Lumber News Archives: Jan 2013

Truck Logger AGM 2013 : Part I ; BC Government Announces; US Housing Starts ; Dust and Sawmill Safety; Housing Starts, Japan ; US Factory Output ; Ontario State of the Forests Report ; Madison’s Timber Preview ; Canfor to Invest in South Carolina Mill ; Two Sawmill Fires, One Stabbing ; BC Seeks Firefighters ; North American Lumber Market 2013 ; Canadian Lumber Production ; Japan Log and Lumber Import Projection ; EU Exotic Timber Imports ; John Deere to Focus on Forestry ; South Carolina Permits Large Sawmill Construction ; Wildfire Interface Zones ; Seasons Greetings ; Canadian Housing Starts ; Housing Starts, Japan ; UN State of the World’s Forests 2012 ; IP Sells

January 31, 2013

Truck Logger AGM 2013 : Part I

This year has started off with a bang. The always-engaged crowd at the annual Trucker Loggers Association AGM was downright boisterous at the event held January 16 to 18 in Victoria, BC. Not only was it sold-out, with both exhibitor and attendee space at capacity, but the temperament of all those involved was uplifting.

This is the seventh, or eighth, TLA convention that Madison’s has attended. The past few years have been marked by a dour, sometimes sullen, crowd. Even in the year that BC forest products exports to China officially surpassed those to the US, the mood was not entirely celebratory. This year, even though a lot of questions and uncertainty remain, was all about looking forward. Was about planning for a profitable future.

Officially titled, “Shifting Gears, Building Momentum“, the event’s first speaker session on Wednesday morning was dedicated to the coast and what the industry there would look like in 20 years. All presenters chose to give a historical recap before making their projections.

First up was Bob Matters, Chair of the Wood Council of the United Steelworkers.


“Since 2008, 37 coastal forest operations, which provided 4,500 direct jobs, have been lost. Since 2000 there has been a 40 per cent decrease in the amount of coastal forestry jobs, to 46,000. Log exports have risen from 2.4 million cubic metres in the 1990s to 5.5 million cubic metres in the 2000s. For those same time periods, BC’s revenue from forest products has dropped from $1.1 billion to $533 million.”

“These sharp drops are not a result of the US housing and 2008 market crash,” Matters continued. “But of fundamental changes to BC forest practices. There is a crisis in reforestation. The future of forestry involves all stakeholders taking a holistic approach together to revitalize the coast. The future is in an overall vision to develop a workable plan, in public policy designed to manage the resource, in rebuilding value-added manufacturing, and in community involvement.”

Matters also stated that until First Nations land claims are resolved there can be no certainty of fibre supply, and therefore no investment.
Next spoke Patrick Armstrong, President of Moresby Consulting.

“In 2013 to 2033, BC’s coastal forest products industry will be signified by concerns of environment and society,” said Armstrong. “Issues like climate change, the marketplace, First Nations, and ecosystem-based management will be paramount.”

This last point Armstrong defined as “considering all pieces of the forest; the commodity and the value.

“Other environmental controversies, such as those in gas and oil, will affect forestry,” concluded Armstrong.”

Following that session, Madison’s asked Armstrong for details on the ‘value’ part of this definition.

“The ‘value’ is not just in what is taken out of the forest but in what is left behind. For example: wildlife, views, water, etc. These values are well-established, they are not just ecological but are also well-being values for humans.

“By our not degrading the ecosystem, it remains resilient. If all an operator does is maximize the immediate returns, they will take out all the logs, the commodity, from a forest with no consideration for the ecosystem. But the ‘value’ adds monetary returns to the commodity in the future. So ecosystem-based management gives you the wherewithal to manage these other values.”

Chief Otis Jasper, of the Sto:lo First Nations in the Chilliwack area, said the most important thing for First Nations and forestry in the past ten years, and for the future, is relationship building.

“There is 200,000 cubic metres of actual land removed from the watershed on our territory [where the Fraser River and the Harrison meet] every year,” explained Jasper. “Which results in the Nation losing actual land mass at the high water cycle. After the difficult beginning of First Nations being engaged in the forest products industry, we now have 78,000 cubic metres of sustainable harvest annually. We have good relationships with our current stakeholders and we are organized more as a business model now.

“Looking forward, we will continue to be involved and we see a bright future ahead.”

The final speaker for that morning session was Bill Markvoort, Manager of Forestry and Timberlands for Probyn Logs and President of the TLA.

Like the other presenters, Markvoort spoke a bit about the past before going into his vision for the future. He made a very striking comment, using information he got from Russ Cameron, President of the Independent Lumber Remanufacturers’ Association of BC.

“Russ told me that out of 107 remanufacturers in existence ten years ago, there is now less than 47 all of which are operating at less than 30 per cent of what they were ten years ago,” detailed Markvoort.

“There are several steps we can take to prepare as best we can for the next 20 years. Good governance is critical. We need fair stumpage based on sound, long term economic and social planning. There must be good relationships with various stakeholders. We need to maintain working forests where the rural forest meets the urban interface.”

On this point Markvoort expanded somewhat, “On Mount Elephantstone, on east Vancouver Island, in Powell River, and in the Fraser Valley, just as four examples, there is valuable second-growth which is going to the highest bidders. We can apply this model elsewhere.”

