Lumber News Archives: Aug 2010

US Real Estate ; BC Wildfires Progress ; US Housing Starts Up; Housing Starts Canada ; USW & CONIFER Bargain Tentative Deal ; Wood Imports, China ; A Look at Paper ; Madison’s Timber Preview ; US Real Estate ; More Wildfires ; Japan Housing Starts ; Global Trade in Softwood Logs ; The Question of Japan ; Wildfires Continue ; Canada’s Forest Industry Transformation Program ; More 2Q Results ; Wildfire Season ; Madison’s Timber Preview ; US Economic Recovery ; Transportation, North America ; Japan SPF J-grade Lumber Prices Soar ;

August 29, 2010

US Real Estate

Figures released Wednesday by the Mortgage Bankers Association show that mortgage applications in the US rose 13 per cent for the week ending August 13, the highest level in 15 months This increase was driven by a 17 per cent surge in applications to refinance home loans, but is still lower than the last big boom during the first three months of 2009. Of total mortgage applications, the share of applicants seeking to refinance a loan rose to 81 per cent, from 78 per cent the previous week. Applications for loans to purchase homes, however, fell by more than 3 per cent, another sign that low rates mortgage rates have failed to spark home sales.

Mortgage Reform

The average rate for a 30-year fixed mortgage dropped to 4.42 per cent in the week ended August 20, from 4.44 per cent, Freddie Mac said in a statement Friday. The average 15-year rate was 3.9 per cent.
Analysts weigh in on the meaning of this activity, particularly in the face of US government movement to further stimulate the US housing industry.

“The flood of refinancing is influencing markets,” says Bloomberg Business Week, August 18. “Government-backed mortgage bonds are underperforming Treasuries amid concern the record-low borrowing costs are leading to acceleration in refinancing. In addition, the inability of some homeowners to qualify for new Fannie Mae and Freddie Mac loans is raising speculation the US will loosen rules, punishing more bondholders as higher yielding mortgages disappear.”

This sentiment is echoed by many economists tracking US home building.

“This is one of the big problems facing the Fed; rates have been low for so long that anyone who needs a loan and can qualify has probably already taken advantage of the low rates,” said Chris Gaffney of Daily Reckoning August 19.

The Obama administration is expected to propose its own reform plan in January, and US Treasury secretary Tim Geithner said on Tuesday, there was a “strong case to be made for a carefully designed guarantee in a reformed system”. Without such support, “future recessions could be more severe”, with greater home price declines and damage to financial wealth, according to the Financial Times.

Industry leaders got a chance Tuesday to put forth ideas on how to fix government-owned mortgage finance giants Fannie Mae and Freddie Mac and the broader housing finance system. Dubbed the “Conference on the Future of Housing Finance,” and moderated by Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan in Washington, DC, the conference is billed as a first step toward housing finance reform.

Pacific Investment Management LLC co-founder Bill Gross, who manages the world’s biggest bond fund and participated in Geithner’s conference, told the Financial Times last week that without government backing for mortgages, he would require borrowers to make down payments equal to 30 per cent of the value of the loan.

Reform of Fannie Mae and Freddie Mac, which have incurred losses of about US$150 billion for the US since being placed under government control in 2008, was left out of the massive financial regulatory overhaul bill enacted last month, but has since risen to the top of the economic and financial policy agenda. The objective of the Fed is to reinvest maturing mortgage debt from its US$2,300 billion balance sheet and maintain its easy monetary policy stance.

The Federal Reserve began buying Treasuries this week as part of its latest effort to ease credit, with the purchase of US$2.55 billion made on Tuesday. A second round of purchases, targetting debt maturing between 2016 and 2020, will take place on Thursday. With the bulk of Treasury purchases in the two- to 10-year sector, this should, in theory, help keep mortgage rates low, as the average life of a US fixed rate 30-year mortgage is about seven years, due to a traditionally buoyant refinancing market. Since the Fed announced the resumption of buying last week, the yield on seven-year Treasury notes has dropped below 2 per cent from 2.23 per cent, while 10-year yields are below 2.60 per cent, down from 2.84 per cent.

In the meantime, many homeowners face negative equity – meaning their mortgages are worth more than their homes – and lending standards have tightened after the financial crisis. In short, people may be going to banks with requests for cheaper home loans, but many banks remain reluctant to approve the new loans. From the investor perspective, prices on many Mortgage Backed Securities (MBS) have fallen recently, as investors lock in the significant profits they have made on the back of expectations of some increase in refinancings and also because they think the government may intervene to encourage banks to approve more refinancing requests.

If the Fed eventually renews its purchase program in a much larger fashion and buys another trillion dollars worth of US Treasuries, it would drive long-term interest rates up much more. Canada’s dollar would strengthen, which would negatively affect Canada’s exporters and manufacturers, already hit hard by Canada’s rising dollar. Moreover, the Fed’s response shows that Canada’s recovery, which has relied primarily on domestic spending, will have to continue to go forward on its own, said Douglas Porter, deputy chief economist for BMO Capital Markets is a statement August 11.

