Wood Panels

Dec. 17, 2013 - When Frank Etchart took over the family logging business in Kamloops in 1989, he knew that harvesting small-diameter wood in less-than-favourable conditions required optimum efficiencies in order to generate decent profits. Thus began a quest to secure the best teams and equipment for the job.

Etchart has many good things to say about his fleet of Hitachi, John Deere and other brand equipment. The latest addition is a harvesting head designed specifically for small-diameter timber – the Quadstar QS500 processor, a 22-inch four-roller multi-stemming head from Southstar.

Earlier this year, he purchased three units and mounted each on Hitachi 210 carriers. The increase in efficiency has been significant, the logger explains.

“It’s a rare case of everything on the heads making sense, from the welding of the frames to the routing of the hoses and the placement of the valve,” he says. “Prior to making my purchase, I saw a larger Southstar head in action in Vernon and was impressed by the work it did. In the six months I’ve been using the Southstars, it has been nothing but a steady series of surprises – all of them good.”

Etchart’s enthusiasm for the heads is especially gratifying to Marcel Payeur, a longtime equipment and service provider who, along with four other Canadian partners, purchased New Zealand-based Southstar in October 2011. “Southstar had earned a reputation for reliability amongst loggers in New Zealand, Australia and Indonesia, and we bought the company with the intention of expanding that reputation across North America,” he says. “Owners such as Frank are going a long way in establishing our presence in Canada.”

Etchart, 65, is hardly the classic B.C. logger. He was born in Spain and raised in France, and shortly after emigrating to the province in 1969, enrolled at the British Columbia Institute of Technology to study mining engineering. This eventually led him to work for an oil company that, ironically, obliged him to spend a year overseas, in 1985.

When Etchart returned to B.C. in 1986, the oil and gas sector was in decline, so he decided to work for his three uncles who had launched Nadina Logging Ltd. near Burns Lake in the 1950s. “Over the decades, my uncles had migrated to Merritt, where there was plenty of work – and near enough my home in Kamloops to commute daily,” he recalls.

By 1989, one uncle had retired and another was approaching retirement age, so Etchart decided to purchase the company. “I did it partly because I loved the outdoors, for the sake of family continuance, and because Nadina was a well-respected small player in the region,” he says. “Then as now, we worked with a local mill, Aspen Planers Ltd., and even though I didn’t have much dirt under my fingernails, my initial function was mainly to sign the cheques, so I got by OK. I learned the language of logging over time as well as how to operate the different machines – starting with the smallest chainsaw – since back then I couldn’t handle anything larger.”

In 1989, Nadina consisted of a six-man crew, several skidders, a buncher, one truck, and the capacity to harvest about 40,000 cubic metres annually. Today, the company retains about 25 people and cuts 250,000 cubic metres yearly, in the forests surrounding Merritt. Inventory consists of two Tigercat bunchers (with a third contracted), three skidders (Tigercat and John Deere), two Deere loaders (one for loading and the other for decking) and six processors – the latter an even split between Hitachi and John Deere.

While Etchart was honing his skills and growing Nadina, Marcel Payeur was presiding over a Hyundai dealership in the Okanagan, having already worked as a field mechanic and manager for Timberjack and developed another company as a parts and service provider. “Subsequent to Hyundai I took on a Volvo dealership, and by the close of 2010 I was looking for other opportunities,” he says. “Southstar, which was formed by Waratah inventor Dave Cochrane in 2008, proved to be it.”

With Waratah, Cochrane had revolutionized bucking and delimbing. As the mastermind behind Southstar, he had developed and was selling six different types of heads to clients in New Zealand, Australia and Indonesia, with some of the first units having logged over 20,000 hours and still working today.

When Payeur (who had sold one of the first Waratah 620s in North America), four other Canadian partners and a New Zealand partner purchased Southstar, they immediately set about modifying five of the processors to suit the North American market. “We introduced our first head at the Interior Logging Association’s show in Vernon in May of 2012, and Vernon logger Randy Spence purchased two 23-inch heads soon after,” says Payeur.

Meanwhile, Etchart and his crew were looking for a durable solution for their processing fleet. “We heard through the grapevine that Southstar heads were being unveiled in B.C. and we certainly knew Marcel’s reputation for taking good care of his clients, so I met with him and then I checked out the 23-inch head in action in Vernon,” he says.

Etchart initially ordered one head from Payeur, but several days after it was delivered in March of this year, he was so impressed with the machine that he ordered another. “A few days after that I ordered a third,” he says. “The machines are beautifully designed. To give just one example, in other processors the hoses running from the boom to the head usually get broken, but the hoses on the Southstars are routed right through the centre.”

