Lumber News Archives: Nov 2012

Lumber News Archives: Nov 2012

US Home Building, Financing ; Canadian Apartment Construction Price Index ; US Industrial Production, Canada Manufacturing ; Sawmill Explosion ; BC Forest Products’ Exports to Jump 2013 Projections ; Madison’s Timber Preview; Canada Housing Starts, Permits ; Housing Starts, Japan; Electrical Right-of-Way Increases Slash and Burn ; CIC Invests Supply Chain Problems; Post-Tropical Storm Sandy ; Sawmill Fires ; Japan Wood Products Demand Projection; Financial Results, 3Q ; Stella Jones Buys ; Sherwood Contributes Mountain Pine Beetle Battle ; Madison’s Timber Preview ; Quarterly Results ; Sawmill Worker Severe Injury ; US Gross Domestic Product ; Ontario Forest Tenures

November 26, 2012

Home Building, Financing

Next week come out figures on US new home building for October. Given the absolute level of shock at the glowing numbers for both starts and permits in September, one hardly knows what to think about the coming data. A flurry of news, announcements, and speculation this week about the housing market, foreclosures, mortgages, and vacancy rates, might shed some light on the situation.

Freddie Mac released Wednesday its US Economic and Housing Market Outlook for November showing what a healthy national housing market should look like taking into account recent trends, key housing indicators, and the shifting demographic patterns that will define a new and realistic trajectory over the next five years.


Outlook Highlights

• Housing starts increasing to about 1.7 to 1.8 million dwellings per year compared with 2.1 million in 2005;

• Home sales increasing to about 5 per cent of the housing stock, or about 6.5 to 7.0 million homes per year, compared with sales of 7 per cent of the stock in 2005;

• US house price appreciation rising gradually to about 3 per cent per year compared to 11 per cent of 2005;

• Vacancy rates easing further to about 1.7 per cent on for-sale homes and 8 per cent for rental homes, down from peaks of about 3 per cent in 2008 and 11 per cent in 2009, respectively; and,

• Serious delinquency rates nearing 2 per cent, down from a peak of 9.5 per cent in early 2010.

Meanwhile, both mortgage delinquencies and foreclosures on US homes decreased during 3Q 2012, the Mortgage Bankers Association (MBA) reported on Thursday.

The delinquency rate, which includes mortgages that are past due but not yet in foreclosure, fell to a seasonally adjusted 7.4 per cent during the quarter, down from 7.58 per cent in 2Q, and 7.99 per cent in 3Q 2011. The decrease was driven mainly by a drop in loans that are 90 days or more delinquent, now at its lowest level since 2008, said Mike Fratantoni, MBA’s vice president of research and economics.

The percentage of mortgages somewhere in the foreclosure process was 4.07 per cent, down from 4.27 per cent in 2Q and 4.43 per cent a year ago. That’s the largest quarterly drop in the history of the survey, but still “four times the long-run average for this series,” Fratantoni said in the report.
And the percentage of properties entering the foreclosure process hit its lowest level since 2007, falling to 0.9 per cent, down from 0.96 per cent in 2Q, and 1.08 per cent a year ago.

The MBA results are gathered from a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

Elsewhere, foreclosure activity on US homes rose in October compared to the previous month but continued to decline on an annual basis, highlighting the bumpy nature of the housing recovery, a report from RealtyTrac showed on Thursday. The overall decrease put the combined number of reported default notices, scheduled auctions, and bank repossessions, at 186,455. While that is 3 per cent above the number in September it is still 19 per cent lower than October 2011. The increase comes after the level fell in September to the lowest total since July 2007.

Lenders repossessed 53,478 homes last month, a drop of less than 1 per cent from the previous month, and down 21 per cent from October 2011. Home repossessions have declined on a monthly basis the past 24 months.

Regionally, foreclosure activity increased month-on-month in over half of the 212 metro areas tracked in the report, and jumped significantly in some hard-hit metro areas.

In addition, the S&P Supercomposite Homebuilding Index, which consists of 11 US home building companies, climbed 65 per cent this year as of Wednesday, compared to 7.7 per cent for the S&P 500 Index.

Yet elsewhere, demand for single-family rental housing is outstripping the available supply of homes, and some housing markets that have been hit hardest by the foreclosure crisis have seen rental demand jump by more than 25 per cent in the past year, according to a report to be released Tuesday by real-estate firm CoreLogic. Slightly more than half of all rental units in the US, or around 21 million units, are single-family homes.

Leasing activity was up 7 per cent from one year ago in August and up 12 per cent from the beginning of this year, even though the inventory of homes for rent is down by 11 per cent from one year ago.

As a result, it would take just 2.6 months to rent the available stock of for-lease homes in August, down from 3.2 months of supply last year, and over 5 months in 2007. It took just six weeks for a listing to be rented, which was unchanged from one year ago but down from more than eight weeks in 2009.
“Nationally, rental leasing volumes were up sequentially every month during the last two years,” said CoreLogic’s November ‘MarketPulse’ report. “Over this same period, an average of 42,000 rentals were added to the stock of rental homes each month. This is more than twice the average flow that the US was experiencing prior to the housing recovery.”

