TLA 67th AGM ; US Housing Starts ; Japan Housing Starts ; Log and Lumber Exports to Japan British Columbia’s Current Forest Management Practices ; US Biomass Collection Funding ; Canadian Housing Starts ; New Forestry Licensing and Pricing Models in BC ; Transportation and the Forest Industry ; Madison’s Live Online Lumber Producer Listings ; Japan Lumber and Timberland News ; PricewaterhouseCoopers Annual Forestry CEO Survey
January 31, 2010
TLA 67th AGM
The 67th annual BC Truck Loggers Association Convention and Trade Show was held in Victoria, BC this week. Attendance was somewhat more sparse than in previous years, but attendees made up for the lack of numbers in enthusiasm, and the panel discussions were no less informative than usual. The theme for the event was “The New Faces of Forestry”. A luncheon with BC Premiere Gordon Campbell kicked off the festivities. As the show was in BC’s capital, members of the provincial legislature were scattered about the room, sitting at tables with attendees. The Premiere took a moment before his speech to introduce each MLA individually.
“For the last 20 years, BC’s forest industry has shown volatile trending in the wrong direction,” said Campbell. “This province has been exporting $10 billion annually in wood products. But what will the world be like in another 20 years? [ . . . ] The BC government will build a framework to assure we allow opportunities for workers and for investors, and that we solve old challenges. [ . . . ] We must recognize that we are in a global competition, that we must not just sustain the current market but must drive efficiency.”
Convention and Trade Show
Premiere Campbell went on to say, “BC has the third largest new energy sector globally. Biomass fuel will be as important in 50 years as pulp and paper was for the past 50 years. [ . . . ] We will ensure a long term industry that people want to invest in. [ . . . ] If the US promoted wood use domestically it would not have to spend so much time putting up barriers to free and open trade [with Canada]. China, as a customer of wood products, can offset trade imbalances that are going on with the US. The honest fact is that China doesn’t need BC for building with wood, but if we help, if we nurture a market there, exports will grow.”
Campbell ended by announcing a government funded technology engineered wood product centre in Prince George, BC coming soon.
After lunch the trade show floor opened with exhibitors made up mostly of equipment suppliers for logging operations. At 6:00pm attendees were hustled out to a pub crawl sponsored by Brandt Tractor, which got quite rowdy and boisterous. Did Madison’s say attendees showed enthusiasm for the event? As the evening progressed that enthusiasm was heavily fuelled by free-flowing drinks and plates of appetizers. Madison’s had difficulty splitting off from the event at a reasonable hour. Frequent references to an early breakfast panel which included BC Minister of Forests and Range Pat Bell fell on deaf ears.
Just after 7:00 the next morning Madison’s mustered enough cognitive ability to make it to the breakfast. Soon the room was filled with similarly groggy attendees still reeling from the previous evening’s refreshments.
A stirring video created by the Pacific Forest Foundation, encouraging young people to seek employment in the forest titled “This is my Office”, was screened at the breakfast meeting. Streaming of this video will be available through the Madison’s website soon, once technical details are worked out with the Pacific Logging Congress.
BC’s Minister of Forests and Range, and Integrated Land Management, Pat Bell, took BC Premiere Gordon Campbell’s speech of the previous day one step further. “We are starting to see early trends in recovery both for company share prices and in lumber commodity prices. The entire supply chain has dried up of inventory, and there is no log inventory at the mills. Everyone has been managing at the lowest inventory levels, so only a small uptick in demand will drive up lumber prices.”
Bell took a moment to discuss lumber demand in China and expectations for that demand to increase in the near future. The Minister invited industry members to join him on his annual trade junket to that country over the Remembrance Day week in November, saying, “Until you go there you can’t understand the size of the country.” The ability of the Chinese government to respond to changes in market conditions is critical, Bell explained. The Minister was careful to point out that, “BC lumber producers ready to jump back into the US lumber market will scare Chinese customers away. They want assurance of a long term relationship. [ . . . ] BC sold more wood into China in the first week of 2010 than it did for the entire month of January 2009. [ . . . ] Make no mistake, we are not discounting the US; we are building a second marketplace.”