Multi-stem production

Etchart is also impressed by the four QS500 rollers. “We deal with three- to five-inch log diameters, and in order to make this kind of operation viable you have to feed as much as possible through the processor – five stems at a time. With our previous three-roller processors, the stems would routinely get stuck. The addition of a fourth roller on the QS500 creates less of a gap, and the rollers encircle the stems nicely.”

The QS500 has a 20 to 22 feet/second feed speed at 280 litres/minute flow. These S series heads have a four-roller design and side shift feature that enables operators to pick up two, three or four logs at a time and accurately process them.

Other features include a wide frame; high-pressure
cylinders; oversized pins and bushings; and large fabricated delimb arms. Including the rotator, the entire unit weighs 2,450
kilograms.

Etchart notes, “Previously we would take two or three trees out of a deck but could only process them one at a time and had to separate by species, meaning we could easily have a dozen sorts in the same area. This put enormous pressure on our operators.” With the Southstar computer system, the operator can process different species of trees without switching, and with a priority bucking feature the computer makes
all the decisions on lengths by reading the diameter
extremely accurately.

Equally important from Etchart’s point of view is ease of maintenance: on one QS500 that has logged over 900 hours, his crews have yet to change the harvester bar. All they do is grease the tip daily, and then weekly turn the bar from top to bottom and sharpen it. “The head, combined with the Hitachi carrier, is so rigid that the bar makes the cut and never gets stuck,” he says, adding that the Hitachi 210 is his unit of choice because it consumes only 21 litres of fuel per hour compared to other brands that burn over 30 litres hourly. “Again, for a smaller operator like Nadina, these benefits amount to something substantial.”

Oct. 31, 2013, Vancouver - Canfor Corporation reported net income attributable to shareholders of $28.4 million, or $0.20 per share, for the third quarter of 2013, compared to $110.3 million, or $0.77 per share, for the second quarter of 2013 and $20.5 million, or $0.14 per share, for the third quarter of 2012. For the nine months ended September 30, 2013, the company's shareholder net income was $200.6 million, or $1.41 per share, compared to $5.1 million, or $0.03 per share, reported for the comparable period of 2012.

The shareholder net income for the third quarter of 2013 included various items affecting comparability with prior periods, which had an overall net positive impact on the Company's results of $2.2 million, or $0.02 per share. After adjusting for such items, the Company's adjusted shareholder net income for the third quarter of 2013 was $26.2 million, or $0.18 per share, down $61.5 million, or $0.43 per share, from an adjusted shareholder net income of $87.7 million, or $0.61 per share, for the second quarter of 2013. Adjusted shareholder net income for the third quarter of 2012 was $13.6 million, or $0.09 per share.

The Company reported operating income of $49.3 million for the third quarter of 2013, compared to operating income of $128.2 million for the second quarter. The decline in operating income largely reflected lower lumber sales realizations, increased market stumpage costs and lower lumber and pulp production volumes, partly offset by improved sales realizations for the pulp and paper segment.

In a reversal of the trend experienced in the previous quarter, when North American lumber prices saw a sharp correction after peaking in early April, lumber prices in the third quarter showed a gradual improvement, supported by relatively solid global demand that, in part, reflected improving home prices and low home inventory levels in the U.S. Based on July and August 2013 data (latest data available), total U.S. housing starts were up 2% from the second quarter of 2013, averaging 887,000 units SAAR (seasonally adjusted annual rate). Canadian housing starts rose 4% from the second quarter of 2013 to 194,000 units SAAR, contributing to a marginal increase in lumber consumption. Continued solid demand from offshore markets supported steady offshore lumber shipments in the third quarter.

The average North American benchmark Western Spruce/Pine/Fir ("SPF") 2x4 #2&Btr price for the third quarter of 2013 was US$328 per Mfbm, down US$7 per Mfbm, or 2%, from the previous quarter, while several other grades saw more significant declines. Overall average sales realizations were well down compared to the previous quarter, reflecting lower average prices in both North American and offshore markets and, to a lesser extent, an average export tax of 5% on shipments from Canada to the U.S., partly offset by a slightly weaker Canadian dollar. Price realizations from all markets reflected a carry-over of weaker market conditions experienced in June into the third quarter. In offshore markets, where the majority of pricing is negotiated monthly or quarterly in advance, the carry-over effect on realizations was more marked. Average sales realizations for Southern Yellow Pine ("SYP") products saw a moderate decrease from the previous quarter; while the benchmark SYP 2x4 #2 price of US$393 per Mfbm was down slightly from the second quarter, larger decreases were seen in wider dimension product prices.