Another instrumental factor in the sharp slowdown in foreclosure activity: The pipeline of risky home loans made before 2008 is shrinking. Loans issued since then, after banks tightened lending standards, are less likely to go unpaid, according to Associated Press.

“We’re past the bulk of the high-risk loans that were most susceptible to foreclosure,” Daren Blomquist, a vice president at RealtyTrac said to AP.

Canadian Apartment Construction Price Index

Canada’s composite price index for apartment building construction increased 0.1 per cent in 3Q compared with the previous quarter, said Statistics Canada Friday. This change was the result of a slight increase in material prices used in the apartment building construction market.
Year over year, the composite price index for apartment building construction was up 1.9 per cent.

US Industrial Production, Canada Manufacturing

Industrial production in the US declined 0.4 per cent in October after having increased 0.2 per cent in September, the US Federal Reserve said Friday. Post-Tropical Storm Sandy, which held down production in the Northeast region at the end of October, is estimated to have reduced the rate of change in total output by nearly 1 percentage point.

Canadian manufacturing sales advanced 0.4 per cent, to $49.8 billion in September, said Statistics Canada Thursday. The gain reflected higher production in the aerospace product and parts industry and increased sales of primary metals. Excluding the aerospace industry, total manufacturing sales decreased 0.7 per cent. The increases were partly offset by a decline in the motor vehicle assembly industry.

Industrial Production US, Manufacturing Canada

Manufacturing production fell 0.9 per cent as motor vehicle output declined for a third straight month. Manufacturing had gained 0.1 per cent in September. Excluding the effects of the storm, manufacturing output was little changed from its September level, the Fed said.

The gain in US industrial output last month would have been modest even without the storm, with fears over the possibility of higher taxes and sharp cuts in government spending early next year making businesses hesitant to raise output and invest.

The Fed said Sandy, which tore through the East Coast at the end of October, cut output by nearly 1 percentage point. The brunt of the impact was felt by utilities and producers of chemicals, food, transportation equipment, and computers and electronic products, it said.

The average workweek in the manufacturing sector has been bouncing around 40.5 hours since August after peaking at 40.9 hours in January, while overtime for factory workers has been unchanged at 3.2 hours since June.

The factory operating rate is 2.9 percentage points below its long-run average.

Overall industrial capacity utilization fell to 77.8 percent — the lowest level since November 2011 — from 78.2 percent in September. That was 2.5 percentage points below its long run average.

North of the border, Sales rose in 8 of 21 industries, representing just under half of Canadian manufacturing, according to StatsCan. Sales of durable goods increased 1.1 per cent to $25.8 billion, while non-durable goods sales decreased 0.4 per cent to $24.0 billion.

Inventories edged up 0.2 per cent to $65.2 billion in September, with the machinery and food industries leading the gains. Machinery inventories rose 2.1 per cent to $7.1 billion, the highest value on record for the industry. Inventories of machinery have increased in seven of the past nine months. In the food industry, inventories increased 1.7 per cent to $6.2 billion, reflecting widespread gains.

Sawmill Explosion

An explosion sparked a large fire at a sawmill in southern Kentucky on Monday morning. according to WYMT TV. The fire happened at Forest Products in the Gray community of Knox County. Six fire departments responded to the scene. Firefighters had the flames contained before noon Monday.

Sawmill Fire

Workers inside the building told fire fighters they heard some type of explosion before the building caught on fire. General Sales Manager John Smith told WYMT TV that workers came running into the main office saying the building was on fire. When Smith walked outside, he saw one of the company’s two sawmills going up into flames.

“There was fire coming through the roof quite a bit, and the building began to sag where it was getting hot and the transformers exploded. A tremendous amount of fire,” said Smith.

Firefighters are not sure what caused the fire, but they say they believe there was some sort of explosion.

“When we got paged, an employee told me that they were upstairs in this building, and they heard an explosion so they came outside and it was around the air tanks underneath them,” said Chief Darryl Baker with West Knox Volunteer Fire Department.

At this time, Smith says the building is probably a total loss, but he is thankful all the workers got out safely.

BC Forest Products’ Exports to Jump

Export Development Canada’s (EDC) forecast for British Columbia’s export growth calls for a strong rebound of 10 per cent in 2013, after a slight decline of 3 per cent this year, said the agency Thursday.

The province’s international exports are led by three key industries:

Forestry, which accounts for 20 per cent of the province’s total exports; energy, accounting for 20 per cent; and, industrial goods, accounting for the other 16 per cent.

British Columbia’s forestry exports are forecast to grow by an impressive 26 per cent in 2012, said the EDC.

BC Forestry Exports

“Continued strong demand from China and rapidly-growing Asian economies will benefit British Columbia’s export sector, which will expand at double-digit pace again in 2012,” said Peter Hall, Chief Economist for EDC. “Exports to Asia now represent over 40 per cent of the province’s exports, and are expanding in excess of 25 per cent this year.”