There need be no further proof of the Minister’s claim of China, and indeed Japan, requiring a stable source of supply than the shocking decrease of Russian log imports into that region over 2009. Uncertainty caused by Russia’s announcement, and then delay, of an 80 per cent tax on raw log exports sent Chinese and Japanese customers fleeing to other countries to source logs. Refer to Page 6 of this week’s Madison’s Reporter for 2009 log and lumber import levels into Japan for more information.
Bell mentioned the importance of biomass fuel, “In 2009, 3 million cubic meters of former waste was consumed as bioenergy in BC.” As with Premiere Gordon Campbell’s speech, there were obligatory references to the Olympics and to the new HST tax, which will take effect in BC this spring.
Bell summed up by confirming his Ministry’s four objectives: full utilization of fibre, including bioenergy; modified silviculture practices, specifically in terms of the Commercial Forest Reserve; China as an important customer for BC wood products, and; larger wood-framed buildings domestically.
At that point the panel welcomed questions from the floor. When asked why forest products’ trade into India was not being similarly promoted as trade to China, the Minister explained, “There are some arbitrary health and safety standards that are currently keeping Canadian wood out of India. We are working on this but the government model in India, of democracy, is not as responsive as China so we expect growth of wood exports to that country to be a ten year effort.” Bell again invited industry to attend his annual trade junket to China, saying the cost per participant was about $4000 to $6000 for the week.
There was some discussion about log exports, a thorny issue particularly on the coast and particularly with those involved on the harvesting end of the lumber value chain. Bell summed up the issue, “The BC public wants to know that a log exported is truly surplus to lumber production industry needs. If log exports enhance a harvest stand, where the company would keep higher value logs for domestic production and export lower value logs for immediate revenue” then his Ministry supports log exports.
Another important question from the floor, regarding a proposed tenure reform system based on nurturing international investment and how that factors into an industry meant to serve the people of BC, was tackled by each panel member.
Russ Taylor of Wood Markets International said, “In terms of new investment, the focus should be on engineered wood, LVL and such value-added items, and companies should also focus on second growth logging.”
Avrim Lazar of the Forest Products Association of Canada replied, “Foreign investment in the Canadian lumber industry only makes sense if there is a diversified use of the chip stream; this is the soundest long term financial model for Canadian forest products.”
Moderator Peter Lister of FPInnovations added, “It is hard for small Canadian operators to compete in this arena, it seems to be a niche market involving value-added products and a heavy emphasis on customer service.” Lister went on to say, “Secondary manufacturers in Canada have trouble getting the items they need out of the primary mills to serve specific customer requests.”
This same complaint has been heard out of Japan, and China, for the past year and half. Canadian lumber producers need to stop expecting a return of overproduction of the mighty 2×4 and move into providing for customer needs, even something so simple as metric sizes. The days of a supply-side spruce market are over, where mills were so flush with orders they could refuse small adjustments needed by customers.
As Pat Bell said several times, and Gordon Campbell as well, productivity and competitiveness on a global scale is the name of the game. Canada is in a good position to maintain its status as one of the top forest product suppliers, but is facing tough competition from every single other region and must continue to move forward and adapt.
US Housing Starts
New home construction in the US fell far more than expected in December, at 557,000 units, while the number of building permits issued in the month beat projections by rising to the highest level in 15 months. Single family were starts off by 6.9 per cent compared to November while the volatile multi family sector rose 12.2 per cent over the previous month. Regionally, starts rose 3.3 per cent in the South but fell 0.9 per cent in the West, 18.5 per cent Midwest and 19 per cent in the Northeast.
Building permits rose 10.9 per cent to 653,000 units, sharply exceeding expectations for 590,000. Single family authorizations rose 8.3 per cent to 508,00. Permits were up 15.8 per cent over December 2008. Regionally, permits rose 27.9 per cent in the Northeast, 18 per cent West, 10.5 per cent Midwest and 4.6 per cent in the South.