Colin Cieszynski, analyst with CMC Markets Canada, said of the Fed’s announcement: “It suggests that the Fed is prepared to continue supporting the economy. [ . . . ] Rolling over securities the agency currently holds can be seen as continuing current programs and slowing the withdrawal of the previous quantitative easing rather than hitting the panic button and launching a new round of QE.”

The US mortgage bond sector has underperformed, particularly relative to US Treasury debt. As well as the refinancing calculations, the value has been affected by the Federal Reserve’s latest shift in monetary policy. Specifically, there will be increased supply for mortgage investors to absorb after the Fed said last week it would reinvest the proceeds and cash flows it receives from MBS on its balance sheets into US Treasuries, not MBS. This means that the Fed is essentially putting on a trade which is widely used by investors – it is going short MBS and going long US Treasuries.

As this strategy pushes down Treasury rates, it could further entice homeowners to refinance, according to the Financial Times.

BC Wildfires Progress

Up to 300 of Canfor’s forestry workers in Vanderhoof and Houston, BC, have been pulled off the job due to extreme forest fire risk, as fires in the area burn across 20,000 hectares of forests. It’s possible hundreds of Canfor workers in other regions of the province could also be pulled from the woods, said Canfor spokesperson LeFebvre to CTV.

“We are looking at active growth on all of our fires,” said BC fire information officer Gwen Eamer. The flames were fuelled by a cold front that brought gusting winds up to 40 kilometres an hour in the fire-ravaged northern and central region overnight on Wednesday.

One section of the Pelican Complex fire in the Cariboo region devoured 15 kilometres in under two hours. Fire crews were holding the Meldrum Complex fire from jumping the Fraser River on Thursday, after being pulled off due to safety concerns late Wednesday.

In the northwest, fire crews were avoiding the erratic front of the four large fires, tackling the sides of the blaze instead. The growing Binta Lake fire, 200 kilometres west of Prince George, forced people out of another 32 homes and placed an additional 335 residences on evacuation alert.

US Housing Starts Up

US housing starts increased more than expected in July, as building permits dropped. Housing starts increased by 1.7 per cent, to a seasonally adjusted annual rate of 546,000, the Commerce Department said Tuesday. Single-family housing starts dropped 4.2 per cent to an annual rate of 432,000.

Housing Starts, US

US housing starts, year over year, were down 7 per cent in July. While single-family housing starts in July dropped, groundbreakings of homes with five or more units surged by 17 per cent.

Building in coming months will likely be sluggish, as the latest data showed July building permits fell 3 per cent to an annual rate of 565,000.

The National Association of Realtors last month said the 3.99 million previously owned homes for sale at the end of June would take about 8.9 months to deplete at the June sales pace. That’s the highest monthly supply since August 2009.

On Monday, the National Association of Home Builders said US home-builder sentiment dropped for a third straight month in August to the lowest level in nearly a year and a half.

Housing Starts Canada

Canadian new home construction fell to its lowest level in seven months in July, Canada Mortgage and Housing Corp. reported August 10. New housing starts fell 1.6 per cent in July to a seasonally adjusted annual pace of 189,200 units on a drop in single-home construction.

Canada Home Building

“The pace of housing construction activity continues to bestrong, but is slowing across the province,” stated Ontario Home Builders’ Association President James Bazely in response to the CMHC numbers.

“Many economic indicators are trending upwards, however the recovery remains fragile and the second half of the year is unlikely to be as strong as the first half.”

Bazely cautioned that while housing starts are strongly correlated with job creation, it is a lagging indicator and reports from new home sales offices across the province suggest that demand is slowing slightly.

USW & CONIFER Bargain Tentative Deal

The USW BC Interior Bargaining Committee and the Council on Northern Interior Forest Employment Relations resumed talks last week and Tuesday concluded a tentative agreement. The new deal is modelled on the Interior Pattern Agreement and contains all the gains made in prior bargaining, says a USW press release.

Labour Contract

Details released so far reveal a 4-year agreement that greatly enhances job security and union security provisions that significantly improve contract language surrounding the permanent and/or partial closure of lumber manufacturing operations.

In addition to 2 per cent wage increases in the 3rd and 4th years, a profit pay plan may provide additional compensation as the industry recovers.

The USW Bargaining Committee is recommending the membership ratify this tentative agreement.

Wood Imports, China

China’s wood imports for the first six months of 2010 continued to show robust demand, says the Japan Lumber Reports, noting that imports from North America have exceeded Russian volumes. Growth of lumber imports into China is astonishing and expectations for the end of 2010 are at 13 million cubic metres, a record high.

Full-year log imports will likely be 32 million cubic metres, the same as 2006, according to China Wood.

