Lumber News Archives: June 2012 - Madison's Lumber Reporter

Rail Transportation Statistics ; Madison’s Timber Preview ; AFPA First Quarter ; Japan Housing Starts ; 14-Storey Wood Framed Building ; Canadian Industrial Capacity Utilization Rates ; 2006 SLA Arbitration Final Filings Engineered Wood ; BC Timber Supply Committee Update ; Canada Housing Starts ; Flooding ; Insurance Bureau of Canada’s Weather Research ; Merritt, BC, Sawmill Fire ; Wood Chips ; Madison’s Timber Preview ; Record Wildfires ; First Quarter 2012 GDP, Canada and US ; Babine Restarts ; CN Rail Complains ; Sawmill Fire Latest Economic News ; Madison’s Investment Rx; Home Sales, Prices, US ; CP Rail Job Action ; 10 Storey CLT Building in Melbourne ; Lakeland Planer Resumes

June 27, 2012

Rail Transportation Statistics

The latest figures on North American freight shipments and rail car loadings, for March, indicate increasing volumes of goods moving on Canadian and US railways. Forestry and lumber products account for a good portion of that improvement.

As well, intermodal volume in May on the major US railroads hit the highest level in history for that month, according to a release by the Association of American Railroads on June 7. US intermodal traffic last month was 3.5 per cent higher than the same month a year ago. The May 2012 weekly intermodal average of 235,662 trailers and containers is the highest May average in history. Although carload volume was down 2.8 per cent year-over-year, the big losses were due to slumps in the major commodities of coal and grain. Lumber and wood products, meanwhile, were up 2,357 carloads, or 16.9 per cent, in May compared to April.

US and Canada

On May 30, Statistics Canada reported that Canadian railways carried 26.7 million tonnes of freight in March, virtually unchanged from March 2011. A drop in domestic loadings was fully offset by an increase in cargo received from US connections. Traffic received from US connections advanced 13.1 per cent, to 3.3 million tonnes. Intermodal freight loadings rose 9.7 per cent, to 2.5 million tonnes.

The increase occurred solely on the strength of containerized cargo shipments, as trailers loaded onto flat cars declined. Total domestic freight loadings, composed of non-intermodal and intermodal traffic, fell 1.6 per cent to 23.4 million tonnes over the same 12-month period.

However, shipments of lumber and ‘other wood products (plywood, veneer)’ increased by 5.8 per cent from February to March, and 14.3 per cent compared to December. Shipments of lumber were 9,055 and 10,565 rail cars in December and March respectively. Shipments of ‘other wood products’ were 3,300 and 4,072 rail cars in December and March respectively.

Trade using surface transportation between the United States, and Canada and Mexico totalled US$85.8 billion in March, 6.2 per cent higher than in March 2011, said a May 29 release by the Bureau of Transportation Statistics of the US Department of Transportation. March 2012 was the highest month for North American trade value since collection of data began in 1994, exceeding US$85 billion for the first time and topping the previous record of US$80.8 billion in March 2011.

The value of US surface transportation trade with Canada and Mexico in March increased by 88.2 per cent compared to March 2002. Imports in March were up 76.1 per cent since March 2002, while exports were up 104.5 per cent.

US-Canada trade reached US$50.1 billion, a 2.9 per cent increase. In March, Michigan led all states in surface trade with Canada as it has in previous years, at US$6.3 billion, a 3 per cent increase from March 2011. Of the top 10 states by value, Illinois had the largest percentage increase over March 2011, at 16.5 per cent.

The latest Freight Transportation Services Index, released Wednesday by the US Department of Transportation Bureau, showed the amount of freight carried by the for-hire transportation industry rose after a one-month decline, by 0.2 per cent in April from March. The April 2012 level was 16.2 per cent above the April 2009 recession low but is down 3.8 per cent from the historic freight shipment peak reached in December 2011.

April 2012 freight shipments rose 2 per cent from April 2011 and 16.2 per cent from April 2009 but remain below the level in April 2008, prior to the recession.

Despite the 3.8 per cent decline from December 2011, freight shipments in April 2012 were at the fourth highest level since the early recession month of July 2008, which had been the highest level in the 22-year history of the series. After dipping to a recent low in April 2009, freight shipments increased in 24 of the last 36 months, rising 16.2 per cent during that period.

Freight shipments are up 0.4 per cent in the five years from the pre-recession level of April 2007 and up 10 per cent in the 10 years from April 2002, despite declines in recent years.

Freight shipments in April 2012 rose 16.2 per cent from the recent low in April 2009, when freight shipments were at their lowest level since June 1997.

In trucking, two measures of US activity signal the industry remains steady and has even firmed up since mid-May. The first, the for-hire truck-tonnage index, rose 2.8 per cent in April from a year earlier, up from 0.2 per cent the prior month, marking 29 months of growth, based on data from the American Trucking Associations released Thursday. The US economy has never contracted without tonnage turning negative first, so the truck figures are a leading indicator.

The second measure, FTR’s index of US truck loadings, increased 3 per cent to 115.9 in April from a year earlier, the highest since 2008, said the Nashville, IN-based transportation-forecasting company this week.

Madison’s Timber Preview

Ongoing discussions of a very complicated subject, the BC mid-term timber supply, warrant a special distribution of this week’s issue of Madison’s Timber Preview. For this week only, Madison’s is making the Timber Preview available to all Reporter subscribers.

AFPA First Quarter

Values of lumber, panelboard, and pulp and paper manufactured by Alberta Forest Products Association-member companies totalled approximately $545 million for the first quarter of 2012. While the value of production was down $31 million from 1Q 2011, it increased roughly $61 million from 4Q 2011.