US Economy
Meanwhile, Home builders, mired in their deepest slump since the Great Depression, are likely to see a rebound in sales in 2010 as stabilizing home prices and record-high affordability conditions draw buyers into the market, the chief economist of the National Association of Home Builders said this week.
David Crowe predicts that housing starts will rise more than 25 per cent in 2010, to 700,000. For all of 2009, an estimated 554,000 homes were started, down 39 per cent from 2008’s total of 906,000 and the lowest since 1945, the Commerce Department estimated Wednesday. Starts of single-family homes dropped 29 per cent to 444,000 in 2009, the lowest on record, dating to 1959.
Low interest rates will continue to help the housing industry: Even though they are expected to rise this year the 30-year mortgage — now just above 5 per cent — will stay below 6 per cent through the year, predicted Frank Nothaft, chief economist for mortgage agency Freddie Mac.
But Crowe and other economists speaking at the International Builders show, being held this week in Las Vegas, cautioned that there are plenty of reasons to be cautious about the home-building outlook for 2010.
Any optimism on home building should be tempered on a number of counts, said Ed Sullivan, chief economist for the Portland Cement Association, whose members provide concrete used in residential and commercial projects.
Single-family starts could rise 20 per cent in 2010, but that is “from a desperately low level and pathetically mild in absolute numbers,” he said.
In other news, the US Labor Department reported a rise in producer prices of 0.2 per cent in December.
The rise followed a 1.8 per cent gain in November and a 0.3 per cent rise in October. For the 2009 year, prices grew 4.4 per cent.
In a separate report, the number of US workers filing new applications for unemployment insurance rose in the week ended January 16, according to the Labor Department.
Initial claims for state unemployment benefits grew 36,000 to a seasonally adjusted 482,000 – the third consecutive weekly rise.
Japan Housing Starts
Housing starts in Japan declined 19.1 per cent in November from a year earlier but rose by 1.6 per cent compared to the previous month. Annualized housing starts recorded 0.798 million units in November compared to October’s 0.762 million units. Construction spending fell by 11.6 per cent in November compared to one year ago.
Japan Housing
Japan’s Ministry of Agriculture, Forestry and Fisheries will submit a bill to promote using local wood for public buildings in order to generate demand for wood, according to the Japan Lumber Reports.
Rather than requiring the use of wood, the bill imposes restrictions on the use of other building materials like concrete and steel. The Minister said that it is time to shift from concrete to natural wood as a building material which is good for human health and gives much warmth and comfort, according to the Reports.
Both the supply and demand sides are bound by law to use local wood for public buildings of a certain height and square footage.
Log and Lumber Exports to Japan
Japan’s Forest Agency told a gathering of the wood industry in that country that due to depressed housing starts, demand of domestic logs and lumber for the first half of 2010 will be lower than the same period one year ago, according to the Japan Lumber Reports.
Imported logs and lumber are expected increase in 2Q 2010 due to such low demand in 2Q 2009.
Japan Timber Imports 2009
The Agency forecast that total yearly import of Russian logs will be 670 million cubic meters while import of lumber wil be 681 million cubic meters. This is the first time in history that lumber import volumes exceeded that of log imports, said the Agency.
North American log and lumber demand is expected to remain unchanged over 2009. Log demand will be 1,230 million cubic meters for the first half of 2010. European lumber supply, mainly consisting of lamina, is expected to be 970 million cubic meters for the first half of 2010.
Both forecasts are lower than the same time in 2009.
January 24, 2010
British Columbia’s Current Forest Management Practices
There are a number of contentious opinions in the British Columbia forest industry regarding how to manage timber harvesting, salvage, silviculture, and the forest in general. Rumours on this topic have been circulating among the province’s politicos for a number of years, but few expert sources were willing to go on record until now.
In particular, silviculture professionals are raising an alarm about forest regeneration in BC in the wake of the mountain pine beetle infestation. This issue touches closely on timber harvesting, salvage, and stumpage because it has traditionally been the obligation of wood processing companies to replant areas logged. Beetle affected stands, having a volume of trees that were attacked by the beetle, must be harvested before the wood degrades to a point beyond traditional lumber processing. Given the scope of beetle kill, the sheer amount of land mass involved, the BC Ministry of Forests has made adjustments to forest management requirements in an attempt to give companies access to killed timber while it can still be milled into lumber.