British Columbia’s exports of energy are forecast to ease to 10 per cent growth in 2012 after an expected 32 per cent increase in 2011, driven by higher prices for coal and increased natural gas output from the Montney shale gas field.

“Demand from Japan, Canada’s traditional top coal export market, should strengthen in 2012 as reconstruction efforts get underway. Coal exports will also benefit in the longer term from greater production capacity and new mining developments already underway.”

“With a number of mining projects at various stages of development or expansion, exports of industrial goods from B.C. should expand 2 per cent next year, falling well short of the 18 per cent surge in 2011.”

November 21, 2012

2013 Projections

In the runup to and aftermath of the US federal election this week, with its seemingly endless campaigning, analysts and economists of all walks have released their projections for the coming months. Everything from GDP to exports, production to employment, have been examined.
This week Madison’s will provide a sampling of these forecasts.

Economic and Construction

General Economics

First up is Export Development Canada (EDC), which released its global export forecast for this autumn on October 30. EDC boldly declares that “[global stimulus] spending programs were initiated too soon in the cycle [downturn]. But when the initial effects of the new money wore off, we were back to dealing with those pre-recession excesses. Now, the economy is showing signs of being back in balance – but there’s hardly any policy ammunition left.”


EDC “American business is in the best shape ever: corporate profits are near an all-time high of US$1.9 trillion, while businesses are holding US$1.8 trillion of cash and equivalents, the most liquid balance sheets since the 1950s. US productivity has grown 6.6 per cent since the crisis began in 2009. [ . . . ] Previously delayed spending reductions will hit the US early in 2013, which together with tax cuts set to expire on December 31, 2012, would slap the US with a fiscal tightening amounting to a massive 5.1 per cent of GDP.

“EDC’s estimate of the underlying growth in the US economy is 4.3 per cent, which, net of the 1.5 per cent ‘fiscal cliff’ impact, yields an economic forecast of 2.8 per cent growth for 2013.”

For its part, the Desjardins Economic and Financial Outlook, released October 22, finds that “global GDP growth should remain at 3 per cent in 2012 and 3.4 per cent in 2013. [ . . . ] The latest estimate for US real GDP growth showed that the country posted growth of only 1.3 per cent last spring, instead of the 1.7 per cent announced in [our] second estimate.

“We expect US growth to accelerate to 1.9 per cent in 3Q, which will help offset 2Q’s poor performance and keep US annual growth for 2012 at 2.2 per cent. The problems arising from the fiscal cliff remain and the assumptions used will slow real GDP growth to 1.9 per cent in 2013.

“Growth forecasts for the [Euro] region remain at -0.4 per cent for 2012 and 0.1 per cent for 2013.

“Recent corrections to Canada’s economic accounts have forced an upward revision to the expected real GDP growth in 2012, to 2.2 per cent. It will remain at this level in 2013,” says Desjardins.

Next is the TD Economics’ Monetary Policy Monitor, released October 19, “Without a corresponding boost from net exports and business investment, Canadian real GDP is forecast to slow below its trend rate for the balance of the year and into early 2013.”

Production and Exports

EDC: “Strong overseas demand for raw materials will combine with rising US demand and the continuation of a decade-long diversification of sales into fast-growing emerging markets, to lift Canada’s merchandise exports
growth from 4.9 per cent this year to 6.7 per cent in 2013. Topping growth off at 12 per cent is the Canadian forestry sector, where wood product sales will surge as US homebuilding takes off.”

Desjardins: “US retail sales rose by 1.1 per cent in September, the ISM manufacturing index climbed above the 50 mark during the same month, reaching 51.5, and consumer confidence soared. The residential real estate market also appears to be steadier. In two months, the jobless rate fell from 8.3 per cent to 7.8 per cent.”

Last, but certainly not least, is Reed Construction Data which Thursday held a webinar on US economic conditions in general and construction in particular, now that the question of who will be US President has been answered.

Kermit Baker, Chief Economist for the American Institute of Architects started off somewhat cheekily by saying that the US$6 billion spent on federal and state elections amounts to a tax on the “One Per Cent”, in the form of donations made to the Super PACs.

“Things look remarkably the same following the election as they did on November 5,” explained Baker. “One big difference is that companies can no longer delay making decisions based on the looming election.

“The fiscal cliff must now be dealt with. Automatic cutbacks in federal spending will affect non-residential construction, however the sequestration targets of US$2 billion per year decline in major spending for construction spending will not make altogether that much difference. Residential construction played a remarkably small role in this election given its huge role in the financial meltdown.

“There are over 1.5 million US homes currently in foreclosure, and another almost 1.5 million 90 days or more past due.”

“In terms of architecture billings there has been rocky improvement. Getting credit has been the single greatest difficulty for architects and builders,” concluded Baker.

Up next was Ken Simonson, Chief Economist at the Associated General Contractors of America.

“New building of apartments is booming, for rentals specifically not for owner/occupiers,” began Simonson. “First time buyers are reluctant to step into the housing market. Single family home building numbers are not going to retreat but otherwise remain a question.

“Total construction spending in the US is up 12 per cent, a total positive change from the past year.”