Lumber shipments and production were down 56.5 million board feet (5%) and 79.5 million board feet (6%), respectively, from the previous quarter, principally reflecting capital-related downtime and subsequent ramp-ups related to upgrades at the Company's Elko and Mackenzie sawmills, semi-annual maintenance shuts at the Company's southern pine operations, as well as an additional day of statutory downtime in the third quarter. Lumber unit manufacturing costs increased compared to the previous quarter, principally reflecting market-driven stumpage increases in unit log costs as well as increased costs associated with severe flooding in the southeast area of British Columbia in the previous quarter. Unit manufacturing costs were further impacted by the aforementioned lower production levels in the current quarter.

The company continued to preserve its strong financial position, ending the quarter with cash and cash equivalents of $90 million, and a net debt to capitalization of 7.5%. For Canfor, excluding Canfor Pulp, net debt to capitalization at the end of the third quarter was 3.0%.

During the quarter, the Company completed the first phase of the previously announced purchase of Scotch & Gulf Lumber, LLC ("Scotch Gulf") for $29 million, representing an initial 25% interest in Scotch Gulf, plus transaction closing costs and a proportionate share of working capital. Canfor's interest will increase to 100% by August 2016.

Canfor's collective agreement with the USW expired on June 30, 2013. The Company and the USW have been actively pursuing negotiations for a new collective agreement. The USW has served strike notice for certain mills, however, negotiations are at the mediation stage and as such no strikes or lockouts can occur. Mediation talks are currently being held in abeyance to allow the USW to pursue negotiations with other parties.

Commenting on the third quarter performance, Canfor's President and Chief Executive Officer, Don Kayne, said, "As expected, lumber prices staged a gradual recovery after reaching their low point in June. We continue to be encouraged by solid demand for our lumber products in all of our major markets." Kayne added that additional production volume arising from the Company's recent Elko and Mackenzie sawmill upgrades will further enhance Canfor's ability to take advantage of improving market conditions. Regarding the pulp and paper segment's third quarter results, Kayne said, "With our scheduled maintenance shutdowns now behind us and our next outage not planned until the second quarter of next year, we will be focused on enhancing our operational performance in the coming quarters."

As announced last week, the Company will permanently close its sawmill located in Quesnel, British Columbia. The Company anticipates that the closure will occur in March 2014. Canfor also entered into an agreement with West Fraser Mills Ltd. for an exchange in forest tenure rights, a non-replaceable license and undercut volumes. Commenting on the recent announcements, Kayne said, "The timber availability in the Quesnel region following the mountain pine beetle infestation unfortunately leaves us unable to continue operation of our Quesnel sawmill." Kayne added "The additional fibre we have been able to secure in the exchange agreement with West Fraser enhances the fibre requirements for our Houston facility. We are committed to minimizing the impacts of this closure on our Quesnel employees."

With respect to the fourth quarter of 2013, North American lumber consumption is forecast to show a modest improvement before an anticipated seasonal slowdown late in the period. The repair and remodeling sector is projected to benefit from a continued appreciation in home value, which encourages home improvement projects. Offshore markets are projected to remain fairly stable. Export taxes on shipments to the U.S. remained at 5% for October and will be 0% for November. NBSK pulp markets are projected to improve modestly in the fourth quarter of 2013, while a risk of price weakness continues to exist from further hardwood pulp capacity projected to come online in early 2014.

Oct. 29, 2013 - A contest launched by The Greenest Workforce gives students the opportunity to compete for paid internships in forestry. But interested students are running out of time to apply – applications must by in before October 31st.

Contest rules requires students to submit a resume, a photo, and a statement explaining why they would be perfect for a Green Dream Internship. Students must get the most votes for their photo and statement any way they can by November 15, 2013.

The 21st-century Canadian forest products industry requires savvy trailblazers who care about their future, the environment and quality of life. The industry is proud to be forging an innovative path to a green and growing future. To do so it needs 60,000 workers or more by 2020 to help fill a long list of jobs such as: millwrights, electricians, engineers, human resource specialists, sales staff, truck drivers, foresters, chemists, communicators and more.

With the help of the Government of Canada, the industry has launched a resource tool called TheGreenestWorkforce.ca which provides information on the industry, as well as available career opportunities on offer right now across Canada.

Voting begins November 1, 2013 ending on November 15th. The Top 7 students within each of the internship positions will be invited to interview with the host company. Winning students will be notified of their 2014 summer internship by December 2, 2013.

Students can apply for the contest by going to TheGreenestWorkforce.ca.