Forest Management British Columbia
Some say there are lumber companies taking advantage of the beetle kill situation by paying reduced stumpage on beetle infested trees but taking out of the stand green timber, while leaving the recently dead trees behind. The US Coalition for Fair Lumber Imports is seriously examining this stumpage issue, having posted on its website at the beginning of 2009 “grave concerns” about this alleged ‘subsidy’ for BC lumber producers.
An anonymous spokesperson for a prominent, established BC forestry consulting firm this week laid out the situation in plain language for Madison’s. “The harvest is pushing into green wood at $0.25 stumpage. Innovative Timber Sale Licenses are being tendered without silviculture obligations. Timber harvesting in BC is shifting to these ITSL, which the Ministry of Forests does not interpret as a subsidy. The concept is not bad; timber licenses that don’t sell are put up without silviculture obligations, bringing down costs for lumber producers. However, in principle, the stand has lower value. And the flip side is that there is a huge amount of biomass left behind which the Crown is ignoring. For 35 per cent of the dead area, there is no forest regeneration.”
This source directed Madison’s to the Ministry of Forests Forest and Range Practices Advisory Council minutes where this tenure reform is spelled out. Readers will find it at the top of page 2 here http://www.for.gov.bc.ca/code/pac/minutes/20090312.pdf
This week Madison’s spoke at length with John Betts, Executive Director of the Western Silvicultural Contractors’ Association. In reference to a recent paper published by Ben Parfitt at the Canadian Centre for Policy Alternatives, Betts said, “In regards to the $0.25 stumpage, there are a lot of factors that kick in for the discount to take effect. There is not a massive harvest of dead wood, there are serious utilization issues. Companies are chasing the edge of the beetle kill.”
Betts estimates that this ‘billable waste’ contains enough thermal energy to serve domestic thermal requirements for every resident in BC for two years. From Betts’ point of view, “stumpage is being manipulated. Based on an appraisal system, the volume and size of seedlings is not taken into account. Companies are allowing the forest to regenerate naturally, which is not a reliable strategy. Companies are not replanting what they cut because there is a lot of latitude with the definition of ‘free growing’. Resident trees, and seeds in ground, are being counted as regrowth, which will not provide full timber value in the future.”
Betts explained that, “If replanting occurs right away, in seven years there is a viable plantation. If ‘free growth’ is allowed, there is a lot of scrubby stuff in 30 years.” The problem, says Betts, is that “companies are just doing what the regulations say.”
Amanda Brittain, Media Contact for the Association of BC Forest Professionals explained to Madison’s that in terms of professional practice, the ABCFP has received “no complaints, there is nothing reported” of practices going counter to the Foresters Act. The issue here, say anonymous sources close to the situation, is that according to the strict wording of the Act there is nothing illegal going on. However the common mood in the woods is that there is intentional circumvention of the spirit of these guidelines.
How to distinguish the facts from the rumours? It seems that each agency, government office, harvester, lumber company, etc. has a particular point of view, a particular concern and a particular interest in not having some of these issues discussed openly. In a situation like this, Madison’s position is to look at the hard data.
Rob Scagel, Principal Consultant for Pacific Phytometric Consultants provided Madison’s with a large volume of information that is also available to the public from the Ministry of Forests website, from BC Timber Sales, and from the Harvest Billing System.
“When the timber harvest is broken down by species, and by grade, there are all kinds of peculiarities,” Scagel interpreted. In response to the US Coalition concerns, Scagel explained, “there has been an inordinate decrease in stumpage, which is not mirrored in a change in grade profile.”
The problem with determining exactly what is going on with the harvest arises because, “BC does not track the harvest on an area basis. You can’t take tenure and say it is a certain amount of hectares, which makes it enormously difficult to make an assessment.”
