Lumber News Archives: Nov 2010

Canadian Wood Export ; Madison’s Timber Preview – Restructuring Completed ; US Housing Starts ; Consultation Period Expires ; Steelworkers Respond to Interior Forest Labour ; AFPA 3rd Quarter Wood Building Promotion ; Cargo and Reload; Canadian Housing Starts ; Mountain Pine Beetle Fight Progress in Alberta ; Japan Housing StartsNorth American Transportation ; Madison’s Timber Preview – US Economic Indeces; Quarterly Reports ; BC Trade Mission to China ; AbitibiBowater Explosion at Plant, Restructuring ; BC Lumber Trade Mission ; US Coated Paper Duties ; US New and Existing Home Sales ; US Foreclosure Troubles Continue ; Loss Norbord ; Canfor, West Fraser Report Harvest vs Salvage ; Madison’s Timber Preview : Timberland Value 2011 ; US Home Building ; Pulp and Paper Products Council September Release ; US Mortgages, Update ; Interfor Reports

November 29, 2010

Canadian Wood Export

India’s rapidly growing economy and vast army of low-cost labour indicates great potential for the wood products sector, declared Bob Flynn, Director of International Timber for RISI in an October 28, 2010 press release. In addition, forecasts of a rapid influx of rural workers into urban areas will likely mean, as it did in China, greatly increased demand for wood for housing construction and furnishings. Like China, India has a long-term shortage of wood supply, and although imports of wood and wood products into India are currently far behind China, all signs point to India as being the next big market for log and (perhaps) lumber imports.India’s population currently stands at 1.14 billion, and is projected to be 1.53 billion by 2030. Total softwood log imports have grown by an estimated 38 per cent per year from 2004 through 2010. Demand is forecast at 1.2 million cubic metres of softwood log imports in 2010.
If India’s demand grows at even half the rate of China’s over the past decade, then competition in the global log markets is going to become very intense in the future, according to The Economist, a US magazine.

To India

However a silly bureaucratic error is preventing western Canadian lumber producers from shipping their products into India. Madison’s was first alerted to the problem at the beginning of this year and is disappointed to find out that Canadian officials have as yet made little progress in getting India’s wood import requirements corrected (please refer to the February 5, 2010 issue of your Madison’s Lumber Reporter for details).

“In June 2008, it was identified that India’s plant health regulations did not list Canadian spruce or cedar species as approved. [ . . . ] until such time that these species are added to India’s approved import list, they are in essence barred from shipment to India,” Cheekwan Ho, media spokesperson for the BC Ministry of Forests, Mines, and Lands informed Madison’s in February. “India recently published a draft notification proposing the addition of the outstanding spruce component to India’s plant health regulations.” Meanwhile no such barrier exists for US producers shipping the exact same species from south of the border.

On October 22 in downtown Vancouver Forest Innovation Investment, the Canada Wood Group, and BC’s Ministry of Small Business, Technology and Economic Development hosted a Roundtable Discussion on India. VP’s, managers, and heads of export for almost all lumber companies with operations in BC were there, as well as representatives from COFI, the Canadian Consul to India, plus others were present. Madison’s was delighted to be included as the only media present, especially considering that the day turned out to be very informative.

To counter this simple bureaucratic omission, Brian Zak at the CWG has been working tirelessly with officials from the Canadian and Indian sides since May 2009. Suffice to say the list of correspondence exchanged on the subject is over voluminous.

Apart from the glaring error of missing species, another lumber import hurdle involves getting India to accept heat treatment alone instead of fumigation plus heat treatment for the Canadian species that are allowed as is currently required. Zak was expecting an answer in the next Gazette Notification to be issued by India the following week.

The other main hurdle is the length of time it takes to get a Pest Risk Assessement from India’s Plant Protection Advisor, usually at least a year. Canadian officials have been assured by Indian representatives that red and yellow cedar would be given a priority.

Madison’s learned last week that the latest Gazette Notification from Inida, issued in mid November, still did not include the missing three Canadian spruces. However there has been progress in completing the pest risk assessments for western cedar.

During the roundtable discussion in October it became clear that there are other difficulties involved in shipping lumber from Canada apart from India’s customs officials not being able to find significant species on their approved list and a stringent requirement for both heat treatment and fumigation of the other Canadian species. While demand for wood in India is rising, there is not currently much desire for framing lumber. It seems there is a basic lack of understanding of the properties of wood for building in that country. At the moment demand is mainly for finishing products.

Further, freight to India is about double of that to China added to which there is rarely anything to put into a container on its way back to North America so the charge may be even higher. Roundtable participants agreed wholeheartedly that in this situation only higher grades, specifically shop lumber, will be profitable to send into India.

“We have a customer for all the low grade and utility lumber we can produce,” said one trader. “We don’t need another China.” Enthusiastic agreement all around.

Another hurdle to selling wood into India is the lack of infrastructure. The channels of distribution are not efficient, at each junction there is a markup.

“The eventual customer could end up paying four times more for the product than the importer did,” explained a Canadian lumber exporter to India who made a special trip from Ontario just for this discussion.

Heads turned sharply and at least one trader mumbled, “That’s a tremendous opportunity.”

Madison’s saw the majority of participants jot down the dates of the next major wood products conferences and trade shows in India, no less than four are taking place between December 1, 2010, and February 17, 2011. Each of which will have a major presence by various Canadian federal and provincial agencies including Forest Innovation Investment, Canada Wood Group, BC Wood, and/or the Forest Products Association of Canada.

Madison’s Timber Preview : Restructuring Completed

Of the North American forestry companies that filed for bankruptcy protection in the past several years, AbitibiBowater seems to be having the most trouble satisfying creditors with the terms of its restructuring. This week’s issue of Madison’s Timber Preview examines developments late Thursday in the courts, and looks at the current situation with other companies recently exiting bankruptcy proceeding.

Contact us any time for a subscription.

US Housing Starts

Construction of new homes in the US fell sharply in October, fresh evidence that the housing industry remains under duress. The US Commerce Department said Wednesday construction of new homes and apartments sank 11.7 per cent last month to a seasonally adjusted annual rate of 519,000 units.
The decline marked the poorest showing since April 2009, when construction dropped to 477,000 units – the lowest level on records dating back to 1959. Construction of new homes and apartments is 77 per cent below its peak during the housing boom of 2.27 million units in January 2006.

US Home Building

CMHC said the moderation in housing starts reported in October is consistent with its annual forecast of 184,900 units.

US Building permits, a forward-looking indicator on the health of the housing market, offered little reason for hope of an improvement anytime soon. Building permits edged up 0.5 per cent from September to an annual rate of 550,000.

The housing market is struggling to recover from the collapse of a price bubble in 2006. The high number of homes on sale at relatively bargain prices, weighed down by a flood of foreclosures, is hampering demand for new construction.