The AFPA noted that stronger prices during the months of May and June will likely translate into solid results for 2Q 2012.

Alberta 1Q Shipments

AFPA-member companies produced 705 mmfbm of lumber in 1Q 2012 with a value of $188 million. Part of this production came from the secondary manufacturing sector. Total production volumes were up 48 mmfbm or 7.3 per cent from 1Q 2011, but values dropped $4 million, or 2.2 per cent. Compared to 4Q 2011, production volumes rose 26 mmfbm, or 3.8 per cent, and values increased $19 million, or 11 per cent.

AFPA-member Panelboard operators produced 288 million square feet of 7/16 inch equivalent product in 1Q 2012 valued at $74 million. Compared to the same quarter in 2011, production was up roughly 3 million square feet, or 0.9 per cent, while values increased $5 million, or 6.6 per cent. In comparison to 4Q 2011, production rose by 30 million square feet, or 11.8 per cent, and values increased by $12 million or 19 per cent.

Japan Housing Starts

According to the Ministry of Land, Infrastructure, Transport and Tourism, Japan’s housing starts in April were 73,647 units, up 10.3 per cent from the same month in a year earlier, says the Japan Lumber Journal. This marked the first double-digit increase this year. The seasonally-adjusted rate was 896,000 units.

Housing Starts, Japan

This year, owing to the Japanese government’s promotion policies for house acquisition, housing starts in February marked year-to-year growth for the first time in six months, according to the Japan Lumber Journal.

By building method, housing starts of prefabricated houses increased for the fourth consecutive month to 9,410 units, up 3.1 per cent. Those of 2 x 4 houses also increased for the third consecutive month to 7,876 units, up 8.2 per cent.

Condo starts exceeded 10,000 units for the first time since November 2008, says the Japan Lumber Reports.

14-Storey Wood Framed Building

Not to be outdone by Australia’s announcement a couple of weeks ago of a LEED-standard 10-storey wood building, Norway has announced planned construction of a 14-stoery wood builing.

Bergen Region Housing plans to build a 14-storey wooden apartment block overlooking the western coastal city’s famous fjords, claiming it will be the world’s biggest wooden apartment building.

Tall Wooden Buildings

The project seeks to promote sustainable materials while boosting Norway’s vast forestry industry, the agriculture ministry said yesterday. “The biggest challenge in building a 14-story wooden building is preventing big swings amid strong winds,” Bergen said in an earlier statement.

The building, complete with a rooftop terrace, a Japanese garden, an indoor patio, a glass facade and views of the fjord, could be ready for sale by early 2014. It would be constructed from prefabricated modules.

Canadian Industrial Capacity Utilization Rates

Canadian industries operated at 80.7 per cent of their production capacity in 1Q 2012, up 0.2 percentage points from the previous quarter. An increase in capacity use in manufacturing was partially offset by declines in the resource and energy sectors, Statistics Canada said Thursday The increase of 0.2 percentage points followed an advance of 0.8 percentage points in 3Q 2011 and 0.6 percentage points in 4Q 2011.

Capacity Utilization Rate, Canada

In 1Q 2012, the strength of the manufacturing industries as a whole was responsible for the growth in capacity use of Canadian industries for a second consecutive quarter, said StatsCan. Capacity utilization in the manufacturing sector increased 0.7 percentage points to 81.3 per cent. This was the third straight advance since the decline in 2Q 2011.

The largest contributors to the increase in the capacity utilization rate were the transportation equipment, machinery, wood product manufacturing and fabricated metal products industries.

The capacity utilization rate in the wood product manufacturing industry rose from 74 per cent in 4Q 2011 to 77.2 per cent in the 1Q 2012. The increase was mainly the result of higher production in the sawmills and wood preservation industry.

2006 SLA Arbitration Final Filings

Final submissions were made on May 25 by both Canada and the US in the current arbitration under the 2006 Softwood Lumber Agreement.

Usually the documents presented to the international tribunal are made available to the public within one week, or thereabout. At a full 15 days past that, there is no indication from either side about when the North American forest industry will be able to look at this critical information.
After repeated requests, Madison’s received an email from a representative at DFAIT stating, “The process [of releasing the post-hearing briefs] is taking longer than initially anticipated as mentioned to you last week, and I do not know when they will be available.”

It seems there is an ongoing disagreement about some sections that Canada wants redacted.

Madison’s asked representatives at the US Coalition for Fair Lumber Imports for details, and was told by email, “If it’s an issue of redacting confidential information from the public version, the only confidential information in the case is Canada’s. Any disagreement would therefore have to be over a request from Canada to redact something.”

The LCIA panel has a lot of discretion in the timing of its ruling, so at the moment it is not known when the final decision will made. In this current arbitration, once the decision is made the case is closed, there is no opportunity for appeal.

It seems only reasonable for stakeholders to be as informed as they can prior to this fateful decision. Contact information for DFAIT staff working the softwood lumber file can be found here:

http://tinyurl.com/7v72b4g

June 20, 2012

Engineered Wood

As announced two weeks ago in your Madison’s Lumber Reporter, the new record for tallest wooden structure in the world goes to Melbourne, Australia, for a 10-storey cross-laminated timber (CLT) building. The high-rise apartment building, slated for Victoria Harbour, will also be shooting for 5 Green Star As Built certification, Australia’s equivalent of LEED Platinum for New Construction.

