Timber and Wood Fibre Sectors

Last week Madison’s summarized speeches on macroeconomic and forest products market conditions given at the ninth annual Who Will Own the Forest? timberland investment summit in Portland, OR.

Some extremely interesting presentations and thoughts came at the following session, a panel discussion, “Manufacturing Perspectives on the Timber and Wood Fibre Sectors“. Moderated by Joe Patton, Vice President of Lumber at the Westervelt Company, the panel included: Marc Brinkmeyer, Founder and Chair of Idaho Forest Group; Alan Sherrington, Weyerhaeuser’s North West and Canadian region lumber manager; and, Allan Trinkwald, President of Simpson Lumber Company. Patton and Sherrington are former Chairs of the American Wood Council (AMC), an initiative sponsored by the Softwood Lumber Board (SLB) and counterpart to the Canada Wood Council (CWC).

Manufacturing Perspectives

A 42-storey wooden residential tower construction project funded by the Softwood Lumber Board was featured in the New York Times this week.

Please see this week’s issue of your Madison’s Timber Preview for details on the latest movements in cross-laminated timber (CLT) and multi-storey wood-framed building.

Brinkmeyer gave a frightening overview of concrete and steel’s potential future market share in US residential construction.

“It is not about the US west vs the south, or the US vs Canada,” Brinkmeyer correctly pointed out. “It is not about ‘state-of-the-art’ modern mills vs older family-run operations. The concrete and steel manufacturers lobby is much more established, stronger, and better organized than the lumber lobby is. For example, OSB has lost ground to foam sheathing in US residential construction projects.”

In 2012, foam sheathing was approved in US housing construction standards, to be used by itself or along with conventional wood sheathing — OSB or exterior grade plywood.

“Half of the growth of population globally will be in urban centres,” Brinkmeyer explained. “These are not single-family houses.”

“In 2013, 3.5 billion of the total 7 billion people on this planet live in cities. By 2020, 7 billion of a total 11 billion will be living in cities,” said Brinkmeyer. “Traditionally wood products make up 95 per cent of market share in North American residential construction.”

Brinkmeyer went on to say that while solid wood manufacturers are making inroads into multi-family construction, with products like CLT, engineered wood, and LVL and other veneers, the concrete and steel industry could be poised to take market share away from lumber in the residential construction sector.

Given this, the new AWC mission is to increase the use of wood by assuring the broad regulatory acceptance of wood products, developing design tools and guidelines for wood construction, and influencing the development of public policies affecting the use and manufacture of wood products. The AWC works closely with the CWC, which has a similar mandate.

AWC data shows that the value of wood currently going into US non-residential construction is US$881 million annually, and that the potential for market increase under the old building code was US$2.5 million. The opportunity for wood in non-residential US construction under the new building code is US$3.8 million, says the AWC. Specifically, a five to 15 per cent penetration of the non-residential North American building market [using CLT] potential will consume 1.5 to 2 billion board feet of lumber annually.

However, the concrete and steel lobby in the US has moved quickly in response to progress made by the SLB and AWC, following the success of the “reThink Wood” campaign.

“Four key trade associations representing the steel stud industry have joined together to promote the use of cold-formed steel framing in construction”, warned the AWC last week. [They] met in Chicago September 11 to establish a coalition to address market threats initiated by the lumber and masonry industries in recent years, particularly in the mid-rise construction market.”

“The concrete, steel, and foam lobbies are better organized than the wood lobby,” concluded Brinkmeyer.

One big issue for builders is that concrete and steel producers give building contractors price quotes as far as one year out, explained Brinkmeyer.

In his presentation, Trinkwald gave some pointers on how the lumber industry can work together to combat the aggressive efforts of competing building products manufacturers.

“Timberland owners have to be aware that theirs is a product,” detailed Trinkwald. “Sawmills need to work together due to the intensive capital investment requirements. We need to work together on public opinion in terms of supply constraints and lumber prices. One good avenue toward this is to talk about employment opportunities.

