Lumber News Archives: Jan 2012

Lumber News Archives: Jan 2012

Early Wildfire Season ; Forestry Plan, China ; Japan Update ; Resolute Forest Products’ Christmas Letter to Retirees ; NewPage Port Hawkesbury Sold ; Madison’s Introduces . . . ;State of Europe’s Forests ; Seasons Greetings and Holiday Wishes! ; Canada Existing Home Sales ; Mortgages, US ; 2006 Softwood Lumber Agreement ; Softwood Lumber Board ;

January 23, 2012

Early Wildfire Season

Recent large forest fires in Chile are being investigated as having been deliberately set. Authorities in southern Chile are still fighting numerous fires that have raged for several days, destroying more than 31,000 hectares of forest as well as dozens of homes, according to the Office of National Emergencies. The blazes were concentrated in Chile’s southern Bio Bio region, 280 miles south of Santiago, where as many as 162 homes went up in flames, says Voice of America. The fires also destroyed a plant at the Celulosa Arauco paper mill site.

The blaze consumed the wood panel manufacturing operation owned by Arauco, and led the Copec SA-owned company to halt pulp production and evacuate employees at their nearby paper mill. Arauco estimates that 9,900 acres of forestry plantations have been affected, but said in a statement that the company “is still evaluating damage from the fire and isn’t in a position yet to quantify the effects,” according to Bloomberg Businessweek.

On December 15, the company had announced it would invest US$1.9 billion to expand production at that Arauco plant to 1.3 million metric tons annually from 280,000 tons a year, with work slated to start in 2013, daily paper Diario Financiero reported.

North and South America

The fire has also caused significant losses to the local agricultural industry.

“It will be difficult to recover,” one local farmer told La Tecera. “It’s a blow that will affect hundreds of jobs.”
According to the Herald Sun, Chilean President Sebastian Pinera told reporters Thursday, “We still have 20 fires that are active,” warning that Chile is facing “an extraordinarily risky and vulnerable” fire season due to dry summer weather.

Interior Minister Rodrigo Hinzpeter said some of the fires might have been set intentionally.

The first of the fires began six days ago in the Torres del Paine National Park, a popular tourist destination. At the beginning of this week authorities said they planned to reopen the park as early as Wednesday.

An Israeli citizen, Rotem Young Singer, 23, was arrested on Saturday on suspicion of starting the fire.

In Canada, a grassfire that raged northwest of Fort Macleod Wednesday afternoon during a severe windstorm appeared to be under control by evening after threatening homes and property for five hours, according to the Lethbridge Herald. The grass fire started about eight kilometres west of Highway 2 and north of Hwy 785 but fierce winds whipped the blaze up and sent it eastward, forcing the closure of Highway 2 south of Granum, AB.

In British Columbia, at roughly 4 am on December 30, firefighters were called to Sperlich Log Construction — a log home-building business on the north edge of the small community, about 30 kilometres north of Vernon, BC. The fire was largely under control and RCMP officers who had come to the scene to assist were preparing to leave, believing the blaze had been largely knocked down.

But then, almost an hour after the initial report of the fire, a blast shook the property, killing 29-year-old volunteer firefighter Daniel Botkin. Botkin was killed when an explosion ripped through a burning shed that was under construction near where the original fire erupted in a building, according to RCMP.

The next morning several structures at the lot continued to smoulder, said Huck Galbraith, a salesperson at Tim-Br Mart south of the log home lot, to the Calgary Herald.

“There are posts standing, but the roof is gone,” he said, describing a massive “barnlike” structure under which a log home was being built when the fire broke out.

Fire officials haven’t confirmed the cause of the fire or explosion. The BC Coroner’s Service and WorkSafe BC are expected to participate in an investigation.

In Montana, a pair of rare winter wildfires fueled by 60 mph gusts Wednesday burned buildings and forced hundreds from their homes overnight on the Blackfeet Indian Reservation, but better weather conditions on Thursday helped firefighters get a handle on the blazes, says the Associated Press.

The two blazes started around sundown and together grew to 6,500 hectares by early Thursday, said tribal spokesperson Wayne Smith. At least 300 people were evacuated from homes and a boarding school, though no injuries had been reported. The fires were 85 per cent contained by Thursday afternoon, resident Gabe Renville said.

In slightly related news, a seemingly disproportionate amount of sawmill fires have occurred across North America in the past several weeks.

Near Ottawa, Scugog firefighters were dispatched to Lake Scugog Lumber on New Year’s Eve, where they extinguished a blaze in a large storage shed near the roof truss plant at the Vanedward Drive business, according to Damage to the building and its contents is estimated at more than $200,000, say Scugog fire officials.