If Vancouver, BC, architect Michael Green gets his way, that new height will soon be smashed. At 30-storeys, Green’s wooden skyscraper design puts new meaning to the term ‘eco-building’.

Dubbed Tall Wood building, the primary structure is made from Laminated Strand Lumber (LSL) beams instead of steel. The beams are made from strips of smaller wood fibres that are glued and set under pressure – the process is similar to how common Oriented Strand Board (OSB) sheets are made. The wooden tower may seem like a fire hazard, but in reality it is actually safer than steel. When exposed to fire, large timbers develop a charred exterior that insulates the structural wood underneath. In fact, the weakest point in a building fire is the steel connection from the beams to the supporting posts.

CLT, LVL, LSL

Green documented his research and design specifications, in February publishing the results in an open source paper – a kind of instruction manual for building really tall wood buildings.

In Europe, CLT has been steadily gaining popularity over the past decade, due in part to a strong push by governments to lower the carbon footprint of buildings.

Elsewhere, UK market research group MTW Research published a new market report April 25 providing a comprehensive review titled “UK Timber Frame Housebuilding & Construction Market in 2012”, with forecasts to 2016. MTW Research forecasts that by 2016 timber frame sales in the UK will grow by 60 per cent in volume and 80 per cent in value, outstripping the expected pace of growth in other areas of the construction market.

The report states that sales of timber frame, SIPS, and volumetric timber buildings increased by some £30 million in 2011 with much of the demand coming from share growth in housebuilding and minimal additional demand from organic growth or non-residential sectors. However, demand patterns are likely to shift from mid-2012 onwards as commercial construction regains ground, says MTW Research.

The UK’s low-carbon regulations such as the Code for Sustainable Homes are cited by the report as key drivers where the timber frame industry is responding well and meeting changing market demand patterns and influences, with timber recognised as the least carbon intensive building material.

When rebuilding in New Zealand commences later this year, following the series of earthquakes which hit Christchurch recently, that country’s pre-fabricated timber sector needs to prepare for a boom in demand or risk losing out to rivals, says the head of a domestic engineered timber company.

Robert Finch, CEO of Expan, a maker of prefabricated construction systems, has researched and created pre-fabricated timber systems specifically for non-residential industrial and commercial buildings, according to NZ Herald News.

Expan takes laminated veneer lumber (LVL), an engineered wood product using multiple layers of thin wood, and turns it into structural beams, frames, columns and joists.

“I think similarly, with the rebuild that has to happen with 5,000 to 10,000 houses, there’s also an opportunity for ordinary light timber framing,” said Finch.

Brent Coffey, chief executive of the New Zealand Timber Industry Federation, told the NZ Herald News, “the benefits of using timber in the rebuild, are that it moves better than other materials during [earth] shakes, is more environmentally friendly [than concrete and steel], and is easier to replace if damage occurs.”

The latest issue of Engineered Wood, published by LP Building Products, explains, “there is an engineered wood product that reduces the drawbacks of conventional framing lumber. It is Laminated Strand Lumber, also known as LSL.

“Today’s top LSL products are created from a mixture of Aspen and Maple hardwoods, which are chosen for their superior strength. The raw logs are debarked, cut into strands and blended with precise amounts of waterproof, formaldehyde-free adhesives. The blended wood strands are formed into dense mats. A massive steam press then uses steam and pressure to convert the mats into panels. Panels are cut and tested before receiving a protective edge-seal.

“Because moisture levels are carefully controlled throughout the manufacturing process, LSL has a 7–10 per cent moisture content. That’s similar to the naturally occurring moisture equilibrium inside a home, which helps eliminate twisting, shrinking, warping and bowing.”

“Laminated Veneer Lumber (LVL) is another material engineered for performance and durability. LVL is manufactured from ultrasonically graded veneers bonded with exterior-grade adhesives. With strengths as high as 1.9E and 2.0E, LVL is even stronger than LSL. But as you might expect, LVL also commands a higher price than LSL. Since LSL is more than strong enough for most uses, the superior strength of LVL is often unnecessary and amounts to over-engineering,” says Engineered Wood.

Some structural engineers, especially in the US, have expressed skepticism in the face of what they may consider to be a promotional push by design media. What of the building standards, then?

Explains the June 2012 issue of STRUCTUREmag, jointly published by the US National Council of Structural Engineers Associations, ASCE’s Structural Engineering Institute, and the Council of American Structural Engineers, “Since CLT assembly configurations are customized by project, so too are the mechanical properties of the completed panels and assemblies. In Europe, mechanical properties are provided by each manufacturer and there is no European standard to date. Instead, European manufacturers are operating on a proprietary basis using European Technical Approval reports.

“In North America, an American National Standard, PRG320: Standard for Performance Rated Cross -Laminated Timber, which covers manufacturing, qualification, and quality assurance requirements has been approved and is available from the APA – The Engineered Wood Product Association. The American Wood Council and FPInnovations have also established a committee to begin developing a design standard for CLT.”

Please refer to the March 11, 2011 issue of your Madison’s Lumber Reporter for an explanation of the FPInnovations research and standards.

BC Timber Supply Committee Update

The British Columbia Mid-Term Timber Supply Committee met this week in Vancouver, BC. Government staff are currently providing background information for member MLA’s.

The reports and data released so far are available on the Madison’s website. Each document includes links to further reports:

Canada Housing Starts

The Canada Mortgage and Housing Corp said Friday the pace of home construction cooled in May after a strong showing in April. The May figure of 19,264 estimated actual starts was in line with the pace of the previous six months. On a seasonally adjusted annual basis, May starts hit 211,400 ccompared with 243,800 units in April. The April figure was revised down from 244,900 units reported previously.