For the first six months of 2009 China imported 909,000 cubic meters of lumber products from Canada, compared to 1.6 million cubic metres for the same time period in 2010, a 176 per cent increase. Imports of lumber from the US increased by 170 per cent, to 593,000 cubic metres.

Imports of logs from Canada rose by 227 per cent, while those from the US rose by 344 per cent. Log imports from Russia fell slightly for the same time period.

August 22, 2010

A Look at Paper

Madison’s usually reserves examination of pulp and paper industry developments for intermittent issues of the bi-weekly Madison’s Timber Preview, however recently released inventory figures seem fitting this week as content for the Lumber Reporter.

Printing and Writing Paper Shipments

This week pulp prices began their expected drop; most analysts agree pulp will see a downward slide for a year, after a unusual propping-up through 2009 due to new demand out of China. However chips and sawmill residue continue to be scarce, due in large part to continued high pulp production and new demand from biofuel producers globally. Pulp price tracker printed Tuesday a US$1.40 drop in North American NBSK price to US$977.50 per metric ton, which is still up US$178.86 since the beginning of this year. Informed pulp market watchers expect continued softening over the next year. In Europe the drop in pulp price this week is even more pronounced, by US$8.19, to settle at US$1011 per metric ton, which is US$181 above the beginning of 2010. The fact that pulp prices in Europe surpassed US$1000 per metric ton recently is a bit surprising. Even the most bullish analyst did not expect that. Significant softening of pulp prices in Europe over the next year will doubtless occur.

The paper grades, both in Europe and North America, have begun to recover nicely from the downturn of the past two years.

“Although the shipments of newsprint to the US market are still down against the weak 2009, the rate of decline has turned flatter and flatter,” proclaims FOEX. “[ . . . ] Utilization rates are recorded as high as 101 per cent.”

Disciplined curtailments and an increase in US demand have driven the price of benchmark 30 lb newsprint up US$1.60 this week to US$602.30, up US$83.20 from the beginning of 2010. Madison’s Reporter subscribers are invited to request the July 30, 2010, issue of Madison’s Timber Preview, which details recent movements in the major paper grades both in Europe and North America.

Building on improvement already underway in early 2010, containerboard prices continue to firm. A leading indicator of boxed shipments, therefore factory sales and consumer demand, European containerboard prices rose €4.50 this week to €530.36 per metric ton, a €114.32 increase on the beginning of the year.

“In Europe, [ . . . ] the 40 per cent plus growth in printing and writing paper demand added over 1.3 million tons of paper. In the US, paper production is estimated to have grown by more than 1 million tons, or 8 per cent, during the first six months of 2010, and in paperboard the gain was about 2 million tons, or 11 per cent,” explains FOEX.

According to the American Forest & Paper Association’s June 2010 US Paperboard Report released July 19, total boxboard production increased by 3 per cent compared to June 2009, but 2 per cent from last month. Year-to-date production was up 4 per cent over 2009. Total US industry consumption of recovered paper, meanwhile, was 2.6 million tons, an increase from June 2009 of 6 per cent, and relatively flat from May 2010. The US consumed 8.2 per cent more recovered paper in the first 6 months of 2010 than during the same period last year, according to the June 2010 Recovered Paper Monthly Report published July 22 by the AF&PA.

Preliminary printing and writing paper shipment figures for July were released August 12 by the AF&PA, showing continued growth but at a slower rate.

“This was the ninth straight month that US printing and writing papers were positive after declining the prior 21 months in a row. However, after five straight months of double-digit year-over-year shipments growth, July’s rate was barely positive compared to June,” said Chip Dillon, research analyst for Credit Suisse, in his August 12 letter. “The AF&PA reported preliminary printing and writing paper shipments from the US mills of 1.48 million tons in July, up 0.9 per cent from July 2009’s total shipments of 1.47 million tons.”

“Lightweight coated paper shipments increased by 11 per cent compared to July 2009 and 21 per cent since the beginning of 2010 and coated free sheet shipments increased by 7 per cent year-over-year and 24 per cent since January 2010. A good portion of the improvement in coated papers is due to ‘lapping’ of extremely weak numbers in 2009,” detailed Mark Wilde, research analyst at Duetsche Bank, in his letter also on August 12.

“Even though pulp prices are correcting — we see a total of US$100-$200 per tonne by year end — coated paper prices are just starting to rise and we see this trend continuing,” concludes Dillon.

In its 2Q 2010 results released August 11, Verso Paper, out of Memphis, TN, reported coated paper volumes up 39 per cent since the beginning of 2010. Based on higher volumes, significantly lower inventories, and declining imports, analysts expect coated groundwood prices to increase into 3Q and 4Q 2010 by US$50 and US$90 respectively, to US$915 per ton in 3Q and US$953 per ton in 4Q.

“Verso’s coated groundwood inventories are only half the level seen a year ago. Should demand for catalogues be stronger than currently anticipated, there is the potential for a growing shortage of coated paper in the US. However, given the sluggish nature of the economic recovery, we currently do not see such a scenario,” concludes Wilde.

