Madison’s Lumber News Archives: Feb 2011

USDA Forest Service New Planning Rule ; Canada’s Response to US Request for Arbitration ; US Housing Starts ; China Plywood Imports and Exports ; Printing and Writing Paper Shipments ; Boise Announces . . . Global Home Building ; Madison’s Timber Preview ; Proposed Heat Treatment of US Softwood Imports ; Housing Starts, Canada ; Japan Housing Starts ; Port Alice Neucel ; Pulp Transportation Deal ; Construction in China ; Madison’s New Product . . . ; Cyclone Yasi, Australia ; North American Winter Storms ; Domtar Reports ; Smurfit-Stone Payout ; Tolko Fire ; Canadian BEACON Project ; Madison’s Timber Preview; Port of Prince Rupert ; Community Forestry Meeting in West Kootenays; Quarterly Reports;

February 28, 2011

USDA Forest Service

Interested parties have until May 16, 2011 to submit comments and input on the USDA Forest Services proposed forest management policy changes.

An open forum to discuss the proposed Rule will be held on March 10, in Washington, DC. The meeting will be webcast to allow for national participation, and there will be additional public forums held throughout the country.

New ‘Planning Rule’

The USDA Forest Service issued a press release February 10, 2011 that included a request for public comment on a proposed Forest Planning Rule. This was intended to provide a science-based framework to support healthy forests and communities. The Planning Rule would establish a new national policy to develop land management plans that protect water and wildlife and promote vibrant communities. The new effort was introduced August 14, 2009, and is the result of an open, collaborative rulemaking process that began in December 2009. Interested parties have until May 16, 2011 to provide input here.

On June 30, 2009, the United States District Court for the Northern District of California invalidated the Forest Service‘s 2008 land management planning rule, holding that it was developed in violation of the National Environmental Planning Act and the Endangered Species Act. The proposed Rule would require preparation of an environmental impact statement and a record of decision for new plans. The proposed Planning Rule would provide guidance for plans to require monitoring through a structured public process that evaluates changes. Monitoring would be used to assess progress toward achieving desired conditions, and for evaluating whether there is a need for re-assessment.

As far as timber supply is concerned, the only reference contained in the summary of the Draft Programmatic Environmental Impact Statement released by the USDA Forest Service in February 2011 states, “Forest management program objectives currently include ecosystem restoration and protection, hazardous fuels reduction, and the maintenance of healthy forests – all of which contribute to a sustainable supply of forest products. With the focus on providing sustainable uses, a unit would be expected to contribute an element of stability to local economies.”
Agriculture Secretary Tom Vilsack said in the press release. “This proposed Planning Rule seeks to conserve our forests for the benefit of water, wildlife, recreation and the economic vitality of our rural communities. The proposed Rule will provide the tools to the Forest Service to make our forests more resilient to many threats, including pests, catastrophic fire and climate change. Healthy forests and economically strong rural communities form a solid foundation as we work to win the future for the next generation.”

The Forest Service will use comments to develop a final Rule. To encourage public engagement, the Forest Service is hosting an open forum to discuss the proposed Rule on March 10, in Washington, DC. The meeting will be webcast to allow for national participation, and there will be additional public forums held throughout the country. Details can be found at

“The Forest Service has been a steward of American lands for more than a century, and this proposed Planning Rule will build on that tradition,” said Forest Service Chief Tom Tidwell in the press release. “We value the thoughtful input we’ve received in the development of this proposed Rule, and we look forward to continuing collaboration to construct an adaptive management framework for the people’s forests and grasslands, based on sound science and reflecting public values.”

To develop the proposed Rule, the Forest Service held over 40 public meetings and roundtables across the country that drew more than 3,000 participants, and hosted a blog to engage the public. Additionally, the Forest Service reviewed more than 26,000 comments on the notice of intent to issue a new planning Rule.

The proposed Rule would update planning procedures that have been in place since 1982, creating a modern planning process that reflects the latest science and knowledge of how to create and implement effective land management plans.

Highlights of the proposed Planning Rule include:

  • assess conditions and stressors, including climate change, on the National Forest System unit, and in the context of the broader landscape;
  • revise or amend land management plans based on the need for change; and
  • monitor to detect changes on the unit and across the broader landscape and to evaluate whether management actions produce desired outcomes.


“This proposed Planning Rule is the outcome of an open and transparent development process,” said Agriculture Under Secretary for Natural Resources and Environment Harris Sherman. “It’s a positive framework that will allow the Forest Service to more effectively restore our natural resources, support the economy, and adapt to changing conditions.”

Agriculture Secretary Tom Vilsack, joined by Forest Chief Tom Tidwell and Under Secretary Harris Sherman, talked about the proposed Rule in a media conference call on February 10.

In response to a question from Dow Jones, Vilsack said, “You’ve got 170 million visitors to the Forest Service. Those are 170 million opportunities for communities surrounding forests to get tourism dollars that really circulate an economy very quickly.

“We are not going to forget the fact that we still have a timber industry in this country, and obviously, their interests have to be looked at and examined in the context of multiple use. There are minerals. There is an emerging energy interest. We have six projects in the Forest Service right now with hazardous fuel reduction that offer an opportunity for biomass energy production. So, I mean, there’s just a whole series of opportunities here, and what we need to do is make sure that whatever we do in managing the forests that we make it as resilient as possible, so to conserve as many of those uses as effectively as possible.”

To a question from Mountain XPress, Vilsack detailed, “As a starting principle, we are very interested in maintaining as much of the old growth as we can. When you talk about resilience and you talk about water conservation and preservation, you are really talking about making sure that the old growth is maintained more effectively. We now have a budgeting process that really provides better resourcing for management and adequate resources for firefighting as well as contingent funds.”