“The manufacturing side needs stability to plan. Whether it be sawlogs or chip & saw, it all comes back to the stump eventually [in terms of mill costs]”, said Trinkwald.

When his turn came to speak, Patton launched into a scathing critique of the quality of southern pine timber running through Westervelt’s sawmills recently.

“Changes to the way southern pine timberlands are managed under prescribed silviculture practices has affected: cutting rotations, planting — species and density, fertilization, thinning, and herbicide application,” said Patton. “There has been an increase in the #3/Utility grade and #4/Economy grade recovery for lumber production. There are more knots, distorted grain, and compression wood. There is less density, strength, and fibre length. These together have also brought about drying difficulties. In the US south, the resource is changing so mills can pay less for it.”

“I cannot cut #3 and #4 grade lumber and make money,” Patton declared.

Madison’s can’t help but wonder if some of these issues being brought up by southern US mills in recent months stem from changes to the design values for southern pine accepted by the American Lumber Standard Committee last year. More on this important topic to come in an upcoming issue.

Madison’s Timber Preview

This week’s issue of Madison’s Timber Preview examines the latest developments in using wood for multi-storey bulding projects. Exciting new designs and construction in the UK, US, Europe, and Australia are profiled.

Volumes of wood for cross-laminated timbers, engineered wood, and LVL and other veneers for these timber towers are also looked at.

As a special bonus this month, Madison’s is making this issue of the Timber Preview available to the public. Please go here to collect the document.

Contact us any time for a subscription to this worthwhile and timely information.

BC Sawmill Issued Stop-Work Order Due to Dust

During a safety inspection of Aspen Planers in Merritt, BC, WorkSafeBC safety officer Vince Strain found dust had collected on beams, duct work, and heat sources such as lights, said the Vancouver Sun September 20. According to Strain’s inspection report, the accumulations were in excess of 1/8 inch over more than five per cent of the enclosed area, the safety standard set by WorkSafeBC last year.

After a stop-worker order was issued September 11, Aspen Planers cleaned up the wood dust by the next day. The rare stop-work order follows the revelation two months ago — outlined in WorkSafeBC inspection reports — that some BC sawmills were still struggling to properly clean up wood dust, said the Sun.

Al Johnson, WorkSafeBC’s vice-president of prevention, told the Sun he is a little surprised that nearly 18 months after the regulatory agency issued a directive to BC sawmills to keep wood dust clear of their facilities that it has had to issue a stop-work order.

Johnson said the industry needs to get to a point where they are managing combustible dust on an equal footing with other aspects of safety and with plant productivity. He stressed the agency will not relax its emphasis on combustible dust, and plans to revisit Aspen Planers and other sawmills this autumn.

North America Transportation Statistics

Roads and rails in the US were busier in August compared to July. The American Trucking Associations’ Truck Tonnage Index was up 1.4 per cent in August after a 0.6 per cent dip in July, the agency reported Wednesday. Year-to-date, the index is up 5 per cent compared to the same period in 2012.

The not-seasonally adjusted index equalled 131.3 in August, which was 1.5 per cent above the previous month’s 129.4.

Canada and US Freight Data

“The strength in tonnage continued again in August, with the index increasing in three of the last four months,” ATA Chief Economist Bob Costello said. “The improvement corresponds with a solid gain in manufacturing output during August reported by the Federal Reserve last week.”

Elsewhere, total US rail traffic rose 3.1 per cent the week ending September 14 compared to the same period last year, according to the most recent report by the Association of American Railroads.

Overall, North American freight traffic broke even year-over-year with carload traffic going up across the board for Canada, the US, and Mexico. This shows more companies are relying on freight sourcing to ship their products as consumer confidence bounces back after the recession and domestic manufacturing continues its recovery.

US freight carload traffic gained 1.5 per cent while intermodal volume increased even more at 4.9 per cent year-over-year.

Beating the US, Canadian freight carload traffic increased by 4.9 per cent for the week ending September 14 and up 5.1 per cent for intermodal volume, the AAR said.

Advancing 6.3 per cent, Mexican freight volume was also surpassed by a 7.5 per cent jump in intermodal volume.

Meanwhile, durable goods orders increased 0.1 per cent in August, the Commerce Department said Wednesday. The gain followed a revised 8.1 per cent drop in July that was larger than originally reported.

Orders excluding transportation equipment, which is often volatile, fell 0.1 per cent following a 0.5 per cent drop in July.

Demand for nondefense capital goods excluding aircraft, a proxy for future business investment in computers and electronics, rose 1.5 per cent following a 3.3 per cent decrease. It was the largest increase since May, Bloomberg News reported.

North of the border, the Canadian railway industry carried 27 million tonnes of freight in July, a 1.8 per cent decrease from the same month last year, Statistics Canada said also Wednesday. The drop occurred despite a rise in traffic from the United States.

Within Canada, combined loadings of non-intermodal freight and intermodal freight decreased 2.5 per cent to 23.3 million tonnes.

Non-intermodal loadings fell 3.2 per cent to 20.7 million tonnes as a number of key commodities saw decreased activity in July. These included iron ores and concentrates (down 293 000 tonnes), canola (down 192 000 tonnes), gasoline and aviation turbine fuel (down 114 000 tonnes), and coal (down 107 000 tonnes). Overall, 29 out of 64 commodities carried by Canadian railways declined during the month.

Despite the drop in loadings, a number of commodities reported strong growth in July. These included fuel oils and crude petroleum (up 164 000 tonnes), other chemical products and preparations (up 156 000 tonnes) and lumber (up 97 000 tonnes).

Intermodal loadings rose 4.1 per cent to 2.6 million tonnes. The gain was the result of increased containerized cargo shipments and trailers loaded onto flat cars.

From a geographic perspective, the Western and Eastern railway divisions in Canada had mixed results in July. The Western Division, which accounted for 60.5 per cent of domestic loadings, reported a 0.5 per cent rise in freight to 14.1 million tonnes. By contrast, the Eastern Division, which accounted for the remainder of the loadings, registered a 6.7 per cent decline in freight to 9.2 million tonnes.

Rail freight traffic received from the United States rose 2.9 per cent to 3.7 million tonnes. The increase marked the highest amount of traffic received for a month of July and occurred on the strength of intermodal loadings, particularly containerized cargo shipments.

Cedar Mill Fire

Fire tore through a sawmill early Wednesday in Maple Ridge, destroying a large section of a cedar operation located along the Fraser River, according to the Maple Ridge News Wednesday.

The blaze at Imperial Cedar Products on River Road started around 1 am. When firefighters arrived on scene, they were greeted by multiple explosions and found a building completely engulfed in flames.

BC Cedar Mill Fire

Overnight workers at a different mill on the same lot called 911 when they saw the first flames, and doused a giant pile of sawdust between the two buildings with water so the fire wouldn’t spread to their building.

Maple Ridge Fire Dept Assistant Chief Mark Smitton says about half a dozen propane tanks had exploded inside the cedar mill. The tanks are used to power the forklifts that move the pallets of wood.

The cause is still under investigation, and no injuries have been reported.

Eight people work at the destroyed mill, but there is no overnight shift. The shutdown is devastating for the workers, some of whom have worked at other mills that have closed down.

It is believed there’s a chance the machines used to make the shingles could be saved. They’re metal and could be okay provided they weren’t exposed to too much heat. Damage is estimated at at least $1-million.

GP Signs Deal

Georgia-Pacific and U.S. Lumber announced this week they are entering a distribution agreement for engineered wood products. The agreement, effective November 1, provides for U.S. Lumber to distribute G-P engineered wood to ten southern US states.