Apparently one needs each individual TFL, ITSL or invoice record to match up with a map of BC in order to find the region. Multiply this process by over 300,000 records for 2009 alone to find a comprehensive picture. According to the Ministry of Forests’ data on the Harvest Billing System, since 2004, mill and forest use designated as “avoidable waste” has doubled from less than 2 million m³ to almost 4 m³. The complexity of analyzing this data will now change, with the announcement of new procedures coming out of the Ministry of Forests and Range just this week.
Rob Scagel explained the figures to Madison’s in an email, “Recovery of harvesting waste in 2009 was about 2.5-million m³. Adding mill waste in 2009 brings an additional 9-million m³. Based on the 2007 Community Energy and Emissions Inventory (CEEI) commissioned by the Ministry of the Environment, the thermal requirements for every residence in BC is about 82-million GJ/ yr. This would require a biomass supply of about 8-million m³. (I am driving the mill bycatch with 19 per cent factor and the forest bycatch with 30 per cent).”
These figures bring us back to the forest utilization issues that Betts brought up. An independent observer may wonder how the average BC resident is being served by lumber companies getting a discount on stumpage in order to harvest recently dead beetle kill, which they may or may not be conducting with proper stewardship, coupled with the obligation to replant being avoided or factored out of the system.
Mike Larock, responsible for Professional Practice at the ABCFP explained to Madison’s, “if forest products companies in BC were to harvest only pine beetle wood, they still would not be able to harvest as much as is dying. This is a national disaster. [ . . . ] One way or another companies pay for the stand, whether they use the grey (long dead) or red (recently dead) trees. In terms of silviculture obligations, the company can pay a levy, sometimes of up to 10 years, up front. In that case the responsibility for replanting would land with the Ministry.”
To back up their claims that there is little oversight and less proactive adjustment by the province in the face of the mountain pine beetle infestation, some industry insiders point to the recent 46 per cent drop in BC government revenues from forests. Specifically, forest revenues were down to $609 million in 2009/10 fiscal year from $1,293 million in 2006/07 according to the BC Revenue Branch. For 2009, the average timber revenue received by the public in BC was only $5.17 per cubic meter according to the total Invoices for Stumpage for that time period. Considering that premium douglas fir, cedar, and grade 1 & 2 spruce-pine logs were contained in that stumpage, Madison’s wonders at the low average figure.
Taking a look at the Harvest Billing System’s 2009 figures, Scagel pointed out to Madison’s that the provincial cut for 2009 was 50.3-million m³ which is 22 per cent lower than 2008, representing at least a 15-year low. 9.5-million m³ of the harvest in 2009 has been through BCTS, which accounts for 20 per cent of the total cut. Normally the BCTS cut accounts for barely 13 per cent of the total. Historically, the cumulative cut to the end of October accounts for about 83 per cent of the annual harvest level. The harvested log volume to the end of 2009 was only 47.8-million m³ for a significant AAC under-subscription of 46 per cent.
The regionalized harvested area in calendar year 2009 is 122,457 hectares requiring a silviculture investment of at least 130-million seedlings.
Madison’s was in the process of speaking to these and other experts and collating all this data when BC’s Minister of Forests, Range and Integrated Land Management Pat Bell announced at the 2010 BC Natural Resources Forum in Prince George new licensing and pricing models for forest harvesting. Read more about this brand new development on page 6 of this week’s Madison’s Lumber Reporter.
US Biomass Collection Funding
The Biomass Crop Assistance Program (BCAP), a new federal program in the US that is intended to increase the usage of renewable energy by covering some of the costs related to the collection of woody biomass and agricultural residues, has been in effect for a few months and has created much interest, as well as confusion, within the forest industry, reports the North American Wood Fiber Review.
US$517 million has been allocated for the period January 1 through March 31, 2010. Other questions include: whether or not the program will be extended after two years, which biomass categories will be eligible, and how wood fibre costs for pulp mills and composite board mills may be impacted.
There have been loud protests from both North American and European forest industry organizations who are concerned that the BCAP program will unfairly favor US energy companies and that sawdust and wood chip costs will go up as the result of the program.
Canadian Housing Starts
The pace of home construction for 2009 peaked in December, closing out the first year in what is expected to be a markedly different era for the sector than the period that preceded it.