Under Secretary Sherman explained further, “I would just emphasize that the heart of this Planning Rule is the requirement that we maintain and restore our forests and our ecosystems and watersheds, and that we provide for animal and plant diversity, and so all of these uses that we are talking about are within the context of those requirements. So multiple use, of course, will be encouraged, but the bottom line here is we need to maintain and restore our forests, protect the water that comes off, deal with the stresses of climate change, and within that context, there are many multiple uses that can go forward.”

To a question from BNA, Chief Tidwell said, “There’s places where because of past management, we have created an even-aged stand of trees, then when you have either insects and disease or a windstorm go through, an even-aged stand often will reduce the resiliency and also species diversity. Through past management in some areas, we have managed for just certain species, and then so many of our pests are natural pests. They are species-specific, and so if you just have a pine type there, a bark beetle comes through there and it will take out all the pine versus if you have a mixed-conifer stand, you may have an infestation in the pine, but then the Douglas fir remains healthy and resilient.”

Canada’s Response to US Request for Arbitration

Canada’s Department of Foreign Affairs and International Trade today released its defense against the US claim of British Columbia’s violation under the terms of the 2006 Softwood Lumber Agreement.

Canada’s statement reads, in part “From 2006 to 2010, for example, the volume of Mountain Pine Beetle-killed timber harvested in the BC interior nearly doubled from an estimated 11 million cubic metres to 19 million cubic metres, even while overall timber harvesting declined following the US housing market collapse. By 2010, MPB-killed timber represented nearly 70 per cent of the total harvest of lodgepole pine, compared to less than 20 per cent in 2006.”

2006 SLA Arbitration

Canada’s defense goes on to say, “The Claimant surmises, and only surmises, that the mere increase in the percentage of Grade 4 timber must consitute a form of “grant or other benefit. [ . . . ] The Claimant must identify a specific government “action” that has “the effect of reducing or offsetting the Export Measures”. [ . . . ] The United States cannot satisfy these criteria in this case. [ . . . ] Even if the US were to satisfy these criteria, the SLA provides an illustrative list of “safe harbours”, which the Parties agreed do not constitute circumvention.”

Panel members to sit on the tribunal are currently being selected, then document discovery procedures will take place. It may be summer before there is any more news on this important issue.

US Housing Starts

Housing starts in the US climbed 14.6 per cent to a 596,000 annual rate, Commerce Department figures showed Wednesday. Work started on 78 per cent more dwellings with two or more units, overshadowing a drop in single-family houses that indicates the housing market continues to struggle.

Home Building, US

January US housing starts fell 2.6 per cent compared to one year ago. Single family starts fell 1 per cent while the volatile multi-family sector rose 77.7 per cent compared to Decemebr. Regionally, starts rose 41.8 per cent in the northeast, 36.4 per cent in the midwest, 15.8 per cent in the south but fell 9.7 per cent in the west.
New building permits fell 10.4 per cent to an annual rate of 562,000. A month earlier, permits had posted a 15.3 per cent monthly gain as builders sought approval before building codes changed in Pennsylvania, California and New York state.

Single family authorizations fell 4.8 per cent to 421,000. Regionally, permits rose 11.4 per cent in the south, but fell 38.5 per cent in the northeast, 27.3 per cent west and 5.3 in the midwest.

As foreclosures continue to pour onto the market the US homeownership rate has been falling. In 4Q 2010, 66.5 per cent of Americans owned homes, down from 67.2 per cent a year earlier and the lowest rate since the end of 1998, according to the Census Bureau.

New-home sales were down 7.6 per cent in December from a year earlier, the latest government data showed. Aside from low demand, builders have also had problems getting financing to start projects.

China Plywood Imports and Exports

China’s production of plywoods has flourished due to the large-scale cultivation of fast-growing plantation forests and the pull from international market, according to China Wood and reprinted in Japan Lumber Journal. China’s plywood production in 2009 reached 44.5 million cubic metres.

Plywood, China

China’s plywood exports have kept increasing not only because many countries like the US have had an ever-increasing demand for plywood, but also because plywood production in Indonesia and other countries has substantially reduced, says China Wood.

Despite the severe impact of world financial crisis in the past two years, China’s plywood exports in 2009 went up by 1.76 times in comparison with the exports in 2003. As the world financial crisis gradually eased off this year, the demand for plywood in various countries kept improving. In the first 10 months of 2010, China’s plywood exports reached 6.254 million cubic metres, up 37 per cent over 2009. The growth amounted to 1.688 million cubic metres.

Printing and Writing Paper Shipments

The American Forest and Paper Association reported Monday preliminary printing and writing paper shipments for US mills of 1.451 million tons in January 2011, representing a 1.4 per cent drop from January 2010’s 1.472 million-ton level.

Printing and writing paper shipments for January 2011 were mixed, with coated paper volumes increased compared to one year ago, but uncoated paper continuing to slow.

After rising year-on- year for 11 straight months, US printing and writing paper shipments hit harder comparisons in October and have seen year-on-year declines for four months straight. Coated paper shipments improved by 2.3 per cent compared to December 2010 and 15 per cent compared to one year ago. Uncoated freesheet shipments increased by 0.6 per cent compared to December 2010 but fell by 2.5 per cent compared to one year ago.

US Paper Shipments

US shipments of coated paper rose 0.9 per cent to 587,800 tons in January from 582,400 tons in January 2010, according to the AFPA.

Shipments of uncoated freesheet dropped year-over-year for the fifth straight month in January, falling to 730,900 tons. However, January’s uncoated freesheet shipments were 10.5 per cent above November 2010.