“This report was not as bad as the headline number suggests,” said Patrick Newport, US economist at IHS Global Insight.

Newport noted that permits were more important than starts because they are better measured, are less affected by seasonality, and are forward looking.

“Single-family permits — the most important number in this report — rose 1 per cent, the first increase in seven months,” he said.

“Going forward, the permits numbers point to flat housing starts numbers over the next two to three months.”
The National Association of Home Builders reported Tuesday that its monthly index of builders’ sentiment remained in the doldrums with a reading of 16 in November, up only slightly from an October reading of 15.

Index levels below 50 are seen as reflecting a negative outlook for housing on the part of the builders.

Consultation Period Expires

The 40 day consultation between Canada and the US under the terms of the 2006 Softwood Lumber Agreement expired last week. Officials at the US Coalition for Fair Lumber Imports explained to Madison’s in a phone interview that the Coalition understands the formal Consultations were unsuccessful, and that Canada did not respond to questions.

The next step would be for the US to file a formal request at the LCIA for arbitration on the difficult issue of log grading in BC, which the Coalition expects to happen “fairly quickly”.

Softwood Lumber Arbitration

“This is a fact-intensive issue,” explained Zoltan van Heyningen, spokesperson for the US Coalition to Madison’s in a phone interview. “The US Trade Representative is operating normally. The facts requested from BC were not received, as far as we can see Canada seems determined to simply push the ball further down the road.”

During the consultation process BC officials did not explain why the US may be wrong about its belief that there is a violation, which suggests to Madison’s that a formal request will be made from the US government for an international tribunal. Once arbitration is launched the LCIA could possibly request that data.

“I believe strongly that we have continued to meet our obligations in providing the requested information to the USTR,” said BC’s Minister of Forests, Mines, and Lands, Pat Bell, to Madison’s in a phone interview. “There should not be arbitration.”

“Should legal action be launched, BC will defend its position vigorously. Unless the LCIA requests new information, BC would provide the same data to the international tribunal as it did to the USTR.”

“BC has complied to the rules we signed on to in 2006, the US has to demonstrate any wrongdoing,” concluded Bell.

Steelworkers Respond to Interior Forest Labour

Talks broke down Wednesday afternoon between the Interior Forest Labour Relations Association, representative for most of British Columbia’s southern interior lumber producers, and the United Steelworkers Union.

“After inviting the Union to resume bargaining in late October, the southern interior company association has now—after only a few days of meaningful bargaining—turned their backs on the Union’s attempt to meet and maintain the northern interior pattern agreement,” according to a USW bulletin obtained by Madison’s.

Labour Trouble

“Surprisingly, this third-rate employer position is endorsed by the same IFLRA members Tolko Industries and West Fraser Mills who consider the pattern fair for their northern interior employees but sadly, too good for their southern interior counterparts,” continues the USW bulletin.

“The USW across the province of BC has tried hard to enter a new and better labour relationship model, and I hope that applies here as well,” said Pat Bell, BC’s Minister of Forests, Mines, and Lands to Madison’s in a phone interview.

“It is in the best interests of everyone to have labour stability,” continued Bell. “This may be a flurry of rhetoric for now, I hope calmer heads will prevail in the future.”

The USW bulletin concludes with the statement, “Local Unions in the southern interior will be seeking a mandate from their members.”

“The employer’s group took a turn for the worse Wednesday,” explained Bob Matters, Chair of the Steelworkers Wood Council, to Madison’s in an phone interview. “It was a regressive proposal.”

“We are going to take time to communicate with union members to make sure they have all the information, no matter how long that takes.”

“We can’t ensure production and delivery will continue uninterrupted before a collective agreement is signed,” concluded Matters.

Due to schedule constraints, Madison’s was unfortunately unable to reach an IFLRA spokesperson by press time Friday.

AFPA 3rd Quarter

Total shipments of lumber, panelboard, pulp and paper manufactured by Alberta Forest Products Association-member companies in 3Q 2010 rose modestly over 2Q and increased significantly compared to 3Q 2009, according to an AFPA statement released Friday.

The improvement in shipments and revenue was due largely to strong prices in the pulp and paper market and increased production of lumber.

AFPA-member companies shipped 732.5 million board feet (mmfbm) between July and September 2010 with a value of $169.6 million. Part of this production came from the secondary manufacturing sector. Total shipments were up 7.23 per cent from Q3-2009 and 0.74 per cent from Q2-2010.

November 22, 2010

Wood Building Promotion

A private members’ bill to promote the use of wood building put to Parliament in the spring is being met with opposition by Canada’s steel industry. Bill C-429 was introduced in the House of Commons by Gérard Asselin (Manicouagan, Bloc Québécois), and on April 21, 2010 passed the first vote. The Bill has now been read a second time and referred to the Standing Committee.

In order to improve employment prospects in northern Québec’s hard-pressed lumber industry, Asselin wants to amend the federal Public Works Act to make wood a ‘preferred’ building material for any new government buildings or repairs. With the legislation, Public Works and Government Services would have to consider using wood to build two new office towers in Gatineau, or to repair the decrepit parliamentary precinct. The bill takes its lead from countries like France, Norway and Sweden, as well as Quebec and British Columbia.
Public Works spends several hundred million dollars a year building, renovating and fitting up buildings for federal occupancy, but that’s a drop in a bucket for a $50-billion forestry industry.

In Canada’s Parliament

The bill, which has already cleared two of three required readings in Parliament and clause-by-clause committee review, is being opposed on several grounds including trade and economic policy, materials science, and basic fairness. Opponents have banded together as the Coalition for Construction Fairness.

Sault Ste. Marie MP Tony Martin (NDP) has decided to vote against the Bloc MP private member’s bill.

It was apparent in the committee testimony that there was confusion among even its supporters whether they wanted wood simply to be considered, or on equal footing to other construction materials, or to be preferred. Witnesses noted the proposed bill likely contravened domestic and international trade agreements, could drive up costs by excluding material choices, undermine the national building code, and limit design freedom for construction professionals.

There was also no mention of the origin of wood to be used in government buildings.

Martin said the bill has “tied Parliament in knots,” to the Ottawa Citizen. He argues MPs couldn’t vote against a bill that supports a product as Canadian as wood — especially coming from Quebec, where thousands of forestry jobs have been lost.

“MPs are painted into a corner. You couldn’t vote against it and now we’re stuck with it,” he said. “And I have no qualms saying it’s stupid and we have been hoisted on our petard by respecting a parliamentary member and not wanting to offend the forestry industry and Quebec … it’s not too often you get two sacred cows in the same bill.”

“I come from a lumber producing area and I love wood … but there are such a host of unintended consequences and problems this could create,” said Conservative MP Chris Warkentin also to the Ottawa Citizen.

“This isn’t the best thought-out national policy I’ve seen,” said Hamilton Mountain MP Chris Charlton (NDP) to “It’s a very impractical bill – you’re not going to construct a 20-storey office tower out of wood.”