On this point, Bernard Markstein, US Chief Economist for Reed Construction Data added, “Vacancy rates are low, and as rents continue to go up the housing starts for rentals will rise.”

Madison’s Timber Preview

There are a lot of questions being asked about the recent storm in the US northeast, and what effect the rebuilding and reconstruction will have on solid wood prices in the next few months.

This week’s issue of Madison’s Timber Preview examines softwood lumber inventories in the US and Canada, and looks at what impact the eventual rebuilding and reconstruction in the storm-affected areas will have.

Contact us any time for a subscription to this timely and valuable information.

Canada Housing Starts, Permits

The total value of Canadian building permits fell 13.2 per cent, to $6.5 billion in September, following a 9.5 per cent advance in August, said Statistics Canada Monday. The decline was mainly the result of the non-residential sector, where the value of permits in all three components fell.
Canadian housing starts fell in October as both single and multiple urban starts slumped, Canada Mortgage and Housing Corporation said Thursday. The seasonally adjusted annualized rate of housing starts was 204,107 units in October, down from 223,995 in September and 18.9 per cent below the cyclical peak of 251,802 reached in April.

Housing Starts, Canada

The seasonally adjusted annual rate of urban starts fell 10.1 per cent to 182,134 units in October, said the CMHC. Urban singles starts decreased 7.6 per cent to 62,402 units, while multiple urban starts dropped 11.4 per cent to 119,732 units.

October starts decreased in all regions, declining by 1.5 per cent in British Columbia, 6.4 per cent in Ontario, 12.3 per cent in the Prairies, 16.8 per cent in Atlantic Canada and 16.9 per cent in Quebec.

Construction intentions in the non-residential sector declined 30.8 per cent to $2.2 billion after a 27.7 per cent increase in August, said StatsCan. Ontario and Quebec accounted for most of the decline at the national level. Non-residential construction intentions rose in four provinces, led by British Columbia and Nova Scotia.

In the residential sector, the value of permits edged up 0.4 per cent to $4.2 billion, following two consecutive monthly decreases. Increases reported in four provinces offset declines in the others. Ontario posted the largest advance, followed by Quebec. The largest decline occurred in Alberta, with Newfoundland and Labrador a distant second.

Housing Starts, Japan

Total housing starts for Japan in September were 74,176 new units, a 15.5 per cent increase over August. New eco building regulations introduced last September caused housing starts to fall for a few months as builders got used to the new codes, according the the Japan Lumber Reports.

Seasonally adjusted annual starts were 868,000 units, a 2.5 per cent decrease from August.

Japan Housing Starts

Units built for owners and for rentals both increased in the double digits, says the Reports. 2×4 units also increased, by 41.9 per cent compared to September, to 9,515 units.

Wood-based units rose by 17.3 per cent, coming it at over 10,000 units for four consecutive months. This type of building had a 58 per cent share of the total in September, a 2.5 per cent increase over August.

Electrical Right-of-Way Increases Slash and Burn

As MaryAnne Arcand, Executive Director of the Central Interior Logging Association explained to the BC Mid Term Timber Supply Committee at hearings in Vancouver, BC this summer, logging contractors clearing right-of-ways for new power lines in northern BC are slash burning valuable timber.

The CBC reported Friday that BC Hydro is warning people living northwestern BC of smoke haze in that area as they cut down and burn hundreds of kilometres of timber to make way for the Northwest Transmission Line.

BC Hydro Burns Timber

The utility’s transmission line project connects an existing substation near Terrace, BC and a new substation to be built further north, near Bob Quinn Lake in 2014, says the CBC.

“In clearing the right-of-way there’s a lot of woody debris that has to be disposed of. And we do have approval… to dispose of that by burning,” said BC Hydro spokesperson Lesley Wood.

Wood said she didn’t know the total volume of the wood being burned, only that it is considerable.

“When you considering that you’re clearing a right of way up to 80 metres worth of clearing for 340 kilometers — it’s a lot,” she said.

Wood says it isn’t economically viable to use the trees for biofuel or firewood, but says the Nisga’a nation, one of the groups contracted to do the cut and burn, may try to sell some of the timber.

Sharon Glover, CEO of the BC Association of Professional Foresters, said there’s no need to be burning the timber — that some of it is bound to be salvageable.

“To say that the forest , ‘We’ll just burn it because it’s not our problem, it’s in our way,’ we need to think differently. If you just burn it you’re saying that timber has no use to anyone. And we just don’t buy it.

“We suspect in the mix of that timber that some of it is going to be merchantable, usable as saw logs, and other timber might be used for bioenergy, shipped to pellet plants or shipped to biomass projects.”

“If you are going to remove permanently, from the timber land base, large tracks of timber, you’ve got to include the costs of shipping that timber elsewhere so that the people of BC get value from the timber that’s removed.“

She adds the practise makes little sense in the current forestry climate where communities devastated by the mountain pine beetle epidemic are looking to log wood from areas currently under conservation.

“Why would you burn it in one area and have a shortage in another?” she wondered to the CBC.