Research analysts at Deutsche Bank found in a recent industry survey that most contacts expect the annual secular decline to be 2 to 5 per cent compared to one year ago. While the secular decline could allow for some pricing deterioration, especially if imports continue to increase, Deutsche Bank analysts believe a projected uptick in pulp markets will support current uncoated freesheet prices.

Boise Announces . . .

Boise Cascade’s Building Materials Distribution Division announced February 14 that Scott Sunday will assume responsibilities as the Division Commodity Manager on March 2, 2011. Scott will replace Dale Catt who will retire effective March 1.

Scott has been active in both the retail and wholesale segments of the industry since 1984.

Dale began his career in the industry in 1971. He has served in many positions and locations for Boise Cascade and Bohemia Lumber. Since 1991, Dale has served as Boise Cascade’s Commodity Procurement Manager and has been a friend, mentor, and trainer to many people in the industry.

February 22, 2011

Global Home Building

White House Plans for Fannie Mae and Freddie Mac

The Obama Administration released a white paper on Friday that proposes winding down mortgage giants Fannie Mae and Freddie Mac and lessening the government’s role in the housing finance system.

The white paper focusses on a series of short steps to increase fees and downpayment requirements. The Administration hopes these measures will allow banks to more effectively compete in offering loans without government guarantees. The Administration also proposes to raise the minimum down payment for GSE financing to at least 10 per cent, and possibly to increase the minimum down payment requirement for FHA financing, as well.

Treasury Secretary Timothy Geithner said Friday morning in a conference call with reporters that a new housing finance system without Fannie and Freddie could take seven years to put in place, suggesting it might fall in part to future administrations.

Mark Zandi, chief economist for, told CNBC that the Obama administration had “laid out a prudent, appropriate plan.”

“At the end of the day, though, the government is going to have to play some role in a catastrophic backstop,” Zandi said.

Canada, Japan, US

The Canada Mortgage and Housing Corp reported Tuesday that the pace of new-home construction in Canada increased slightly in January, rising to 170,400 units on a seasonally adjusted annual rate, up from 169,000 the previous month.

Meanwhile, Japan’s Ministry of Land, Infrastructure, Transport, and Tourism said that December housing starts were the highest monthly since the Lehman shock in 2008, making a seasonally adjusted annual rate of 861,000 units, a 7.5 per cent increase over November.

In the US, Home prices fell in almost half of big cities in 4Q 2010, as the number of foreclosures rose to record levels, said the National Association of Realtors Thursday.

The Canadian Real Estate Association released a revised forecast Tuesday that estimates there will be 439,900 existing homes sold in 2011, down 1.6 per cent from 2010, but better than the 9 per cent decline that CREA had forecast at the end of 2010. The real-estate association is also taking a more positive view of pricing, with the national average price now expected to rise by 1.3 per cent this year to $343,300. CREA had earlier predicted that the national average home price in 2011 would fall by 1.3 per cent from last year to $326,000.

Japan’s December home building increase was stronger than the consensus of a 4.7 per cent rise, and followed increases of 6.8 per cent in November, 6.4 per cent in October, 17.7 per cent in September, 20.4 per cent in August and 4.3 per cent in July. Total Japan housing starts for 2010 rose 3.1 per cent over 2009, to 813,126 units which was the lowest level since the mid-1960’s. Units built for sale increased for the first time in four years. New owners’ units rose 7.2 per cent, while condominium building increased by 20 per cent but remained at the second-lowest historic level (after 2009). Wood based unit building also increased by 7 per cent, to 460,134.

Demand for housing in major cities is clearly rebounding. Starts in the Tokyo metropolitan region jumped 7.4 per cent while starts grew 3.3 per cent in the Kinki region, which includes Osaka and Kyoto.

Madison’s explained in the July 16, 2010 issue of your Reporter that indications out of Japan pointed to a solid home building recovery for early this year.

Yet Japan’s housing starts have failed to meet the 1 million benchmark, and are almost 30 per cent off the level of 2008. Starts in Japan are expected to rise 9.9 per cent to 898,900 units in fiscal 2011, the Research Institute of Construction and Economy said. This expectation for fiscal 2011 is in line with the Bank of Japan’s assessment released January 25, which said, “Housing investment is showing signs of picking up.”

It is, however, uncertainty about the US real estate market and home building industry that has investors confounded. Some indicators are up while others are down, meanwhile mortgage horror stories and shenanigans surrounding bank foreclosure procedures continue to emerge at alarming rates.

Is this the time to be bullish on US real estate? Pundits are beginning to think so.

“They [the bears] will be mistaking the trees for the forest,” wrote Andrew Jeffery, a principal of Cirios Real Estate, for on Tuesday. Jeffery cites: pent-up demand among young adults; real estate as a rather good hedge against inflation; investors snatching up multifamily properties—a market that typically recovers first; robust investor demand for real estate; and the bold—yet rational—declaration that it will take years to work through shadow inventory of foreclosed homes, but there will be no flood.

“Right now, houses are on sale. Prices are projected to appreciate in 40 per cent of US housing markets in 2011 and 60 per cent in 2012. Buy discounted properties and resell for a profit using either traditional or unconventional methods,” explains real estate investor Tom Bukacek on on Wednesday.

Getting credit right now is tricky, but it turns out a lot of people don’t need it to buy these undervalued homes. The Wall Street Journal printed Tuesday that cash buyers represented more than half of all transactions in the Miami-Fort Lauderdale area last year, compared to 13 per cent in 4Q 2006, according to an analysis from real-estate portal Meanwhile, downtown Miami home prices rose 15 per cent in 2010 from a year earlier, according to the Miami Downtown Development Authority.