Charlton sees the bill as a “one off” attempt to deal with a larger issue — the fact that strategically important Canadian industries such as steel and forestry products are being sold off to foreign companies that cut jobs in Canada. Dealing with that, she said, requires a national industrial policy.

Hamilton East-Stoney Creek MP Wayne Marston (NDP) also said he plans to vote against the bill, as he has at every other stage of its review.

“My position remains the same, I’m opposed to it,” he said. “I’m from Steel Town and this calls for a priority that I can’t accept.”

David Sweet, MP (Conservative) for Ancaster-Dundas-Flamborough-Westdale and the area’s lone voice on the government benches, is also opposed to the idea, adding the government has already given $1 billion to aid to the forestry sector since 2007 along with tax breaks on machinery.

“We need to look at legislation that is fair and will have positive outcomes and this isn’t it,” he said.
Canada’s steel industry has joined a coalition opposed to an effort to making wood the material of choice in federal government building projects. Members of the coalition include trade associations for the iron and steel, concrete, cement, civil engineering and iron workers industries among others.

In a letter to Members of Parliament ahead of an expected vote this week, the coalition urges them to defeat the bill on the grounds that any jobs it creates in lumbering districts will be offset by losses in other areas; it contravenes government procurement policies, and requiring one material over another undermines the national building code.

“To say it politely, we don’t support this,” said Ron Watkins, president of the Canadian Steel Producers’ Association to “We think anything that favours workers in one section over workers in another is bad public policy. We think all construction materials should operate on a level playing field.”

Steel products supplier ArcelorMittal Dofasco, out of Hamilton, ON, spokesperson Andrew Sloan said his company joined the coalition because it sees any public policy that favours one sector over another as fundamentally unfair.

“The economy in the fourth quarter for a lot of our businesses isn’t looking good and the last thing we need is another hurdle,” Sloan said. “It seems the rocky road to recovery is going to be a little rockier than some people imagined.

“What we want is to be able to compete on a level playing field,” he added.

Steel for construction, Sloan said, accounts for about one-third of ArcelorMittal Dofasco’s volume “so this would set a very bad precedent.”

A wood preference policy is discriminatory and will increase federal construction costs, said Stephanie Rea of the Canadian Construction Association to the Ottawa Citizen. Her group argues the bill limits the freedom of architects, designers or contractors to select the best material for a buildings use.

Wood can’t work for everything and being forced to use it could cause malfunctions and failures, and drive up costs. It also gives an “advantage” or protection to one industry at the expense of others, which violates the principle of fair and open competition, she said.

In fact, the construction industry faces enough turmoil and giving wood preferential treatment could push other businesses into bankruptcy and wipe out jobs.

Cargo and Reload

Eastern stocking wholesalers say they are always learning. “If we can’t learn something every day, we might as well quit,” said one trader. NAWLA was summed up as a useful experience where all were in good spirits. The main topic of discussion was offshore markets, especially China. Log shortages were also high on the list of worries as many offshore customers outbid domestic mills. Whether they plan to buy KD or green lumber, fir or hemlock, most customers realize they will be paying more next year for coastal lumber. The customers that plan ahead and put their orders in place early will benefit.

Canadian Housing Starts

Canadian home construction in Octosber fell to its lowest level in more than a year.Canada Mortgage and Housing Corp. reported Monday that the seasonally adjusted annual rate of housing starts was 167,900 units in October, down from a revised 185,000 in September, a decline of 9.2 per cent.

Housing Starts, Canada

CMHC said the moderation in housing starts reported in October is consistent with its annual forecast of 184,900 units.

Looking ahead, the association predicts housing starts could decrease by another 100,000 units or so, becoming more closely aligned with demographic demand which is currently estimated at about 175,000 units per year.
The annual rate of urban starts decreased 12.3 per cent to 142,400 units in October. Urban multiple starts fell 15 per cent in October to 84,700 units, while singles slipped eight per cent to 57,700.

Rural starts were estimated at an annual rate of 25,500 units in October.

“Starts of single-detached units had fallen by 39 per cent, while multiple unit starts had moved up by 29 per cent. While the former comes as no surprise as the resale market cooled considerably, the uptrend in multiple units had been more of a head scratcher. Multiple unit starts made up 60 per cent of total starts over the last four months, well above the average 50 per cent since 2000, noted Toronto-Dominion Bank senior economist Pascal Gauthier. “

Mountain Pine Beetle Fight Progress in Alberta

Alberta is making good headway in its fight against mountain pine beetle infestations, as revealed by Government of Alberta aerial surveys conducted across the province since July. The aerial surveys, completed in August and September, pinpoint locations and counts of trees attacked in 2009 and 2010. Results are combined with the findings of beetle population trend surveys conducted last spring to determine where and how much removal of infested trees will occur in the coming year. Operational plans for removing infested trees will be developed this autumn.

Alberta Pine Beetle

Alberta credits the reduction on its aggressive efforts to remove attacked trees before the insects could spread again, as well as extreme temperature fluctuations last winter that increased the beetle’s natural mortality rate.

A controlled burn program in forested areas east of Saskatchewan River Crossing has contributed to keeping the beetles out and forestry plans can be manipulated to tackle vulnerable areas and eliminate any infected trees that are found, Alberta Sustainable Resource Development Public Affairs officer Duncan MacDonnell said from his office in Edmonton on Tuesday.

The province is focusing on keeping existing infestations under control while arming as much as possible against incoming beetles, said MacDonnell. The program currently includes removing all infected trees as they are found, he explained.

There’s no hint of mountain pine beetles in the Clearwater Forest. Keeping it that way is an ongoing challenge, said Tom Daniels, forestry superintendent for West Fraser Timber in Sundre, AB, to the Red Deer Advocate Wednesday.

West Fraser is co-operating in every way possible with Alberta SRD’s measures to control existing infestations and prepare for potential inflights from British Columbia.

But officials warned pockets of infested trees remain uncut and the spread from British Columbia may resume next year.

“We had some success this year, but the battle is far from over,” said Mel Knight, Alberta’s Sustainable Resource Development Minister.

Pine beetles threaten up to 6 million hectares of forest in Alberta, and have removed some 400,000 beetle-infested trees since 2006.

Japan Housing Starts

September new home building in Japan jumped 17.7 per cent compared to the same month in 2009, to 71,998 units, according to the the Ministry of Land, Infrastructure, Transport and Tourism.

Home Building, Japan

Seasonally adjusted annual starts for October were at 837,000 units, the fourth straight month for increases. Floor space also increased, for the seventh straight month.

September starts for condominiums were more than double than in September 2009, and over 10,000 units for the first time since February 2009. Condos increased by 5,843 units compared to August.