Smurfit Kappa Group’s operations earned profits of €206 million in the first six months of the year, according to company financial statements released August 12. The Ireland-based company reported that sales in the first half of 2010 grew 7 per cent to €3.2 billion, from €3 billion during the same period last year. Strong prices for its paper and packaging products helped boost operating profits in the first six months of 2010 by 22 per cent to €206 million, from €170 million during the first half of 2009.

Packaging and paper products company Cascades, out of Kingsey Falls, QC, posted a better-than-expected 2Q 2010 profit on higher demand and selling prices, and forecast a sequential rise in profit, according to an August 11 company press release. Q2 shipments were up 9 per cent compared to 1Q 2010, and total sales rose 2 per cent to C$998 million for the same time period.

After an abysmal 2008 and an even worse 2009, such recovery in the paper sector bodes well for increased demand for sawmill residue, specifically chips.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines recent movement by Mississauga, ON’s, Sino-Forest Corporation to grab large share control of three timberland holding companies out of China, one with significant timber rights in Suriname. Glowing 2Q 2010 financial results, including net earnings compared to 2009, are detailed.

Contact us any time for a subscription.

US Real Estate

The number of US homes lost to foreclosure surged in July as lenders took back more properties from homeowners who were in default for months on end. Lenders repossessed 92,858 properties last month, up 9 per cent from June and an increase of 6 per cent from July 2009, foreclosure listing firm RealtyTrac Inc. said Thursday.
Major US banks wrote off approximately US$8 billion on mortgages in the first three months of this year, on track to repeat – or even surpass – last year’s full-year total of US$31 billion.

Home Sales, US

Among states, Nevada posted the highest foreclosure rate in July, with one in every 82 households receiving a foreclosure notice. The number of properties in Nevada receiving a foreclosure warning last month rose nearly 7 per cent from June, but fell nearly 30 per cent from the same month last year.

Meanwhile, Housing prices firmed in 2Q 2010 — mostly due to the extension of the first time home buyer credit and low mortgage rates, according to a survey released Wednesday by the National Association of Realtors.
The NAR said 100 out of 155 metro areas saw higher median home prices compared to a year ago, and distressed sales were down four per cent from last year.

“Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes on the market we don’t expect any consequential movement in home prices for the foreseeable future,” NAR Chief Economist Lawrence Yun said.

More Wildfires

With the hottest weekend of the year approaching in British Columbia, Ministry of Forests and Range staff are reiterating warnings about preventing human-caused forest fires. There is a zero expectation of precipation for almost the entire province, and temperatures are expected to soar to between 20 and 31 degrees Celsius for significant portions of the Interior, both north and south, and for the mid-coast.

Meanwhile, Heavy downpours cooled Russia’s capital after weeks of no rain and unprecedented heat, but dozens of wildfires still rage around Moscow on Friday and a new blaze was spotted near the country’s top nuclear research centre.

Wildfires Globally

Russia’s Emergency Situations Ministry said its teams have managed to reduce the area covered by wildfires, but more than 500 are continuing to burn across the country, including 29 around Moscow. About 14,000 firefighters are battling blazes around the Russian capital.

Russia was receiving help from the United States, which on Friday began deliveries of firefighting equipment valued at US$2.5 million, the US Embassy said. The state of California also has contributed fire-protective clothing.

A new wildfire also started east of the nuclear research facility in Sarov, 300 miles east of Moscow. The blaze spread quickly, prompting firefighters in the region to call in reinforcements from neighboring areas.
Two firefighters have been killed battling forest fires in Spain that officials suspect were started deliberately. The blazes broke out on Thursday night near a village in the Pontevedra province, in the Galicia region, and had been fanned by shifting gusts of wind.

They have now been brought under control but over 250 acres of forest has been left burnt and blackened.
Authorities in Portugal struggled Thursday to contain wildfires sweeping across northern parts of the country.

The Civil Protection Service said it was fighting 29 wildfires in forests parched by weeks of hot, dry weather, including the hottest July in almost 80 years.

More than 600 firefighters, more than 200 vehicles and nine aircraft were deployed, the Civil Protection Service said on its website. Army bulldozers were cutting firebreaks in the northern Peneda-Geres protected nature reserve where they helped extinguish one of two wildfires.

Japan Housing Starts

According to Japan’s Ministry of Land, Infrastructure, Transport and Tourism report published on July 30, June housing starts in Japan increased after the decline in the previous month to 68,668 units, up 0.6 per cent from the same month a year earlier, according to the Japan Lumber Journal.
However, the seasonally-adjusted annual rate fell below the 800,000-unit mark for the third consecutive month, with 750,000 units.

Housing Starts Japan

By construction method, prefabricated houses increased 8.3 per cent in the wake of the previous month to 11,417 units . Two by four houses marked the fifth consecutive month of year-to-year increase, of 6.3 per cent, with 8,842 units. Wooden houses increased for the sixth consecutive month, by 1.7 per cent, to 40,748 units, according to the Reports.