The percentage of buyers in Phoenix, AZ, paying cash hit 42 per cent in 2010—more than triple the rate of 2008, according to Raymond James’s equity research division. Nationally, 28 per cent of US sales were all-cash transactions last year, according to the National Association of Realtors, compared to 14 per cent in October 2008. The harder a market has been hit, say economists, the higher the percentage of cash deals now.

The median price of a single-family home dropped from a year earlier in 71 of 152 metropolitan areas tracked by the US National Association of Realtors, the group said in a report Thursday. Prices in Cumberland, MA, tumbled 20 per cent, the biggest decline, followed by a 14 per cent drop in Kankakee, IL. The median price nationwide rose 0.2 per cent to US$170,600, as cities including New York and Boston posted gains.

Home sales gained 15.4 per cent in 4Q 2010 from the previous three months, at a seasonally adjusted pace, led by a doubling in Idaho, the Realtors association said in a separate report Thursday. Actual sales jumped 55 per cent in Vermont and 34 per cent in Minnesota.

This year, existing home sales probably will gain 7.9 per cent to 5.3 million from a 13-year low of 4.91 million in 2010, the Realtors’ group said in a forecast on its website.

Data provided by Moody’s Analytics track the ratio of median home prices to annual household incomes in 74 markets. By that measure, housing affordability at the end of September had returned to or surpassed the average reached between 1989-2003 in 47 of those markets. Most economists believe the housing boom took off in 2003.

“Due to the upward jog in sales and the downward dip in stock, the number-of-months inventory recorded a good improvement in November to stand at 6.9. That’s only the second time in over four years that the number-of-months inventory has fallen below 7. In January 2009, the number-of-months inventory maxed out at 12.1,” explains Alex Carrick to Daily Construction News. “Probably never again will home prices be as low as at some point this year, with spring as the best bet. Mortgage financing based on current interest rates will never again be so advantageous.”

Foreclosure filings in the US fell 17 per cent in January from a year earlier, the fourth straight month of declines, but rose 1 per cent from December as legal scrutiny of lender practices slowed actions against delinquent homeowners, RealtyTrac Inc said Wednesday. Banks seized 78,133 homes in January, a 12 per cent increase from December and an 11 per cent drop from January 2010. Seizures fell 16 per cent from a year earlier in judicial states and 9 per cent in other states.

Foreclosure rates only seem to be slowing down since most are just being postponed.

“We expect a spike in the first quarter,” said Rick Sharga, a RealtyTrac spokesman. “If we don’t get that, it could mean that the foreclosures are being pushed back even more and that the time needed for recovery will be prolonged.”

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the latest movements by TimberWest Forest Corp. A land purchase from Western Forest Products, company discussions with the Township of Ladysmith for a boundary extension of the town to include some TimberWest land, and 4Q 2010 results released, all this week, are detailed.

Contact us any time for a subscription.

Proposed Heat Treatment of US Softwood Imports

The US Department of Agriculture is proposing that all Canadian wood packaging material that crosses the border be heat treated to kill any pests. Canadian goods shipped on wooden pallets are currently exempt from that treatment, as are similarly packaged goods that cross into Canada from the US.

Spruce Longhorn Beetle

The brown spruce longhorn beetle is native to northern and central Europe. It likely arrived in Canada through wood packing material through the Port of Halifax.

The Canadian Wood Pallet Association said meeting the treatment requirement would add $2 to the cost of each crate. With about 150 million such packages sent a year, that would add at least $300 million in shipping costs for goods crossing the border.

“I think it’s going to be far higher than $300 million when you talk from coast to coast,” said Herman Long, the owner of pallet manufacturer Scotia Pallets and a director of the Canadian Wood Pallet Association.
“In essence, everything that goes on a crate now will have to be heat treated, which is not necessarily a bad thing, except the administrative responsibilities to trace every piece of wood that’s going everywhere,” he said.

The Canadian Manufacturers and Exporters Association is also concerned about the impact of the rule change.
“The result of this could be very dramatic, in terms of increased cost for the type of pallet used and ultimately impact the cost of goods,” said vice-president Ann Janega.

The US is expected to rule on this proposal this spring. It is predicted that Canada will adopt the same decision, meaning the new cost would apply to American exporters as well.

Heat treatment is already mandatory for Canadian wooden packaging material sent elsewhere in the world.

Housing Starts, Canada

The Canada Mortgage and Housing Corporation announced Tuesday that Canadian housing starts totalled 170,400 units in January compared to 169,000 units in December 2010. The seasonally adjusted annual rate of urban starts decreased by 1.7 per cent to 146,900 units in January, while single urban starts moved lower by 2 per cent to 64,000 units. Rural starts were 20.5 per cent from December at a seasonally adjusted annual rate of 23,500 units.

Canada Housing Starts

Starts in multiple-unit dwellings, such as condos, fell 1.5 per cent to 82,900 units.

Starts on closely watched urban single-family homes were down 2 per cent at 64,000 units.
Separately, the Canadian Real Estate Association boosted its 2011 resale housing forecast to reflect a firmer economic outlook and a further expected rise in consumer confidence.

CREA substantially lifted its forecast that national sales activity will reach 439,900 units in 2011, although this would still be a year-on-year decline of 1.6 per cent.

Japan Housing Starts

Housing starts in Japan rose by 1.5 per cent in December compared to the same month in 2009, to 74,517 units. Seasonally adjusted annual starts for December were 861,000.

Home Building, Japan

Total housing starts in 2010 for Japan were 813,126 units, a 3.1 per cent increase over the previous year. Various government incentives are expected to further help the Japanese home building recovery.

Port Alice Neucel

The Neucel Specialty Cellulose mill in Port Alice, BC has been sold to Fulida Group Holdings Ltd of China by private equity investors Wellspring Capital Management. The Port Alice mill is the only BC pulp mill producing dissolving sulphite pulp, a product made from hemlock wood chips that is used in making fibres like rayon, plastics, lacquer and explosives.

Fulida’s interest is driven by demand for rayon fibre to supply its textile mills in China. Fulida is taking full ownership of the mill together with affiliate Zhejiang Fulida Ltd., which bought a minority position in the mill in 2010.

The number of dissolving sulphite mills worldwide is relatively small, but prices for the product are more than twice the price for northern bleached softwood kraft, the product used in paper and cardboard manufacturing.

Pulp Transportation Deal

A servicing agreement between Squamish Terminals Ltd, its pulp industry customers, and Canadian National Railway is expected to make the terminal more efficient.

Under the agreement, CN will provide seven-day-a-week service to Squamish Terminals, which in turn will guarantee to unload pulp cars daily. Pulp companies using the terminal will work with both CN and Squamish Terminals to match traffic flows with vessel schedules. The terminal previously operated on a five-day, Monday-to-Friday schedule, with weekend work as required.

Squamish Terminals is located on Howe Sound, just 32 nautical miles north of Vancouver, is one of the largest pulp handling terminals on the North American West coast.

February 15, 2011

Construction Projects

In 2010 construction projects boomed all over China, many designed by American and European architecture firms. At a time when Western economies struggle and construction projects have been delayed or scaled back, China is on a major push to urbanize, building new office towers, apartment blocks, exhibition halls, stadiums, high-speed train stations and nearly 100 new airports. Finding the process quite different from building in North America or Europe, from securing building permits and functionality to speed of completion and logistics, US architects describe building in China as both challenging and rewarding.


In January 2008 building began on Zhongkai Sheshan Villas, consisting of 78 private villas and a club facility on a 46-acre site situated at the foot of Sheshan, the only mountain forest area in the suburbs of Shanghai. The site plan and villas were designed by an international team of architects, planners, landscape architects, and interior designers. With each villa individually designed, the vision for the project is one of a mature, American neighborhood where different styles and scales have developed over time.

In that development, a strong emphasis is placed on the integration of the landscape and the interiors, as well as on a contemporary interpretation of classic Chinese design principals. The designs range in size from approximately 3,000 square feet to approximately 7,000 square feet.

Sourcing architects from around the globe is necessary for the scope of building planned in China for the coming decade. According to the American Institute of Architects, 30 per cent of US design firms, which employ 26,000 architects, currently practice globally. There are more than 1,500 AIA members living overseas. The most rapid economic and population growth will occur in developing countries in which there are the fewest number of architects per capita, says the advisory group. In Indonesia’s cities, there is only one architect for nearly 30,000 people, compared with one architect for 2,500 people in the US. In China’s cities, one architect currently serves 15,000 people, while in India’s cities, one architect serves some 14,000 people. The gaps are expected to widen. In 2050 projections, in Indonesia’s cities, there will be one architect for every 37,500 people; in China, one for every 28,000 people; and in India, one for every 36,000 people.

China Vanke Company Ltd is the largest residential real estate developer in China, with a 2010 market capitalization of US$15 billion. It is engaged in developing, managing and selling properties across 20 cities in Pearl River Delta, Yangtze River Delta and Bohai-Rim Region. China Vanke said in a December 2, 2010 statement that preliminary data showed its property sales for November jumped 146 per cent from a year earlier, to 12.9 billion yuan (US$1.9 billion). The developer recorded sales of 99.8 billion yuan in January through November 2010, and the growth in November sales marked an acceleration of 137 per cent in October 2010, although with an admittedly low base of comparison to 2009. Vanke said it had added seven new projects since reporting its October sales.

Residential property prices in China’s 100 key cities rose 0.82 per cent in November from a month earlier, according to China Real Estate Index System. China’s government estimates that 300 million people — about the population of the United States — will move into urban areas in the next 15 years. Almost every major city is building or expanding a new central business district or financial centre.

China has become a main market for construction projects, but business there is not always plain sailing due to logistical problems, infrastructure constraints, and local government interference. China’s investment on real estate from January to November 2010 reached 4.27 trillion yuan (US$647.3 billion), up 36.5 per cent compared to the same period in 2009, according to statistics from China’s National Development and Reform Commission.

Despite the growing number of Chinese architects, China’s real estate developers still prefer to cooperate with foreign architects. Wang Qian, a consultant for ZK Real Estate Development Company of Shanghai, told a New York Times reporter, “I have no idea whether Chinese architects can do this. Maybe they can, but I don’t want to take that risk. In China there has not been any development like this. The villa market is rather young.”

In China, “people have no preconceived notion of what building development should be,” said Silas Chiow, China director for the US firm Skidmore Owings Merrill (SOM), to the Washington Post. “That gives young architects an opportunity to try new ideas.”

SOM designed Shanghai’s Jin Mao tower, one of the most visible buildings on the Pudong skyline, with its traditional Chinese style, as well as Beijing’s New Poly Plaza, with the world’s largest cable-net-supported glass wall, and Tower III of the World Trade Centre in Beijing. SOM also designed the futuristic car-shaped Pearl River Tower, with wind turbines and solar panels.

“China is almost like an experimental laboratory for different architects,” Chiow said.

Many of the largest, most visible projects designed by foreign architects are government-funded, said Peng Peigen, a well-known architect and professor at Tsinghua University in Beijing, to the Washington Post. Chinese officials, and some private developers, often prefer to see an international name on a structure that they hope will become a landmark.

US and European architects see it as an unparalleled chance to show off their expertise, experiment with cutting-edge designs, use new energy-efficient ‘green’ technologies, and as an opportunity to gain experience on a massive scale.

Another lure for US architects to work in the Chinese building industry is the chance to see a project designed, built and in regular use in as little as a few years. The speed of development brings its own challenges, some architects say. Among them, the foreign architects’ desire to build environmentally sustainable buildings and cities often run smack into the local imperative to build it quickly — and often build it cheaply.

For example, an American architect told the Washington Post that in the US, buildings are typically designed to last 75 to 100 years, with many of the best-known and best-loved buildings, such as New York’s Empire State Building, gracefully entering late middle age. But in China, he said, the private developers often want a building to last 30 years at most.

“Their idea of a building is like a commodity. It’s disposable,” quoted the Washington Post.

“We worked with the local production design firms who handled all of the production and transport issues. We were specified things and they usually ignored us and found a substitute. It was a little frustrating,” Stuart Silk, Principal at Seattle’s Stuart Silk Architects, involved in several major building projects in China, explained to Madison’s in an email.

There are several Canadian agencies, both federal and provincial, working in China to promote and guide wood building. While Forestry Innovation Investment, Canada Wood China, and BC Wood are making great strides in increasing the use of wood in Chinese construction, logistical issues and local government inconsistencies remain significant challenges to builders and architects from North America and Europe.

Madison’s New Product . . .

Madison’s Investment Rx for January compiles the latest movements in solid wood manufacturing, and presents production data, export figures, and US real estate information in a compact report. The first two issues of our monthly Investment Rx will be provided free, as a bonus to subscribers and industry followers.
Check your emails for our new product soon!

Non-subscribing website readers are invited to request a copy of January’s free issue of Madison’s Investment Rx.

Cyclone Yasi, Australia

Howling winds whipped up by Severe Tropical Cyclone Yasi with speeds of up to 290 kilometres (181 miles) per hour ripped off roofs, felled trees and cut power supplies as the storm crossed Australia’s Queensland coast Wednesday. Forecasters had earlier said that Yasi, the first category five storm to hit the area since 1918, was likely to be “more life-threatening than any (storm) experienced during recent generations.”

More than 10,000 seaside residents and tourists were sheltering in 20 evacuation centres across the region — some so packed that people were turned away — while tens of thousands more were staying with family and friends.
Mines, rail lines and coal ports have been shut, with officials warning the storm could drive far inland, hitting mining areas of Queensland state struggling to recover from recent devastating floods.

Queensland accounts for about a fifth of Australia’s economy and 90 per cent of its steelmaking coal exports. Yasi destroyed 20 per cent of Australia’s sugar cane production and 85 per cent of banana supplies that were harvested in Queensland, the hardest hit region..

Australia, Storm Damage

Yasi was set to generate up to 700 millimetres (27.5 inches) of rain and huge and treacherous storm surges of between 2.3 and seven metres (eight to 23 feet) that are threatening to flood towns and tourist resorts.

The storm is so enormous that it would almost cover the United States or large parts of Europe, models published by News Ltd newspapers showed.

Cyclone Yasi may have cost Australia up to US$5 billion in damages after ripping through the country’s northeast, destroying towns and key crops, catastrophe modeller EQECAT estimated Friday.

Damages could cost Australia, still recovering from unprecedented floods, US$3-$5 billion, said the firm, which is heavily relied on by the insurance industry.

A separate modelling firm, AIR, put the estimate much lower at US$340 million to US$1.49 billion.
The storm’s size and power dwarfs Cyclone Tracy, which hit the northern Australian city of Darwin in 1974, killing 71 people and flattening more than 90 per cent of its houses.

It is also twice the size and far stronger than the category four Cyclone Larry that caused US$1.5 billion in damage after hitting agricultural areas in 2006.

North American Winter Storms

The US National Weather Service reported temperatures in the teens and single digits across much of the country, but bone-cracking winds pushed the chill into negative territory for many parts of the Midwest. Ice, snow and the deep freeze continued a week of misery for as many as 100 million people in more than 30 states.
The bitter winter storm stretching 2,000 miles (3,200km) is crippling swathes of the US and has moved into Canada.

Canada, US Stalled Transportation

Many areas grappled with treacherous road conditions after the storm cut a swathe from New Mexico to Maine on Wednesday, paralyzing much of the Midwest. Airlines set about unravelling schedules and getting travelers on their way after more than 10,000 flights were cancelled over two days.

Plummeting temperatures in the central US complicated recovery efforts, touching everything from the winter wheat crop to rail transportation to preparations for the NFL’s Super Bowl on Sunday in Dallas.

In New England, the weight of snow and ice caused dozens of building roofs to collapse, including a large industrial building in Easton, MA.

Subzero temperatures in the Plains hard red winter wheat region on Thursday could harm those portions of the crop unprotected by a blanket of insulating snow, said forecasters Accuweather.

Utility crews raced to restore power to many thousands of homes and businesses in Ohio, New Jersey and Pennsylvania, where freezing rain and ice brought down electrical lines. Rolling blackouts were implemented across Texas, due to high demand during a rare ice storm.

Domtar Reports

Domtar Corp, out of Montreal, QC, has posted net earnings of US$325 million in 4Q 2010 compared to net earnings of US$191 million in 3Q. Sales for 4Q 2010 amounted to US$1.4 billion.
For fiscal year 2010, net earnings amounted to US$605 million compared to net earnings of US$310 million for fiscal year 2009.

Domtar Quarterly

“4Q paper shipments were weaker partly due to seasonal factors, but our average pricing held up well,” said John D. Williams, Domtar President and CEO.

“We were able to post best ever 4Q profit before items even though production related issues resulted in higher than expected maintenance costs. Higher pulp shipments, net of the impact of the sale of the Woodland hardwood pulp facility, helped offset seasonal weakness. In addition, we redeemed all of our 2011 notes, effectively completing our systematic debt reduction program.”

In its outlook, the company said it expects North American paper demand will continue its downwards trend, with a gradual offset by people returning to the jobs market in the US. However, it also cautioned that higher commodity prices could affect costs throughout the year.

Smurfit-Stone Payout

Executives who carried Chicago’s Smurfit-Stone Container Corp out of bankruptcy protection in June 2010 and into an acquisition in January 2011 are poised to reap millions when the company is sold to Rock-Tenn Co.

Stockholders will receive US$17.50 in cash for their shares, and Rock-Tenn stock valued at US$17.50 a share. This amounts to a 27 per cent gain over the closing price of Smurfit-Stone stock on Friday January 21, 2011.

Madison’s Timber Preview January 28 issue examined the Rock-Tenn purchase in detail. Reporter subscribers are invited to request a sample of that issue.

Outgoing CEO Patrick Moore, who had announced plans to retire in March, already was in line for a US$3.5-million bonus for leading the company through bankruptcy. Including stock and options that will vest automatically with the sale, he’ll walk away with total gains of US$59.5 million, according to securities filings.
General Counsel Craig Hunt will receive equity gains worth US$7.2 million, and severance payments worth US$1.7 million if he is not retained by Rock-Tenn or leaves for “good reason,” according to filings.

Tolko Fire

Fire crews from Kamloops, BC spent several hours at the Tolko plywood mill near Heffley Creek Thursday fighting a stubborn fire. Operations Chief Andy Philpot says the blaze broke out in sawdust and other materials that had built-up underneath the lathe.

The weather conditions yesterday helped keep the fire at bay. Once the fire was extinguished, Tolko’s maintenance crews took over.

February 07, 2011

Canadian BEACON Project

An exciting project born out of assessing forest management activity in Alberta 15 years ago has grown into a national initiative to model forest management and conservation planning across the Canadian boreal region. The BEACON project, lead by Fiona Schmiegelow, professor in Renewable Resources at the University of Alberta, uses extensive forest resource inventory (FRI) data to connect management actions to ecological indicators.

Boreal Ecosystems Analysis for Conservation Networks

Established in 2003, the BEACON team is housed with both the Department of Renewable Resources at the University of Alberta, and the Department of wood and forest science at Université Laval.

In a 2004 paper titled “Divided landbase, overlapping tenures, and fire risk“, Steve Cumming and Glen Armstrong wrote, “The forest modelling program was used to investigate the effects on timber supply and delivered wood cost of alternative forest tenure policies on a forest management agreement area in northeastern Alberta. Under the current tenure policy (business as usual), the woodlands divisions of one large pulp company and several sawmill companies are responsible for different aspects of planning and forest management on the area.

“That initial model has grown to be driven by standardized forest inventory data assembled from government and industrial regional and local sources then standardized, and now covers all managed forest lands in the Canadian boreal. Cumming, co-leader of the BEACON project and a professor in the Forest Science Department at Laval University and continuing to build on his graduate work, spoke to Madison’s this week about the model and its usefulness to Canada’s forest industry.

“This goes beyond logging. Our model has the most detailed biophysical data available,” Cumming began. “This model draws from a huge amount of field work done in the past twenty years. Besides tree species, we simulate data like stand dynamics, landscape pattern metrics, forest fire activity, bird distribution, caribou habitat and more to link the health of the forest to wildlife population or wildfire activity. In time we will map and project forestry behaviour plus every ecological process currently being modelled at a better level than current satellite information provides. To date we have data covering most of Canada.”

Using the timber harvest, wildlife, and ecology data assembled, the team’s efforts are rolled into computer program tools that combine growth and yield and spatial forest management models with ideas from economics and wildlife management. They also evaluate tree species models, and conservation planning ideas, wildlife species protection and forest management.

In 2001, an early model was used to simulate the behaviour of the forest industry in response to the state of the forest at any point in time, forest policy considerations, and financial parameters related to the costs of harvesting, log transportation, regeneration, and access development. These were defined by the merchantable forest inventory and the degree of road development. Some modifications from the 2001 version, intended to improve the representation of forest industry behaviour, resulted in significant changes in amount and allocation of conifer harvest and in simulated harvesting costs.

Fast forward to January 2010 when Cumming and his team explain, in their new report entitled “Canada’s Forest Resource Inventories: Compiling a Tool for Boreal Ecosystems Analysis and Modelling” how to take this modelling approach national.

“The specific concern is the provision of appropriate landcover data for various national modelling initiatives.The key is a consistent, national data set of spatial FRI data. This will allow the BEACON team and their [sic] collaborators to link species habitat, forest management, and conservation planning models across essentially all of Canada’s managed forest lands. This will allow tradeoff analyis between forest resource values and e.g. songbird or woodland caribou conservation at national scales. Models based on this digital forest inventory database have spatial and thematic resolution commensurate with forest management planning and are thus of great utility for multiple objectives, including the evaluation of management scenarios at large spatial and temporal scales.”

“The overall idea of this model was to expand on regional studies and incorporate them into a nationwide tool,” explained Cumming to Madison’s. “In the early 1990’s our work was very Alberta-centered. But over the last three years we have engineered the low-level codes to data modelling capability, spatial distribution for most of Canada’s managed forests.