Housing Starts, Canada

The slowdown was led by a decline in multiple family urban starts, which fell 20.7 per cent to 125,300 units, while urban single starts decreased 4.2 per cent to 64,300 units.

The seasonally adjusted annual rate of urban starts decreased by 15.8 per cent to 189,600 units in May.

May’s seasonally adjusted annual rate of urban starts decreased by 35.8 per cent in Québec, by 18.3 per cent in Ontario, and by 7.7 per cent in the Prairies. Urban starts increased by 6.4 per cent in Atlantic Canada and by 20.9 per cent in British Columbia. In each region, the decrease or increase was mainly due to changes in multiple starts.

The total value of building permits fell 5.2 per cent to $6.5 billion in April, following two consecutive monthly increases, said Statistics Canada Tuesday. The decline was largely the result of lower construction intentions for institutional buildings and multi-family dwellings in Ontario.

Flooding

A few weeks of intense wildfires across North America are rapidly followed this week by flooding in several Canadian regions. Prince George, BC, and Thunder Bay, ON, by Friday morning had each declared states of emergency.

Flood Watch

Several days of heavy rain have washed out roads and is now threatening to flood several communities across the Interior of British Columbia.

On Thursday evening, the City of Prince George declared a local emergency encompassing one neighbourhood, and issued evacuation orders to 17 residences.

The BC River Forecast Centre issued a flood warning for the Fraser River in Prince George and upstream after up to 75 millimetres of rain soaked the region over the past two days.

Thunder Bay, ON, city councillors passed a resolution Monday night to establish a disaster relief committee as they take steps to apply for provincial government funding to help flood victims.

The flooding in Thunder Bay has prompted the Red Cross to call the situation one of its largest disaster responses in Ontario in recent years.

Alberta officials Wednesday issued high stream flow advisories in southwestern Alberta, including the Bow River and its tributaries upstream of Calgary, with Banff and Lake Louise already experiencing some flooding.

The Bow Valley parkway closed Wednesday between Castle Junction and Johnston Canyon in Banff National Park due to flooding.
Flooding is also reported throughout the mountain parks. A mudslide has closed the Trans-Canada Highway in B.C. between Revelstoke and Golden.

All rivers and tributaries between Grande Prairie and the Waterton Lakes at the U.S. border just south of Cardston are expecting to be high flowing, said Carrie Sancartier, a spokesperson with Alberta Environment.

Meanwhile, data analysis firm CoreLogic said in a new report released Thursday that the US metropolitan area at greatest risk of hurricane damage, both in the number of properties affected and the potential value of damage, was New York City. For the firm’s purposes, the area also includes Long Island and northern New Jersey.

The risk is particularly from flooding, says CoreLogic.

Insurance Bureau of Canada’s Weather Research

According to projections made by Professor Gordon McBean, a world renowned climate scientist from the University of Western Ontario, warmer temperatures in the summer months will, in some regions, result in an increase in wildfires, drought, water scarcity, lightning flash density, and the risk of hail storms. Also parts of the country will see more intense winter storms, more freezing rain, and precipitation, as well as a significant decline in sea ice cover, and increased coastal erosion.

Canadian Weather Reseach

In 2011, catastrophic events cost Canadian insurers roughly $1.7 billion and almost $1 billion in each of the two previous years. The majority of these insured losses were caused by extreme weather events, but smaller weather events also played a role in significant property damage for consumers.

The Insurance Bureau of Canada commissioned this research to better understand severe weather as a factor in the increasing damages to personal and commercial properties that we are seeing in many parts of Canada. IBC wanted to know more about how current weather patterns are likely to evolve in the decades ahead, and to begin the process of helping Canadians prepare to adapt to these changes.

Merritt, BC, Sawmill Fire

Flames ignited a portion of the main sawmill at Tolko Industries in Merritt, BC, Wednesday. No one was injured.
“No explosions were reported or believed to have been the cause of the fire and further investigation will not be attempted until the fire has cooled and investigators can safely enter the scene,” said Merritt RCMP Const. Tracy Dunsmore, shortly after the fire started, according to the Merritt Herald.

Tolko spokeswoman Sheri Greeno said the fire did not occur in the sawmill operational area.

“That unit houses a suction unit that collects fumes and metal shavings from saw filing and grinding equipment,” she said. “The fire did enter the wall attached to the sawmill.”

Operations have stopped until an investigation is completed by WorkSafeBC.

WorkSafeBC spokesperson Megan Johnston said the agency has inspected the Merritt Tolko mill four times since the Safety Order in April.

The latest inspection was on May 25.

“The initial report indicated the fire began in a bag house structure that is located outside of the mill, but it is connected to the mill. It doesn’t appear to be dust that started this,” Johnston.said to the Herald.

June 06, 2012

Wood Chips

Reports out of eastern Canada last week indicate that newly ramped up production at sawmill operations are causing a glut of wood chips. Apparently finding regional customers in the pulp and paper sector for the valuable residuals has proven difficult of late. One sawmill in New Brunswick, Devon Lumber in Fredericton, told the CBC last week that it has a pile of wood chips two storeys high.
Mark Arsenault, President and CEO of the New Brunswick Forest Products Association, said to the CBC there is indeed an oversupply of chips on the market.

“Newpage in Nova Scotia, Abitibi [Resolute] in Nova Scotia, the White Birch mill in Quebec, and also in Maine have shut down or stopped or reduced their receivables of pulpwood from New Brunswick,” Arsenault said.