Wood based units had a 57.1 per cent share of all construction, a slight drop over the previous month due to the amount of new condo building, while 2×4 units increased by 14.5 per cent, the eight straight month of increases.

Building permits fell by 14.9 per cent, to 48,357 units, compared to September 2009.

November 15, 2010

North American Transportation

British Columbia’s Minister of Forests, Lands, and Mines, Pat Bell, is not the only government official currently leading an industry trade mission to Asia.

Shirley Bond, BC Minister of Transportation and Infrastructure departed November 1 with senior executives from Pacific Gateway partners Port Metro Vancouver, Port of Prince Rupert, Canadian National, Canadian Pacific, Burlington Northern Santa Fe Railway, and Vancouver International Airport for the 10-day trade mission, which includes Korea, Japan, Hong Kong and China. The purpose of the trip is to grow business at BC ports and expand Asia Pacific trade.

Total tonnage handled at Port Metro Vancouver and Prince Rupert Port is up by nearly 20 per cent and 34 per cent respectively from 2009.


Manitoba is pushing hard to turn Canada’s Arctic into an international trade zone, and aims to transform Winnipeg into an air-cargo hub to and from Asia, while converting the underutilized Port of Churchill into a bustling site handling containers of consumer goods from China. Delegates from China, Russia and Nunavut will join political, academic and transportation leaders from Manitoba next week to develop plans to create the Canadian Arctic gateway to Asia.

Manitoba’s inland port at Churchill on Hudson Bay handled its second-highest volume of wheat in over 30 years during the port’s 2010 shipping season, the Canadian Wheat Board reported Thursday, making this the second busiest season for the port since 1997. In total, 20 ocean vessels loaded wheat or durum at the Hudson Bay deep-water port this season, bound for Europe, Africa and the Americas.

The Canadian National Railway Company and North America Stevedoring Company announced Monday the construction of a new multi-modal steel transloading facility in Chicago, IL. The new facility will be located at the Port of Chicago on 190 acres of land adjacent to CN’s Kirk Yard and Interstate 90, roughly 13 miles south of downtown Chicago. It will offer producers multi-modal transportation options by rail, truck, intermodal container, inland barge and ocean-going vessel for steel products, as well as dimensional loads and heavy equipment, as early as January 2011.

“This partnership will benefit our 25-marine-terminal network beyond the Great Lakes and St. Lawrence Seaway system, enabling the growth of our steel-handling business. It could be the first stepping stone to future expansions along CN rail corridors,” commented Denis Dupuis, founder and President of QSL, a partner in the construction project.

Trade using surface transportation between the United States and Canada and Mexico was 25.3 per cent higher in August 2010 than in August 2009, reaching US$68 billion, according to US Bureau of Transportation Statistics data released Tuesday. The value of US surface transportation trade with Canada and Mexico in August 2010 remained 5.9 per cent below the August 2008 level. In August, 86.3 percent of US trade by value with Canada and Mexico moved on land. The value of US surface transportation trade with Canada and Mexico in August was up 12.9 per cent compared to August 2005, and up 35.1 per cent compared to August 2000. Imports in August were up 29.3 per cent compared to August 2000, while exports were up 42.5 per cent.

US–Canada surface transportation trade totaled US$39.9 billion in August, up 21.1 per cent compared to August 2009. The value of imports carried by truck was 23.2 per cent higher in August 2010 compared to August 2009, while the value of exports carried by truck was 19.8 per cent higher during this period.

Denny Slagle, President and CEO of North American Trucks, the parent company of Mack Trucks and Volvo Trucks North America, sees the on-highway market leading recovery of the housing market and therefore the construction sector, according to the November 3 issue of

Pointing out that the US fleet is now almost eight years old on average, Slagle said there is huge pent-up demand out there, and noted that Mack’s order intake in 3Q 2010 was up 86 per cent compared to the same quarter in 2009, and 40 per cent higher than 2Q 2010.

“The construction market is still way off,” he says. “There are still problems with the housing market, and that’s holding everything back. We might see something of a comeback by 2011, possibly not until 2012. We just don’t know.”

Preliminary data from FTR Associates, out of Santa Fe, CA, indicates that class 8 truck total net orders for all major North American original equipment manufacturers in October amounted to 18,386 units, a 22 per cent increase over the previous month. October was the third consecutive month showing month-on-month increases. Net order activity for the latest six-month period, including October, annualizes to 171,662 units. The figure includes the US, Canada, Mexico and exports.

Eric Starks, President of FTR, said in an interview with Automotive World, “Increased order activity in October was in line with expectations and is consistent with FTR’s current forecast of only a modest increase in demand for equipment in 2011. Typically October is a seasonally strong month for orders with November the strongest order month of the year. Therefore, if November orders do not surpass October by several thousand units that would suggest that many fleets are holding back on buying equipment.”

Commercial Vehicle Group, out of New Albany, OH, Wednesday reported revenues of US$150.9 million for 3Q 2010, compared to revenues of US$110.8 million for 3Q2009. The company currently expects North American class 8 production units to be approximately 155 thousand for the full year 2010 and in the range of 220 to 230 thousand units for 2011. As of September 30, 2010, the Commercial Vehicle Group reported a positive cash balance of US$43.8 million.

“We are pleased to see the continued signs of recovery in several of our key end markets and the benefits of our profit improvement initiatives, which are reflected in our positive results,” said Mervin Dunn, President and CEO.

Goodyear Tire & Rubber Company showed unit sales of original equipment manufacturers tires gained 12 per cent and of replacement tires 3 per cent in 3Q results released October 28. The segment’s operating income increased by US$3 million to US$5 million, owing to improved price/product mix, higher sales and production volumes as well as decreased pension expense and benefits from cost reduction actions.

Madison’s Timber Preview : US Economic Indeces

This week’s issue of Madison’s Timber Preview takes a deep look at movement in the US economy, stock market reactions to further US Federal Reserve stimulus, and various indeces tracking forestry and US home building and remodeling.

Contact us any time for a subscription.

Quarterly Reports

Third quarter earnings results poured out this week from North American forestry companies, solid wood and pulp and paper producers alike.

Domtar Corporation has reported net earnings of $191 million in 3Q compared to net earnings of $31 million for 2Q 2010 and net earnings of $183 million for 3Q 2009. Sales for 3Q 2010 amounted to $1.5 billion.

Smurfit-Stone Container Corporation has reported net income of US$65 million for 3Q 2010, compared with net income attributable to common stockholders of US$1.41 billion, for 2Q 2010, and US$65 million for 3Q 2009.

Western Forest Products is reporting a net income of $6.9 million in 3Q on sales of $175.5 million. For comparison, in 2Q2010, the company reported a net income of $9.5 million and a net loss was reported for 3Q 2009 of $16.6 million.

Catalyst Paper has reported a net income of $6.0 million in 3Q on sales of $322.3 million. This result contrasts with a net loss of $368.4 million on sales of $299.4 million in 2Q.