“Within a year or so we will have high level strategic data modelling capability, spatial distribution for most of Canada’s managed forests, and will be able to pinpoint the economic and timber supply opportunities and costs of ambitious new conservation objectives in the boreal. We can then look for ways to minimize the impacts on the timber supply and delivered wood costs.

“While it is not new to link a spatial forest management plan to conservation objectives, the forest base, doing this on a very large extents scale is new, and the linking to systematic conservation planning technology areas is also new at such extents,” detailed Cumming. “These tools identify candidate protected areas, that are usually quite large so that natural processes are potentially sustainable on their own. The trick is to find solutions that work for conservation and for the forest industry.”

Cumming’s experiences in Alberta are an example of why this tool is so valuable.

“The province of Alberta calculates how much white spruce harvest will be allocated to various sawmills within each forest management unit, while another operator is going after pulp logs in the same area,” Cumming explained. “Without integrating these different management activities in time and space, it becomes impossible to manage for wildlife habitat.

“Our models lower harvesting costs while creating much more options for conservation and species protection. Making selections based on looking at individual areas separately is likely generating less revenue and keeping the dollar value of that asset down. At the moment, the way Canada’s forestland is managed by being divided into regions, we are not getting either the most economic benefit or more ecological benefit as opposed to looking at the country as a whole,” concluded Cumming.

Details on the project can be found here:

Cumming kindly forwarded research documents to Madison’s containing a multitude of technical information. Subscribers are invited to request copies from Madison’s.

Madison’s Timber Preview

The surprise announcement late Sunday of Rock-Tenn Co’s purchase of Smurfit-Stone Container Corp sent share prices of several North American packaging manufacturers up. This week’s issue of Madison’s Timber Preview examines the sale, the combined company, and what this could mean for the containerboard industry in 2011.

Contact us any time for a subscription.

Port of Prince Rupert

The Port of Prince Rupert, in northern British Columbia, recorded its strongest cargo volumes ever in 2010, following up on a 12-year high in volumes the previous year.

According to the port, it handled 16.4 million tonnes of cargo in 2010, up 35 per cent over 2009 volumes and the first time it has surpassed 13 million tonnes since 1997. The increased cargo volumes were driven by strong growth in coal volumes through Ridley Terminals Inc. and continued growth in containers at the Fairview Container Terminal, which opened in 2007.

Prince Rupert Port

According to the port, Fairview handled 343,366 TEU’s (20-foot equivalent units) in 2010, a 29.5 per cent increase over container traffic in 2009. Import container volumes grew 24.2 per cent, while export volumes grew 37 per cent.

The port noted that Drewry Publishing, an independent marine consulting firm, in September cited the Port of Prince Rupert as the fastest growing container port in North America and the eighth fastest in the world.

The port stated that Ridley Terminals Inc. handled a record 8.3 million tonnes of cargo in 2010, a 99.5 per cent increase over 2009 and the highest volume handled since its opening in 1984. The port said strong global demand for coal continues to drive growth. However, Prince Rupert Grain volumes decreased 15.5 per cent to 4.3 million tonnes, while log volumes grew 62 per cent over 2009.

In the cruise business, passenger traffic rose 0.4 per cent over 2009, with Prince Rupert welcoming 55,300 guests from 25 cruise vessel visits in 2010.

Community Forestry Meeting in West Kootenays

More than 30 West Kootenay community leaders gathered in Castlegar, BC, on Wednesday for a community dialogue session seeking solutions to the forestry crisis in their region, amid deepening public concern over the state of BC forests.

The working session, titled ‘BC Forests. Our Future’ was organized by the BC Government and Service Employees’ Union and included local MLAs Katrine Conroy and Michelle Mungall, representation from local governments and MP’s office, forest sector unions and non-profit stakeholder groups in the region.

BC Forest Community Leaders Meet

“More than 70 mills have closed and over 40,000 forest sector jobs have been lost since the BC Liberal government came to office,” said BCGEU president Darryl Walker. “Over 1,000 forest ministry jobs have been eliminated. Compliance and enforcement has been dramatically scaled back, while changes to legislation allow forest companies to effectively regulate themselves.

Of the 200 Castlegar area residents polled, 96 per cent said that the forest industry was ‘critically’ or ‘somewhat’ important to them personally, and fully 50 per cent said they have suffered a recent job loss in their family. A staggering 91 per cent of respondents said that forest ministry layoffs were a bad idea. Tellingly, 79 per cent agreed that the Ministry of Forests is not currently fulfilling its public mandate to protect and enhance BC’s forests.

Quarterly Reports

Norbord Inc. has reported a net loss of $2 million in its 4Q, with earnings of $17 million for its entire operating year. Tembec has posted a net loss in its 1Q, ending December 25, 2010, on consolidated sales of $422 million, compared to a net loss of $9 million one year ago.

Norbord, Tembec Report

True North Hardwood Plywood Inc. has announced the winding-down of its hardwood plywood operation in Cochrane, ON. In the fourth quarter, Norbord recorded a $6 million after-tax non-cash provision for its 50 per cent investment in this business.

Norbord’s operating North American OSB mills ran at approximately 90 per cent of their capacity in 2010 compared to 80 per cent in 2009. Including the indefinitely closed mills, North American operations ran at 70 per cent of capacity in 2010, compared to 60 per cent in 2009.

Tembec anticipates better results in the coming quarters. As planned, the Dissolving and Chemical Pulp segment absorbed significant maintenance costs during the quarter. The decline in High-Yield Pulp results was anticipated as hardwood paper pulp markets are seeing more challenging conditions than those of softwood markets.
Corporate expenses included a charge of $4 million for share-based compensation. The share appreciation is consistent with the company’s view that consolidated financial performance will improve significantly in the coming quarters.