The NBFPA has made recommendations to the government of New Brunswick on ways to reduce the oversupply of wood chips.

Piling Up

Rick Doman, President and CEO of EACOM Timber, out of Montreal, QC, explained to Madison’s in a phone interview Thursday morning that this situation is “not new. Its happened before”.

“Right now there is no home for sawmill byproducts,” said Doman. “Pulp and paper mills in the area are slowing down.”

When asked about selling chips to pulp producers further away, Doman said, “Transportation becomes costly. Besides, the problem isn’t just here [in eastern Canada], it looks like a North America-wide issue.

“When global demand for pulp and paper products declines, as it is now, and producers take downtime, it causes challenges for the spot chip market. Some sawmills have to close or curtail because if they are not selling the byproducts, like wood chips, sawdust, and hog fuel, they are not getting that revenue stream. This seriously affects the economics of operating a lumber producing business.
“In these circumstances it is difficult to run full time, even when lumber prices are higher.”

In 2010, when North American lumber demand was at historic low levels, worse than what veteran traders had ever seen, pulp and paper prices were riding high. Both sectors operate in cycles, and are subject to general economic conditions. At this moment there appears to be a bit of a lull in pulp demand, although the drop should not be considered alarming.

A source for a major Canadian lumber producer with sawmills in Ontario and Quebec explained to Madison’s that the downtime with pulp producers was not affecting that company’s Ontario mills “right now”.

“But if other sawmills open up there will be problems,” the source said. “What chips we are producing we sell, we have long term contracts. The kraft mills and pulp mills that have closed in the east of Canada and the US are having an impact. Even some of our Ontario mills at times carry a chip inventory.

“In Quebec there have been curtailments [with this company], some due to issues selling chips and one for a different reason.”

According to global pulp and paper tracker FOEX, market pulp, or NBSK, prices in both North America and Europe are up since the beginning of this year. Paper, however, has not fared so well, which may be why upstream producers are now being affected.

Northern bleached softwood kraft (NBSK) pulp prices in Europe have risen by US$20.35, to US$849.39 per ton on Tuesday when FOEX publishes its weekly prices. In the US, market pulp prices have increased by US$10 to US$900 per ton. While not at the US$1,000 per ton that pulp prices were enjoying a mere two years ago, the current rates are still well above the US$600 per ton price level of early 2008.

Global chemical paper grade market pulp shipments in April were 3.442 million tons, a decrease of 11.4 per cent from the previous month but up by 1.3 per cent from the same month year ago, according to a Pulp and Paper Products Council press release on May 24. Inventories at the end of April stood at 32 days of supply, up by one day from the end of March but down by one day from April 2011.

Pulp inventories at European ports increased in April by 36,800 tons, or 3.6 per cent, to 1.1 million tons compared to March inventories, according to Europulp this week. Compared to one year ago, the port inventories were lower in 2012 by 47,000 tons, or by 4.3 per cent.

According to a recent press release by Wood Resources Quarterly, based in Seattle, WA, during the first four months of 2012, hardwood pulp (BHKP) prices have increased faster than softwood pulp prices. In April, BHKP prices were at US$760 per ton in Europe, which is up US$85 per ton from January, and US$820 per ton, US$50 per ton higher since the beginning of 2012, in the US, says WRQ.
Paper prices, meanwhile, continue to take a real beating. In Europe, prices on everything from newsprint to printing & writing paper to kraftliner have been falling steadily since the beginning of this year.

The PPPC’s latest release says that North American newsprint statistics over April came out with positive surprises. While overseas exports were down again in a serious way, the regional shipments showed an increase of 1.7 per cent in April, compared to April 2011. The cumulative shipment data was still slightly negative, showing a drop of 1.3 per cent over the first four months, said the PPPC on May 24. The strike by the Canadian Pacific Railway may well have a negative impact on the May numbers, once those are published, in about four weeks. North American newsprint total demand showed a 1.9 per cent upturn in April, which was a change from the quite long string of negative demand numbers. The cumulative change over four months shrank to a drop of 1.5 per cent, according to PPPC.

The good news is that there is a rapidly growing new customer base for sawmill residue, which will increasingly put pressure on the pulp and paper sector’s monopoly on wood chip and sawdust buying. Pellet exports from North America to Europe reached a new record high in the 4Q 2011. Shipments have increased practically every quarter for four years, up from 130,000 tons in the 1Q 2008 to almost 600,000 tons in the 4Q 2012, according to the North American Wood Fiber Review, published by WRQ. Export data collected from exporters and customs information in both North America and Europe show that wood pellet shipments reached just over two million tons in 2011, up almost 300 per cent from 2008.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines changes to Brazil’s Forest Code. The President vetoed some important sections which would have weakened silviculture regulations for forestry and agriculture companies. Environmentalists claim the entire bill should have been vetoed.

Record Wildfires

Summer has barely started and already firefighters in southwestern New Mexico continued to battle the largest wildfire in the state’s recorded history Friday as the flames scorched stretches of the Gila Wilderness. Experts say the massive blaze could be a preview of things to come this fire season as the rest of the West copes with a dangerous combination of wind, low humidity and dry brush.

The Whitewater-Baldy blaze in New Mexico has charred more than 216,000 acres in Gila National Forest and has become the largest wildfire burning in the country, officials said Friday. It was 10 per cent contained Friday, morning double the level of the day before, and firefighters were scouting along the fire’s eastern and southwestern flanks to establish firm containment lines, officials said.

Forest Fires

The Michigan Department of Natural Resources is reporting more progress in battling a wildfire that has consumed about 21,500 acres.

The DNR announced Friday that the nearly 34-square-mile fire in Luce County’s Duck Lake area was 63 per cent contained.
Fire experts are warning that US$512 million in congressional budget cuts could leave communities dangerously exposed in an early and active fire season.

Such warnings have sharpened with the early onset of this year’s fire season, and the record-setting outbreak in New Mexico.
Experts fear the shortfall will leave fire crews scrambling for resources, and force govern ment agencies to dip into other non-fire budgets to cover the gap.

First Quarter 2012 GDP, Canada and US

The Commerce Department on Thursday lowered its estimate for first quarter US GDP growth from an initial estimate of 2.2 per cent. The downward revision was largely because consumers and governments spent less than first estimated, businesses restocked more slowly, and the US trade deficit grew sharply.

Economic Growth, US and Canada

Analysts believe the US economy is growing at a slightly faster rate this spring. They estimate growth at an annual rate of between 2 per cent and 2.5 per cent in second quarter. Many expect the economy will maintain that pace for all of 2012, an improvement from last year’s 1.7 per cent growth.

Still, growth of 2.5 per cent is typically enough just to keep pace with population changes. Most economists say it takes almost twice as much growth to lower the unemployment rate by 1 percentage point over a year.

Canada’s Real GDP rose 0.5 per cent in the first quarter, the same pace as in the previous quarter, said Statistics Canada Friday. Business investment contributed the most to first-quarter GDP growth. Final domestic demand grew 0.3 per cent. On a monthly basis, real GDP by industry edged up 0.1 per cent in March.

As was the case throughout 2011, business investment continued to fuel growth. Business investment in plant and equipment advanced 1.2 per cent, the ninth consecutive quarterly increase. Housing investment expanded 2.9 per cent, well above the previous quarter’s pace of 0.8 per cent. Non-farm business inventories increased in the first quarter.

Babine Restarts

Following in the footsteps of Sinclar’s Lakeland stud mill in Prince George, BC, last week, Babine Forest Products in Burns Lake, BC, has also resumed work at its planer mill to finish processing the stack of semi-complete lumber, according to the Prince George Citizen.

“We had about 14 million board-feet of lumber already cut, so we’ll be operating to the middle of June to do the planer run and get the lumber shipped,” said Steve Zika, CEO of Hampton Affiliates, owners of Babine and sister mill Decker Lake Forest Products.
Zika was in Burns Lake on Tuesday and Wednesday from corporate headquarters in Portland, OR. “Starting the planer run is one of the reasons I was up at Babine. I wanted to smell the wood and see the workers.”

About 40 people are temporarily back at work at Babine. Zika had to find other mills to buy the logs and the transportation is now underway, says the Citizen.

CN Rail Complains

Customers of Canada’s railways, which often operate in a monopoly position — particularly in remote areas of Canada’s north — were elated late last year when the federal government announced the Rail Freight Service Review to address systemic complaints of poor service at Canadian National Railway and Canadian Pacific Railway.

Friday morning, Claude Mongeau, CEO of CN, urged Ottawa to not interfere in the rail industry, according to the Financial Post.
A report is expected in the coming days from the facilitator, and the federal government said it remains committed to tabling a bill this fall that would grant shippers a right to a service agreement.

“The reality is that it would be very disappointing if the government went down that path,” Mr. Mongeau said to the Post. “Ottawa isn’t designed to step into the middle of complex commercial situations.”

Bob Ballantyne, Chair of the Coalition of Rail Shippers, told the Post that rail customers were more concerned during negotiations that the railways wouldn’t agree to any standardized measures.

Mongeau contends that both railways have stepped up to improve service in the aftermath of the Review. He admits that CN “ruffled some feathers” in the past with the pace at which it implemented change, a massive understatement to say the least.

Sawmill Fire

Fire swept through the Cass Sawmill in Cookville, TN, Wednesday afternoon, causing an estimated US$50,000 damage and giving firefighters some anxious moments, according to the Herald Citizen.

“We had two dangerous issues, a water supply problem and a 1,000 gallon propane tank that was located beside the mill,” Blair said. No one was injured.

He said the fire may have spread through dry grass from a brush pile located not far away to the sawmill, which consisted of three buildings and various equipment and building supplies.

“It destroyed one wooden building and the contents, equipment and supplies, as well as a truck trailer that had been used for hauling sawdust, but we kept the fire from spreading to two other mill buildings and we worked hard and kept that propane tank from exploding.”

He said water supply was a problem since the nearest feasible hydrant was five miles away.

June 13, 2012

Latest Economic News

In addition to quite encouraging US home sales and home price data out this week, other economic indicators from the US and Canada are beginning to paint a picture of overall recovery. The rail strike by Canadian Pacific workers has thrown Canadian manufacturers, particularly in the west, into a tizzy. However, the federal government has already indicated that it will not tolerate a prolonged labour disruption, so expectations are that CP trains will be running again soon. That particular dispute turned ugly mid-week when the rail carrier sent temporary layoff notices to 2,000 workers, with another 1,400 jobs temporarily threatened should the issue not be resolved by next week. Please refer to Page 2 of your Madison’s Lumber Reporter for details on the CP Rail labour talks.

North of the border, Statistics Canada Thursday released 1Q 2012 financial statistics for enterprises. Operating profits for Canadian corporations remained virtually unchanged from 4Q 2011, amounting to $75.2 billion in 1Q, StatsCan said. With 11 of 22 industries reported higher profits, gains in the financial sector were largely offset by declines in the non-financial sector.