CIC Invests

China Investment Corporation has been working on a deal to purchase a 12.5 per cent stake in Vancouver Island-based Island Timberlands from an infrastructure affiliate of Brookfield Asset Management for about US$100 million, reported the Wall Street Journal Tuesday.

The move marks the latest effort by the Chinese sovereign-wealth fund to step up its investment in assets that could help shield its giant overseas portfolio from rising inflation risks, says the WSJ.

Closely held Island Timberlands, which is jointly owned by Brookfield and other institutional investors, consists of about 256,570 hectares of freehold timberlands mainly on Vancouver Island.

CIC already has a large stake in Vancouver-based mining giant Teck Resources, buying a 17.2-per-cent stake in 2009 for $1.5 billion, says the Vancouver Sun.

During a visit to Toronto in September, Chen Deming, China’s commerce minister, told a gathering at the Canada China Chamber of Commerce that the country’s state-owned enterprises should be treated “fairly” and “objectively” when they invest abroad.

Winston Wenyan Ma, a managing director in CIC’s representative office in Toronto is a member of the board of the Chinese business association in Canada.

November 12, 2012

Supply Chain Problems

As the damage and devastation following Post-tropical cyclone Sandy continues to be counted, one thing is already abundantly clear: there are going to be serious transportation and infrastructure problems in the affected areas for some time to come. While it is too early to provide a complete tally of the washed-out roads, highways, bridges, and other surface transit routes, the fact of long term issues is already evident. The shocking reality of New Jersey and coastal New York residents lined up for over 1 km, a two hour wait, for gas on Wednesday brings unpleasant clarity to the problem. Even the services that keep basic infrastructure open and running were unavailable in the days following the storm.

Most mass-transit systems were rolling again in New York Thursday, while service resumption was slower in harder-hit New Jersey. At mid-day, the Port Authority of New York and New Jersey (PATH) reported an update on conditions at its transportation facilities:

Post Storm

  • all bridges had reopened. The Brooklyn-Battery Tunnel, Holland Tunnel, and Queens Midtown Tunnel remained closed until further notice;
  • all New Jersey PATH rail service was suspended until further notice. There is no estimated time for the resumption of rail service;
  • limited bus service resumed Thursday morning at the Port Authority Bus Terminal (PABT);
  • ferries were running between New Jersey and New York in daytime hours, starting from Paulus Hook, Weehawken, and Hoboken North at 14th Street, and going to the World Financial Ferry Terminal in Battery Park City;
  • the Long Island Rail Road restored limited hourly service on the Ronkonkoma Branch and on the Port Washington Branch from Great Neck Thursday morning: and,
    * the Port Authority’s maritime facilities were closed until further notice.

In addition:

  • motorists were advised that the City of New York was not allowing vehicles with fewer than three passengers to cross the Lincoln Tunnel and enter Manhattan between the hours of 6 AM and midnight; and,
  • Greyhound Bus service into and out of the PABT resumed Thursday.

The New York subway system began partial service Thursday, but it will take a week just to pump out the remaining water, said the Metropolitan Transit Authority. Fourteen of the city’s 23 subway lines were running Thursday morning, though none operate south of 34th Street in Manhattan.

Grand Central Terminal, which is visited by 750,000 people a day, started running trains to the northern suburbs again Thursday afternoon.

Amtrak restarted service on many of its Northeast routes. Modified service was being offered Thursday between Boston, MA, and New Haven, CT, and between Newark, NJ, and points south. The carrier is planning to offer limited service to and from New York City beginning Friday.

State power utility Con Edison said Thursday that based on its assessment of “unprecedented damage,” it expects to restore the “vast majority” of customers who lost power by the weekend of November 10-11. The rest could be out of luck for another week or more. The utility said that about 900,000 customers served by underground and overhead electrical distribution equipment in New York City and Westchester County lost power but 250,000 of them were back online as of Thursday morning.

One correspondent mentioned that residents of Europe are appalled that downed power lines are responsible for a large amount of the power failures.
“Nobody here in Switzerland has seen a power line above ground since their childhood–they’ve all been placed underground, so they are safe from the elements. And there are no power losses in the country…no matter how heavy a snowstorm or a windstorm!”, remarked one concerned European.

The US$800 billion provided by the American Recovery and Reinvestment Act (ARRA), used to stimulate the economy during the recession, does not seem to have been used for such forward-looking projects. Public construction spending by federal, state, and local governments peaked at a record high of US$326 billion (seasonally adjusted) during March 2009 and has been trending down since. It was down 15.5 per cent from the peak to US$275 billion during August.
The federal government will cover 100 per cent of emergency power and public transportation costs through November 9 for the areas of New York and New Jersey that were hit hard by superstorm Sandy, announced Federal Emergency Management Agency (FEMA) Administrator Craig Fugate in a conference call with reporters Thursday.

Typically, the cost-share for governments in disaster responses is 75 per cent federal and 25 per cent state and local. If there’s a need for FEMA to kick in greater than 90 per cent, Congress can call for 100 per cent federal funding for all recovery costs, which is what it did in the cases of Hurricanes Katrina, Rita, and Wilma, Fugate said.

Fugate said FEMA can make recommendations for specific “life-saving, life- sustaining” funding, as the President Barack Obama did last night, for 100 per cent federal funding for power restoration and transportation. Fugate said that the President directed the agency to provide direct federal support for power restoration and transportation operations for 10 days.

Fugate reiterated the $3.6 billion in FEMA’s disaster relief coffers are enough in the Sandy recovery efforts.

Post-Tropical Storm Sandy

Our hearts and thoughts go out to those affected by the devastating storm in eastern North America this week. While clean-up and recovery seems a long way off, the strength and resilience of individuals and communities will overcome even this great challenge.

Sawmill Fires

A fire has destroyed Tembec’s shuttered planer mill in Cranbrook, British Columbia, Thursday night. Firefighters were called to the site around 10pm local time. It was quickly evident they would not be able to save the structure, but instead worked to stop the fire from spreading across the 36-hectare property. The cause of the fire is not yet known. No one was injured.

Tembec closed the sawmill in 1998, and the planer in 2010. The kilns were permanently shut down in May, 2012. The company received just over $100,000 from the Ministry of Forests in July to pinpoint and clean up any contamination issues on the property.

Tembec issued a notice in September calling for bidders to buy and dispose of the planer mill, kilns, and other items.

A fire tore through a lumber company showroom in Brookline, NH, on Thursday night, causing at least four alarms to sound, according to unofficial reports says the Nashua Telegraph.

Lumber Mill Fires

The Brookline Police Department reported a call coming in for a fire at Bingham Lumber. Officers had the two entrances to the road blocked off to vehicular traffic and kept onlookers a distance back from the scene. Smoke curled up through the treeline silhouetted against building outlines on the property. At least 10 fire departments responded to the blaze.

The family that owns that business was lucky that one of the first firefighters on the scene also works part-time for the company and knew their dog was in his crate in the office so let him out.

The lumber yard contained at least 10,000 square feet of showroom space. It was the largest fire to strike Brookline during his 35-year tenure with the volunteer Brookline Fire Department, said Fire Chief Charles Corey Sr.

Fire officials told reporters that the fire appears to have originated in the warehouse in the rear of the building when a stain shop was located.
Investigators from the state fire marshal’s office arrived on the scene Friday morning to determine the cause.

Japan Wood Products Demand Projection

Japan’s Forestry Agency recently compiled the short-term forecast of supply and demand for major timber for 4Q 2012 and 1Q 2013, according to the Japan Lumber Journal.

New housing starts in fiscal year 2012 were used as the base for the forecast, and were estimated to be 883,000 units, up by around 5 per cent from the previous fiscal year. The demand for lumber in 4Q was projected to be the same as in the previous year for both domestic and imported lumber.

Wood Products Demand, Japan

As for the imported lumber, the import volume of European lumber was projected to increase significantly, due to the yen’s appreciation making the price appear low, says the Journal.

The supply and demand of North American lumber products were expected to increase from the same period in the previous year, backed by the firm demand.

Financial Results, 3Q

Vancouver, BC’s, West Fraser Timber Tuesday posted earnings of $55 million in 3Q 2012, on sales of $772 million.
In the quarter the lumber segment generated operating earnings of $37 million. The panels segment, which includes plywood, LVL and MDF, generated improved operating earnings in the quarter of $22 million.

Ainsworth Lumber, also out of Vancouver, BC, Thursday posted a net income of $32.6 million in 3Q 2012, on sales of $115.6 million.

At September 30, 2012, Ainsworth’s available liquidity, consisting of cash and cash equivalents, and short-term investments, was $86.6 million, an improvement of $32.4 million during the third quarter, and $28.9 million since December 31, 2011 resulting from their strong operating results year to date.
International Forest Products, based in Vancouver, BC, Friday reported net earnings of $1.1 million in 3Q 2012.

Excluding restructuring costs and other one-time items, Interfor’s net earnings in 3Q were $0.6 million, compared with net earnings of $0.9 million in 2Q 2012 and net earnings of $2.4 million in 3Q 2011.

Lumber production in 3Q was the highest in Interfor’s history, at 350 million board feet, up 17 million board feet quarter-over-quarter. Sales volume, including wholesale activities, was 366 million board feet, compared with 363 million board feet in 2Q.

Sales values at the company’s operations in the US Pacific Northwest were flat quarter-over-quarter while chip prices in that region were off 12 per cent relative to 2Q.

Activity levels in China and Japan have improved in recent weeks.

Montréal, QC’s, Resolute Forest Products Friday reported net income of $31 million for 3Q, on sales of $1.2 billion. This compares with a net loss of $44 million on sales of $1.2 billion in 3Q 2011.

The wood products segment reported operating income of $6 million in 3Q, $6 million lower than 2Q. Continued improvements to North American housing starts led to a 9 per cent increase to average transaction price, but shipments fell 11 per cent.