Canada Mortgage and Housing Corp. said this week housing starts were up 5.9 per cent in December from the month before, to an annual rate of 174,500 units, the most since October 2008.
Canadian Economy
Both single-family homes and multi-family homes pushed higher, with singles up 6.4 per cent to 79,400 and multiples up 6.7 per cent to 77,700.
A rebound in urban starts, up 6.6 per cent to 157,100 in December, was the main driver behind the overall rise, CMHC said.
December’s seasonally adjusted annual rate of urban starts increased by 17.8 per cent in Quebec, by 15 per cent in Atlantic Canada, by 8.7 per cent in British Columbia, and by 2.9 per cent in Ontario.The rate of urban starts decreased by 3.8 per cent in the Prairies.
Rural starts were unchanged at 17,400 units.
Meanwhile, Export Development Canada’s semi-annual trade confidence index moved to 77.4 in the autumn of 2009, a jump from 68.5 since spring. The surge represents the largest rebound in confidence since the September 11, 2001 attacks, and generally reflects the consensus that a global recovery is underway.
Statistics Canada reported Tuesday that Canada’s trade balance slipped back into deficit in November, at $300-million, after recording an upwardly revised $503-million surplus in the previous month.
New Forestry Licensing and Pricing Models in BC
BC Forests Minister Pat Bell rolled out two new policy initiatives Wednesday to help the bioenergy industry get more secure access to waste fibre needed to fuel growth of their fledgling sector.
Changes to BC Forest Sector
The first is the creation of new type of timber or timber-waste right, called a receiving license. It will give bioenergy companies a right to a certain amount of low-value timber or wood waste that companies with regular timber rights would not normally bring out of the woods.
The second initiative is to move the stand-as-a-whole pricing system — which has been piloted in the BC Timbers Sales open bid program — to timber already held by companies in longer-term harvesting rights.
John Rustad, MLA for Nechako Lakes and Parliamentary Secretary for Silviculture explained to Madison’s Thursday that under the current system, “When a primary licensee harvests timber there is waste left behind on the block. This new system allows for biomass companies to remove additional volume, which accumulates against this new license.”
In other words, removal of biomass does not reduce the volume of timber harvest for the primary licensee.
Rustad went to say, “This will encourage maximize utilization of the fibre and has the added bonus of reducing scaling costs in total [lumber company and government together] by $1 or $2 per meter of log.”
Forests Minister Pat Bell told Madison’s also on Thursday that the new pricing system will consist of “an area based auction. The model is to sell timber by area rather than on a cubic meter basis.”
The Minister acknowledged that there must be agreement from the US Coalition for Fair Lumber Imports before the new program can be initiated, however Bell told Madison’s that he expects implementation to be “as early as this autumn.”
Zoltan van Heyningen, Executive Director of the Coalition said to Madison’s in an email, “The underlying cruising system being contemplated in our view runs afoul with the SLA. Minister Bell obviously seems to recognize this fact.”
January 17, 2010
Transportation and the Forest Industry
The sudden and disorganized failure of Arrow Trucking out of Tulsa, OK, just before Christmas has shone a bright light on the status of surface transportation in North America.
Several sizable American trucking companies are hovering on the brink of bankruptcy while one major operation has just emerged from restructing with a strong brand. Meanwhile, the latest news on rail transportation both in Canada and the US signals a recovery in terms of commodities moving on rail lines.
North American Transportation
As announced in the December 24, 2009 bonus issue of your Madison’s Reporter, Tulsa, OK’s Arrow Trucking has filed for bankruptcy. The company abruptly shut off thousands of gas cards on December 21 and closed up shop the next day, leaving hundreds of truckers around the country looking for a way home. About 200 employees at Arrow Trucking’s headquarters were told to pack up their belongings and go home. On December 24, 2009 the US Department of Transportation’s Federal Motor Carrier Safety Administration ordered Arrow to secure its abandoned trucks, trailers and cargo.