Canada and USA

On a year-over-year basis, operating profits for Canadian corporations were 4.6 per cent higher in the first quarter than in the same quarter of 2011. Profits increased 3.1 per cent in the non-financial sector and 8.7 per cent in the financial sector. Manufacturing profits decreased 16.2 per cent, to $13.5 billion, in 1Q as 8 of 13 manufacturing industries reported lower profits. Computer and electronic product manufacturers, motor vehicle and parts manufacturers and air, rail and ship products manufacturers led the decline. For construction, profits rose 11.8 per cent, to $3.9 billion, in 1Q primarily on the strength of residential building construction, particularly of condominiums. Profits for the transportation and warehousing industry were up 17.8 per cent, to $2.9 billion. Most of the growth came from transportation, where profits rose 38.1 per cent, to $1.5 billion.

Elsewhere, consumer confidence in Canada got a boost in a May, according to a new survey that also shows the population’s outlook on the economy is rising. The confidence index tracked by consulting firm TNS hit 98.8 this month, more than three full points above April’s 95.4 reading, TNS said Thursday. The survey interviewed 1,207 adults across Canada between May 14-17, 2012.

The 0.4 per cent increase in retail sales reported by Statistics Canada on Wednesday showed consumers are spending more after a weak start to the year, but not quite resuming their 2011 role as the main drivers of growth. Compared with March 2011, overall retail sales were up 4.1 per cent. Stripping out the motor-vehicle and parts dealers, sales were up just 0.1 per cent. Gasoline sales actually fell, to the surprise of analysts, and there were gains in just seven of the 11 retail sub-sectors that Statistics Canada tracks. Sales at general merchandise stores rose for the third straight month, up 1.1 per cent in the month. Receipts increased by 1.8 per cent at building-material and garden-equipment dealers and by 1.3 per cent at clothing and accessories outlets.

In the US, consumer confidence improved last week for the first time in a month as falling gasoline prices helped stem dismay over household finances. The Bloomberg Consumer Comfort Index was minus 42 in the seven days ended May 20, compared with a four-month low of minus 43.6 the prior period. The measure slumped 12.2 points over the previous four weeks, wiping out almost the entire gain for the year.

New orders for durable goods edged 0.2 per cent higher last month, a minimal gain after a revised 3.7 per cent drop in March, the Commerce Department said on Thursday. This data is a sign manufacturing will keep contributing to the US expansion, economists told Bloomberg. The increase was lead by a rebound in auto making as growing confidence in the economy prompts Americans to replace older models, keeping assembly lines busy this quarter.

US stock index futures edged higher on Thursday morning as investors were hopeful that data on durable goods orders and initial jobless claims will show the world’s largest economy is on the right track to recovery, according to Reuters.

In US employment figures, which together with housing have stubbornly resisted showing signs of true recovery, the number of people seeking unemployment benefits fell slightly last week, signalling modest job growth. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 370,000, the US Labor Department said Thursday. The four-week moving average, considered a better measure of labor market trends, dropped 5,500 to 370,000.

Claims have barely budged in the past four weeks, indicating a marginal improvement in the pace of job creation after April’s disappointing 115,000 gain in nonfarm payrolls.

The number of people still receiving benefits under regular state programs after an initial week of aid fell 29,000 to 3.26 million in the week ended May 12.

The so-called continuing claims data covered the week used by the household survey to derive the unemployment rate. The jobless rate dropped to 8.1 per cent in April from 8.2 per cent the prior month and from from 9.1 per cent in August 2011. Part of the reason for the drop is that employers have added a million jobs over the past five months. But it has also declined because some people gave up looking for work.

Though Thursday’s economic reports were a bit lackluster, said Reuters, they offered no signs of deterioration in the world’s largest economy.

There was truly good news in the US housing market this week. Home prices jumped 1.8 per cent in March, the biggest monthly increase in at least two decades, as the housing recovery builds momentum, the Federal Housing Finance Agency said Wednesday. The FHFA report measures changes in real estate values using purchases of properties with mortgages backed by Fannie Mae or Freddie Mac. It doesn’t provide a specific price for homes. For the first quarter, prices rose 0.5 per cent from a year earlier, the first annual increase since 2007.

Purchases of previously owned US houses climbed 3.4 per cent in April to a 4.62 million annual rate, the first increase in three months, the National Association of Realtors said Tuesday. The median home price was US$164,800 in March. In April, it climbed to US$177,400, according to the trade group.

Demand for new US homes increased 3.3 per cent in April to a 343,000 annual rate from a revised 332,000 in March, the Commerce Department reported Thursday.

“The economy continues to grow with economic indicators on a positive trajectory and pointing to a recovery. But struggles remain. High unemployment, a declining labor force, stagnant wages, and a large delinquent inventory across many parts of the country are slowing the recovery’s momentum,” Fitch Ratings wrote Friday.

Fitch expects home prices – after inflation – to drop another 7.8 per cent — a smaller forecasted decline than the 9.1 per cent projected three months ago. By state, Fitch sees widely varied performances ahead – but 12 state housing markets were seen as “undervalued” and 14 with pricing at “sustainable” levels.

Please refer to Page 2 for more information on US new and existing home sales data.