NewPage Corporation has reported a net loss of US$67 million in 3Q on sales of $943 million. These results can be compared to a net loss of US$138 million in 3Q 2009 on sales of US$791 million.

3Q Results

Fibrek Inc, formerly SFK Pulp, has reported a net earning of $3.8 million in 3Q, compared to a net loss of $14.5 million in 3Q 2009. Consolidated sales reached $132.2 million, an increase of $19.4 million when compared with sales of $112.8 million in 3Q 2009. This increase is mainly attributable to higher pulp prices and a favourable sales mix of $39.0 million, which was partially offset by a lower sales volume of $12.2 million and an unfavourable exchange rate of $7.4 million.

Ainsworth Lumber Co. has recorded a net income of $10.1 million in 3Q 2010, compared to net income of $22.3 million in 3Q 2009, despite an increase in gross profit of $6.0 million. This reduction is primarily due to a $30.0 million decrease in the unrealized foreign exchange gain on long-term debt.

BC Trade Mission to China

An agreement signed Tuesday with Beijing National Building Materials shows that Chinese interest in Canadian construction technology and BC wood products is reaching new heights, the Honourable Christian Paradis, Canada’s Minister of Natural Resources, and BC Forests, Mines and Lands Minister Pat Bell announced. The agreement is for BNBM to build a wood-frame building in Beijing with technical support from Canada Wood China.

418 Million Board Feet of BC Lumber Sold to China

In a separate announcement, Pat Bell said the opening of a roof truss manufacturing facility in Langfang City is driven by the growing success and demand for wood truss roofing systems in China.

The Hebei government owns the truss plant and is responsible for the land, factory setup and all other equipment and labour. A key step in manufacturing a roof truss is the use of a roller press, a large piece of machinery that completes the assembly process. Forestry Innovation Investment’s China office provided a $30,000 roller press to the facility and Canada Wood Group will provide technical training to operate the press.

The plant has the capacity to manufacture 400 roofs per year from structure-grade lumber.

One highlight of the mission involved a groundbreaking for a wood-frame construction project in the Tianjin Economic Development Area, 160 kilometres southeast of Beijing. An agreement for a multi-storey, wood-frame construction project was just signed in March, and now construction is starting on a residential building and two office buildings.

TEDA is one of most rapidly expanding areas in China and has experienced an increase in GDP of 22.5 per cent each year over the last five years. Senior TEDA officials also indicated their interest in establishing a free trade zone for lumber, which would provide a gateway to northeast China for BC lumber producers.

AbitibiBowater Explosion at Plant, Restructuring

A coal-bunker explosion and fire late last week at the Bowater Newsprint Calhoun Operations plant in Ohio seriously injured a Bradley County volunteer firefighter employed at the paper mill who was responding to the emergency. Bowater employee Phillip Shelton, who also serves on the plant’s Emergency Response Team, suffered second-degree burns to his face, arms and back, and was flown to Erlanger Medical Center for treatment. Shelton is also a volunteer fireman.

The fire is currently being investigated.

In other news, A hearing is scheduled this Friday before the chief US bankruptcy judge for the District of Delaware. A decision concerning the future of Abitibi-Bowater’s holdings — including its paper mill in Iroquois Falls — gets closer as the company is set to argue this week in support of its restructuring plan.

The US court began examining the restructuring plan on September 24, after the Quebec Superior Court gave its approval.

November 8, 2010

BC Lumber Trade Mission

Previously-owned home sales in the US were up 10 per cent in September compared to August, to a greater-than-expected 4.53 million units. That brought the supply of homes on the market to 10.7 months, according to data released Monday by the US National Association of Realtors. Home inventory figures are based on current rate of sales. As new and existing home sale figures continue to rise that 10 month unsold inventory will drop in the blink of an eye. Median home prices fell 2.4 per cent in September, to US$171,700, compared to one year-ago. Analysts are predicting US home prices will bottom out in 2011, without indicating in which part of 2011 this bottom would materialize.

Lumber Demand in China

From another source, the US Department of Commerce released new home sales figures on Wednesday for September, up 6.6 per cent, to 307,000, from August. The supply of new homes for sale dropped 1 per cent, to 204,000, bringing the DOC’s calculation of supply down to 8 months, at the current sales pace, from 8.6 months in August. The median sale price for new homes climbed 1.5 per cent, to US$223,800, in September.

Albeit small, this latest improvement of the US real estate market, combined with the slight increase in housing starts for September, offers a glimmer of hope that the long-awaited, likely slow, recovery of the US home building industry could be coming. This during the very same week that Pat Bell, freshly appointed to the newly-combined British Columbia Minister of Forests, Mines and Lands, embarks on a 10-day trade mission to China with lumber industry representatives from around the province of BC. With a mandate to increase lumber sales and strengthen industry-to-industry commercial relationships in China, Bell and the other participants intend to spur the increase of BC lumber sales overseas. Dependance on the US home building industry for Canadian lumber producers, while still very important, should lessen further with the success of this latest trade mission.

Trade figures released October 18 by the BC Ministry of Forests show that August was another record-breaking month for BC softwood lumber exports to China, with 257 million board feet exported over a one-month period. Exports to China through the first eight months of 2010 are valued at about $342 million, up 71 per cent, compared to $200 million for the same period in 2009. BC lumber producers had already sold nearly 1.5 billion board feet and are on track to reach somewhere in the neighbourhood of 2.5 billion board feet this year, according to the release.

During a press conference call Tuesday morning, Pat Bell explained that this latest trade mission will be going “beyond Bejing. We are visiting Chengdu, the capital of Sichuan, the province hit hardest by the 2008 earthquake. We are also visiting Hebei Province and the bordering municipality of Tianjin.”

This trade mission will build on the work of previous missions, which demonstrated and promoted use of wood in home building and assisted Chinese officials in changing building codes to encourage wood use. Bell and other delegates will meet directly with developers in China and focus on the supply chain for wood products, as well as holding further meetings with government officials.

“Already since our last visit to Sichuan a rehabilitation centre and a senior’s centre are being built from wood, in addition to a school which is completed and currently in use,” said Bell. “There are 4 million new housing units built annually in China, usually around 1,000 square feet in size, which is a potential 10 million square metres in new building. The developers we are meeting represent 40 per cent of China’s construction industry, or about 100,000 to 300,000 units each. We project 4 billion mfbm in wood products’ exports from BC to China in 2011.”

“Right now home building in China is virtually all concrete and steel,” responded Bell to Madison’s question about the nature of the 4 million new housing units annually. “Of the 10 million new housing starts, 6 or 7 million will be six-storey walk-up apartment buildings. Our push is to get the top two floors made of wood, or even for hybrid construction of the entire building.