On January 4, 2010, at least 30 former employees filed a lawsuit that claims their employer violated the Worker Adjustment and Retraining Notification Act, which requires employers give a proper 60-day notice for a mass layoff, when such notice was not given. On the same day, a tax lien was placed on Arrow Trucking for failure to pay tax liabilities between December 2008 and September 2009, because the company owes the State of Oklahoma $345,572 in taxes and penalties.
On January 5, Tulsa County sheriff’s deputies served bench warrants to former Arrow CEO Doug Pielsticker and Arrow Chair Carol Pielsticker. The Pielstickers had failed to appear at an assets hearing for a wrongful death lawsuit against Arrow Trucking and its company-owned insurer, Astraea Risk Retention Group Inc, after the companies failed to make installment payments in a settlement reached in 2006.
On January 6, a missing persons report was filed by the family of an Arrow driver from Mabank, TX. The family reportedly has not heard from the trucker since before the abrupt Christmas closure.
The failure of Arrow Trucking, with some 1,400 flatbed trucks and 2,600 trailers operating throughout the US, created big ripples throughout the industry. Previously, socked by high fuel prices in 2008, a whopping 3,065 US trucking companies with five or more drivers went under. In 2009, the industry lost 1,255 firms through the third quarter, a pace which is a little better than in 2007. Industry expectations are for improvement in 2010.
On January 6 the US Bureau of Transportation Statistics reported that, for October 2009, trade using surface transportation between the US and Canada and Mexico was down 5.5 per cent compared to October 2008, dropping to $61.4 billion. However, the value of US surface transportation trade with Canada and Mexico rose 7.2 per cent in October 2009 from September 2009. About 88 per cent of US trade by value with its two neighbours moves on land.
North of the border, the Railway Association of Canada released its Railway Trends for 2009 in December, providing detailed figures for Canadian rail transportation to the end of 2008. In a press release on December 30, Cliff Mackay, President and CEO of the Railway Association of Canada said, “From all signs, the decline in freight rail traffic hit bottom during this summer and has begun to rebound. It may take a couple of years for the business to rebuild to the peaks of the mid-2000’s.”
The federal government allocated about $900 million to VIA Rail Canada alone for rejuvenating locomotives and cars, building new stations and adding tracks at key points in inter-city service across Canada. While freight carriers saw their traffic tumble by upwards of 25 per cent during the first half of 2009 as the recession cut into the overseas demand for export commodities as well as the movement of containerized goods in and out of Canada, signs of improvement could be seen in the number of locomotives and freight cars brought out of storage toward the end of 2009 to handle an up-tick in business, according to the RAC.
In other distribution news, CanWel Building Materials has acquired Broadleaf Logistics for $50 million in private placement financing. A treated wood (lumber, flooring, siding and industrials) distributor, CanWel saw a good match with Broadleaf’s focus on cedar, douglas fir and engineered wood. A consolidation of company offices and warehouses is expected. With warehousing likely to be in central locations, delivered prices and FOB mill prices will be adjusted.
Indications are that such distribution pipeline shakeups will be occurring both in the US and Canada in the near future. One main reason is that credit limits for smaller companies are tightening, making it more difficult for these operators to continue without access to a bigger wallet.
Indeed, on January 4, Building Materials Holding Corp, a leading provider of building materials and construction services to professional home builders and contractors in the US, announced it has completed its financial restructuring and successfully emerged from Chapter 11. The company has moved its corporate headquarters from San Francisco back to Boise, ID — the original home of BMC West — and will unify its operating brands to BMC SELECT. BMC traces its roots to 1902, when Cascade Lumber Co. was founded in Yakima, WA.
PricewaterhouseCoopers has now released its annual CEO Perspectives, containing viewpoints of CEOs in the forest, paper and packaging industry worldwide. The report, out on January 6, contains interviews with 33 forest, paper and packaging CEOs from across the globe who explore four main topics; making the right amount of the right product at the right price and providing top-quality customer service, finding smarter ways to get lean and preserve cash, reaping the benefits from sustainability and innovation, and what is next for the industry.