Madison’s Investment Rx

This month’s issue of Madison’s Investment Rx went out last week. Recent changes in the delicate supply-demand balance for North American solid wood products and the latest data on US forestry products and softwood lumber imports from Canada are examined

Home Sales, Prices, US

Americans bought more previously owned homes in April, a sign that the weak housing market is gradually improving. The National Association of Realtors said Tuesday home sales rose 3.4 per cent last month to a seasonally adjusted annual rate of 4.62 million.
That brings home sales back near the pace in January and February — which was the best winter for sales in five years. Still, sales are well below the nearly 6 million per year that economists equate with healthy markets.

New US single-family home sales rose more than expected in April and prices pushed higher, further evidence the housing market was turning the corner. The Commerce Department said on Wednesday sales increased 3.3 per cent to a seasonally adjusted 343,000-unit annual rate after a 332,000-unit pace in March.

US Home Sales, Prices

The median price for existing homes sold in April rose to US$177,400, up 10.1 per cent from a year ago.

The median price of new homes rose 0.7 per cent last month to US$235,700 from March. Compared to April last year, the median price was up 4.9 per cent.

Inventories of new homes on the market remained near record lows despite a rise of 1.4 per cent to 146,000 units last month. At April’s sales pace it would take 5.1 months to clear the houses from the market, down from 5.2 months in March.

U.S. home prices rose in March and in the first quarter of the year, according to a government index released Wednesday, highlighting a trend of gradual stabilization as the market finds its footing after a severe bust.

Overall, home prices rose 1.8 per cent on a seasonally adjusted basis in March from a month earlier, according to the Federal Housing Finance Agency’s monthly home-price index. Compared with a year earlier, home prices were up 2.7 per cent.

On a quarterly basis, home prices rose 0.6 per cent in the January-to-March period from the last quarter in 2011. They were up 0.5 per cent from the same quarter in 2011, the first year-over-year increase since the second quarter of 2007.

CP Rail Job Action

The strike at Canadian Pacific Railway has put a stop to international trade moving through the rail tunnel connecting Windsor, ON, and Detroit, MI. CPR and Borealis Transportation share ownership of the tunnel.

“The suspension of CP’s freight network in Canada, due to the walkout means tens of thousands of carloads of freight are not moving. This is impacting our customers’ business and Canada’s economy,” CPR spokesperson Ed Greenberg wrote in an email to CBC News.
Greenberg declined to estimate what the financial fallout of the tunnel’s closure is.

CP Rail Disruption

The waiting games continues for Windsor area businesses that rely partly or wholly on the Canadian Pacific Railway lines.

They can’t do much right now since CPR workers went on strike Wednesday. Business owners in the region who use the rail line to ship goods are now discussing contingency plans.

Some are waiting on whether Ottawa legislates CPR workers back to work. If it happens by early next week, some business owners tell CBC Windsor they will be OK.

One railway official from Essex Terminal Railway, which moves 35-40 cars of goods around the city each day, said earlier this week this strike is costing Windsor $1 million a day.

The strike is about pensions.

The Teamsters union accuses CPR of taking a tough stance by trying do reduce pensions as much as 40 per cent in some cases.
Labour Minister Lisa Raitt said both sides are still at the table.

In the meantime those who use CPR in one way or another are stuck on the tracks — and their goods are going nowhere.
Some railways, such as Canadian National, use tracks owned by CPR and, in some cases, are not using those lines during the strike.

10 Storey CLT Building in Melbourne

Work has started on a 10-storey cross laminated timber structure (CLT) in the Docklands are of Melbourne, Australia, that will rise 242 centimetres above the world’s tallest similar buildings, according to the Sydney Morning Herald. The innovative new Forte building, rising up at the west end of Bourke Street, will also be Australia’s most environmentally friendly multi-storey residence, with a 5-star green rating.

It will house 23 boutique apartments and four townhouses and be built entirely from CLT.

Cross-Laminated Timber Building

Forte will be completed in October after nine months’ construction, ‘’quicker than most houses get built’’, Lend Lease chief executive Mark Menhinnitt said.

Green Building Council of Australia chief executive Romilly Madew said the sustainability initiatives had the potential to transform timber use in buildings around Australia.

‘’In a fire event the product will char, it won’t burn,’’ Mr Menhinnitt said. The $11 million structure had been put through a CSIRO fire test.

Lend Lease also plans to build a public library in Docklands from the same material.

The tower will resemble a traditional apartment in its internal and external finishes. ‘’If you walk inside an apartment, you wouldn’t know [it was made of wood]. There will be a [wood] wall inside each apartment, so you will get a warm timber finish in one area.’’

The speedy construction improves Lend Lease’s capital performance because buyers settle sooner. Because the development was unusual, the company chose not to pre-sell apartments.

Lakeland Planer Resumes

During a meeting with workers Thursday night, Sinclar Group Forest Products officials announced the planer mill at Lakeland in Prince George, BC, will be opened soon, according to CKPG TV. The mill will operate with the remaining inventory, although it’s not clear what will happen once that inventory is cleared. An explosion and fire destroyed the facility’s sawmill last month, killing two and injuring more than twenty others. The planer survived the blast with little damage.

Elsewhere, President of Sinclar, Greg Stewart, said Wednesday in regards to whether the stud mill will be rebuilt, they company not entirely sure yet, according to HQ Prince George.

“It’s still far too early in the process to be able to say. We do believe that there are conditions that are favourable towards a rebuild. One, I think we have the best employees in the industry, we have long-time local owners, we do have access to fibre as it stands today, as well we have great relationships with our stakeholders.”

Four employees still remain in hospital, but Stewart says they continue to show improvement.

Stewart added that the Sinclar Group extended the employees’ wages for five weeks to help with the financial impact.