Getting back to his steps to prepare for the future, Markvoort continued, “We need to address the silviculture backlog left in the wake of the Mountain Pine Beetle infestation. There MUST be trades and skills training. There needs to be changes to forest policy; just wishing for improvements in the value-added sector won’t make it so. As an example, the price of gas in 20 years will likely have a huge impact on forestry economics. And, we must continue with the market-based approach, especially the nurturing of new markets, and not hide behind tariff laws as an excuse to make no changes.”

That afternoon’s session, “What Business Needs from Government“, and the following morning’s topic, “Harvesting the Allowable Annual Cut: How Do We Get There?” were equally fascinating and will be covered in the next issue of your Madison’s Lumber Reporter.

BC Government Announces

There must be a provincial election afoot because the announcements out of the BC Liberals were coming fast and furious this week. Two were made in conjunction with the Truck Loggers Association AGM in Victoria, BC.

BC Premier Christy Clark announced $5 million in funding for the The Forestry Service Providers Compensation Fund, and Minister of Forests, Lands and Natural Resource Operations Steve Thomson announced some changes to the coastal timber pricing and auction system.

BC Government to Improve Coastal Forest Economy

To increase harvesting activity on the coast, government is exploring the use of new scanner
technology for scaling logs, accelerating the auction of an additional 500,000 cubic metres by BC
Timber Sales, improving the log-export system, and exploring ways to better harvest the timber
profile, announced Steve Thomson, Minister of Forests, Lands and Natural Resource Operations
Thursday morning at the Truck Logger AGM in Victoria, BC.

A change in the fee schedule for logs exported under Order in Council from the Mid Coast
timber supply area is also coming into effect immediately. The fee on low- and mid-grade logs
will be reduced to a minimum of $1.00 per cubic metre for a two-year trial period. The high cost
of logging and low value of timber in this remote area has resulted in lessened economic activity.
The lower fee should increase harvesting activity in this remote area.

Log export policy revisions include a change to the fee structure for exporting some logs.
However, the revised fee does not apply to logs exported under existing Orders in Council. The
new fee schedule comes into effect March 1, 2013.

The higher price from exported logs allows forest companies to harvest stands that would
otherwise be uneconomic and provide for increased harvesting and economic activity.

Read the full release here:

US Housing Starts

Celebrations broke out across the continent this week as the US Commerce Department released housing starts for December 2012, an astonishing 12 per cent improvement over the previous month. In December! One would have to go far back into the records indeed to find a similar increase for that particular month. As US Federal Reserve Chair Ben Bernanke said recently; 2013 is going to be a very good year for the US.

December US housing starts rose 12.1 per cent to a seasonally adjusted annual rate of954,000, the Commerce Department said Thursday. Compared with a year ago, new home construction was up 36.9 per cent. For all of 2012, 780,000 new homes were started, the most since 2008.

US New Home Building

Starts in November were revised down to a rate of 851,000, reflecting a 4.3 per cent decrease from the previous month.
Construction of single-family homes, which made up two-thirds of housing starts last month, rose 8.1 per cent in December to a rate of 616,000 units. Single-family construction was up 18.5 per cent from a year earlier.

Thursday’s Commerce Department report showed that the number of new building permits inched up by 0.3 per cent to an annualized level of 903,000 in December. That was above economists’ estimates for a rate of 905,000.

The Commerce data showed new home building rose in all four US regions last month. It was up by 24.7 per cent in the Midwest, 21.4 per cent in the Northeast, 18.7 per cent in the West and 3.8 per cent in the South.

Actual housing starts, which are calculated without seasonal adjustments, dropped slightly to 61,500 from a downwardly revised 63,300 in November.
Home builders are optimistic about the market, with a The National Association of Home Builders report Wednesday showing its housing-market index at 47 in January. Builder confidence remained at the highest level in January since April 2006. Still, that index failed to rise for the first time in nine months largely on uncertainty over taxes and spending in Washington.

Dust and Sawmill Safety

The BC Safety Authority, which oversees the safe installation and operation of equipment and administers BC’s Safety Standards Act, made nine recommendations in a report Tuesday about wood dust. Fire and electrical codes in BC sawmills should be upgraded in an effort to mitigate the risks posed by explosive levels of wood dust and to avoid the kind of explosion that killed two mill workers last year, says the report.

Sawmill Safety Rules

The Canadian Standards Association should classify wood dust as combustible and make improvements to the requirements around natural gas and propane codes, said the B.C. Safety Authority report released this week.
The report noted the US Occupational Safety and Health Administration has classified fine wood dust as having “strong explosion” characteristics.
WorksafeBC concluded that the likely ignition source was hot electric motor and gear reducer equipment running wood waste conveyors in low, confined areas of the mills.

The report’s recommendations are directed at mill owners and operators, the Office of the Fire Commissioner in BC, as well as the Canadian Standards Association.

The changes are intended to cover pellet plants and other wood processing facilities as well as sawmills. Researchers compared the explosion hazard of different kinds of dust, finding wood “flour” can be a more powerful explosive than coal dust when it is dry and exposed to an ignition source.

Housing Starts, Japan

Japan’s housing starts in November 2012 were 80,145 units, up 10.3 per cent year-on-year, which marked a double-digit increase for the third consecutive month, said the Ministry of Land, Infrastructure, Transport and Tourism according to the Japan Lumber Journal. The seasonally-adjusted annual rate was 907,000 units. The floor area also increased for the third consecutive month to 7 million square meters total, an 8.5 per cent increase.

Japan Housing Starts

By owner/occupant, housing starts of rental houses in Japan marked a large growth for the third consecutive month with the growth rate of 23.2 per cent, and those of owner-occupied houses and built- for-sale houses steadily grew and increased for the third straight month, says the Japan Lumber Journal.
As a result, total housing starts during January-November 2012 are 806,853 units, up 5.5 per cent. The annual total will most likely exceed the result of
the previous year, with a figure very close to the 900,000 unit mark.

By construction method, housing starts of prefabricated houses were 12,590 units, up 21.4 per cent, and those of 2×4 houses were 11,501 units, up 31.2 per cent, both of which marked the third consecutive month of increase.

Total prefabricated home housing starts during January-November 2012 were 120,388 units, up 4.1 per cent, while new 2×4 houses for that time frame were 97,229 units, up 9.3 per cent.
The annual total of the latter may exceed the record high of 107,715 units marked in 2008.

US Factory Output

US factory production rose in December for the second straight month, buoyed by more output of autos, electronics and business equipment.
The Federal Reserve said Wednesday that factory output increased 0.8 per cent last month compared with November. That followed a 1.3 per cent rise in November, which partly reflected a rebound from Post-Tropical Storm Sandy.

Total industrial production increased 0.3 per cent in December from November. That followed a 1 per cent rise in November. Production slowed last month mostly because utility output dropped 4.8 per cent, reflecting unseasonably warm weather.

The Institute for Supply Management’s closely watched index of manufacturing activity rose to a level that signalled growth in December. And manufacturers added 25,000 jobs last month – the best hiring spree for the sector since May.

The overall economy grew at an annual rate of 3.1 per cent in the July-September quarter. But analysts believe activity slowed considerably in the October-December quarter to a rate below 2 per cent or less, in part because companies cut back on restocking. Less restocking leads to slower factory production, which weighs on economic growth.

January 22, 2013

Ontario State of the Forests Report

The Ontario Ministry of Natural Resources reports comprehensively on the state of Ontario’s forest resources every five years. The latest release was on December 19.

The current State of Ontario’s Forests (SOF) report describes Ontario’s forests and forest management, based on a criteria and indicators framework for sustainable forestry. Criteria reflect provincial forest sustainability goals and are designed to reflect public values and desired long-term outcomes for Ontario’s forests. Indicators are specific measures used to assess progress towards the achievement of forest sustainability goals and objectives. The reporting period for the report is April 2004 to March 2009.

The feature report focuses on specific themes, such as: state of the forest sector; biodiversity; forest health; and, climate change. and provides a high-level summary of the Criteria & Indicators (C&I) framework. The C&I interactive PDF provides detailed information about the C&I framework and will be updated periodically to provide new information prior to the release of the next SOF report.
Both documents are available on the Ontario Ministry of Natural Resources website here:

Ontario Forests 2004 – 2008

Ontario’s forest sector experienced a major economic downturn from 2004 to 2008, resulting in the following:

• Annual harvesting levels dropped by 10 million cubic metres, or 43 per cent, over the five year period;

• While employment levels increased from 2001-2004, forest sector jobs were lost at an average rate of 11 per cent per year from 2001-2006;

• Estimated operating surpluses (a measure of profitability) decreased by approximately $1.1 billion, or 57 per cent, in the wood products sector and $814 million, or 29 per cent in the paper manufacturing sector over the five-year period.

Provincially funded initiatives worth over $660 million were implemented to revitalize the forest sector.

From 2004 to 2008, over 167,000 hectares were added to parks and protected areas. As of 2009, parks and protected areas covered nearly 10 per cent of Ontario’s land mass.

Over 95 million cubic metres of wood were harvested from nearly 880,000 hectares. Forestry operations and the subsequent manufacturing of forest products generate substantial economic benefits for the provincial economy. Approximately four billion tree seeds were collected from 2004 to 2008. One hundred and twenty million tree seedlings were planted annually on Crown land.

The annual average investment (including capital and repair expenditures) in Ontario’s forest industry was over $1 billion. The level of investment declined throughout the entire period, corresponding with the decline in the forest products sector.

Resource industries (e.g., forestry and mining) accounted directly for 7.1 per cent of Ontario’s jobs. Forest-based resource industries accounted for 1.2 per cent of the jobs in Ontario and provide an above average share of full-time jobs with compensation above the provincial average.

Forty-eight independent forest audits were conducted. Compliance with provincial legislation, policies, and guides was 95 per cent.

Harvest levels ranged from 23.2 million cubic metres in 2004 (73 per cent of the 32 million cubic metres available for harvest in approved forest management plans) to 13.2 million cubic metres in 2008 (42 per cent of the 31 million cubic metres available for harvest in approved forest management plans). The volume harvested by the forest industry over the past several decades (Figure 4) was well below available levels . The shortfall in harvest levels represents a substantial loss of economic, social, and potentially environmental benefits for Ontarians.

According to Statistics Canada census data, the number of forestry- related jobs in Ontario steadily declined. From 2001 to 2006, jobs were lost at an average rate of 10.8 per cent per year. During 2006 and 2007 in particular, thousands of jobs were lost in Ontario’s forest sector due to permanent and indefinite mill closures. Most resource-based industries in Ontario showed similar declines in employment levels.

Estimated operating surpluses, a measure of profitability, in the paper and wood products manufacturing sectors declined from 2004 to 2008. The wood products manufacturing sector (e.g., sawmills, veneer, plywood, and engineered wood) remained relatively stable from 1999 to 2003 but substantial declines occurred from 2004 to 2008 [graph 1]. In 2004, the estimated operating surplus in the wood products manufacturing sector was $1.9 billion. By 2008, the estimated operating surplus in the wood products manufacturing sector dropped by 57 per cent to $808 million.

Operating surpluses in the paper manufacturing sector (i.e., pulp, paper, paperboard, and converted paper products) have steadily declined since 2000 [graph 2]. In 2004, the estimated operating surplus in the paper manufacturing sector was $2.8 billion. By 2008, it had dropped 29 per cent to $2 billion.

Minor fluctuations were observed in the number of forest-associated species of conservation concern. Between 2005 and 2010, nine new species were added (deteriorating), 67 species were removed (improving), 13 species were down-listed (improving), 14 species were up-listed (deteriorating), and the conservation status of 819 species did not change. Most of the changes were attributable to improved data rather than actual changes in the abundance of species.

While forest harvesting and renewal levels declined, renewal efforts exceeded harvest levels. From 2004 to 2008, the average annual area regenerated was 202,947 hectares, which was approximately 13 per centhigher than the average annual harvest area. The reliance on natural renewal increased, resulting in a corresponding decrease in the amount of some assisted renewal activities.

From 2004 to 2008, nearly 230,000 hectares were assessed annually to determine the success of the renewal treatments. Ninety-one percent of the areas assessed were identified as having been renewed.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the latest timber harvest data in the US, as well as log prices and projections for log supply issues in the near future.

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

Canfor to Invest in South Carolina Mill

Canfor Southern Pine, a division of Canfor headquartered in Vancouver, BC, Wednesday announced that it will expand its existing lumber production facility in Horry County, SC. The US$3.6 million investment is expected to generate 56 new jobs.

Canfor plans to install a continuous kiln system to increase its lumber drying capacity at the facility by 50 per cent. The expansion is expected to be complete by mid-July of this year.

Canfor is currently taking applications to fill the new available positions. Canfor is in need of truck drivers, electricians and qualified machine operators. Interested applicants are asked to go to the Conway facility to apply.

Canadian Housing Starts

Canadian housing starts slowed in December but more gradually than expected as an increase in single-family starts in urban areas softened the sting of a slowdown in multiple-unit and rural ground-breakings, the Canada Mortgage and Housing Corp said Wednesday.

Seasonally adjusted, the annual rate of housing starts was 197,976 units in December, down 1.7 per cent from 201,376 in November. On an real basis, CMHC said there were 16,352 actual starts in December, with condo construction falling 4.7 per cent and single-unit dwellings rising by 8.6 per cent.

The seasonally adjusted annual rate of urban starts dipped 0.1 per cent to 178,870 units, with single urban starts climbing 8.6 per cent to 67,419 units and multiple starts dropping 4.7 per cent to 111,451 units.

Housing Starts, Canada

There was a broad disparity in activity across the country, with Ontario urban starts up 33.4 per cent but all other regions down. Urban starts fell 23.9 per cent in the Prairies, 11.8 percent in Quebec, 8.2 perc ent in British Columbia and 1.6 per cent in Atlantic Canada.

The seasonally adjusted annual rate of rural starts fell 14.3 percent to 19,106 units from 22,298 units in November.

Two Sawmill Fires, One Stabbing

Alpine Lumber’s sawmill in La Jara, CO, burned to the ground on Saturday at approximately 3 am. Conejos County police officer Shawn Woods happened to be driving near the mill when he saw the flames and called it in.

Sawmill Fires

When owner Mike Hostetter arrived on the scene he said the flames had already engulfed the entire building. Twelve trucks were trying to put out the fire.

However, on Wednesday morning the remains of the building was still smoldering as workers were beginning work to remove the burnt debris.

Hostetter said the mill lost at least three big pieces of equipment, multiple conveyors, chain saws, and some laser lights, just to name a few things.
“There is no suspicion of arson at all,” said Hostetter. He speculated that the fire may have started due to an electrical malfunction because of the cold weather conditions lately.

As Hostetter pointed to the smoldering remains of the building he commented that the remains will probably stay smoldering for weeks because of all the sawdust.

“We called the fire department out here again on Monday due to the smoldering,” said Hostetter.

Also on Wednesday the Clark County Sheriff’s Office received a call of a fire at Goldie’s Sawmill just south of Wayland, MO. When fire personnel arrived, the mill was completely engulfed in flames. Wayland, Clark County and Alexandria Fire assisted with the call.

The fire department requested an ambulance to the scene. At this time there was a stabbing and two people were taken to the hospital. Until further investigation of the incident to determine if it was self defense or assault, no further information is available.

BC Seeks Firefighters

The British Columbia Ministry of Forests, Lands and Natural Resource Operations’ Wildfire Management Branch is recruiting physically fit, motivated and team-orientated individuals to fill fire crew positions for the 2013 fire season.

Interested candidates can apply until January 24 online through the Wildfire Management Branch website:

Successful applicants will be assigned to crews in various locations throughout the province and typically will start in May and work until the end of August.

All crew members must meet national physical fitness requirements. New crew members receive extensive training in fire behaviour, fire management tactics, fireline equipment use, fireline organization, communications, air operations and orienteering.

January 14, 2013

North American Lumber Market 2013

Rumours of the demise of North America’s forest product industry, circulating between 2009 and 2011, were greatly exaggerated. In fact they were completely wrong. Solid wood products manufacturing is not at all a “sunset industry”.
A flurry of news reports in the mainstream press in the past couple of weeks offered conflicting opinions. Headlines ranged from “Scotiabank declares lumber its top investment pick for 2013” from the Globe and Mail on December 21, to “Lumber Prices May Tumble 25% After Leading Commodities in 2012” by Bloomberg Monday, and “Lumber, Year’s Best Performer, Enjoys Its 15 Minutes” out of CNBC Thursday. Given the range of forecasts and projections offered, how is a layperson supposed to know what to think?

More importantly, how can the industry itself best assess the true nature of the lumber market? One thing is obvious, the first few weeks of 2013 will determine how strong, or soft, prices will be for the first half of this year, at least. Looking at the prices in Madison’s print today, it is safe to assume that the first half of 2013 will be signified by strong solid wood prices indeed.

Commodity Prices

As everyone knows by now, the main drag on the lumber market has been extremely depressed US home building since September 2006. Lumber buying in that country was very low for over five years, which negatively impacted imports of wood from other countries. Especially Canada. Bearish observers pointed to stubbornly discouraging data of US home sales as proof that housing starts would remain low for several more years. What a lot of people didn’t notice, or didn’t bother to point out, is that the large number of homes still to go on the market, the so-called “shadow inventory”, which was supposed to keep the real estate market oversupplied, is based on the current rate of sales. Since very few homes were sold nationally in the US through 2011, this inventory seemed huge. As soon as there were a few sales here and there in certain markets, increasingly robust demand in other regions, and recovering home prices in general, the amount of homes for sale shrunk incredibly fast. The “shadow inventory” went from almost 12 months in 2009 to just seven months in October 2012. In 2009 there were 4.7 million US homes facing foreclosure, while in October last year that number stood at 3.4 million.

Meanwhile, the rate of home selling only continues to accelerate, meaning that inventory is going to shrink further. Americans bought new homes in November at the fastest pace in more than two and a half years, further evidence of a sustained housing recovery.

Sales of new homes rose 4.4 per cent in November from October to a seasonally adjusted annual rate of 377,000, from the revised October rate of 361,000, the Commerce Department said December 27. That’s the fastest pace since April 2010, when a federal tax credit boosted sales. New-home sales have also increased 15.3 per cent over the past year, although sales remain below the 700,000 that economists consider healthy.

Home prices are also increasing. The report showed that the median sales price of new houses sold in November was US$246,200, up 3.7 per cent from US$237,500 in October, and up 14.9 per cent from US$214,300 in the same month a year ago.

The Standard & Poor’s/Case-Shiller national home price index released December 26 increased 4.3 per cent in October compared with a year ago. That’s the largest year-over-year increase in two and a half years. Prices rose for the 12-month period in 18 of the 20 cities tracked by the index.

The National Association of Realtors said December 28 that its seasonally adjusted pending home sales index rose 1.7 per cent in November from October to 106.4. That’s the highest since April 2010, when a homebuyer tax credit caused a spike in sales. And after excluding those months when the tax credit was available, it’s the best reading since February 2007.

Sales of previously occupied homes rose to the highest level in three years in November, the National Association of Realtors said last week. the National Association of Realtors indicated that the median price for all existing housing types in the US was up 11.1 per cent year over year in October. The increase followed a 5 per cent gain in October and suggests higher sales of previously occupied homes in the coming months. There’s generally a one- to two-month lag between a signed contract and a completed sale. Home sales are on track to rise 10 per cent this year to their highest level in five years, buoyed by ultra-low mortgage rates and steady job gains. The Realtors’ group forecasts that sales may rise in 2013 to about 5.1 million. The supply of previously occupied homes for sale has finally thinned out and is at an 11-year low.

The Federal Housing Finance Agency (FHFA) seasonally-adjusted purchase-only index for single-family homes is based on Fannie Mae and Freddie Mac mortgage signings. The FHFA’s house price index recorded a 1.1 per cent increase from 2Q to 3Q of 2012, and a 4 per cent advance compared to 3Q of 2011. The FHFA’s month-to-month change in September was up 0.2 per cent.

And in data that came out Wednesday, spending on US residential construction has steadily increased over the past eight months and rose another 0.4 per cent in November. From July through September, residential construction grew at an annual rate of 13.5 per cent. The pace of home construction is nearly 22 per cent higher than a year earlier, according to government data. Builders are on track this year to start work on the most homes in four years. Housing construction is on track to contribute to economic growth this year, the first time that has happened in the five years since the housing bubble burst. Builders are increasingly confident that the housing recovery will endure. A measure of their confidence rose in November to the highest level in 6 1/2 years.

In October construction spending rose 1.4 per cent, the biggest gain in five months. A big jump in residential building pushed up the overall total.

The US Census Bureau reported that total construction spending powered up 1.4 per cent in October to US$872 billion, at a seasonally adjusted annual rate, after rising 0.5 per cent in September, and marked the seventh consecutive monthly increase. October’s healthy growth was largely due to continued strong expansion in residential construction spending. That was 17 per cent higher than a 12-year low hit in February 2011. The Census Bureau also revised up construction spending numbers for August by US$9.7 billion, which was 1.2 per cent higher than previously reported, and for September by US$8.8 billion, 1 per cent higher than previously reported. Year-to-date not seasonally adjusted construction spending was up 9.3 per cent compared to the same period a year ago.

Total residential construction spending, which includes improvements, increased for the seventh consecutive month, soaring 3 per cent to US$300.8 billion, seasonally-adjusted, after increasing 1.2 per cent in September. New residential construction spending, which excludes improvements, rocketed up an even stronger 3.9 per cent after shooting up 3.1 per cent the previous month. Year-to-date total residential construction spending was up 13.3 per cent from the same period a year ago, and new residential construction was up 17.4 per cent from 2011.

Solid wood prices have not yet experienced the usual winter seasonal softening. Order files at most sawmills are between two and four weeks (meaning manufacturers are sold out of production for the next two to four weeks. If someone were to order wood from a mill today it would not even be produced until then). Customers from China will be away from business for two full weeks for Chinese New Year, so a spate of ordering is expected in advance of that.

And, traditionally customers in the US begin ordering in earnest in February for spring home building. Given the above, it is pretty obvious that lumber producers are busy from now until February. It is basically impossible for wood commodity prices to go down between now and then.

It is safe to assume that lumber and panel prices will remain strong, in fact will likely rise, for at least the first half of this year. Those who are impressed by current price levels, those who only look as far back as a couple of years or five years, are missing an important point.

The recent record high for benchmark dimension lumber, WSPF KD 2×4 #2&Btr, was US$440 mfbm for several weeks running in spring 2004. On the panel side, benchmark OSB 7/16″ Ontario sustained C$703 msf for almost two months in late spring 2003. So while prices now may seem high compared to the recent past, there is actually quite a bit of room for improvement.

Canadian Lumber Production

Lumber production by Canadian sawmills increased 10.6 per cent from September, to 5,192.7 thousand cubic metres in October, said Statistics Canada Thursday. Compared with October 2011, lumber production increased 7.7 per cent. Sawmills shipped 5,082.2 thousand cubic metres of lumber in October, up 17.7 per cent from September.

Japan Log and Lumber Import Projection

Japan’s North American Lumber Conference, held on December 7, released projections by members for log and lumber imports from North America for 2013, according to the Japan Lumber Reports.

Demand for North American logs is expected to increase by 5 per cent over 2012, to 3,231 million cubic metres, while lumber imports are expected to increase by 2 per cent, to 2,738 million cubic metres. In total, log and lumber imports from North America to Japan are projected to be 5,969 million cubic metres in 2013, say the Conference members. This is a 3.6 per cent increase over 2012.

Members commented that solid wood demand in Japan was dull in 3Q but then picked up in 4Q 2012. Some members forecasted that housing starts would improve by 5 per cent in 2013 over 2012, an estimate that is in keeping with the Japan Housing Agency’s projection.

Members also commented that, due to the recovery of the US home building industry, prices for lumber in North America continue rising. As well, China and Korea are actively purchasing, which is causing a scarcity of logs in the Asia zone.

Continued weakening of the Yen also concerned members because that keeps driving the cost of North American logs and lumber up within Japan. As a result, there is an expectation that demand for domestic logs and lumber will increase as the costs of imports climb.

EU Exotic Timber Imports

Grave concern over the import of illegally harvested exotic timber into Europe has resulted in new rules aimed at prohibiting the import of any illegally produced wood products into the EU.

EU Exotic Timber Imports

New European Union import regulations may affect the price and availability of timber used for large outrigger mats and temporary roadways, says a Trade and European Union Timber Regulation (EU TR) release Friday.

The legal guide was developed in conjunction with the West African Office of the World Wildlife Fund (WWF) for timber exporters and importers from Ghana and Liberia.

The new rules, which take effect in March, are to help combat the unlawful felling of trees and thus help combat illegal logging and the deforestation of rainforests.

The change in regulations stems from European law aimed at combating illegal forestry. From March 3, traders will have to prove they bought their timber legally. Joinery firms will also have to provide proper certification for their wood on request.

The maximum punishment for timber merchants caught with illegally-felled wood will go up to two years in jail or a fine of €79,000.
In addition, traders risk having their businesses closed down.

For its part, Zanzibar is sparing no efforts in conserving its endangered forest and environment. Zanzibar forests have been disappearing due to local’s heavy reliance on forest products, especially wood for fuel. Forestlands are also lost in the cause of clearing of land for agricultural purposes and infrastructure development.

The objective is to expand to reach at least 60,000 hectares of forests in Zanzibar beyond the pilot phase. The target beneficiaries include 16,000 rural households.

John Deere to Focus on Forestry

John Deere’s Worldwide Construction & Forestry Division has implemented organizational changes to enhance its focus on forestry customers, says a company press release Friday.

John Deere Strategic Changes

CONTINUED The changes improve alignment and management of the company’s overall global forestry product portfolio and stewardship of the forestry product lines, says the release.

In his expanded role, newly appointed Vice President of Worldwide Forestry and Business Development in the Worldwide Construction & Forestry Division Martin Wilkinson, assumes responsibility for the division’s forestry business worldwide, while retaining his responsibilities for business development, strategic planning and communications.

“These strategic organizational changes help John Deere better align our resources to customers’ needs and will better position Deere to grow our forestry business” said Michael Mack, president, Worldwide Construction & Forestry Division. “The changes reflect a dedicated focus to our forestry customers”
Mack said best practices and economies of scale will continue to be leveraged across the overall construction and forestry division and rest of the John Deere enterprise when applicable.

South Carolina Permits Large Sawmill

The South Carolina Department of Health and Environmental Control has approved an air quality permit for a large sawmill proposed for the Rowesville area, according to the Times and Democrat.

Klausner Holding USA, a German company, is considering placing a lumber mill on approximately 248 acres between Rowesville and Orangeburg.

If Orangeburg County lands the state’s largest sawmill, it could gain up to 300 jobs and a better option for its timber owners, according to forestry and business officials, says the Times and Democrat. Some critics have questioned the proposed mill’s impact on the state’s forests and whether the resources are available.

The company’s permit application says it wants to produce dried lumber and byproducts, such as bark, wood chips, sawdust and dry shavings.

The facility, which could operate around the clock, will have a maximum annual production of 700 million board-feet per year.

The proposed mill will include log storage and processing; sawmill operations; sorter line operations; biomass-fired hot water heaters; natural gas-fired hot water heaters; drying kilns; planer mill operations; lumber load out and miscellaneous support equipment, such as emergency engines.
The plant will initially supply about 1 million to 2 million tons of lumber a year.

The permit approval comes as plans have been announced for the company to construct sawmills in North Carolina and Florida.

January 04, 2013

Wildfire Interface Zones

On November 26 the US Forest Service has awarded US$13.4 million to two Colorado companies to aid in forest fuel reduction. Confluence Energy of Kremmling and West Range Reclamation of Hotchkiss, CO, will clear mountain pine beetle-killed trees from the White River and Medicine Bow-Routt national forests. The two contracts are expected to treat at least 20,000 acres in the two national forests. US$8.66 million will be used to remove trees susceptible to insect and disease infestations, such as the lodgepole pine, subalpine fir, Douglas fir, Engelmann spruce, aspen, and ponderosa pine. Eagle Valley Clean Energy will provide fuel to its planned 11.5 megawatt woody biomass-fueled power plant in Gypsum, CO. The electricity generated from the plant will be supplied to Holy Cross Energy, which services 8,000 to 10,000 homes. US$4.75 million of the funding will be used to remove beetle-killed trees in the Medicine Bow-Routt National Forest.

Fuel Load

In British Columbia, the extreme fire danger in the wake of the pine beetle infestation is well known, so much so that many municipalities and communities have taken interface zone fuel management into their own hands. According to the BC Forest Service website, “the wildland/urban interface is the geographical point where the diverse values of the wilderness and urban development meet. In the interface, structures and vegetation are sufficiently close that a wildfire may spread to structures or a structural fire may ignite trees and vegetation.”

To find more information on community fire treatments, please click

The City of Kamloops Community Wildfire Protection website explains that, “extremely effective fire suppression over past century has allowed for forest ingrowth and dead vegetative material to accumulate increasing the fuel load in our natural forests. With each passing year as fuels continue to accumulate (a ponderosa pine typically loses 30-50 per cent of its needles each year).”

In BC, interface committees have been established in the Coast and in Kamloops and Kootenay areas to address unified command and other organizational issues, says the BC Forest Service website. Other parts of the province work on a department-by-department basis.

In a new program which connects the above two ideas, the Green Heat Initiative, Community Energy Association and UBC have combined to release an exciting new tool which will help communities and municipalities to identify and implement green heat opportunities. The idea is to both remove existing fuel loads which are dangerously close to population areas and to use the biomass removed to make green energy. The tool allows a region to calculate the cost-benefit analysis to determine savings available through green heat installations, while keeping an eye on the potential long-term ecological effects on the forests of such activity.

Dave Dubois, Project Coordinator for the Green Heat Initiative, unveiled the new tool at the recent Canadian Bioenergy Association conference, in Vancouver, BC. Please refer to the November 30, 2012 issue of your Madison’s Lumber Reporter for coverage of that conference.

“Our Fire Interface Rural Screening Tool for Heating is a model created using ecological models, forest inventories, and GIS tools to estimate the ongoing, sustainable biomass fuel supply available in a specific area,” explained Dubois in his presentation to CanBio. “The model quantifies fibre available for the first cut, going after sawlogs and pulp logs, for up to ten years. Then for years 11 to 50, the model estimates the residual fibre available with a 25 km radius.”

Madison’s spoke to Dubois this week for more details.

“A user will input several parameters of the forest type around their community,” explained Dubois to Madison’s in a phone interview Monday, “including: age; what the forest is being managed to; the level of fire prescription; area in hectares; the approximate cost, or value of the biomass; and, the length of district heating for that community. On the last point, if it is a single building that length is zero.

The model was based on data from Burns Lake, Sicamous, and Invermere, BC.

“Enderby has a small district heating system [fired by residual biomass fuel] using 800 tonnes per year,” continued Dubois. “The 540 kW system, including boiler, piping and building, was installed for $1.2 million. These figures were reproduced by our system. In Burns Lake, which is looking at putting in a district heating system, an engineer’s report came back saying it would cost over $8,000,000. Using the input data, our tool came up with a much lower number.

“However,” cautioned Dubois, “our model is not designed to be an engineering tool. It is used for proof of concept. A lay-person could use it to make an analysis to determine the viability of a project.”

When asked exactly how many municipalities in BC would do well to take advantage of this tool, Dubois said, “If you are not using natural gas, or are off the natural gas grid, you should definitely take a look.

“There are significant parts of BC which are paying 50 per cent more for their natural gas than the south of the province does. For example, on the Highway 16 corridor out to Prince Rupert. These areas may find it economic to put in district heating using readily-available biomass.”

When asked about concern of the length of time fibre will be available, Dubois explained, “At the moment BC uses millions of tonnes of biomass annually for cogeneration, and large scale projects. The Green Heat Initiative is the exact opposite, it is for small-scale projects. A community will usually start with their community centre, pool or mall, then the district heating infrastructure can move beyond that. In Europe, once a town puts in an installation, it tends to grow until the various projects actually meet up.

“The tool helps determine the secure, environmentally sustainable, long-term fibre supply. The tool uses biomass from wildfire mitigation but it can also come from the existing community forest.”

Details on the Green Heat Initiative are available here

People will be able download the tool, which works in Microsoft Excel, when the new website is unveiled in January, or contact Dubois to have it emailed earlier

Canadian Housing Starts

Canadian housing starts fell in November for both single- and multifamily homes, particularly in Ontario and British Columbia, Canada Mortgage and Housing Corp said Monday.

The seasonally adjusted annualized rate of housing starts was 196,125 units in November, down from 203,487 in October and well below the high above 250,000 hit early in the year. It was the weakest reading since November, 2011.

Canada Home Building

The seasonally adjusted annual rate of urban starts fell 4.0 per cent to 174,323 units in November. Urban single starts declined 5.4 per cent to 58,606 units, while urban multiple starts fell by 3.2 percent to 115,717 units.

Urban starts fell 14.3 per cent in Ontario, 16.5 per cent in British Columbia and 45.6 per cent in Atlantic Canada, while rising 15.4 per cent in Quebec and 16.1 per cent in the prairies.

Housing Starts, Japan

Japan’s Ministry of Land, Infrastructure, Transport and Tourism reports housing starts in October 2012 were 84,251 units, a 25.2 per cent improvement from the same month in a year earlier, and a double-digit increase for the second straight month, according to the Japan Lumber Journal. The seasonally-adjusted annual rate was 978,000 units, which exceeded the 900,000 unit mark for the first time in five months.

Home Building, Japan

Building of new owner- occupied houses, built-for-sale houses, and rental houses all marked double-digit increase, says the Journal. Among them, rental houses jumped remarkably.

Including October results, total housing starts during January-October 2012 amounted to 726,708 units, up 5 per cent over the same time period one year ago. At this rate, this year’s total housing starts are expected to exceed the result of the previous year, with about 880,000 units.

Looking at the results according to application, housing starts of owner-occupied houses rose 13 per cent to 28,894 units, those of rental houses increased by 48.2 per cent to 33,939 units, and built-for-sale houses were improved by 14.2 per cent to 21,064 units.

All of them increased for the second straight month. Of built-for-sale houses, condominiums and single-family houses both increased for the second consecutive month with 10,334 units, up 17.8 per cent and 10,656 units, up 11.8 per cent respectively.

According to building method, housing starts of prefabricated houses were 12,546 units, up 21.3 per cent and those of 2 x 4 houses were 11,157 units, up 44.4%. Total housing starts during January – October 2012 are 107,798 units, up 2.4 per cent year-on-year, with prefabricated houses, and 85,728 units, up 6.9 per cent with 2×4 houses.

By area, those in the Tokyo metropolitan area were up 25.1 per cent, the Chubu area were up 24.2 per cent, the Kinki area were up 12.2 per cent, and other areas were up 31.3 per cent, says the Journal.

UN State of the World’s Forests 2012

On November 20 the Food and Agricultural Organization of the United Nations released its State of the World’s Forests reports on the status of forests, recent major policy and institutional developments and key issues concerning the forest sector. The report makes current, reliable and policy-relevant information widely available with regard to the world’s forests.

State of the World’s

Chapter three of the UN report, “Forests, forestry and forest products for a sustainable future”, describes a world where economic output has more than doubled in the 20 years since the Rio Earth Summit; but this growth has been achieved at the expense of natural resources, including forests.

The world now needs to change its thinking about “progress” and develop new approaches for future economic success, says the report.

If wood products are produced from non-sustainable sources, the result will be deforestation or forest degradation, impeding sustainable development. In addition, not all forest products are positive in themselves. The forest practices that are collectively known as “sustainable forest management” must be used throughout the world for the global economy to become greener. At the core of sustainable forest management is the simple idea that as trees are used, they are replaced by new trees. To the extent that “good wood” is used in the manufacture of higher percentages of buildings, infrastructure and other consumer products, the economy will become greener and more sustainable.

IP Sells

International Paper announced Thursday it is selling its building products unit to Georgia-Pacific for US$750 million cash, a move designed to sharpen focus on its massive packaging business.

The sale had been expected since IP acquired the unit, which sells lumber and particle board for home construction, as part of its US$3.7 billion buyout of smaller rival Temple-Inland earlier this year.

IP is the largest North American producer of corrugated packaging, commonly used to make shipping boxes.

The sale gives IP more cash to invest in the packaging business.

Georgia-Pacific will get the unit’s 16 manufacturing facilities located primarily in southeastern and eastern United States, regions that are expected to see new home construction when the economy recovers.

IP expects the deal to close in 1Q 2013.

Separately, IP said it will change the way it reports its pension expenses by reporting operating earnings that don’t include the charges.