvested and produced 170,000 cubic metres of lumber in 2010, but a total of 215,000 cubic metres is needed to keep the plant running.
Meanwhile, prolonged sawmill shutdowns on the west coast of the US are being blamed on poor market conditions and timber supplies. Some residents of Grant County, OR, remain concerned that the timber supply from federal lands won’t return to levels that would support the two mills there. Ochoco Lumber Company’s Malheur mill is the only sawmill currently operating in that county, according to the March 9 issue of the Blue Mountain Eagle.
Knox Marshall, resource manager for the fourth-generation family-owned Murphy Company and manager of a veneer mill in Elma, OR, purchased from Weyerhaeuser in June 2007, explained to Oregon’s Chinook Observer on March 8, “Between 1990 and 2010, in Washington, Oregon, and California 403 mills have closed with a loss of 35,116 jobs.”
This is a small sampling of severely restricted solid wood production in North America today, and the accompanying dearth of logs. Combined with the loss of log and lumber transporters, reaction time to even moderate increases in demand is sure to be painfully long.
Sarawak Timber Association’s council member Kenny Law told the Borneo Post Wednesday that Japan had been among the state’s biggest timber products importer, especially plywood. In the past two years, that state’s plywood exports to Japan were averaging at 45 per cent of its total.
Already Malaysia’s timber industry is expecting an estimated 10 to 15 per cent growth in plywood exports this year due to the sudden increase of demand from Japan. Up to 10 timber factories located at Ishinomaki, Ofunato and Miyako city area have been devastated by Japan’s recent earthquake and tsunami. The reported damage included six plywood mills, one particle board mill and one pulp and paper mill, according to the Borneo Post.
“A high percentage of volume has been placed through mills throughout the state of Malaysia to ensure sufficient supplies of wood, sawn timber and plywood. Sarawak-based public listed timber companies all enjoyed a price raise due to the anticipation of increased demand in the timber market,” said Law. “Last year, the state exported a total of 2.75 million cubic metres of plywood – about 46 per cent of that constituted export volumes to Japan.”
Japan produces about 2.5 million cubic metres of softwood per year domestically, with a consumption up to five million cubic metres. To this, Law commented, “Production capacity is quite big in Japan but in the last few years, they are not producing to full capacity.”
The southern part of Japan (Tokyo province), the mills are not affected and should be able to produce at full capacity to cater for the domestic market.
After the severe downturn in US housing of mid-2006 and the subsequent financial and banking crisis of 2008 triggered by zero-interest mortgages, North America’s lumber and panel producers are treading a fine line in keeping operations going just enough to meet current demand. But no plans have been made for the future, when demand starts to rise. It seems that most companies are waiting to actually see more demand before increasing operations. There is going to be a significant time lag getting timber from the bush to the mill, much more so than when the lumber industry was humming along in 2005.
As solid wood commodity prices rise, the lack of logs will cause consternation for mills when they realize the volume of potential sales they will be missing.
This week’s issue of Madison’s Timber Preview examines the latest figures out of the Pulp and Paper Producers Council and the American Forest and Paper Association for pulp and containerboard prices, shipments and inventories, as well as looking at projections on capacity and possible future price increases from Deutsche Bank and Credit Suisse analysts released this week.
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The US Commerce Department Wednesday released February new home sale figures at 250,000, down 17 per cent compared to January, and down 28 per cent compared to February 2010. February sales were the lowest in recorded history. January new home sales were upwardly revised to 301,000. Regionally, sales fell 6.3 per cent in the South, 14.7 per cent in the West, 27.5 per cent in the Midwest and 57 per cent in the Northeast.
Median prices of new homes were down 14 per cent to US$202,100 compared to January’s US$234,800. Unsold home inventories were flat at 186,000 units. The months supply rose to 8.9 months from 7.4 months in January due to the slower sales pace, which is typical for the season.
Meanwhile, sales of previously owned US homes dropped by 9.6 per cent to a 4.88 million annual rate, figures from the National Association of Realtors showed Monday. The median price of existing homes fell 5.2 per cent from a year earlier.
Home Sales, US
Foreclosures and short sales, which typically occur below market value, accounted for 39 per cent of transactions in February, up from 37 per cent the prior month, the National Association of Realtors said. All-cash purchases made up a record 33 per cent of transactions in February.
Sales fell across the board, with multi-family dwellings declining 10 per cent and single-family home units dropping 9.6 per cent. Compared with February last year, overall sales were down 2.8 per cent.
Private research firm CoreLogic, which counts closings filed in more than 2,000 counties, says the pace of home sales in February was just 3.6 million units on an annual basis. If true, that means the inventory of unsold houses is more like 17 months’ supply, or roughly double the level reported by the NAR, according to Mark Fleming, chief economist at CoreLogic.
Across the US, real estate agents are reporting a rise in traffic at open houses, according to the Associated Press. But they say buyers are reluctant due to the shellshock they suffered after the free-money machine blew up in everyone’s face.
A recent study by Capital Economics found that 60 per cent of sales are to foreigners and investors, most of them paying cash. In fact, in international real estate circles, the US is viewed as the “new emerging market,” says Thomas Shapiro, president of global real estate investment firm GTIS Partners, to the Associated Press.
Foreigners are attracted to US real estate because their local currencies are so much stronger than the dollar. Investors are also attracted to the properties because rents are rising. “You don’t get much money from buying Treasurys as safe investments,” said Paul Ashworth, managing partner at Capital Economics. “There is a search for yield that is making residential property look more attractive.”
“If you have a secure job and the economy around is growing, then it’s a great time to buy,” says Barbara Corcoran, a New York real estate investor and analyst. “That’s not true in too many places, but you can see improvement in certain pockets.”
Japan’s Ministry of Land, Infrastructure and Transport has asked the Japan Federation of Housing Organization to built 30,000 temporary dwellings in the next two month, which will be built by the Japan Prefabricated Construction Suppliers & Manufacturers Association with support from Japan’s Landlord Association, says the Japan Lumber Reports.
The massive earthquake off the coast of Japan March 11 has been named the Tohoku Pacific Offshore Earthquake.
Japan’s Forestry Agency invited 29 industry groups to discuss restoration of the earthquake disaster area, says the Reports. A major problem is that the damaged areas are also supply areas, so volumes are impacted for now.
Japan Damage and Reconstruction
Japan’s Forestry Agency has requested price and supply stabilization of wood products, transperancy on inventories and supply volumes, and cooperation during power shortages, says the Japan Lumber Reports. The Agency notified its members to refrain from cornering, holding off selling, or price manipulation of panel wood products.
Fuel shortages remain a major impediment to reconstruction and manufacturing efforts.
It is currently estimated that up to 60 million cubic metres of softwood plywood capacity has been lost in Japan.
Japan’s plywood producers on the north east coast, including Akita, Marutama, and Hayashi, are hampered by power shortages, lack of adhesive supply, and transportation problems. Japan’s main plywood supplier out of Malaysia has announced it will give priority to emergency demand from Japan, and has raised prices on concrete forming panel by 3,000 yen per cubic metre accordingly. With the rush of orders, some suppliers in Malaysia and Indonesia are asking very highprices for panel, says the Reports.
Please see Page 7 of this week’s issue of your Madison’s Reporter for details.
The ports of Hachinohe, Sendai, Sohma, Onahama, and Hitachinaka are still not functioning so cargo has been diverted to Tokyo and Kawasaki, says the Reports. The Tokyo Lumber Terminal has secured 49,500 square metres of land as emergency storage, for immediate use.
Japan’s Minsitry of Land, Infrastructure and Transport disclosed on March 14 that so far 4,702 housing units have been totally destroyed by the Tohoku quake, 2,496 units are deemed half-destroyed, and 56,135 units are considered partially destroyed in the hardest-hit areas of Iwate, Fukushima and Chiba prefectures.
Assessment of total damage is ongoing in 11 prefectures and 50 cities.
On Monday, the United Steelworkers Union and Tolko revealed they had reached an agreement that could see several positions eliminated in the company’s log yard to improve Tolko’s competitiveness and would necessitate the Creekside mill to start up.
The idea, says the union, is to combine Tolko’s log yards, thus eliminating seven positions for a cost savings of $1.2 million, according to the Williams Lake Tribune.
However, any potential start up hinges on Tolko’s ability to secure timber agreements.
If the Asian market is secured, the company has agreed to running one shift/three lines, USW Local 1-425 president Bill Derbyshire said to the Tribune.
But the union and Creekside’s plant chairperson think that due to the length of time the mill has been down the company could have a hard time finding people. Creekside went on indefinite curtailment in 2008.