Stella Jones Buys

Stella-Jones has signed a non-binding letter of agreement to buy the shares of rival McFarland Cascade Holdings for a deal valued at about US$230-million.
The Montreal-based pressure treated wood products company said it plans to finance the transaction through a combination of term financing and equity.
The company has already received US anti-trust clearance. If finalized, the deal is expected to close in November.

McFarland’s sales for the fiscal year 2011 were about US$255-million. Sales for the current fiscal year are expected to be in the US$280-million range.

Sherwood Contributes

Beginning Monday, November 5, 2012 Sherwood Lumber, out of Islandia, NY, will extend a US$10,000 contribution on behalf of customers and employees, according to a company press release Friday. All customers placing orders with Sherwood next week will be recognized for participating in this US$10,000 contribution to The Red Cross, Long Island Harvest and Habitat for Humanity. In addition, Sherwood will match, dollar for dollar, all employee contributions to any of these three organizations.

November 02 , 2012

Mountain Pine Beetle Battle

Alberta continues to fight the good fight in preventing the mountain pine beetle (MPB) infestation, which has devastated massive amounts of forest in British Columbia, from spreading further east across Canada. There also came news this week that Saskatchewan is financing prescribed burns on the Alberta side of the Saskatchewan border, for the moment just as a preventative measure.

Alberta Sustainable Resource Development (SRD) is continuing along the existing program to halt the beetles’ progress in that province.

Please refer to the January 14, 2011, April 22, 2011, and July 15, 2011 issues of your Madison’s Lumber Reporter for details.

The latest press release from Alberta, dated August 2, explains that survey results from Slave Lake, AB, west to Grande Prairie, and Grande Cache show beetle populations decreased over the winter. In parts of central Alberta and areas north of Peace River they remained the same or increased only slightly.

As in previous years, beetle population surveys were conducted in Alberta this year between May and June at 179 sites, says the SRD release.

Surveys involve cutting core samples from trees and comparing the number of dead versus live beetle larvae under the bark. Results indicate the number of new beetle-infested trees is expected to decline in some areas of the province. In portions of Alberta’s pine forests where the numbers are likely to increase, the findings will help set priorities for control work in the coming year.


Alberta recently allocated $40 million to the mountain pine beetle program to fund survey and control work and reforestation of areas where attacks have damaged pine forests. The funding brings the total the province has allocated to fighting the beetle to $296 million since 2004.

Forest products companies use this information to plan harvesting in their tenures to reduce the impact of the MPB. Weyerhaeuser and Canfor direct their clearcutting towards at-risk areas, after SRD has removed highly infected individual trees in remote locations to restrain spreading, says an article in the Daily Herald Tribune published Sunday. In the last few years, SRD has seen a 50 per cent reduction in beetle infestation year over year.

In Saskatchewan, the Ministry of Parks, Culture and Sport has awarded a contract to a BC logging company for up to $240,000 over three years to cut, pile, and burn MPB infested trees in Cypress Hills Interprovincial Park, according to the Southwest Booster Wednesday. In the last four years, Mountain Pine Beetle populations in Saskatchewan have been steadily increasing and are now threatening the existence of the Lodgepole Pine Forests in the Cypress Hills Interprovincial Park and surrounding area.

The numbers of infested trees in Saskatchewan increased from two in 2006 to 433 trees this year.

Madison’s spoke to Alberta SRD Communications Manager, Duncan MacDonnell, Thursday for an update.

“The leading edge of the MPB infestation has not really moved,” began MacDonnell. “It’s still just east of Lesser Slave Lake. However there is an increase of concentration in the already infested areas.”

When asked if that means an increase in pine beetle population or in dead trees, MacDonnell said, “Well, both.

“There were pockets of overwinter survival, we know that from our mortality surveys this spring. The mortality surveys measure growth in beetle population trends. Also, in September we counted the green vs. red ratios, of the trees. The results were not great but nothing monumental has changed.”

“At this point it is business as usual in Alberta,” continued MacDonnell. “We are continuing to focus on the priority areas.

“Right now we have posted on the Alberta Purchasing Connection website a list of contracts for single tree cut and burns. While the logs aren’t going anywhere, this is work for loggers. Anyone can apply, they don’t have to be from Alberta. The work is going to start in November. We have funding for $30 million in single tree cut and burn projects and another $10 million in rehabilitation. So that’s work for loggers and for silviculture professionals.”

Similar projects are also going on south of the border in South Dakota, Wyoming, and Montana.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the latest Canadian and US residential and non-residential building indexes, as well as looking at the trends of several building materials’ prices over the past five years.

Contact us any time to receive this vital and timely information.

Third Quarter Results

Canfor Corporation Tuesday posted a net income of $20.7 million in 3Q 2012, on sales of $683.8 million. Operating income was $22.3 million, down $3.7 million from $26.0 million for 2Q.

The company ended the quarter with cheques issued in excess of cash on hand of $7.1 million and operating loans of $17 million, with a total of $354.3 million still available under its operating lines.