Rob Gonnermann, Scugog’s deputy fire chief, said Tuesday that an electrical problem is most likely to blame for the blaze. A number of completed products as well as a forklift and various mechanic’s tools and other equipment were lost in the fire, he said.

A large lumber yard in Lee, western Massachusetts, was engulfed in flames Tuesday night, drawing firefighters from across Berkshire County who were able to keep it from spreading into the community’s downtown, according to the Boston Globe. Officials said the blaze at the Dresser-Hull Lumber Co on Railroad Street was reported shortly before 8 pm. That location is just steps from Main Street and downtown, but officials said that they had the blaze knocked down within the yard by midnight and that nearby homes and businesses were not in immediate danger. No injuries were reported, said the Lee police dispatcher.

State and local fire officials found an electrical problem with a diesel engine block heater in one of the delivery trucks parked in the building, which sparked the night fire and a subsequent explosion. The blast blew apart a section of wall at the south end of the 6,000-square-foot structure.

Meanwhile, people who lost property in last year’s Texas wildfires have until Friday to apply for financial assistance from the Federal Emergency Management Agency. The deadline for phone registrations is 9 am, January 6, and the deadline for online applications is midnight. Survivors in all 23 counties designated for Individual Assistance under the major disaster declaration are urged to register before it’s too late.

“This is the last call for wildfire survivors,” FEMA official Kevin Hannes said in a news release. People who already registered don’t have to worry about the deadline, even if they haven’t received their cheque.

This Friday is also the deadline to apply with the US Small Business Administration for low interest loans to fund repairs to property.

To date, more than US$13.4 million in grants has been approved for home repairs or replacement, rental assistance and other needs. Another US$19.5 million in SBA low-interest disaster loans has been approved for 164 homes and businesses.

Forestry Plan, China

At the end of China’s 12th five year plan, the gross product of the forestry industry will reach a value of 3,500 billion RMB, the State Forestry Administration has said.

According to the Japan Lumber Journal, the Plan mentions that at the end of 2015, the forest coverage rate in China will reach 21.6 per cent, the delivering rate of collective forestry property rights and ownership of forests card will reach 90 per cent, forest stocking volume will reach 14.3 billion cubic metres, the annual output of commercial timber will reach 100 million cubic metres, and the total carbon stored of forest vegetation is expected to reach 8.4 billion tons.

Japan Update

The Japan North American Lumber Conference has released log and lumber demand projections from North America to Japan in 2012.
Log demand is projected to be 3,010 million cubic metres, a 1.4 per cent increase over 2011, according to the Japan Lumber Reports.

Lumber demand is expected to be 2,710 million cubic metres, a 1.2 per cent drop over last year.

Japan Forestry Demand 2012

In north east Japan, lumber demand was expected to drop due to the earthquake and tsunami, says the Japan Lumber Reports, but actually for the first ten months of 2011 lumber imports from North America were 200 million cubic metres, a 33 per cent increase over all of 2010.

Resolute Forest Products’ Christmas Letter to Retirees

It seems that Resolute Forest Products, formerly AbitibiBowater, is willing to go to any lengths, including stealing from workers’ retirement funds, to fulfill its wish to takeover Fibrek. On December 24, 2011, Resolute workers received a letter from the company stating, in part, “as of December 31st, 2010 the company was short $71,794,000 in the pension fund” and retirees could lose 17 per cent of their rightfully-earned money.

The cost of the Fibrek takeover is about $72 million.

Kim Ginter, vice President with the Communications, Energy and Paperworkers Union, said Resolute should make sure it can take care of its obligations at its existing operations.

“So I wish they would just clean up their house before they look at taking over more companies,” said Ginter to the CBC.

Resolute Forest Products

On Tuesday, Fibrek’s Board of Directors filed its Directors’ Circular saying it “has thoroughly reviewed Abitibi’s Insider Bid to determine the course of action that it believes is in the best interests of Fibrek’s shareholders and other stakeholders.

“Abitibi’s insider bid conveniently ignores probable and material new streams of operating income. It deprives shareholders of significant intrinsic long-term value associated with our growth prospects,” stated Pierre Gabriel Côté, President and CEO of Fibrek.

On Thursday, Resolute appealed the tax rate for their mill in Fort Frances, ON. The appeal is now before the Municipal Property Assessment Corp’s Assessment Review Board.

The appeal covers the tax years of 2009 to 2011. Resolute wants their assessment lowered from $28,260,000 to no more than $15,010,000, according to the Fort Frances Times.

If the company’s appeal is successful, the town of Fort Frances will have to make a retroactive payment to Resolute of roughly $2.2 million for the municipal portion of the adjustment to the company for the years 2009-11.

And on Friday, the province of Nova Scotia reached a deal with Resolute to purchase 25,000 acres of land for $23.7 million.
This land deal is part of Nova Scotia’s assistance package for the Bowater Mersey operation.

NewPage Port Hawkesbury Sold

Pacific West Commercial Corporation is the successful bidder for the idled NewPage Port Hawkesbury operation in Nova Scotia. The bid is now subject to meet several conditions, as well as a court approval. The value of the bid has not been disclosed, and it is not known when the sale will be complete.

Pacific West is associated with Stern Partners Inc, a Vancouver investment firm that also owns Alberta Newsprint Co of Whitecourt, AB, and Westland Paper Co, in Oregon.

President and the founder of Stern Partners, a private investment firm in Vancouver, BC, Ron Stern told CBC News that if the sale of the mill is approved, he plans to leave the newsprint machine idle, and will only operate the supercalendered paper machine.

Stern said he has already told the union that many of the 600 people who worked at NewPage Port Hawkesbury, before it idled in September, will no longer have jobs at the mill.

Stern will enter into further negotiations with the provincial government, Nova Scotia Power, and the union representing mill workers before the final sale is approved. Without securing a new deal on electricity from Nova Scotia Power, the sale will not be finalized.

Significant issues are also said to still exist around the mill’s access to crown timber.

Madison’s Introduces . . .

Madison’s is delighted to introduce a new staff member. Freshly graduated from Forest Resource Management at UBC, Earl Heath has been interning with Madison’s since September. Every week Earl job-shadowed Zara Heartwood on her weekly phone survey of North American lumber producers and wholesalers.

Having now officially stepped into the role of Lumber Market Analyst, Earl will be contacting lumber industry players across North America every Thursday to provide Reporter subscribers with the latest, most immediate information on the goings-on of the lumber industry.

In addition, due to the non-stop flurry of news and changes within the solid wood industry weekly, and sometimes daily, we are adding a new page to your weekly Reporter, starting in the first week of January. We are also, at the request of a subscriber, adding two commodities to our Key Prices index.

January 10, 2012

State of Europe’s Forests

Initially launched in June, the revised and now complete “State of Europe’s Forests 2011” report was released in November by Forest Europe, the pan-European policy process for the continent’s forest. This Ministerial Conference on the Protection of Forests in Europe develops common strategies for its 46 member countries and the European Union on how to protect and sustainably manage forests.
The report aims at providing decision makers and the broad public with up-to-date, comprehensive, and fact-based information on the status and trends in forests and sustainable forest management in Europe in the period 1990-2010. The report has been jointly prepared by Forest Europe, the United Nations Economic Commission for Europe, and the UN Food and Agriculture Organization, and is based on detailed information provided by European countries and is an attempt to provide a clear picture of the interactions between forests and society, and a snapshot of the main forest functions, their status and trends. It is also a tale of twenty years of commitments towards sustainable forest management in the pan-European region.

2011 Report

The main findings of the report are: forests cover one billion hectares in Europe, or 45 per cent of Europe’s land area, 80 per cent of which are in the Russian Federation, and which amount to 25 per cent of the world total; European forested lands are expanding, thus removing the equivalent of about 10 per cent of European greenhouse gas emissions annually; most Europeans think that their forests are shrinking; the sector provides four million jobs and accounts for 1 per cent of the region’s GDP; low carbon-nitrogen ratios in forest soils will be problematic in several locations; and most countries have explicit objectives on forest-related carbon.
The full report, weighing in at 342 pages, provides comprehensive data on the scope and location of Europe’s forests, climate change mitigation, conservation of forest biodiversity, the green economy, wood for energy, wood products’ manufacturing, and much, much more. There is also a two-page policy brief, and a 12 page summary. These documents are available on the Forest Europe website, here

The report demonstrates that contrary to what most Europeans believe, Europe’s forests are expanding, by 17 million hectares over the past 20 years. The total growing stock of forests in Europe increased by nearly 9 billion cubic metres between 1990 and 2010, and the net annual increment in forest volume is currently higher than annual timber felling in almost all countries. Across Europe as a whole, only about 40 per cent of the increment is felled, including in the approximately 30 million private forest holdings, even though ownership factors vary greatly between countries.