Consequently, the share of wooden houses is 59.3 per cent, which is nearly five points higher than the rate for June 2009, which was 54.6 per cent.

Global Trade in Softwood Logs

Higher worldwide demand for forest products has increased global shipments of softwood logs by 20 per cent in 2010, reports the Wood Resource Quarterly. This year may be a turning point for global log trade, which had fallen 30 per cent between 2007 and 2009.

August 15, 2010

The Question of Japan

Madison’s noted with great interest the absolute upset of Japan’s leadership in that country’s August 30, 2009 general election. News that the Liberal Democratic Party’s (LDP) 50 year reign had ended prompted expectations of a new direction for the Japanese government, particularly in economic policy. Enactment of changes stagnated, however, and on June 2, 2010 new Prime Minister Uukio Hatoyama resigned due to broken campaign promises. The July 11, 2010 blow for the ruling Democratic Party of Japan (DPJ) in upper house elections, leaving it without a majority, casts further uncertainty on future policy decisions.

Lumber Demand

China has recently surpassed Japan as the world’s second largest economy. Analysts speculate that once Japan recovers from its ‘lost decade’ it will again rise to the world’s number two position, although a strengthening Yen may hold back the rate of Japan’s growth.

Japan’s demographics show that housing has been more underbuilt for longer than in the US, meaning Japan is poised for an increase in new home building. The latest lumber import figures and, possibly more important, increases in domestic lumber prices, seem to bear out this theory.

As detailed in the July 30, 2010 issue of your Madison’s Lumber Reporter, domestic lumber prices in Japan saw increases of US$50 per cubic metre in 3Q 2010 negotiated prices, due to several busy months for Japan’s large component companies which has depleted stocking inventories.

After falling steadily from 2006 to 2009, North American lumber imports into Japan rose almost every month in 2010, from 214,000 cubic metres in January to 239,000 cubic metres in May. Total Japanese lumber imports from North America for the first five months of 2010 is 1.0 million compared to 2.3 million cubic metres for the entire year of 2009, according to the Japan Lumber Journal.

Japan’s North American log imports for the first five months of 2010 were 1.1 million cubic metres, rising from 230,000 in January to 295,000 cubic metres in May. Total North American log imports for 2009 were 2.5 million cubic metres. Russian log imports into Japan, meanwhile, continue to suffer due to uncertainty about the high raw log export tax in that country. In 2006, 4.8 million cubic metres of Russian raw logs were imported into Japan, by 2009 that number fell to just 632,948 cubic metres. In the first five months of 2010, only 206,344 cubic metres of logs were brought from Russia to Japan, according to the Japan Lumber Reports.

In negotiations between German whitewood buyers and Scandinavian shippers, lumber shippers argued that not only had log procurement costs continued to rise but also that considerably improved sales alternatives existed on markets inside and outside Europe. In Japan in particular, Scandinavian shippers have registered noticeable growth in demand over the course of the last few weeks, a trend that has been used for corresponding price increases there as well, according to the July 29, 2010 issue of EUWID.

On July 30, 2010 Japan housing starts figures showed a 0.6 per cent increase from a year earlier, the first year-on-year rise in two months. This growth was helped by government subsidies and tax breaks for energy efficient homes. Starts had declined 4.6 per cent in May, the Ministry of Land, Infrastructure, Transport and Tourism reported. Annualized housing starts in June totalled 750,000, increased from 737,000 in May.

By contrast, construction orders received by big 50 contractors declined in June after increasing in May. Orders were down 10.2 per cent compared to a 9.2 per cent rise in May. Building construction orders fell 13.4 per cent annually, reversing last month’s 33.5 per cent growth.

Owner-occupied houses in Japan rose 4.4 per cent compared to June 2009 at 27,656 units, the eighth consecutive monthly gain. New houses for rent fell by 10.9 per cent compared to one year earlier at 24,871 units, down for the 19th straight month. Condominiums and houses for sale rose 24.6 per cent at 15,705 units, the fourth consecutive year-on-year rise.

In terms of effect on North American lumber and panel producers, Canfor, West Fraser and Interfor reported in 2Q 2010 results that consistent demand out of Asia is helping bolster Canadian lumber production and prices.
“The resilience of the offshore market is expected to persist as strong lumber demand continues in China and Japan for both housing construction and remanufacturing and Do-It-Yourself markets,” explains Canfor’s July 29, 2010 press release.

“Shipments to Japan and China increased 18 per cent in the quarter from the previous quarter and nearly 60 per cent from levels reached in the comparative period in 2009,” detailed West Fraser’s July 22, 2010 press release.

“Pacific Rim markets including Japan and China accounted for 21 per cent compared to 23 per cent of lumber sales in the first quarter. [ . . . ] In terms of volumes, there was an overall shift in markets from North America to Pacific Rim markets including Japan and China compared to 2009. Excluding wholesale programs, shipments to North America accounted for 76 per cent of all shipments for the first half, 2010, with 22 per cent of total shipments destined for the Pacific Rim markets, as compared to 81 per cent and 16 per cent respectively for the comparative period in 2009,” explained Interfor’s July 22, 2010 press release.

Lumber and log demand in Japan suffered greatly in 2008 and 2009. While indications of recovery are starting to show it will likely be 2011 before a return to healthy lumber import figures in Japan. Meanwhile, the beginning of its increase in demand for North American lumber helped Canadian producers through the turbulent first two quarters of 2010.

Wildfires Continue

Russia and British Columbia in particular continue to suffer from hundreds of out-of-control forest fires.
Dozens of incoming flights were diverted from Moscow’s Domodedovo and Vnukovo airports on Friday as smog brought runway visibility down to 200 metres. The emergencies ministry said more than 500 separate blazes were burning nationwide on Friday, mainly across western Russia.

At least 52 people have died and 2,000 homes have been destroyed in the fires.

Yuri Besedin, a Moscow emergency official, said: “All high-temperature records have been beaten, never has this country seen anything like this, and we simply have no experience of working in such conditions.

Besedin said 31 forest fires and 15 peat bog fires were burning in the Moscow region alone.

Most of BC’s fires are concentrated in the Kamloops, Cariboo and northwest areas.

On Thursday, the number of active blazes held steady around 400, said BC fire information officer Gwen Eamer. “I know that number doesn’t sound good, but we’ve been getting about 40 to 50 new fires everyday, so the fact we are holding steady at 400 is decent,” Eamer said.

But with “volatile” fire activity in the Cariboo region, the total number of hectares of provincial forests burned jumped to 93,350 hectares from 77,500 on Tuesday, she added.

More than 200 fire personnel from the United States, Ontario and Alberta have arrived to help battle the province’s wildfires. There are about 2,000 B.C. fire officials already in the field.

Wildfires continued into Thursday evening northwest of Edmonton, AB, near Peace River and Lesser Slave Lake, a provincial government wildfire report said.

Fire officials directing crews battling a wildfire in central Oregon say fire containment lines held Thursday without any significant growth in the fire’s perimeter.

Canada’s Forest Industry Transformation Program

The Government of Canada launched a $100 million program Monday to help expand opportunities for Canada’s forestry sector through the development of innovative projects and technologies.

The purpose of the IFIT program, which was first introduced in Canada’s Jobs and Growth Budget 2010, is to demonstrate and deploy new and advanced technologies in the forest sector through investments in innovative processes.

Canadian Forestry Funding Program

The goal is to encourage the development of a wider range of innovative technologies, which would help secure a more prosperous future for Canada’s forestry industry and the communities who depend on it. Forest sector companies that have existing facilities in Canada, including those that have been recently affected by the global economic downturn, could be eligible for IFIT support.

“As the forestry sector expands the number of innovative products it produces and sells around the world, new employment opportunities will emerge,” said the Honourable Denis Lebel, Minister of State for the Economic Development Agency of Canada for the Regions of Quebec. “While the traditional industry continues to thrive, positions for workers with technical and market knowledge will emerge.”

More 2Q Results

Ainsworth Lumber said Thursday it lost $17.8 million in 2Q 2010, hurt by a foreign exchange loss on its long-term debt, compared with a profit of $24.7 million a year ago. The results included a $23.1-million charge related to foreign exchange, compared with a gain of $46.6 million a year ago. Sales totalled $96.1 million, up from $70.8 million.

Domtar Corp. earned US$116 million on revenue of US$1.5 billion, up 17 per cent from one year ago. In May Domtar reinstated its dividend at a quarterly 25 cents a share and announced a US$150-million share buyback.

Weyerhaeuser Company last Friday reported net earnings of US$14 million for 2Q 2010 on net sales of US$1.8 billion,compared with a net loss of US$106 million on net sales from continuing operations of $1.4 billion for the same period last year.

Financial Results

Excluding these items, Weyerhaeuser reported net earnings of US$42 million in 2Q 2010.
Louisiana-Pacific Corporation reported also last Friday results for2Q 2010. Total sales of US$447 million were up 67 per cent versus a year ago, led by higher OSB prices while US housing starts increased 12 per cent from 2Q 2009 levels.

For the quarter ended June 30, 2010, LP reported net sales of US$447 million, an increase from US$267 million in 2Q 2009. For the second quarter, the company reported operating income of US$49 million as compared to a loss in 2Q 2009 of $32 million.

For the second quarter of 2010, LP reported income from continuing operations of US$24 million as compared to a loss from continuing operations of $27 million for 2Q 2009.

For the first six months of 2010, LP reported income from continuing operations of US$1 million as compared to a loss US$58 million for the first six months of 2009.

August 10, 2010

Wildfire Season

As of Friday morning, there were 279 wildfires burning in British Columbia, 175 of which started over the last three days. Since April 1, crews around the province have responded to 943 wildfires, of which 469 have been human-caused and 462 lightning-caused. These fires have burned a total of 38,821 hectares.

A 2.25 square mile blaze near Tehachapi, CA, about 70 miles north of Los Angeles, on the western edge of the Mojave Desert was 25 per cent contained Thursday after burning about 30 homes and other structures in a scattered community called Old West Ranch. To the north, a fire that destroyed eight residences and a few outbuildings as it spread across about 25 square miles of the Sequoia National Forest in the Sierra Nevada was 12 per cent contained Thursday.

“Wildfires can start in an instant. As we move into the hotter, drier summer months, be prepared to leave in a moment’s notice when camping, hiking or otherwise enjoying BC’s backcountry,” said BC Minister of Forests and Range, and Integrated Land Management, Pat Bell in a Ministry press release Friday morning. “The public needs to be extra vigilant and understand the risks when operating in or enjoying forested areas.”

Unstable Weather

Nearly 5,000 acres burned and four homes were lost Wednesday in a forest fire near Boise, ID, where lightning touched off the blaze, which went whipping through dry sage and brush that’s extra-thick after this year’s cool, wet spring. A 2,200 acre fire in the remote John Day River canyon in Eastern Oregon was started by lightning strikes Tuesday and is making short runs in steep rocky terrain covered with grass, sagebrush and juniper. Two structures are threatened. So far 121 people, three helicopters and five engines are fighting that fire, and there has been no containment. The Bass River blaze, near the Garden State Parkway in Pennsylvania, burned 677 acres and was 80 per cent contained by Wednesday morning.

In this, Russia’s hottest summer on record, peat-bog fires are burning outside Moscow, shrouding the city in smog. On Tuesday wildfires destroyed about 20 houses in neighboring small village Vladimirskaya. There were no reported deaths or injures. Forecasters say that temperatures in Moscow will hit 40 degrees Celsius (104 degrees Fahrenheit) in the coming days and then the heat wave may subside.

A six acre woodland fire in East Sussex, UK, is being battled by to 30 firefighters. Crews from Tunbridge Wells, Wadhust, Forest Row and Heathfield have been using specialist equipment to contain the fire.

In the province of Alberta there are 49 wildfires burning, 36 of which were caused by lightening, including a 330-square kilometre blaze about 13 kilometres northeast of Suncor Energy’s Fire Bag project.

Ontario is assisting Manitoba’s forest fire fighting efforts. On July 25, two CL-415 water bombers, one Bird Dog aircraft and an Air Attack Officer were sent to The Pas, Manitoba. As well, twenty FireRangers and one Agency Representative were sent to Thompson, MB.

A wildfire has caused the closure of a main highway heading into the Yukon. Highway 37 is closed from a point 30 kilometres south of the Yukon border all the way to the border crossing. The only other route into the Yukon is via the Alaska Highway, a detour of more than 1,700 kilometres.

In British Columbia, this has been “a pretty good fire season so far. We had a lot of moisture in June especially in the south. But July was hot and dry,” Minister of Forests and Range, and Integrated Land Management, Pat Bell told Madison’s Thursday afternoon. “This weekend will determine the outcome of the fire season. We have some unstable weather, some lightening strikes, and some human-caused fires. If we can get through this weekend, into mid-next week, without too much damage then this year’s fire season will be not bad.”

The BC Ministry of Forests has 150 staff out patrolling to make sure people abide by the total fire ban, said Bell.
Tuesday night a 53 hectare wildfire in Kamloops, BC, forced the 1 a.m. evacuation of Wilson’s mobile park and kept several hundred city residents on evacuation notice through Wednesday. Late Wednesday, air tankers were battling another wildfire estimated at 100 hectares on the southeast corner of Bonaparte Lake, about 65 km north of Kamloops. Firefighters from Kamloops Fire and Rescue, two 20 unit crews from the BC Forestry Service, five helicopters, two bush trucks, and two water tankers worked on that fire throughout the day. The Jade wildfire in Yalakom Valley jumped to 1,000 hectares Wednesday morning and remained at about 15 per cent contained by evening.

An estimated 125 firefighters, eight helicopters and 10 heavy equipment units are working the fire which was ignited July 21 by a lightning strike. An aggressive fire northwest of Lillooet is still estimated at 1,000 hectares in size and is 15 per cent contained.

Lightning strikes caused an estimated 165 new wildfires in BC’s Interior overnight Wednesday, prompting officials to issue two new evacuation orders and call in aerial reinforcements as hot, dry weather continued to blanket the province.

While many of the new fires burning across BC remain small, officials say nearly 20 notable fires pose a potential threat to the public.