For its part, Canfor Pulp Products Tuesday reported a net loss of $4.6 million for 3Q 2012, compared to net income of $3.3 million for 2Q 2012 and net income of $23.9 million for 3Q 2011. For the nine months ended September 30, 2012, the company’s net income was $9.0 million, compared to $122.8 million for the nine months ended September 30, 2011. The company reported an operating loss of $8.2 million for 3Q 2012, compared to operating income of $10.4 million in 2Q 2012.

The company ended the quarter with cheques issued in excess of cash on hand of $4.4 million and operating loans of $7 million, with a further $32.2 million available under its operating lines.

Quarterly Results

Norbord Thursday reporting earnings of $28 million in 3Q 2012 on sales of $302 million. This can be compared to earnings of $6 million in 2Q 2012 and a loss of $1 million in 3Q 2011.

Also Thursday Domtar reported net earnings of $66 million for 3Q 2012 on sales of $1.4 billion. These results can be compared to net earnings of $59 million for 2Q 2012 and net earnings of $117 for 3Q 2011.

Conifex Timber Thursday reported a net loss of $3.7 million in 3Q 2012. This result can be compared to a net loss of $2.4 million in 2Q 2012, and a net loss of $2.2 million for 3Q 2011.

EBITDA in 3Q 2012 was negative $0.5 million compared to positive $0.6 million in the previous quarter and 3Q 2011.

Lumber segment revenue totalled $54.4 million during 3Q 2012 compared to $55.8 million in the previous quarter. A small increase in revenue from lumber shipments despite a 4 per cent decrease in shipment volumes was offset by a decrease in revenue from residual products and from the company’s third party logistics business.

Lumber segment EBITDA was $1 million for the current quarter and 3Q 2011, and $1.7 million for 2Q 2012. Inventory valuation adjustments, short-term consulting fees and gains from lumber future derivatives resulted in a net expense of $0.4 million in the current quarter compared to a net benefit of $1.5 million in the previous quarter and a net benefit of $0.5 million in 3Q 2011.

Sawmill Worker Severe Injury

A 40-year-old man’s arm was cut off above the elbow Monday in an accident at the Philomath, OR, operation of Mary’s River Lumber.

The Albany man, who worked for the company through the temp agency Selectemp, was using a hula saw in the fence plant when the accident happened, according to details provided by company president Brad Kirkbride and Capt. Greg Ridler of the Benton County Sheriff’s Office.

Worker’s Arm Reattached

The hula saw is used to cut lumber into shorter pieces.

The man had worked at Mary’s River Lumber on and off for a year, Kirkbride said.

Kirkbride voluntarily shut down the fence plant immediately after Monday’s accident. Based on market demand, he doesn’t intend to run the plant for a while, he said. The sawmill, a separate operation in Philomath, continues to run.

Kickbride said that it’s been many years since a serious injury like this occurred at the sawmill.

Oregon Occupational Safety and Health Division officials inspected the plant Tuesday and continue to investigate the circumstances of the accident, said spokesperson Melanie Mesaros. Details of how the accident occurred won’t be released until the investigation is complete, she said.

Surgeons were able to reattach the man’s arm. The early outlook for recovery is hopeful, and he was listed in fair condition Wednesday afternoon at Legacy Emanuel Medical Center in Portland, a nursing supervisor there said.

US Gross Domestic Product

US economic growth picked up in the third quarter, boosted by stronger consumer spending, an improving housing sector and increased defense spending.
Gross domestic product, the broadest measure of the nation’s economic health, grew at an annual rate of 2 per cent from July to September, the Commerce Department said Friday, faster than the 1.3 per cent rate in the second quarter.

Residential construction accelerated at a 14 per cent pace in the third quarter, signaling the housing sector may have finally started recovering. But because housing makes up less than 3 per cent of the entire US economy, the impact was minor.

Growth was held back by the first drop in exports in more than three years and flat business investment in equipment and software.

Consumer spending, which makes up more than two-thirds of the economy, grew at an annual pace of 2 per cent in the third quarter. This was the single biggest contributor to stronger economic growth, and was supported mainly by stronger auto sales.

Surprisingly, higher federal defense spending also boosted the economy, growing at a 13 per cent annual rate after shrinking in the three prior quarters.

An inflation gauge in the GDP report rose at a 1.8 per cent rate, accelerating from the second quarter’s 0.7 per cent pace. But a core measure that strips out food and energy costs slowed to a 1.3 per cent rate, suggesting the rise in overall inflation will be temporary.

Ontario Forest Tenures

Buchanan Forest Products, out of Thunder Bay, ON, is surrendering its sustainable forest licenses in all major forests in the northwest, according to the CBC.

A spokesperson for Ontario’s Ministry of Natural Resources said it’s government policy to revoke the licences of bankrupt companies like Buchanan.

But Kathleen McFadden, the acting assistant deputy minister with the forestry division of the Ministry of Natural Resources, said that won’t cut Buchanan completely out of forest operations in the region and the company’s mills could still get the wood they need.

“There’s the potential for those mills to secure a wood supply through business-to-business arrangements,” she said to CBC.

As well, McFadden said there’s potential the new forest license holder could contract-out harvesting operations to Buchanan.
Buchanan still owns the saw mills in Longlac and Nakina, ON.

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