More than 578 million cubic metres of marketed roundwood products were produced, and the overall value increased to €21,152 million in 2010.

680 million cubic metres of timber fellings were reported by 31 countries, representing 98 per cent of the European forests. The largest total volumes of fellings were reported for North Europe, at 181 million cubic metres, Central-West Europe, 172 million cubic metres, and the Russian Federation, with 170 million cubic metres. Combined, those three regions share about 76 per cent of the total timber fellings reported for Europe.

Thirty eight countries reported information on total roundwood production, again representing 98 per cent of the forests in the European area. 578 million cubic metres of roundwood removals have been reported for 2010, 150 million cubic metres of which is in Central-West Europe, and 144 million cubic metres in North Europe.

The value of roundwood removals for the 33 reporting countries amounted to €21,152 million. The highest value was reported for the Russian Federation, at €3,409 million, followed by Germany, €3,003 million, and France, €2,980 million. The value of wood removals varied between €5 per hectare in the Russian Federation and €241 per hectare in Central-West Europe.

Forestry experienced a healthy growth in output and value added in all regions except South-East Europe, particularly after 2005. In Europe, forestry’s output value per cubic metre of roundwood removals in 2008 stood at €66 per cubic metre, a 34 per cent increase since 2000. Value added was €39 per cubic metre, or a 23 per cent increase since 2000. However, in real terms, and adjusting for inflation, the value added per cubic metre of roundwood remained

Trade of wood products doubled between 1990 and 2005, but primary wood and paper volumes decreased afterward due to the 2008-2009 economic crisis. However, the value of European trade was more stable. In 2008, gross value added by forestry, wood industries, and pulp and paper industries totalled €127 billion in Europe. Forestry and logging activities account for 20 per cent of the forest sector’s gross value added; the remaining 80 per cent is almost equally distributed between wood and paper industries.

Despite the slight increase in output value of €12 billion, or 3 per cent, value added in Europe has declined by €8 billion, or 17 per cent. Forestry’s percentage contribution to GDP has almost been cut in half, with practically all this decline attributed to North Europe and Central-West Europe, which together represent 70 per cent of value added in the European pulp and paper industry.
The forest sector value added ranged from €108 to €123 billion from 2000 to 2008, with an average value of €114 billion per year. In 2009, the wood industry experienced a sharp decline of 17 per cent in value added as compared to 2008, which was was a record low since 1999. Forestry and pulp and paper also saw a decline of about 20 per cent in 2009.

The net value added per hectare varies greatly among regions. Central-West Europe has the highest figure €171 per hectare. During the last few years all regions except Central- East Europe and South-West Europe had an annual
increase in net value added, varying from 1.2 to 18.8 per cent per annum. Net entrepreneurial income shows a similar picture to net value added.

There has been a shift in the regional distribution of the forest sector’s value added in Europe over the past few years, the report found. The share of Central-West Europe has gradually decreased from 52 to 47 per cent. North Europe’s share has decreased from 19 to 16 per cent, while the combined share of Central- East Europe and the Russian Federation saw an increase from 8 to 16 per cent.

Please see charts on Page 6.

The net revenue of forestry is an important indicator of the degree of economic sustainability of forest management.
In 2010, Central-West Europe had the highest figure, at €171 per hectare, followed by Central-East Europe, North Europe, South-West Europe, South-East Europe and the Russian Federation.

The latter region has a low figure due to its large area of forest available for wood supply.

Seasons Greetings and Holiday Wishes!

In keeping with more than 60 years of tradition, started with the very first issue of your Madison’s Lumber Reporter on September 15, 1951, Madison’s is taking our annual break.

This is the last edition for 2011, we will resume publishing, full of vim and vigour as usual, on January 6, 2012.
We wish all our readers and subscribers a joyous Happy Holiday and the best of health in the New Year!

Canada Existing Home Sales

The Canadian Real Estate Association said Thursday the average existing home sale price across the country in November was $360,396, a 4.6 per cent increase from a year ago but the smallest year over year increase since January. It also said sales activity is now in line with the 10-year average.

Nevertheless the government has targeted condominiums during this housing boom. It now forces investors to have 20 per cent down to qualify for mortgage default insurance, up from the 5 per cent it requires for owner-occupied buyers. Still there remains some scuttlebutt the government will tweak the condo rules again with one suggestion being that 100 per cent of condominium fees count towards debt obligations when considering how large of a mortgage a consumer can get.

Existing Home, Canada

Canadian home resales rose six per cent last month on a year-over-year basis and jumped 0.5 per cent on a seasonally adjusted basis compared to October levels, the Canadian Real Estate Association said Thursday.

November marked the third straight month that national activity on its Multiple Listing Service was up from the one before.

Meanwhile, the number of newly listed homes was down 3.4 per cent from October to November — the largest single month decline of the year.

“The national housing market remains balanced, but is edging closer to seller’s market territory,” the association said in a release.

The latest signs pointing toward a market that favours sellers stand in stark contrast to predictions earlier this year that demand would drop off, giving buyers a break from rapidly rising prices.

But a continuation of ultra low interest rates — which have sat at one per cent since September 2010 — due to trouble signs outside Canada’s borders has kept demand strong and buyers competing.

New listings slipped lower in more than two-thirds of Canadian housing markets, with Toronto, the Hamilton-Burlington region, and Calgary falling the most. The national sales-to-new listings ratio a measure of market balance, rose to 55.5 per cent in November — its highest reading since the spring.

And while sales so far this year have been stronger than expected, up 2.1 per cent on a year-to-date basis, they have remained in line with the 10-year average.

However, sales in November were so robust, that they broke that pattern to climb seven per cent above the 10 year average to the fourth highest level on record for the month.

Mortgages, US

The number of mortgage applications filed in the US last week rose 4.1 per cent from the prior week, the Mortgage Bankers Association said Wednesday, as low rates drove a surge in refinance applications.

Refinance activity climbed 9.3 per cent to reach its highest level since November 4, according to the MBA’s weekly survey, which covers more than three-quarters of all US retail residential mortgage applications. Purchasing, meanwhile, decreased by a seasonally adjusted 8.2 per cent during the week ended Friday.

The four-week moving average for all mortgage applications is now up 0.7 per cent, the MBA said.

The share of applications filed to refinance an existing mortgage rose to 79.7 per cent of total applications, up from 76 per cent the previous week.

US Mortgages

The average rate on the 30-year fixed mortgage has dropped to 3.94 per cent, matching the record low set in October, Freddie Mac said Thursday.

The average rate on 30-year fixed-rate mortgages with conforming-loan balances fell to 4.12 per cent, the lowest rate this year, from 4.18 per cent, while rates on similar mortgages with jumbo-loan balances decreased to 4.47 per cent from 4.52 per cent. The average rate on FHA-backed 30-year fixed-rate mortgages dropped to 3.94 per cent, also a year low, from 3.98 per cent.

2006 Softwood Lumber Agreement

Industry and government sources on both sides of the border confirm there are no major stumbling blocks to extending the 2006 SLA and that an announcement is expected in the New Year.

Renewal, Softwood Lumber Agreement

Under the agreement, the US has already won favourable judgement on two complaints at the international tribunal. The third, a complaint that British Columbia is exaggerating the downgrading of the classification of wood ravaged by mountain pine beetle — to reduce stumpage fees producers have to pay — is headed to the oral argument stage in February 2012.

Softwood Lumber Board

The North American Softwood Lumber Board held its first meeting on November 29 in Chicago, IL, to launch the Softwood Lumber Check-Off.

The Board voted to create four standing committees:

  • Executive Committee will oversee day to day operations of the Check-Off;
  • Programs Committee, to be chaired by Hank Scott, CEO of Collum’s Lumber, SC, will oversee market research, research and promotion programs and evaluations;
  • Finance Committee to be chaired by Mike Case, CEO of Westervelt, AL, will oversee financial affairs;
  • Governance and Industry Relations Committee, to be chaired by Steve Zika, CEO of Hampton Affiliates, OR, will oversee annual nominations and industry communications.

Programs will need to demonstrate a significant ROI to the softwood lumber industry through activities that:

  • Increase demand, generate sales, or improve market conditions;
  • Protect and maintain softwood lumber markets;
  • Develop new uses and applications for softwood lumber.
    Other matters addressed by the SLB:
  • The Board voted to outsource all staff and service functions.
  • Two executive positions were established and filled: Steve Lovett was appointed Chief Executive Officer and Cees de Jager as Chief Marketing Officer.
  • Service functions will be handled by an association management company whose scalable staff and services offer the most efficient use of industry funds.
  • The Executive Committee will review the operational model in 12-18 months to ensure it is consistent with the aims and objectives of the organization.
  • The Board recommended to USDA that the Board collect assessments on imports directly from importers of record, in lieu of having assessments collected at the border by US Customs and Border Protection.

Shipments will be subject to assessment beginning January 1, 2012, but will not be invoiced for payment until the end of 1Q 2012.

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