“As of today BC has spent a total of $31.5 million in fire-fighting expenditures, compared to $70 million in 2009. Its costing $1.5 million per day to fight fires,” continued Bell.
“Wildfires can start in an instant. As we move into the hotter, drier summer months, be prepared to leave in a moment’s notice when camping, hiking or otherwise enjoying BC’s backcountry,” said Bell in a Ministry of Forests and Range press release Friday morning. “The public needs to be extra vigilant and understand the risks when operating in or enjoying forested areas.”

Since 2004 the province has provided $37 million to local governments to help pay for interface fire preparation.

“That funding has enabled communities to tackle the immediate surrounding area, the fire interface zone, to reduce the fuel load,” Bell explained. “The Kamloops fire Wednesday was quickly brought under control because that community has done a lot of work to remove the low value residual fuel.”

John Betts, Executive Director of the Western Silvicultural Contractors’ Association, explained to Madison’s in an interview in January 2010 the significant danger of that residual fuel.

“A few years after mountain pine beetles attack a tree, the red needles littering the forest floor, as well as the dead grass, can flame like crazy. At first the grass grows because when the pine needles fall off the sun shines through to the forest floor. But come winter that grass dies. A fire here is of more intensity and severity than one in a green forest,” Betts cautioned. “Residual wood on the ground actually burns the soil, which may harm the site and reduce productivity in the future.”

When asked about the weather forecast, Bell said, “Right now it is hotter and dryer than normal, and there is some unstable weather conditions.”

Residents are advised to practice extreme fire safety methods, and to immediately report any smoke and fire they see.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines recent increases in newsprint prices in North America and Europe, and newspaper company share price improvements.

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US Economic Recovery

Recovery of the US economy lost momentum in the spring as growth slowed to a 2.4 per cent pace, its most sluggish showing in nearly a year and too weak to drive down unemployment. Consumers spent less, companies slowed their restocking of shelves and the nation’s trade deficit dragged more on the economy in the April-to-June quarter. In a separate report, the Commerce Department said Friday that the recession was deeper than previously estimated.

US Economy

The US Commerce Department report did offer some encouraging news. Businesses invested the most in 13 years on equipment and software during the second quarter. For the first time in two years, builders boosted spending on commercial projects. And home builders spent the most in 27 years, although many expect that to fade now that government homebuying tax credits have expired.

The report also showed that the economy grew at a 3.7 perc ent pace in the first three months of this year. That was much better than the 2.7 per cent pace estimated just a month ago.

Much of the expansion was driven by the government’s massive $862 billion stimulus package of tax cuts and increased spending. Also, companies helped energize growth with a burst of spending to replenish inventories that were cut down during the recession.

Demand for durable goods dropped one per cent last month to a seasonally adjusted US$190.5 billion, the Commerce Department said Wednesday. It was the second straight monthly decline and the largest drop since August, 2009.

Transportation, North America

The cost of shipping consumer goods from Asia to Canada is surging, with another price increase kicking in next week, as freight forwarders face a shortage of containers this summer and autumn.

Canadian Pacific Railway Ltd. brought in $1.2 billion in revenue in 2Q 2010, a 20 per cent increase over 2009, as most of its segments showed improvements.


The market is bustling for “intermodal freight,” or goods transported inside standardized metal containers that are readily transferred between ships, trains and trucks. CP reported Wednesday that it had $336-million in intermodal freight revenue in the second quarter, up 14.5 per cent from the same period last year.

In 2Q 2010, Calgary-based CP’s profit jumped 23 per cent to $166.6-million, beating analysts’ estimates. RBC Dominion Securities Inc. analyst Walter Spracklin said to the Globe and Mail the adjusted share profit of 92 cents shows CP’s strength, considering that flooding forced the shutdown of the railway’s main line in southern Alberta for 11 days in June.

“Our progress is on track,” said CP CEO Fred Green. But he cautioned that demand for the railway’s services will be volatile due to “limited visibility” on the global economy.

Grain transport was the only one of seven business segments at Canadian Pacific to show any drop in revenue, and the decline was a relatively small $10 million.

Meanwhile, the Calgary-based railway’s revenue from coal, automotive and intermodal freight all showed marked improvements.

Japan SPF J-grade Lumber Prices Soar

Large compenent companies in Japan have had several busy months and inventories are down, at the same time Japan’s currency rose to 90 yen against the US dollar, according to the Japan Lumber Reports.

Spruce Lumber Japan

3Q 2010 negotiations on SPF lumber settled at about US$500 mmfbm(nominal C&F) on 2×4-8ft and about US$600 on 2×10, while stud prices are about US$530, says the Japan Lumber Reports.

Busy component companies are hasty to secure future volume, especially in the face of a rising yen.
In Japan there is concern about the production of J-grade lumber in North America due to low lumber prices locally.

In a usual seasonal building cycle, Japanese demand for 2×4 lumber increases toward autumn as housing starts rise, which is making component companies very worried about the J-grade lumber supply, explains the Reports.