In this same way distributors and transporters will have to adjust to industry changes, both recent and future, as they come up. The past two years have brought several fundamental shifts to the forestry business whether those inside the industry like it or not. Those who react, who respond to the changing needs of customers, will reap the rewards as economies globally recover. Those who refuse to change, who stick to old business models, will inevitably fall by the wayside as have many companies that shut their doors over the last 18 months.
Madison’s Live Online Lumber Producer Listings
Calling all mills, remans, wholesalers, and exporters!
Madison’s is embarking on its annual Lumber Mill Listings update. We will be verifying the information contained in our extensive forest industry database over the next few months. Contact our office to ensure the details we have on your mill or wholesale operation is accurate.
Contact our office any time to update your free listing.
Japan Lumber and Timberland News
The Japan North American Lumber Conference was held on December 15, 2009, providing the Japanese lumber industry an opportunity to sum up the past year and make projections for 2010.
Demand is up in most areas, with the projection of log demand for 2010 expected to be 2,520 million cubic meters, up 3.2 per cent from 2009, and lumber demand expected to be 2,470 million cubic meters, up 7.1 per cent from 2009, according to the Japan Lumber Report.
Meanwhile, the Japan Real Estate Institute recently announced that timberland value in Japan has dropped for 18 consecutive years, according to the Japan Lumber Journal. The average value of timberland for most regions was down 4.3 per cent from 2008, while the value of land used for firewood or charcoal fell by 2.7 per cent, compared to 2008.
Japan Logs & Lumber
Due to the strong yen, demand for SPF lumber is firm while demand for Douglas Fir from the US is expected to rise in the face of a depressed US lumber market, according to the Japan Lumber Report.
An increase in demand for North American logs is expected given a rise in the use of Douglas Fir for plywood over Russian Larch. Stable supply is key for growth in this field, says the Report.
The Japanese industry is concerned, however, about declining log harvests in North America caused by falling US housing starts. The Report also states that Chinese demand for North American logs is also increasing but not by as much as for Russian and New Zealand logs, mostly due to fumigation issues.
Meanwhile, timberland values in Japan have been falling steadily. The per cubic meter value of standing cedar timber has decreased by 19.5 per cent, for cypress the value has fallen by 16.8 per cent, and for pine the value is down 10.5 per cent compared to 2008, according to the Japan Lumber Journal.
Reasons given for the decline were given as, in order of importance; the drop in lumber prices, decrease in demand for construction lumber, no timberland buyers, and uneasiness about the future of the forest industry, based on a survey generated by the Japan Real Estate Institute.
PricewaterhouseCoopers Annual Forestry CEO Survey
The 2010 edition of PwC’s annual CEO Perspectives report showed that while some North American and European CEOs believe the worst is over for the lumber industry, they anticipate a long road ahead and a slow recovery. All CEOs in the mature markets agree that it’s unlikely that demand will return to pre-financial crisis levels due to the rise of digital media and other factors.
For executives in the emerging markets such as China, however, perspectives differ widely from those in mature markets such as Canada and the US. Emerging markets face continuing strong growth for wood and paper products. Every Asian CEO interviewed was bullish on the future. Executives reported demand is already recovering somewhat and they see forest products as a growing industry in their regions.
PwC’s CEO Perspectives
Executives need to look beyond short-term survival to the long-term future of their companies and the new challenges ahead. For instance, every forest, paper and packaging company needs a strategy to capitalize on the sustainable nature of forests and the growing global demand for ‘green’ products.
The industry needs to consider new partnerships and business models.
Reduced costs and enhanced revenue streams resulting from new or alternative uses of fibre and biomass could fundamentally alter the structure of the entire industry in due course.
PwC’s survey revealed that the industry has perhaps over-invested in physical assets and underinvested in markets, stakeholders and other players along the value chain. CEOs reported that too many people still have a negative perception of the industry’s environmental impact, when in reality the overall footprint is significantly less than is popularly believed. The industry needs to invest in communications to positively influence key stakeholder groups (i.e. policymakers, customers and consumers at large) to position the forest products sector as a truly sustainable industry that derives the most value from every tree.
Sustainable forest management and forest conservation projects can help offset these negative effects.
Examples include: