Lumber News Archives: Nov 2011

US Economy ; Madison’s Timber Preview ; Housing Starts, Japan ; Canada Manufacturing Sales ;New Trade with Asia ; Northern British Columbia Truckers Revolt; Canadian Housing Starts ; Timber Pest Battles Globally ; Sawmill Fires Biomass Fuel ; Madison’s Timber Preview ; Canada’s Rail Freight Service Review ; Report on Earthquake and Tsunami Damage, Japan ; Quarterly Results, Mill Curtailments ; BC Trade Mission to China ; National Softwood Lumber BoardSouthern Yellow Pine ; Madison’s Investment Rx ; Quarterly Results ; US Home Sales ; Real Estate and New Building, China ; More Green Transformation Funding Announced Pulp and Paper ; Madison’s Timber Preview ; 2006 Softwood Lumber Agreement Extension ; US Housing Starts ; Japan Forestry Projections ; More Green Transformation Funding Announced

November 30, 2011

US Economy

A wealth of data out Thursday, November 17, paints an encouraging picture for the US economy. US stock-index futures trimmed losses after initial jobless claims decreased and housing starts topped forecasts, bolstering optimism in the economy, according to Bloomberg.

Applications for US jobless benefits decreased by 5,000 in the week ended November 12, to 388,000, the lowest level since April, Labor Department figures showed Thursday. The four-week average, a less volatile measure, dropped to 396,750, the first time the average had been below 400,000 in seven months. Applications need to consistently drop below 375,000 to signal sustained job gains, according to the New York Times. They have not fallen that low since February.

Housing, Stock Market, Jobs

The number of people receiving benefits fell 57,000 to 3.6 million in the week ended November 5 in figures that are one week behind the application data. That number is the lowest since September 20, 2008.

The Labor report doesn’t say whether companies are stepping up hiring, but it indicates that they are at least slowing the pace of layoffs. That is an important development that could help chip away at the unemployment rate, which ticked down to 9 per cent in this month’s report from 9.1 per cent a month earlier, says the Wall Street Journal.

Factory output grew in October for the fourth straight month, the US Federal Reserve said Wednesday. Production of trucks, electronics and business equipment all rose.

The Federal Reserve Bank of Philadelphia’s general economic index decreased to 3.6 from 8.7 last month. Readings greater than zero indicate expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware.

The Bloomberg Consumer Comfort Index’s monthly expectations gauge climbed to minus 32, the best reading since July, from minus 45 the previous month. The weekly measure of current conditions was minus 50 for the period ended November 13, climbing for a second week after sinking to an almost three-year low.

Initially, US stocks had turned lower Thursday as losses for European equity markets intensified on worries about rising borrowing costs for France and Spain. But later Dow stock futures rose 22 points to 11,877 and Nasdaq futures rose five points to 2318.75, while S&P 500 stock futures climbed 2.2 points to 1233.2.

US housing starts decreased 0.3 per cent to a 628,000 annual rate from September’s downward adjusted 630,000 pace, said Commerce Department figures released Thursday. Building permits increased 10.9 per cent. Construction starts of single-family homes, which make up about 70 per cent of residential home construction, rose nearly 4 per cent last month. Starts for apartments, a more volatile category, fell more than 13 per cent, says Forbes. But the number of permits to build apartments jumped to a three-year high in October. In 12 months, they’ve surged 63 percent. The growth in apartment construction is, however, coming off extremely low levels. In 2010, only 146,000 apartments were built, the fewest since 1993. By comparison, in 2005, just before the housing market went bust, 258,000 apartments were built. Some signs suggest that builders could match that level over the next few years, according to Associated Press.

More apartment building has contributed to the overall economy’s growth for two straight quarters. And many economists expect apartment construction to grow for at least the next 12 months, as long as the economy avoids another recession.

Also Thursday, the National Association of Home Builders/Wells Fargo Housing Market index rose three points in November, to 20. A reading above 50 indicates an overall positive take on the real estate market, but this month’s reading of 20 is the highest level on the index since May 2010.

Other data released Thursday suggests home ownership in the US continues challenging.

US lenders started foreclosures on more properties in 3Q, the first increase in a year, as a backlog stemming from claims of faulty home seizures began to ease. New foreclosures rose to 1.08 per cent of all loans from 0.96 per cent in the prior three months, according to a report Thursday from the Mortgage Bankers Association. In addition, 8 per cent of mortgage borrowers were at least one month past due on their payments during 3Q, down from 8.4 per cent in the 2Q and 9.1 per cent one year ago, reports the San Fransisco Chronicle. The backlog remains high in part because lenders eased up on foreclosures for much of 2011 after revelations that they had mishandled legal paperwork and procedures when repossessing homes in the past. The Mortgage Bankers Association report also showed that a key gauge of refinancing activity decreased more than 12 per cent for the week ending November 11 from the previous week. The refinance index is down 24 per cent compared with the same period last year, despite lower interest rates.

However, the Center for Responsible Lending, a nonpartisan advocacy group that accurately predicted a foreclosure tidal wave in 2006, issued its own assessment Thursday, saying that 2.7 million American households had lost their homes as of February, with an even greater number to come.The advocacy group, which analyzed 27 million home loans made from 2004 through 2008, estimated that an additional 3.6 million mortgages were in foreclosure or likely to fail.

In related news, the US House of Representatives decided Thursday not to raise the loan level for Fannie Mae and Freddie Mac which have soaked up about US$169 billion in taxpayer aid, as they sought to strike a balance between supporting the market and starting to shrink the government’s housing footprint, according to Reuters. Lawmakers did, however, approve a bill to raise the maximum size of mortgages the Federal Housing Administration can insure, sending it to the Senate for final approval. The measure would push the so-called FHA conforming loan limit in the highest-priced real estate markets back up to US$729,750 through 2013, from US$625,500, a sign of concern over the still-depressed state of the housing sector. The limits, which vary from market to market, were temporarily raised for FHA and Fannie Mae and Freddie Mac during the financial crisis when banks became reluctant to lend. They automatically dropped back on October 1, when the previous increase expired.

FHA, which does not make loans, provides mortgage insurance to borrowers without enough of a down payment to qualify for prime loans. With an FHA loan, home buyers can put down as little as 3.5 per cent. The agency, which is mainly funded through insurance premiums it brings in, backed about one-third of loans used to purchase homes last year.

Elsewhere, California’s investigators will be looking at Freddie and Fannie’s involvement in more than 12,000 foreclosed properties in that state where they served as landlords, according to the Los Angeles Times. They also want to find out what role the two agencies played in selling or marketing mortgage-backed securities. California’s Attorney General, Kamala Harris, has subpoenaed mortgage giants Fannie Mae and Freddie Mac while looking into their lending practices in the state.

Harris also recently announced that her office would not agree to a planned 50-state settlement over foreclosure abuses that federal officials and other state attorneys general are negotiating with major US banks. She called the deal “inadequate for California homeowners,” arguing that it gave bank officials too much immunity from civil litigation.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines containberboard and box inventories and shipments in the US and Europe in advance of an expected improved holiday shopping season.
The market fundamentals of Boise Inc, a large US paper and packaging producer with currently under-rated share prices is also discussed.

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Housing Starts, Japan

Revised July and August Japan housing starts surpassed 900,000 units annualized due to delayed demand after the Great Eastern Earthquake and Tsunami, according to the Japan Lumber Reports.

Seasonally adjusted September starts were 745,000, a 20.2 per cent drop over August. Actual starts in September were 64,206 units, a 10.8 per cent decline over the same month in 2010, says the Reports.

The percentage of wood-based units remained stable at 57.1 per cent, a 0.1 per cent drop from August.

Floor area for September was 5.91 million square metres, down 10.3 per cent from a year earlier, according to the Japan Lumber Journal.

Japan Housing Starts

By utilization, housing starts of owner-occupied houses, rental houses and built-for-sale houses were lower than the same month in the previous year, says the Journal. Especially in built-for-sale houses which had led the growing momentum, the number dropped for the first time in 19 months. In built-for-sale houses, those of condominiums largely dropped to 9,095 units, down 13.9 per cent. Those of single-family houses also decreased for the first time in four months with 9,396 units, down 0.9 per cent.

Regionally, housing starts of all areas decreased as follows: by 15.4 per cent in the Tokyo metropolitan area, by 15.3 per cent in the Chubu area, by 7.1 per cent in the Kinki area, and by 5.5 per cent in other areas. The reduction in metropolitan Tokyo and the Chubu area surprised analysts, according to the Journal.

Japan’s Research Institute of Construction and Economy released housing starts projections for 2011, says the Japan Lumber Reports.

Units built for sale are expected to maintain a high pace due to demand for condominiums. 126,200 condominiums, seasonally adjusted, will be built in Japan in December and January, a 28 per cent increase over one year earlier.

In total, housing starts for fiscal year 2011, ending in March 2012, should exceed 900,000 units, the highest in four years, says the Reports.

For fiscal year 2012, the Research Institute is projecting 903,300 new units, a 3.6 per cent increase over the projections for 2011.

Canada Manufacturing Sales

Canadian manufacturing sales were up more than expected in September, marking a third straight monthly gain for this part of the economy, data showed Tuesday.
Statistics Canada said sales from factories were up 2.6 per cent, on a seasonally adjusted basis, to $49.2 billion. Economists polled by Bloomberg had expected a rise of 1.3 per cent, following August’s growth of 1.4 per cent.
Starting off this three-month streak was a 3.3 per cent jump in factory sales in July. That followed three straight declines, all of which were less than 1 per cent.

Manufacturing Sales, Canada

Higher sales were reported in 10 of 21 industries, representing 60.5 per cent of total manufacturing, said Statistic Canada. Sales in the area of petroleum and coal products were up 13.7 per cent, the largest percentage gain in this sector since March 1999.

In the transportation equipment industry, sales rose 7.1 per cent to $8 billion. The increase reflected gains in the aerospace product and parts, and motor vehicle industries. Sales in the motor vehicle industry advanced 6.2 per cent to $3.8 billion in September as several plants returned to full production.

Inventory levels edged up 0.4 per cent to $63.9 billion in September. Inventories have been trending upwards since the spring of 2010 and are at their highest level since March 2009. Gains were reported in 12 of 21 industries.

The main contributors to the rise in inventories in September were a 3.1 per cent increase in the machinery industry and a 4.7 per cent advance in the aerospace product and parts industry. The gains were partly offset by declines in the primary metal, paper, electrical equipment, and petroleum and coal product industries.

Broken down provincially, Stats Can found that manufacturers in Alberta reported a 5.9 per cent rise in sales to $6.3 billion, the largest percentage increase since May 2008. Gains in September were focused in petroleum and coal products as well as in machinery industries.

Sales in Quebec increased 2.3 per cent to $11.9 billion in September as advances were reported in 12 of 21 industries.

Approximately three-quarters of the gain came from the aerospace product and parts industry, which reported a 25 per cent increase in production to $1 billion.

Sales rose for the third consecutive month in New Brunswick, up 13.3 per cent to $1.9 billion, reflecting substantial gains in the non-durable goods industries.

Manufacturers in Ontario reported a 1 per cent increase in sales to $22.1 billion in September. This was the third monthly rise after a 1.1 per cent decline in June. The largest gains occurred in the motor vehicle and petroleum and coal products industries. These gains were partly offset by declines in the miscellaneous and food industries.

In other Canadian economic news, The composite leading index rose 0.2 per cent in October, after a gain of 0.1 per cent in September. In October, 5 of the 10 components increased, the same as the month before, while 4 declined, 1 fewer than in September. Household spending remained the strongest sector of the economy, while manufacturing remained the weakest.

The housing index advanced 1.6 per cent, as the continued increase in housing starts since the spring was reinforced by a rebound in existing home sales in the last two months. Durable goods sales were mixed, with a dip in furniture and appliance sales offset by an increase in demand for other durable goods. Almost all of the growth in services employment was in the personal sector, as jobs in the business sector continued to post modest gains.

November 21, 2011

New Trade with Asia

Representatives from the governments of Canada and British Columbia, together with groups from a wide range of industries, have descended upon China, Japan, and later this week India, in a blitz of trade missions sure to forge stronger business relations between the respective countries.

The Honourable Joe Oliver, Canada’s Minister of Natural Resources, BC Premier Christy Clark, Pat Bell, BC Minister of Tourism, Jobs and Innovation, and Steve Thomson, BC Minister of Forests, Lands and Natural Resource Operations departed for China November 4. Former BC Forests Minister and current Minister of Health, Mike de Jong, joins Clark on the India leg of the tour, which starts Thursday. Two hundred and fifty representatives from more than 120 companies and organizations representing sectors such as mining, energy, forestry, seafood, transportation and education are participating in the China part of the tour, with about half that number attending the Japan tour with Minister Thomson.

Federal Minister Oliver continued to highlight the phenomenal growth in exports of wood products when he met with Vice Minister Qiu Baoxing, Ministry of Housing and Urban Rural Development, as well as with Clark and Bell, to discuss trilateral cooperation on wood-frame housing in China.

A Canadian Mission

In a conference call with media Monday, Bell explained that despite a slowing in China’s demand for BC wood products in recent months, there are signs demand for logs and lumber will continue to grow.

“We’re not expecting to see another doubling of lumber sales heading into 2012. I think that would be unrealistic based on the volume we are already moving over here, but we are still seeing good signs,” said Bell.

After an evening meeting with BC’s forest companies, Bell came away with the understanding the provincial forest industry is still bullish on China. “They see this as a growth market,” Bell said.

Building on efforts begun in previous trade missions, Bell will also meet with government officials responsible for delivering 85 million housing units over the next five years in hopes of securing agreements for a large portion of that wood to come from BC.

Also on Monday, Oliver announced a demonstration project consisting of two wood-frame apartment buildings totalling 6,000 square metres located in the Tianjin Economic Development Area, one of China’s most advanced and largest development zones. The Government of Canada’s $660,000 contribution to this project was funded under the Large-Scale Wood Demonstration Initiative as part of Canada’s Economic Action Plan. Construction of the project is expected to be complete by mid-December of this year.

Wednesday Oliver spoke at the Jinqiao Wood Townhouse Demonstration Project, which consists of 133 green three-storey townhouses constructed in Shanghai as part of the larger Jinqiao Townhouse Development Project. This demonstration project is one of several in China funded by the Government of Canada to showcase the low-carbon, environmentally friendly and energy-efficient properties of wood-frame construction, and to assist China in meeting its national goals of reducing carbon emissions in new housing projects.

Mid-sized and smaller cities in the interior of China are growing. Sichuan province in the landlocked southwest is home to 80 million people. Its first half, Shichuan’s GDP beat the national average, growing 14 per cent compared to national GDP of 9.6 per cent, according to Forbes Magazine. Car sales are up, and more roads are being built.

In a conference call Thursday, Thomson said “there is a tremendous process of urbanization and construction in China providing significant opportunities for the use of wood.”

Thomson also mentioned a new memorandum of understanding just signed between BC representatives and Shanghai Shi Real Estate for 98 new single-family homes in Shanghai. Thomson explained that Shanghai Shi is the sixth largest developer in the area and that this will be the company’s first project working with BC.

“Traditionally that company builds with steel and concrete,” said Thomson.

Regarding projects already started and memoranda of understanding already signed, Thomson said, “they are getting a lot of attention from around China. Architects and planners are coming from all over the country to be educated in the process of building with wood.”

Thomson said that Forestry Innovation Investment and Canada Wood Group are on the ground in China to “provide technical assistance. China is interested in reducing its carbon footprint, particularly in commercial projects [and building with wood is a great way to do that].”

The China leg of this trade mission was over Thursday, as Clark and Bell head to India. It being early morning of Thomson’s first day in Japan, he provided a preview of that day’s announcements.

“The government of BC is providing $2 million in reconstruction funding for areas damaged by the Great Eastern Earthquake and Tsumani earlier this year. This is in addition to the $1 million already sent by BC to the Red Cross in the spring immediately following the disaster. In Tohoku, BC will assist in reconstruction of a community facility like an elder care centre or a school, with particulars to be decided by the local government. The forest industry of BC will provide $500,000 for this project, which is in addition to the $500,000 already sent by industry to the affected area. The project will be built using BC lumber exclusively for its wood needs.

Thomson also voiced optimism for BC’s forest industry, saying that the feedback he was getting from their meetings was of “positive discussions” with Japan’s leading buyers of solid wood products.

“The companies are reporting continued growth” of Japan’s demand for BC lumber.

“Eighteen per cent of BC forest products go into Japan, so this is a significant legacy program, and will have a lasting benefit to our province,” concluded Thomson.

In related news, UBC’s highly-regarded Sauder School of Business will be opening a new office located alongside the province of BC’s Trade Office in Bangalore, India. This initiative will be announced in Bangalore at a November 15 event hosted by BC Premier Christy Clark. As well, UBC will be opening an office in New Delhi in partnership with the University of Toronto.

Delegates from Langley, BC-based Christian school, Trinity Western University, are participating in the BC trade mission’s visits to Shanghai and Beijing, where they will sign two agreements – one with the Tianjin Education Association for International Education and the other with Hebei University. The agreement with Hebei University is meant to open up cultural, faculty, and student exchange opportunities for both institutions. It also sets the stage for the development of joint programs in the future.

Northern British Columbia Truckers Revolt

As of Monday, approximately 65 logging trucks and their drivers were sitting idle at Canfor’s Fort St. John’s, BC, and Peace Valley OSB, BC, plants, while negotiations were ongoing, according to

Kurt Halladay, a truck owner/operator, said the drivers make $140 an hour on average, which could be up to $80 less than the oil field trucks make. Oil field drivers are still delivering to and from the Fort St. John plants.

Halladay explained that negotiations are happening between the contractors and the loggers, and offers are being brought to the drivers for approval, although he is not involved in the negotiations. Two weeks ago, Halladay says Canfor even tried to give them a pay cut, retroactive to October 24, of up to $9/hour. He hopes an agreement between the two sides can be made soon, says Energeticcity.

Manwhile, Tolko responded quickly to logging truck drivers after some of them took job action Monday morning, according to CKNW 1150. Up to 60 contract and independent drivers refused to deliver logs to a number of company operations, including White Valley, Lavington and Armstrong.

Tolko regional manager Mark Tamas says meetings will be held with contracted drivers on a number of safety concerns. He says one issue deals with weight restrictions on the trucks.

Interior Logging Association spokesperson Wayne Lintott said another matter involves the heavy traffic on, and the condition of, the Kettle Valley logging road, east of Lumby. Lintott maintained that drivers also want rate parity with logging truck drivers in the north, says CNKW. Lintott said all the drivers will be back on the job Tuesday.

Canadian Housing Starts

The Canada Mortgage and Housing Corporation said Tuesday there were 207,600 housing starts in October, down 0.6 per cent from a revised 208,800 units in September.
Urban single-house starts were down nine per cent, while multiple-unit urban starts were up by 1.7 per cent.

Housing Starts, Canada

The drop in housing starts was partly offset by a 2,700-unit gain in rural units and 2,100-unit gain in urban multiple units.

Quebec faced the biggest drop, with annualized urban starts falling by more than 15,000 units. The Atlantic region fell 5,700. The Prairie region rose by more than 9,000 units, Ontario was up more than 7,000 and BC added 400.

Actual starts nationwide rose to 18,360 in October from 15,759 in October 2010.

CMHC expects new housing starts to come in around the 191,000-unit mark this year and level off next year to about 186,750 units.

The average home price in Canada for 2011 is expected to be $363,900 in 2011, and reach $368,200 in 2012.

Timber Pest Battles Globally

A guide published Thursday by the United Nations aims to help countries prevent forest-damaging pests from spreading to new areas. The guide, put together by the Food and Agriculture Organization, was presented by the agency in Beijing, during the Second Asia-Pacific Forestry Week.

Pine Beetles

At least 35 million hectares of forest are damaged by outbreaks of insect pests each year.

According to a news release issued by the UN’s FAO, one of the factors that have exacerbated the spread of pests has been the increase in global trade. Between 1992 and 2008, the volume of wood products traded internationally surged by 125 per cent.

The Guide to Implementation of Phytosanitary Standards in Forestry provides various ways to cope with these threats.

The guide, which was written by an international group of scientists and plant health experts, is intended for policy-makers, managers and forest workers. In addition, FAO has stated its focus will now shift to strengthening individual countries’ capacities to implement the guide.

The timber industry can only do so much to fight the spread of the mountain pine beetle in Colorado and Montana, says Northern Hills District Ranger Rhonda O’Byrne.

Officials in the timber industry said they’re to the point where they need to be extremely selective of where they treat the forest for beetles, simply due to the sheer size and growth of the infestation.

The US Forest Service estimated that in 2009, the beetles infested almost 22,000 new acres (8,900 hectares) of forest. That number jumped to 44,000 (17,800 hectares) in 2010, and early estimates for 2011 place the new infestation even higher, in the range of 50,000-60,000 (20,200 to 24,200 hectares) new acres.

While the acreage grows, the timber industry’s capabilities remain about the same. Tom Shaffer, general manager with the Neiman Timber Company, based in Wyoming, said to the Black Hills Poineer that the industry logged on about 28,000 acres (11,300 hectares) last year. Dan Buehler, company resource manager, added that they probably could have managed about 40,000 acres (16,200 hectares).

North of the border, UNBC ecosystem science and management professor Art Fredeen is working on finding the answers to questions like: How should stands of trees killed by pine beetles be cut down, where should logging take place, and when is the best time to harvest that wood?

UNBC has been given a $100,000 grant to fund a two-year research project that will be used to help shape provincial forest management policy to deal with stands of dead pine.

“With climate change in mind, the carbon stored in wood longterm is a good thing for the atmosphere, but if we burn it for bioenergy it ends up in the atmosphere right away, causing climate change,” Fredeen said.

“There is a desire to maximize the amount of carbon storage, either in forest or wood products. Bioenergy or to a lesser extent, pulp and paper are not good options if you want to store carbon.”

Originally, scientists believed the shelf life of beetle-killed wood for lumber would be only few years but Fredeen has talked to mill workers who are still finding good quality lumber in affected pine tree logs. He said the shelf life might be one or two decades, depending on how wet the climate of the forest is.

The BC pine beetle infestation covers an area of 17.5 million hectares, similar in size to New Brunswick.

Sawmill Fires

Fire crews were called to Babcock Lumber, in Donegal, close to Pittsburg, PA, early Saturday morning.

Twenty-two firefighters fought a blaze Wednesday at ST Wood Products’ lumber storage facility in Fleetwood, a part of Surrey, BC.

Sawmills, Financial Results

Officials said the blaze at Babcock Lumber near Pittsburgh, PA, started at about 9:30 am when more than 20 propane tanks exploded. The entire building was lost, and another property close by was damaged, including dry lumber, sticks to sort lumber, and a Chevy truck used by the mechanics.

The lumberyard is not open for business on Saturdays, so no employees were on the scene except for one security guard, police said.

Elsewhere, when crews arrived heavy smoke and flames were shooting from the structure at ST Wood Products in Surrey, BC, Wednesday.

There is no word yet on the cause of the blaze, and there were no injuries reported. Seven trucks were dispatched to the two-alarm blaze.

In financial news, Cascades Inc has reported a loss of $19 million in 3Q 2011.

In the same quarter last year, Cascades reported a profit of $24 million.

Ainsworth Lumber has recorded a net loss from continuing operations of $58.9 million in 3Q 2011 compared to net income of $10.5 million for the same time last year.

This decrease is primarily due to a $60.5 million increase in the unrealized foreign exchange loss on long-term debt and a $9.5 million decrease in gross profit, partially offset by a $5.7 million increase in income tax recovery.

November 16, 2011

Biomass Fuel

There was a flurry of announcements this week on progress in the woody biomass fuel sector, both in North America and in Europe. This exciting, fast-growing industry, focussed on generating clean energy from residual cellulostic material, has passed the experimental stage. A significant number of new power generation facilities in existing plants, and brand-new energy production operations, have gone operational recently.

Meanwhile, a new report released Thursday by Greenpeace declaring that biomass fuel “threatens forests” has received significant media promotion. As an aside, the Greenpeace report is annoying in its language because it repeatedly refers to biomass fuel as “burning trees”. It is not accurate to say that a pellet plant in Ontario, pictured on page nine of the report, “uses full trees for combustion”. Wood is not combusted to make pellets. However credible, or not, the report may be, the environmental agency is not helping itself by using misleading and inaccurate language. Madison’s likes to take all points of view into account, but such a glaring error, or bias, makes the conclusions drawn in the report seem all that less reliable.

New Projects Announced

Of the latest biomass fuel operation announcements, none simply combust woody biomass to make fuel. Southern Company, based in Sacul, TX, on Tuesday received the first load of feedstock at its Nacogdoches Generating Facility in eastern Texas. This plant uses a bubbling fluidized bed boiler which, together with other technology, to keep nitrogen oxide production almost 31 per cent lower than conventional stroker boilers, and carbon monoxide by-product levels 64 per cent lower. This is a far cry from figures presented on page 31 of the Greenpeace report analysing several biofuel operations.

In another announcement Tuesday, Scottish & Southern Energy received UK government consent to develop a £250 million biomass and waste project within its Ferrybridge coal-powered station in West Yorkshire, in the north of England. The combined heat and power plant will generate heat and electricity from a range of sustainable fuels; including biomass, waste-derived fuels and waste wood. The only thing remotely resembling a smoke stack at this facility will be cooling towers, used to condense the steam. In using residual cellulostic material that would otherwise end in a landfill, this plant will reduce methane emissions locally by 21 times. There will be no smoke emitted at this operation.

This is actually an important point that the Greenpeace report overlooks entirely. While making grand claims that a significant proportion of biomass must be left behind in the forest to provide organic nutrient for regrowth, the calculations provided do not discuss how much carbon and other emissions are released by biomaterial degrading naturally. However, several pages are devoted to demonstrating how much carbon monoxide in released by “burning” trees. This is a gaping hole in logic that can not easily be dismissed.

Which brings to mind another point: in roundly accusing biomass fuel of being unsustainable and harmful to the environment, the Greenpeace report offers no viable solutions. It is easy to say, “Tell your government to stop harvesting biomass residue to make cellulostic fuel”, but what other sources of energy are there? If we are not to use coal, oil, nuclear, or any of the other traditional sources, what is left? In Canada there is easy access to hydro power, but not so in many other parts of the world. It is doing a great disservice, frankly, to vilify an entire industry sector based on old data, out of date production techniques, and carefully selected sources of information. The fact is that modern biomass fuel production involves closed systems and new technology that do not produce smoke nor emit carbon into the atmosphere.

In addition, it is important to note that trees are only one source of feedstock for biomass power, but is the only biomaterial mentioned in the Greenpeace report. Also important is switchgrass, corn stover, and fast-growing, high-rotation crops like eucalyptus and bamboo.

Tennessee’s PHG Energy announced Wednesday that it successfully demonstrating its biomass gasifiers at a Gleason, TN, and now has state approval to sell power back to the electricity grid. Using wood residue as feedstock in the clean thermo-chemical gasification process to produce a fuel much like natural gas, the plant then processes and purifies that gas so that it could be used to run in a 1-megawatt Caterpillar generator. Using money from private investors and partnering with a local brick factory that was looking for novel ways to use its idle brick-forging kilns during the housing construction slowdown, PHG has started with six small gasifiers to displace the use of natural gas in the brick kilns.

In yet another announcement Wednesday, Recast Energy, out of Kentucky, will build a biomass energy plant as steam, power and other utility supplier in partnership with latex manufacturer Lubrizol Corp and specialty elastomer maker Zeon Chemicals. Both facilities need steam, de-ionized water, waste water treatment and compressed air to operate. Recast Energy is in the process of retrofitting a coal-fired boiler to consume clean biomass. The boiler is expected to be operational in the second quarter of 2012, and is expected to entail a US$12 million investment which will create 14 new jobs. Additional off-site jobs in the new biomass fuel supply chain are expected to add another 12 to 20 full-time people in the area.

There are a number of research agencies and analysts examining the question of sustainable feedstock availability for large biomass fuel plants. Several presented new data at the Southeast Biomass Conference & Trade Show, held November 1 to 3 in Atlanta, GA.
Bob Randle, vice president of business development for Genera Energy, discussed the overall advantage of all energy crops, emphasizing switchgrass but saying the company’s focus can apply to all energy crops. “We’re feedstock agnostic,” he said at the conference.

Genera has 5,100 acres of switchgrass in nine counties in eastern Tennessee. The company is also working to build a biomass innovation park outside Knoxville, TN, and owns a cellulosic biofuel biorefienery that is operated by DuPont.

Will McDow, manager of the Environmental Defense Fund’s Southeast Center for Conservation Incentives also spoke at the conference. He presented a statewide feedstock availability model for North Carolina that takes into account both electricity and liquid biofuels from wood, according to Biomass Magazine. Under four different scenarios, McDow illustrated to attendees how much electricity and biofuels can be produced with the resources around the utility, without negatively impacting the wood basket. A 5 per cent electricity standard with production of 100 million gallons of biofuel is sustainable, he explained. Moving up toward 10 megawatt standards brings a more adverse impact on resources, as does the move toward 300 million gallons of biofuels, especially when both are increased.

At the same conference, Daniel Stuber of Forest2Market showed an analysis done for an electric utility, said Biomass Magazine. The analysis accounted for renewable capacity, wood fuel required per megawatt, additional demand value, and high sustained price, each different values in the different scenarios. The tipping point, which analyzes maximum consumption a wood basin can sustain without adverse impacts, was between 525,000 and 750,000 tons, depending on the scenario.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the latest freight statistics out of the US and Canada, infrastructure and railcar investments by railways, and railcar manufacturers’ latest news.

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Canada’s Rail Freight Service Review

In a move sure to bring relief to Canadian operators in remote areas who are at the mercy of Montreal, QC’s, Canadian National Railway’s monopoly on freight service, federal Transport Minister Denis Lebel Monday announced former Alberta Conservative cabinet minister Jim Dinning’s appointment to the Rail Freight Service Review, which started in 2008 to address issues with rail freight service. The goal of the six-month process is to bring together shippers, railways and other key players to develop a template for service agreements and a streamlined commercial dispute resolution process. To support the commercial measures, Canada’s government also intends to table legislation to give shippers the right to service agreements with the railways and provide a process to establish such agreements when commercial negotiations fail.

Canadian forestry companies long frustrated by the fickle and unreliable service provided by the CN welcome such progresses, no matter how long in coming, with widely open arms.

Report on Earthquake and Tsunami Damage, Japan

Japan’s Building Research Institute has released a report on the damage caused by the Great East Japan Earthquake after sending 25 staff to the affected region eight times, according to the Japan Lumber Journal.
The damage to wooden buildings caused by the tsunami is closely examined in the report, available here


Quarterly Results, Mill Curtailments

Canfor, AbitibiBowater (soon to be Resolute Forest Products), Interfor, Acadia Timber, and Norbord all announced quarterly results this week. Bowater Mersey, Swanson Group, Cheslatta Forest Products, Georgia Pacific, JD Irving, Weyerhaeuser, and the recently reopened Kitwanga Sawmill have announced downtime, while Minas Basin Pulp and Paper is cutting staff.

Canfor posted a net loss of $9.6 million in 3Q 2011, compared to net income of $26.2 million for 2Q and net income of $37.2 million for 3Q 2010.

AbiitibiBowater reported a net loss of $44 million in 3Q 2011 on sales of $1.2 billion. This compares with a net loss of $829 million on sales of $1.2 billion in 3Q 2010.

Curtailments, Financial Results

AbitibiBowater CEO Richard Garneau said Tuesday he is “prepared to forgo $1.7 million in personal compensation this year” because his top priority is the long-term success of the company.

Interfor reported a net income of $6,000 in 3Q 2011. Sales revenue was $200.2 million, up $12.0 million or 6.4 per cent versus 2Q, resulting from higher log and lumber sales volumes and prices.

Acadian Timber reported a loss of $341,000 in 3Q 2011. Acadian generated net sales of $17.5 million on sales volume of 341 thousand cubic metres, which represents a $0.3 million, or 2 per cent, decrease in net sales compared to the same period in 2010.
Norbord said Friday that its losses were US$1 million in the three months ended October 1. These results compare to a deeper loss of US$4 million in the same period for 2010. Sales rose to US$242-million from US$229-million.

Downtime has been scheduled for Bowater Mersey Paper Company Ltd for November 14 – 21, and tentatively for December 19 – January 2.

Swanson Group has announced plans to take downtime at all of its manufacturing facilities during November, and the company warned that there would likely be more to follow in the coming months. The Glendale and Roseburg, OR., sawmills will be down the weeks of November 14 and 21. The company’s plywood mills in Glendale and Springfield, OR, will be down the week of November 21.

Cheslatta Forest Products in Burns Lake, BC, has officially shut down, following extended downtime.

Georgia-Pacific closed its stud mill in Monticello, GA, on October 31, affecting about 50 employees.

JD Irving has announced plans to temporarily close two sawmills in New Brunswick. The company’s Kedgwick mill will close between December 2 and the spring of 2012. The Doaktown mill will close between December 23 and February 13, 2012.

Weyerhaeuser’s Santiam sawmill in Lebanon, OR, will be down the week of November 7.

The Kitwanga sawmill in northwestern British Columbia, just opened in June, is already taking downtime.

Minas Basin Pulp and Paper in Hantsport, NS, announced Friday it is reducing its workforce by 8 per cent through layoffs and some by attrition. The mill employs about 180 people.

BC Trade Mission to China

British Columbia Premier Christy Clark, along with Minister of Jobs, Tourism and Innovation Pat Bell, and Minister of Forests, Lands and Natural Resource Operations Steve Thomson, will depart Vancouver November 4 for China. Areas of focus in China are transportation, international education, mining, forestry, liquefied natural gas, seafood promotion, and technology. The Premier will meet with government officials and business leaders in Beijing, Shanghai, and Guangzhou.

Both ministers Bell and Thomson will embark on separate programs. Minister Thomson will also visit Japan, while Minister Bell will travel to Hong Kong before returning to BC.

Two hundred and fifty representatives from more than 120 companies and organizations representing sectors such as mining, energy, forestry, seafood, transportation and education will participate.

The Premier will leave China for India on November 10, along with Health Minister Mike de Jong. In India they will meet with government and business leaders in Delhi, Mumbai, Chandigarh, Amritsar and Bangalore. While in India, the focus will be on mining investment, life sciences, technology, green energy, international education, and forestry.

National Softwood Lumber Board

US Department of Agriculture Secretary Tom Vilsack Tuesday appointed 19 representatives to serve on the first national Softwood Lumber Board. Members will serve two, three or four-year terms of office.

USDA’s Agricultural Marketing Service will provide oversight of the Softwood Lumber Board in accordance with the Commodity Promotion, Research and Information Act of 1996 and the Softwood Lumber Research, Promotion, Consumer Education and Industry Information Order.

Members appointed to represent U.S. manufacturers are: Alden Robbins for the Northeast and Lake states region; Jack Jordan, Henry Scott, Michael Case, Robert Taylor, Fritz Mason and Aubra Anthony, Jr. for the South region; and Steven Zika, Marc Brinkmeyer, George Emmerson, Andrew Miller and Rick Re for the West region.

Members appointed to represent Canadian importers are: James Lopez and Charles Tardif for the East region; and Duncan Davies, Al Thorlakson, Hank Ketcham and H. David Gray for the West region.

Francisco Figueroa will represent all other importing countries.

The first Softwood Lumber Board meeting is scheduled for November 29 and 30 in Chicago, IL.

November 09, 2011

Southern Yellow Pine

In 2010, two US lumber grading agencies, the Southern Pine Inspection Bureau and Timber Products Inspection, agreed to work collaboratively to perform stiffness and bending, and tension strength tests on #2&Btr southern yellow pine KD 2×4’s. These design values are the properties that builders can count on southern pine delivering in construction–including the wood’s load values, or its ability to resist bending, tension, and compression–as well as the product’s general stiffness.

Design Values

Such values for dimension lumber published by the SPIB in 1991 called for a reassessment of the standard if there is “cause to believe there has been a significant change in the raw material resource or product mix,” according to a statement released by the agency on October 6, 2011. It seems that overall trends illuminating a shift in the resource mix have occurred over the past seventeen years, prompting the SPIB Board of Governors to direct additional testing last year.

The test data indicated a “significant reduction in stiffness and bending and tension strength compared to published design values”, prompting the SPIB to propose adjusting the design values based on the test data collected. Newly proposed standards in four out of seven values will be lowered for all grades and sizes by approximately 25 to 30 per cent. In addition, the Dense designation for all grades of dimension products will no longer provide an increased design value over non-Dense grades, and the “mixed southern pine” classification will carry the same design value as the major species, says the SPIB release.

Test results did not indicate enough of a difference between Dense, unclassified and NonDense lumber to continue publishing three different design values for each lumber grade. Dense lumber remains an option for southern pine users requiring Dense material, such as proprietary grades for laminated beams. For a full explanation of SPIB grading, please visit

Since 1924, the light frame construction industry in the US has followed a standard design practice to safely construct buildings. This practice consists of builders, specifiers, and building designers using structural lumber in appropriate applications to resist building code defined loads. Such designers make their lumber end use decisions based on the design values assigned to the grade-marked lumber as applied by the lumber producers. The light frame construction industry is built upon the premise that load resistant framing design can be undertaken with confidence in the structural reliability provided by those assigning design value properties to each unit of lumber produced, explains SBC Magazine this week.

When Southern Pine lumber producers provide a grade-mark on lumber, the grade-mark that is utilized establishes the set of design values that exist and the capacity of that lumber to resist loads. Neither users nor designers of Southern Pine can be expected to anticipate or define for themselves either a higher or lower design value for the lumber selected and build or design with a value other than what has been published by SPIB.

The Southern Forest Products Association has written a summary of the proposal, plus a news release with more background information.

The SPIB submitted the allowable design standards to the American Lumber Standard Committee, which is responsible for overseeing the setting and publication of performance standards for lumber, and the Forest Products Laboratory for review, giving the ruling date as October 20, 2011. However, on that date the ALSC announced it will need another two months to review the proposal before authenticating the findings.

“The board encourages all affected parties to submit their comments in writing or in person,” ALSC’s notice said, adding, “Parties should be mindful that the proposed changes are significant and should take steps they deem appropriate in the interim.”

If ALSC accepts SPIB’s proposals, the new design values could force builders, remodellers, and architects to reduce the maximum spans for joists and rafters they had planned to build with southern pine, buy higher, more expensive, grades of Southern pine, buy other species of wood, or perhaps even shift to different construction materials, according to Prosales, an online magazine for the US building industry. Prosales also maintains that “more species than just Southern pine could see their design values chopped. [ . . ] SPIB is further along in its review process than authorities responsible for setting design values for wood grown in the northeast and northwest US.”

The ALSC scheduling delay, and request for comments, may have been prompted by the National Lumber & Building Material Dealers Association which, on October 13 expressed serious concern over the potential impact of a proposal to lower the design value of Southern Pine lumber. The most pressing of these concerns is “a significant reduction in the economic value of the Southern Pine lumber inventory for dealers, component manufacturers and builders.”

The Structural Building Components Association has also decried the design changes.

“Are we to conclude that a 2×4 with a load resisting value of 1,500 per square inch changes almost overnight to a value of approximately 1,000 psi?”, asked the SBCA in a press release.

The National Lumber and Building Material Dealers Association says if the bureau votes for the new grades, the value of Southern Pine would decrease overnight.

Michael O’Brien, President of the Southern Lumber and Building Material Dealers Association, said to Carolina’s WPDE News, “We’ve been very critical of the abrupt announcement and quick approval. If they find the quality is less, we don’t disagree with changing the design value, but we do disagree with changing it overnight.”

Under the proposed change, the timber would not meet standards for some building codes.

This would hurt lumber yards because many have already purchased the material that soon could be obsolete, said O’Brien.

Some industry executives, speaking off the record, told ProSales they felt NLBMDA and SCBA were blowing the issue out of proportion. There are too many variables going into the production of trusses and other structural members to say definitively that these changes will damage the industry.

“It’s generally believed that an increasing part of the harvest consists of relatively young, thin trees. Given that fact, some experts say, it’s logical that those immature trees don’t perform the same as lumber taken from older, bigger trees,” says Prosales.

An attendee of the October 20 ALSC meeting in Washington, DC, further explained, “The culprit of the need for new values is plantation, fast growth timber, which is an ever increasing share of log base. Perhaps this will turn into an opportunity rather than a nightmare; just as soon as the truss industry can get satisfaction,” according to Layman’s Lumber Guide.

Madison’s Investment Rx

This month’s issue of Madison’s Investment Rx, containing an in-depth analysis of North American lumber inventories, projections for US contruction for the next two years, and a summary of China’s latest lumber buying patterns, has gone out to subscribers.

Contact us any time for a subscription.

Quarterly Results

West Fraser Timber has reported 3Q 2011 results, showing a net profit of $6 million from continuing operations, or $37 million in profit after discontinued operations (sale of the company’s Eurocan deep-sea wharf). Adjusted earnings from continuing operations were $3 million.

Domtar has posted 3Q net earnings of $117 million. Sales amounted to $1.4 billion. The company reported net earnings of $54 million in 2Q 2011.

Norbord is reporting a 3Q 2011 loss of $1 million compared to earnings of $1 million in 2Q. In 3Q 2010, Norbord reported a loss of $4 million.

Canfor Corporation has posted a net loss of $9.6 million in 3Q 2011, compared to net income of $26.2 million for 2Q 2011 and net income of $37.2 million for 3Q 2010.

Acadian Timber has reported a loss of $341,000 in 3Q 2011. Acadian generated net sales of $17.5 million on sales volume of 341 thousand cubic metres, which represents a $0.3 million, or 2 per cent, decrease in net sales compared to the same period in 2010.

US Home Sales

Sales of new US homes rose by 5.7 per cent in September — the first increase in four months — as builders cut prices to the lowest level in nearly a year. The Commerce Department said Wednesday that new single-family home sales climbed to an annual pace of 313,000 in September from August’s slightly revised level of 296,000. The numbers are seasonally adjusted.

Yet total sales of new homes are still 0.9 per cent lower compared to one year ago and the number of properties on the market — 163,000 — remained at a record low.

Meanwhile, the National Association of Realtors’ seasonally adjusted index for pending sales of existing homes decreased 4.6 per cent on a monthly basis to 84.5, the industry group said Thursday. The gauge, however, was 6.4 per cent above its level in September 2010.

Home Sales, US

Buyers of new homes were attracted by lower mortgage rates and falling home prices. The median selling price of new homes, for instance, fell over 10 per cent year-on-year to US$204,400 — and 3.1 per cent compared to the previous month — marking the lowest level since last October.

The median price has fallen three straight months after hitting a nine-month high of US$240,200 in June.

New home sales averaged 302,000 a month in the third quarter, little changed compared to an average of 291,000 in the same period a year earlier.

Pending sales, meanwhile, fell in all four US regions. The biggest decline was in the Midwest, where pending sales fell 6.2 per cent on a monthly basis. They fell 5.5 per cent in the South, 4.7 per cent in the Northeast and 2.1 per cent in the West.

As a result, the troubled housing sector made a minimal contribution to the economy in the third quarter, adding only 0.05 of a percentage point to a solid 2.5 per cent increase in overall gross domestic product.

Real Estate and New Building, China

Facing growing liquidity pressure, developers in China have started to slash prices for some new building projects, with cuts of more than 30 per cent in some cases, angering homeowners who made purchases earlier. The central government is seeking to cool the real estate market by tightening credit and limiting demand.

China Real Estate

Moody’s said in a report on Monday that mainland China developers faced a lower-than-anticipated cash flow arising from slowing sales in an environment where credit from onshore banks was difficult to secure.

The number of new home transactions in Beijing fell 23 per cent year-on-year in the first half of the year. This situation will continue for the next six to 12 months as the central government is unlikely to relax the measures introduced to restrict property purchases, Moody’s says.

In a sales office at Qiuxiafang, more than 20 owners crowded into a small meeting room, accusing three Greenland employees of being “irresponsible, unethical and incapable”.

In Pudong, homeowners trashed the sales office of the Coastal Palace project after the developer China Overseas Property Group cut prices 20 per cent to lift sales.

Separately, homebuyers stormed the sales office of Shanghai’s Sunshine City on Saturday, saying developer Longfor Properties reduced prices to 14,000 yuan, from a high of 18,500 yuan.

China’s government has created a series of policies to curb the runaway housing market, including purchase limits, higher down payments, the introduction of a property tax in some cities and the construction of low-income housing projects.

Official statistics showed that only 1,039 housing units were sold in Beijing during the week-long National Day holiday, which is typically a boom week for the sector, including 908 new homes and 131 second-hand houses, down 22.8 percent over the same period last year.

Shanghai also saw a significant slump in home sales during the holiday. Daily housing sales in the city stood at about 100 units, while in the large cities of Guangzhou and Hangzhou, sales figures remained at only two digits.

The plunge in transactions has resulted in skyrocketing housing inventories, prompting real estate companies to take action.
According to statistics from the Beijing Real Estate Trading Management website, the city added 16,196 new housing units from September 1 to October 25, only ten per cent of which were sold.

As of October 24, Beijing still has 117,500 new housing units waiting to be sold. Even without additional units, it will take at least 20 months to “digest” them, according to the website.

WorldUnion Property Consultancy predicted that housing inventories will come to a head at the end of this year or early next year.

Property developers have already felt the bite. According to statistics from Wind Information, a leading Chinese financial service provider, the inventories of 136 A-share listed real estate companies accounted for 61.82 per cent of the companies’ total assets in the first half of the year, while the ratio during the same period last year was below 60 per cent.

November 01, 2011

Pulp and Paper

Indonesia-based Asia Pulp and Paper, among the largest pulp and paper producers in the world and an affiliate of the Sinar Mas group of companies, is a family-controlled operation of murky credibility. The growing importance of forest certification and sustainability to customers was only further proven October 5 by Mattel’s announcement of cancellation of all packaging material orders from APP.
Mattel told pulpwood suppliers it wouldn’t buy wood and paper from APP and other companies that destroy rainforests. Indeed, its new policy increases recycled paper and wood certified by the Forest Stewardship Council in packaging. In June, Mattel found itself to be the subject of a Greenpeace campaign because it sourced fibre for disposable packaging from APP.

Sustainability Issues

In response, Mattel announced it would develop a sustainable procurement policy for all its wood-based product lines, going beyond packaging to toys, books and accessories.

Increasingly, consumer demands for certification and a focus on stewardship are driving industry decisions in sourcing raw material.

Environment groups are resorting to fibre analysis to cut through greenwash claims by manufacturers and retailers.

On September 27, the results of lab analysis commissioned from US lab Integrated Paper Services by environment group Markets for Change Laboratory, revealed that Kmart’s Indonesian-made ‘Office One’ home brand envelopes contained 19 per cent mixed tropical hardwood fibre, sourced from rainforests.

A Kmart spokesperson was surprised at the IPS laboratory findings and said the company would “take the matter extremely seriously and begin an immediate investigation,” according to the Sydney Morning Herald.

That same week, Indonesia’s secretary-general of the Ministry of Forestry, Hadi Daryanto, explained at a Forest Tenure, Governance and Enterprise conference in Sydney, Australia, that deforestation in Indonesia was slowing as the government had decreed a two-year moratorium on logging in 89 million hectares of primary forest and peatland, prevented fires, and established a Timber Legality Assurance System as part of its effort to cut greenhouse gas emissions by 26 per cent by 2020.

Daryanto also said deforestation dropped from 2.83 million hectares a year between 1997-2000, to 1.08 million hectares a year between 2000-2006, remaining at those levels in 2010.

However Greenpeace Indonesia campaigner Bustar Maitar said the official data were inconsistent and inaccurate and Greenpeace’s own analysis indicated deforestation was continuing at 2.1 million hectares a year.

Greenpeace members denounced the forestry event, saying that conference was a “sign of real desperation”.
Speaking of greenwashing, somehow a study of the positive impact of plantation forestry on degraded peat land and greenhouse gas emissions, commissioned by APP and carried out at Bogor Agricultural University, was awarded an Indonesian Green Award on September 28.

Researchers involved claim the study effectively proves that the development of pulpwood plantations – or afforestation – on degraded peat land, or land that had been stripped of forest, can help the land sustainably recover contributing significantly to increased carbon absorption.

The study was carried out on an area of land of about 600,000 hectares in South Sumatra that was largely destroyed by fire in 1997-98, at which point forest cover in the area had been reduced by 80 per cent. The area was then developed into a pulpwood plantation by APP’s pulpwood suppliers.

Using airborne and spatial radar technology, the research team was able to evaluate the impact of pulpwood plantation on the degraded land over four distinct periods: before the forest fires; after the forest fires; during the early plantation period; and during the recent plantation period, from 2009 onwards.

However, an Indonesian watchdog released a report October 7 slamming that study.

“The micro-delineation documents that provide the basis for the development of the plantations are not effective as they are fraught with data manipulation. Accordingly, they will also be ineffective for the purpose of saving intact natural forest within the said pulpwood plantations,” says the Greenomics Indonesia report.

A policy development institute focussed on good natural resource governance in Indonesia, Greenomics Indonesia calls for government “to re-evaluate forest areas and peatlands granted for pulp and paper plantations to reduce the risk of damaging the international reputation of its forest products and undermining its commitment to greenhouse gas emissions reductions,” according to the group’s website.

Greenomics Indonesia singles out APP specifically, which claims to have set aside 72,000 hectares of forest areas as a conservation initiative. Yet Greenomics says this area is largely deep peat forest, which under Indonesian law cannot be converted. Therefore APP is claiming credit for avoiding an activity that would be illegal.

“If the Ministry of Forestry fails to reposition Indonesia as a pulp and paper producer by conducting a redelineation process for intact natural forest, including deep peatland areas, located with pulpwood plantation concessions, Indonesia will lose its last opportunity for redemption,” states Greenomic. “In the end, historical evidence will show that the present Ministry of Forestry’s tenure produced no meaningful change, meaning it continues to be business as usual.”

APP’s public image has faced a constant uphill battle since 2001, when it defaulted on almost US$13 billion in debt repayments. In 2007, the FSC dissociated itself from working with the company.

Since early 2010, Paper Excellence, another subsidiary of Sinar Mas, has bought four pulp and paper mills in Canada and three in Europe. Two of the Canadian mills are in British Columbia.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview closely examines the latest round of mergers and acquisitions in the North American lumber and paper sectors.

International Paper and Temple-Inland, KapStone Paper & Packaging and US Corrugated, Boise and Hexacomb, and IP together with India’s Andhra Pradesh Paper Mills, are all closing acquisition deals before the end of this year.

Contact us any time for a subscription.

2006 Softwood Lumber Agreement Extension

A two-year extension of the Canada-US Softwood Lumber Agreement is under review.

The agreement is currently scheduled to expire October 12, 2013. The SLA is designed to constrain softwood lumber exports from Canada to the US when demand in the US is low and to allow unrestricted trade in favourable market conditions. As part of this agreement the US agreed to cease the collection of antidumping and countervailing duties on softwood lumber from Canada and to refund US$5 billion in deposits of duties. In exchange, Canada agreed to apply export charges and volume limitations to shipments of softwood lumber to the US when the price of softwood products falls below a certain level.

US Housing Starts

Taking a huge step in defying analysts’ overly gloomy expectations, housing starts surged 15 per cent in September to the highest level in 17 months, according to government data released Wednesday, as increased demand for rental stock as well as rebuilding after Hurricane Irene contributed to the upturn.

The Commerce Department said starts rose to a seasonally adjusted annual rate of 658,000, which is 10.2 per cent above the September 2010 reading and the best level since April 2010 — the month the homebuyer tax credit expired. The median forecast for housing starts in a Bloomberg survey called for a 590,000 pace.

US Home Building Rates, Sentiment Index

The rise was led by a 53 per cent surge in starts of buildings with five or more units to 227,000, the best reading in three years, as demand for rental units is booming.

Starts of single-family homes, the largest part of the sector, rose just 1.7 per cent.

Building permits fell 5 per cent in September from the prior month to a rate of 594,000.

The figures on housing starts were led by activity in the West, where starts gained 18.1 per cent to hit a three-year high. In the South, the largest market for new homes, starts rose 15.7 per cent to register the best reading since April 2010.

Meanwhile, home-builder confidence in October rose by the largest amount since the home-buyer tax credit program ended, though the gauge remains mired at historically weak levels, according to an index released also Tuesday.

The National Association of Home Builders/Wells Fargo housing market index rose by four points to 18, the biggest one-month gain since April 2010 and the best level since May 2010. The index, which measures builder confidence in the market for new-built single-family homes and is closely correlated with single-family housing starts data, came in stronger than the 14 reading seen by a MarketWatch-compiled economist poll.

Japan Forestry Projections

The Forestry Agency in Japan has released 4Q 2011 and 1Q 2012 wood demand projections.

Housing starts in Japan are projected to be between 800,000 and 850,000 units in total for 2011, according to the Japan Lumber Reports.
Domestic log demand for lumber and plywood production is expected to be 3.6 thousand cubic metres, which is the same level as 4Q last year.

Forestry, Japan

Imported log demand, meanwhile, is expected to rise 11.3 per cent compared to 4Q 2010, to 1.1 thousand cubic metres. The main supplier of import logs will be North America, as the US dollar is the most competitive currentcy against the Yen. Demand is projected to drop in 1Q 2012 as the usual seasonal factors come into play.

The appetite in Japan for softwood logs for plywood will result in a continued decrease is the import of south sea logs.

Japan’s Forestry Agency also said that demand for lumber from North America should remain firm due to active housing starts, and are expected to increase slightly in 4Q 2011 and 1Q 2012, says the Japan Lumber Reports.

Japan’s plywood demand should remain active in 4Q as restoration from the March earthquake and tsunami continues, staying unchanged in 1Q 2012.

Plywood mills damaged by the earthquake have restarted so log demand is expected to increase in 4Q then slow somewhat in 1Q 2012 as mill restock their yards.

Some decrease in structural laminated lumber is expected in 4Q due to seasonal conditions.

Demand for Russian logs in 4Q will keep dwindling as the prices are not competitive with other materials. However finished lumber supplies from Russia in 1Q 2012 should be more than in 4Q.

Radiata pine lumber demand is expected to increase somewhat for year end as demand picks up, then stay stable in 1Q 2012, says the Reports.

More Green Transformation Funding Announced

The Government of Canada made another $41.9 million in funding announcements on October 13.

West Fraser Mills, of Quesnel, BC will receive $2 million for its Quesnel River Pulp mill Waste Water Heat Exchanger Upgrade Project to improve the mill’s energy efficiency through the installation of four heat exchangers. The company’s Slave Lake, AB, facility gets $5.1 million to reduce greenhouse gas emissions and improve the mill’s energy efficiency.

Also in Quesnel, Cariboo Pulp & Paper, is receiving $5.5 million to make the facility’s processes more green and lower its environmental footprint by reducing the amount of chemicals that are delivered to the mill.

Tolko Industries’ mill in The Pas, MB, will get $2.5 million

In Windsor, QC, Domtar qualified for $5.5 million for two projects that together are expected to reduce the mill’s water use and energy consumption while improving energy efficiency and increasing production of renewable electricity.

Fibrek, of Saint-Félicien, QC, receives $5.1 million to increase the mill’s energy efficiency and environmental performance.

Trois-Rivières, QC’s, Kruger Wayagamack will get $6.3 million for five projects to improve environmental performance through upgrades to mill processes.

Fortress Specialty Cellulose, of Thurso, QC, is receiving $9.9 million to generate more renewable thermal energy and reduce its greenhouse gas emissions.

Collectively, these 15 projects are expected to generate enough renewable energy to power nearly 5,600 homes. They are also expected to save enough energy to heat an additional 18,000 homes while reducing greenhouse gas emissions by 49,000 tonnes per year.