“We are in close contact with the Chinese officials responsible, they strongly advocate wood construction, and are prepared to push hard promoting wood building. There has already been a change to the national building code to allow for the use of wood, and regional codes have recently followed suit.

“We have undergone a logical shift now to work with the developers, who have been supportive of using wood in home building. If we can break into wood use for six-storey buildings, demand will far outstrip potential supply.”

Accompanying Bell on this trade mission are veterans of previous trips and some first-timers, including the CEOs of Canfor, Conifex, Hampton, Interfor, Tolko and West Fraser. They are joined by senior representatives from six forestry trade associations, the United Steelworkers and research institute FPInnovations.

Madison’s spoke to participants in the busy days of preparation for the Thursday morning departure.
Glen Wilson, President of Overseas Sales for Interex Vancouver, is going for his fourth or fifth time visiting China, “third time with this mission.”

“Interex is exclusive export representative for five BC companies that are shareholders,” explained Wilson to Madison’s in a phone interview. “Our objectives this time are: first, to support government and industry projects currently underway in China and, second, to continue to explore accelerating the development of wood housing in China.

“The site visits and meetings with related developers and Chinese officials will develop and build on work already done to promote wood building. Each time I go over it gets easier, there is more awareness of the product and what it can do, and a broadening of the people involved that understand working with wood.

“We are going to identify opportunities for the manner of wood construction,” detailed Wilson in response to Madisons’ question. “Will there be a lot of single-family home building? Resort and clubhouse style? Higher end? Or the top two floors of six-storey buildings? Interest is growing in using wood, right now there is comparatively very, very little wood building. Changes to the building codes, awareness of what the product can do, and proven results bring interest in the success of using wood for building in China. There are a number of things that are coming together to further increase interest.

“When Chinese customers use wood for whatever purpose, whether crates and pallets or concrete forming, an appetite develops for wood in general,” concluded Wilson. “My real interest is in wood housing; that’s what helps my group the most.”

Frank Everitt, President United SteelWorkers Local 1-424 in Prince George, will be making his first visit to China.

“Other IWA executive members, along with Jack Munroe, travelled to China and Japan in 1976,” said Everritt in a phone interview with Madison’s. “I talked to Jack a couple of weeks ago and he thought this is a good opportunity. We look forward to enhancing BC forestry workers’ position in China, to be selling more wood. It is a huge market there that we want to capitalize on.

“The bottom line is if Chinese customers are more familiar with using wood in general the more positive will be the response. We are going to work hard so the BC Ministry of Forests’ 2011 lumber exports projection turns out to be accurate.

“Traditionally demand from China is for low grade lumber and logs,” replied Everritt to Madisons’ question. “We are going to expand their knowledge of the range of products available, particularly from the BC interior. Log exports benefit nobody domestically, that causes a lot of problems here. We want to export finished products.

“The entire production of those Canfor and Tolko mills that reopened this year is going to China, that is all grades. This is the kind of business we are aiming for in the future.”

Jim Hackett, President of the Interior Lumber Manufacturers’ Association, is also making his first visit to China. “Last year our Chair Mark Semeniuk went.”
“The ILMA represents 14 firms in BC that produce pulp, value added lumber, and structural framing,” Hackett told Madison’s in a phone interview. “We are looking for opportunities, especially for the smaller dimension lumber firms, for new markets in China. Market conditions are changing and expanding rapidly. We will be giving value-added products more of a push, while the veneer and plywood products will probably take a back seat as there is significant production already in China for those commodities. We will be leaving no stone unturned, because the alternative of waiting for 3 or 4 years before US housing starts creep back up to 1 million annualized is just too far in the horizon.

“I will size up the market opportunities for the relatively small producers I represent who export around the world. I will be seeking out opportunities for the lower end producers and will come back with leads for them to contact, new customers in China, concluded Hackett.”

US Coated Paper Duties

The US International Trade Commission has found that imports of coated paper from China and Indonesia are causing material injury to US producers and workers.

The ITC decision, released Friday, clears the way for the US Department of Commerce to impose antidumping and countervailing duties on imports of coated free sheet paper from these countries. On Sept. 21, 2010, the agency issued its final determination citing imports from China and Indonesia as being both dumped and subsidized by significant margins.

“NewPage is very pleased with the International Trade Commission’s finding on injury,” said George Martin, NewPage President and CEO.

The Commerce Dept found that producers or exporters dumped coated paper in the United States at margins of 7.6 to 135.8 per cent for China, and 20 per cent for Indonesia. The agency also determined that these producers or exporters received countervailable subsidies ranging from 17.6 per cent to 178 per cent for China, and 18 per cent for Indonesia.

US New and Existing Home Sales

Sales of previously owned US homes rose 10 per cent in September to an annual rate of 4.53 million units, the National Association of Realtors said on Monday. It was the second monthly gain and far outstripped economists’ expectations for an increase to a 4.30 million-unit pace.

US new home sales rose by 6.6 per cent to an adjusted annual rate of 307,000, the Commerce Department release Wednesday. That left sales off 13.3 per cent from the same month a year ago, when buyers were rushing to capitalise on the first-time homebuyer tax credit.

Real Estate, US

Meanwhile, US mortgage applications for home purchasing and refinancing rose last week as consumers sought to take advantage of near-record low interest rates, data from the Mortgage Bankers Association showed on Wednesday.

According to CoreLogic, home prices fell by 1.5 per cent across the country compared to last year, although individual markets experienced steeper drops. Of the 100 metropolitan districts surveyed by the company, 78 recorded a fall in real estate values, the research found.

US gross domestic product grew at a 2 per cent pace during the three months ending in September 2010, according to the Bureau of Economic Analysis. That beats the second quarter’s 1.7 per cent pace.
US exports grew 1.2 per cent in 3Q, which was slower than the prior quarter’s 2.2 per cent pace. Imports also grew in 3Q, by 4.1 per cent.

US Foreclosure Troubles Continue

US state attorneys general investigating foreclosure practices may begin meeting with lenders this week, less than a month after JPMorgan Chase and Bank of America suspended some home seizures.

Mortgage Foreclosures, US

The federal government reported Friday that 4.2 million homeowners are “seriously delinquent” on their mortgages and some 10.9 million borrowers are underwater, meaning their loans exceed the value of their homes.
In Arizona, California and Nevada, foreclosure auctions on courthouse steps, known as trustee sales, are down 42 per cent since September 20, according to ForeclosureRadar, a real estate tracking service in Discovery Bay, California.

In a real estate market where as many as 7 million homes face foreclosure or have already been seized by lenders, according to Zillow Inc, a clog in the pipeline may delay a housing recovery, which won’t occur until home prices stop falling. Distressed properties accounted for 31 percent of all US home sales last month, RealtyTrac Inc. said October 14.

Bank of America froze 102,000 foreclosures nationwide on October 8 to review its procedures, and has now started the process of preparing affidavits for resubmission to courts.

Meanwhile a group of mortgage investors seeking to pressure lenders to buy back potentially billions of dollars in bad loans says its ranks are swelling and it will soon deliver strong evidence that banks have treated investors unfairly.

New York securities lawyer David Grais and Dallas-based Talcott Franklin on Wednesday met with more than 50 large mortgage bond investors to try to convince them to fight banks.

“The world has changed in the last three weeks as the consortium (of investors) has gone viral, almost,” said William Frey, president of Greenwich Financial Services.

The investors have accumulated key ownerships in 2,600 risky US “private-label” mortgage securities, up from 2,300 six weeks ago.

US Mortgages, Update

New York courts are the first in the United States to require lawyers handling foreclosures for banks and servicers to take steps to ensure the procedure is done properly, the state’s top judge said Wednesday.

According to Jonathan Lippman, the chief judge of the New York State Court of Appeals, the courts were appalled to find that big banks were lax in handling mortgage documents and several lenders and servicers had hired staff who did not properly review files or submitted false statements to evict delinquent borrowers.

Effective immediately, lawyers representing the plaintiffs in residential foreclosure actions must file signed affirmations that they took “reasonable” steps to verify the accuracy of the underlying documents.

US Mortgage Issues

Bank of America share prices fell 3.4 per cent Tuesday, erasing an earlier gain of 0.9 per cent, after people familiar with the matter said PIMCO and the Federal Reserve Bank of New York are seeking to make the bank buy loans that were packaged into US$47 billion of bonds.

US federal officials have said delays in foreclosures, as attorneys general in 50 states investigate allegations of falsified documents, won’t lead to a moratorium on property seizures. About 26 per cent of the loans underlying the securities are at least 60 days late, in foreclosure proceedings or already backed by seized properties, according to data compiled by Bloomberg.

Norbord Quarterly Loss

Norbord Thursday posted a net loss of $7 million in its 3Q. In comparison, Norbord recorded earnings of $37 million in the prior quarter and a loss of $7 million share in the same quarter last year.

Norbord’s operating North American OSB mills ran at approximately 90 per cent of their capacity in 3Q compared to 100 per cent in the prior quarter and 85 per cent in the same quarter last year. Norbord’s two indefinitely closed mills in Texas and Alabama have not operated since 1Q of 2009 and represent 20 per cent of the company’s North American OSB capacity. All of Norbord’s European mills operated at full capacity again this quarter.

Canfor, West Fraser Reports

Canfor Corporation Thursday reported net income of $33.5 million for 3Q 2010, compared to $40.4 million for 2Q 2010 and $4.1 million for 3Q of 2009. The company’s shareholder net income for the third quarter of 2010 was $5.6 million, down from $18.1 million for 2Q 2010 and animprovement from a loss of $5.2 million reported for 3Q 2009.

Canfor’s lumber business operated at approximately 70 per cent of capacity in 3Q, with its recently restarted Chetwynd and Quesnel mill operations in the British Columbia Interior operating through the quarter.
Production from the Quesnel mill is being fully dedicated to the China market.

West Fraser Timber Co. Monday reported earnings after discontinued operations of $45 million on sales of $707 million in 3Q 2010.

In the quarter the lumber segment generated operating earnings of $22 million. After a period of higher lumber prices in 2Q 2010, prices weakened in 3Q reflecting a continuing weak US housing market. SYP lumber prices were particularly hard hit.

West Fraser Timber’s lumber production in Canada was near capacity in its third quarter, while its US lumber operations were operating at 75 per cent capacity due to uncertain markets. Shipments to China continued to increase in the quarter, supporting lumber prices.

November 1, 2010

Harvest vs Salvage

Between the quantity of dead timber left behind in the wake of the mountain pine beetle infestation in British Columbia and the varied, seemingly endless opportunities for biomass fuel production, those in the forest industry should be enthusiastic about entering into partnerships with biofuel producers. And many are. But others are reluctant or outright opposed to the idea due to a fear of what they imagine is a potential impact on sawlog timber supply.

BC Timber Supply and Biofuel Feedstock

Huge masses of unusable timber and harvest residue are left behind on the forest floor every year. Some large lumber companies are continuing to burn slash either in the bush or in beehive burners. Given these conditions, the suggestion that a thriving biomass fuel industry in BC could threaten timber supply is utter nonsense. At the recent CanBio conference in Vancouver (refer to the October 15 issue of your Madison’s Reporter for details), Gordon Murray, Executive Director of the Wood Pellet Association of Canada, charged that “Canfor and West Fraser are responsible for 100,000 cubic metres of slash burning”. That volume of waste alone is enough to run two large pellet plants.

Biofuel producers don’t want sawlogs; the cost would be prohibitive to their business model. Forest companies can and should be working in cooperation with biofuel companies to best utilize their cut block, and to speed up the silviculture renewal process.

Also at the CanBio conference, Jack MacDonald of FPInnovations explained how timber harvesters can make a few simple alterations to their practice in order to leave slash and other residue in manageable piles for removal by biofuel companies. Of forest feedstock, MacDonald pointed out that harvest residues include: roadside, in-block, MPB-killed stands, burned stands, non-merchantable stands, thinnings, FireSmart treatments, and stumps. None of these waste materials are useful at the sawmill.

CORE BioFuel Inc, out of Sarnia, ON, has embarked on several partnerships for their proposed biomass-into-gasoline plant at Houston, BC, for: fibre licenses, engineering, and fuel off-take. As the first commercial demonstration plant for this exciting new technology, the Houston plant would use 220,000 metric tonnes of waste wood annually at a 30 per cent moisture content to produce 67.7 million litres of 92-octane gas, 24.8 million litres of clean water, and 141 kilo-tonnes of neutral carbon dioxide. Because wood is the raw material, gasoline produced will be carbon neutral. In addition, the process generates large quantities of heat so the plant will cogen enough electricity to be self sufficient, and for community heat or community greenhouses. The plant will employ a projected 40 plant employees and generate 150 harvesting jobs out of the Houston site. CORE hopes to build more production plants, projected to be three times the size, if there is enough fibre available in those areas.

CORE President and CEO, George Stanko explained to Madison’s in a phone interview, “We chose BC due to an abundance of wood; both from beetle-kill and due to provincial government timber salvage policies. There is security for wood fibre feedstock for CORE in BC.”

One important partnership CORE has nurtured is with Lakes Timber Health and Salvage, which has a biomass non-replacable forest license for 50,000 cubic metres annually for the next ten years, will be supplying the Houston plant.

Bob Schneider of LTHS told Madison’s in a phone interview, “LTHS will secure fibre from the community forest licenses, wood lots, local First Nations, and other opportunities, to spread out our feedstock supply beyond a few fibre sources. As we move forward there will be more agreements, because we can use residual material from pellet plants, fibreboard producers, etc. In fact we can both supply fibre and take feedstock from those facilities.”

Stanko went on, “CORE uses a thermochemical process to produce gasoline. We are a technology company; we are not lumber people and are not experienced in bringing fibre from the bush to the plant. BC’s Minister of Forests and Range, and Integrated Land Management, Pat Bell, has provided a letter which in part assures that enough fibre will be available to run our plant. LTHS will continue to broker arrangements for feedstock with the community forest, First Nations, etc.”

Schneider detailed further, “The timber stands in our area that are less than 50 per cent sawlog are not economically viable for the sawmill, which leaves a large quantity of biomass throughout the forest. If the stand has a larger sawlog volume, there is still at least a 25 per cent share of biomass.”

“Right now in the bush some lumber companies are using slash pile burning and beehive burners to eliminate forest residue, which we could remove for them if they were interested in developing a relationship,” continued Stanko. “We can also use the bark, charred forest fire wood, and the poplar or maple species that lumber companies don’t want.”

“One sawmill left behind enough biomass in whole log form, which is being burned this autumn, from their summer harvest this year to run the CORE plant for two years,” added Schneider.

When asked for details about CORE its from concept through implementation, Stanko said, “A group of five of us with a lot of experience in the energy field evolved the concept over time. Right now we are putting the financing together. Once the engineering starts we anticipate a two year timeline to plant startup. We are looking at several government programs, both provincial and federal, for support as well as seeking a strategic investment partner.”

One agency which “helped CORE get commercialized and provided a vote of confidence”, according to Stanko, is the Sustainable Chemistry Alliance headquartered at the new Bioindustrial Innovation Centre at the University of Western Ontario. With a board of 12 chemists, the Alliance’s focus is to play an important role in the development of solutions to the impacts of climate change, peak oil, energy security, the need for safe water, and the use of scarce natural resources. Through its work the Alliance hopes to offer the opportunity to create thousands of new jobs for Canadians.

“We intend to offer a solution for a lot of the current energy problems,” concluded Stanko. “For example, ours is one of the few gases that meets California’s new guidelines.”

Madison’s Timber Preview : Timberland Value 2011

This week’s issue of Madison’s Timber Preview examines projected timberland values for 2011, analyst comparisons of TIMOs vs REITs, as well as the latest news out of Sino-Forest and TimberWest.

Contact us any time for a subscription.

US Home Building

US housing starts unexpectedly rose in September, reaching its highest level since government home-buying incentives ended in April, but permits for future home construction fell on a sharp decline in approvals in the volatile multi-family segment, the US Commerce Department said Tuesday.
Housing starts rose 0.3 per cent to a seasonally adjusted annual rate of 610,000 units, while building permits, an indicator of future construction, fell 5.6 per cent to a seasonally adjusted annual rate of 539,000.
Compared with the same month in 2009, housing starts increased by 4.1 per cent in September and permits fell by 11 per cent.

Home Building, US

“The 0.3 per cent monthly increase in US housing starts is better than it looks as starts were revised up in each of the previous two months,” said Paul Dales, an economist with Capital Economics.

The National Association of Home Builders on Monday said its housing market index rose three points to 16 in October, the first improvement in five months, but still a low mark of confidence. A reading above 50 indicates more builders view sales conditions positively than see them negatively. The index, based on data collected through monthly surveys, hasn’t hit 50 in more than three years.

If the US housing market continues to crumble, taxpayers in that country could face a total bill of more than US$400 billion to bail out mortgage brokers Fannie Mae and Freddie Mac by 2013, due to a rise in failed mortgages and a sluggish economy, a report Wednesday from regulator the Federal Housing Finance Agency revealed.
Those two government-sanctioned entities hold about US$6.8 trillion in all mortgage obligations, or nearly 57 per cent of outstanding home loans in the US.

Pulp and Paper Products Council September Release

According to data released Thursday by the Pulp and Paper Products Council, September global pulp shipments showed higher than expected shipment levels. Global market pulp shipments increased 14.4 per cent over August, and 2.9 per cent compared to September 2009, to 3.6 million metric tonnes. Most of the increase is attributable to higher than expected consumption in China, up 70.4 per cent from August and 7.4 per cent compared to one year ago, to 685,000.

PPPC September Figures

PPPC reported that market pulp producers’ global inventories dropped by 2 days, to 32 days, during September, greater than the normal 1-day drop seen during the month of September over the prior 10 years.
Despite the drop in days of supply, Credit Suisse economists estimate that total world inventories increased slightly to 3.74 million metric tonnes, from 3.71 million metric tonnes in August.

During September, market pulp shipments to paper mill customers in North America and Europe combined rose by a strong 6 per cent month-over-month, says the PPPC. Shipments to Latin America and Japan picked up slightly, by 8 per cent and 4 per cent, respectively, while shipments to China and the rest of Asia increased a combined 39 per cent.

US Mortgages, Update

New York courts are the first in the United States to require lawyers handling foreclosures for banks and servicers to take steps to ensure the procedure is done properly, the state’s top judge said Wednesday.

According to Jonathan Lippman, the chief judge of the New York State Court of Appeals, the courts were appalled to find that big banks were lax in handling mortgage documents and several lenders and servicers had hired staff who did not properly review files or submitted false statements to evict delinquent borrowers.

Effective immediately, lawyers representing the plaintiffs in residential foreclosure actions must file signed affirmations that they took “reasonable” steps to verify the accuracy of the underlying documents.

US Mortgage Issues

Bank of America share prices fell 3.4 per cent Tuesday, erasing an earlier gain of 0.9 per cent, after people familiar with the matter said PIMCO and the Federal Reserve Bank of New York are seeking to make the bank buy loans that were packaged into US$47 billion of bonds.

US federal officials have said delays in foreclosures, as attorneys general in 50 states investigate allegations of falsified documents, won’t lead to a moratorium on property seizures. About 26 per cent of the loans underlying the securities are at least 60 days late, in foreclosure proceedings or already backed by seized properties, according to data compiled by Bloomberg.

Interfor Reports

International Forest Products reported Thursday a 3Q 2010 net income of $1.5 million. Included in the company’s accounts for the quarter was a gain of $4.8 million representing Interfor’s share of the sale of two vessels by the Seaboard Partnership net of associated costs. Also included was a tax valuation allowance of $1.6 million and $0.7 million in other one-time costs.

Total sales for the quarter, including wholesale volumes, were 277 million board feet, an increase of 7 million board feet versus 2Q. On a volume basis, excluding wholesale programs, sales to North American markets accounted for 66 per cent of shipments in 3Q versus 78 per cent in 2Q, while Pacific Rim markets including Japan and China accounted for 32 per cent compared to 21 per cent in 2Q.

“Positive results from the start-up of our Castlegar sawmill and higher sales to China helped to offset the impact of lower prices in North America during the quarter”, said Duncan Davies, Interfor’s President and CEO.