The 18 internships positions are:
1. Bilingual Human Resources Intern - Resolute Forest Products, Montreal, Quebec
2. Chemical Engineer – West Fraser Timber, Quesnel, British Columbia
3. Chemical Engineer or Chemical Technologist – Daishowa-Marubeni International (DMI), Peace River, Alberta
4. Chemical or Mechanical Engineer – West Fraser, Quesnel, British Columbia
5. Chemical Engineer – AV Group, Nackawic, New Brunswick
6. Chemical Engineer – AV Group, Atholville, New Brunswick
7. Electronic Engineer – Canfor Corporation, Mackenzie, British Columbia
8. Engineering Technologist or Business Commerce, Operations – Tolko Industries Ltd., Slave Lake, Alberta
9. Environmental or Chemical Engineer – Millar Western, Whitecourt, Alberta
10. Forestry Intern – Tembec, Chapleau/Timmins
11. Human Resources Intern – Tolko Industries Ltd., Vernon, British Columbia
12. Human Resources Intern – AV Group, Nackawic, New Brunswick
13. Mechanical Engineer – Canfor Corporation, Bear Lake, Prince George, British Columbia
14. Mechanical Engineer – West Fraser Timber, Cariboo Region, British Columbia
15. Mechanical, Electrical or Chemical Engineer – Tembec, Temiscaming, Quebec
16. Timberlands Forestry Intern – Weyerhaeuser, Grande Prairie, Alberta
17. Timberlands Forestry Intern – Weyerhaeuser, Princeton, British Columbia
18. Woodlands Forestry Assistant, Operations & Roads – Millar Western, Whitecourt, Alberta

Oct. 24, 2013 - Nearly three decades have passed since the last outbreak of spruce budworm in the vast conifer forests of eastern North America. With budworm on the rise once again in Quebec and threatening to spread through spruce and fir forests from Ontario to Atlantic Canada, Natural Resources Canada’s Canadian Forest Service is leading a diverse task force of scientists, woodlot owners, and industry to review current knowledge and develop possible strategies to contain the looming epidemic.

Spruce budworm outbreaks have a lengthy history in North American forests. Evidence from stunted tree growth rings in ancient spruce suggest around 11 outbreaks during the last 450 years – the fossil record indicates an outbreak history that may reach back more than 8,600 years. These outbreaks have occurred with surprising regularity, roughly every 30-40 years, with three major outbreaks occurring in the past century.

With so much time since the previous outbreak, it may be timely to recall the full magnitude of damage that can be caused by spruce budworm. High densities of larvae consume all available new foliage, leaving fragments of decaying needles and giving forests a characteristic rusty, red-brown hue. At the peak of the previous outbreak, an estimated 51 million hectares of forest across eastern Canada had suffered moderate to severe defoliation associated with budworm feeding. By the late 1980s when the populations crashed, approximately 18 million hectares of dead or dying trees were reported – an area nearly 2.5 times the size of New Brunswick.

The current spruce budworm outbreak in Quebec is located mainly along the lower north shore region of the St. Lawrence River. This outbreak was detected in 2006 over a 3,000-hectare area and has doubled almost every year since. As of 2012, moderate to severe damage was reported in over 2.2 million hectares. So far, budworm densities have remained low south of the St. Lawrence, but provincial surveys by the New Brunswick Department of Natural Resources indicate a gradual but steady rise over the past few years.

In 2010, spray operations to protect foliage were initiated by the province of Quebec in collaboration with SOPFIM (Société de protection des forêts contre les insectes et les maladies). The only control measure approved for suppression of budworm in Quebec is a biological insecticide, Bacillus thuringiensis kurstaki (Btk); chemical insecticides are no longer used. According to SOPFIM scientist Dr. Richard Trudel, the area treated with Btk in 2012 was about 98,000 hectares of the most high-value forests, which constitutes about two per cent of the total
infested area.

A major challenge for any future spruce budworm spray program will be the high cost of treatment. Application costs have ballooned from $4-10/hectare in the 1970s and 1980s to more than $65/hectare as of 2012. Studies are still investigating the potential use of other control measures, including the registered insecticide Mimic (a hormone that causes early moulting) and pheromone-based mating disruption. Whatever tactic is chosen, high treatment costs are likely to preclude a spray operation of the scale seen during the previous outbreak, which between 1985 and 1990 covered nearly 2.8 million hectares in eastern Canada.

Much of what we know of budworm management has come from research spearheaded by scientists of the Canadian Forest Service (CFS). Many of these scientists advocate a budworm treatment strategy based on the insect’s population dynamics. Past research has suggested that spruce budworm rises synchronously throughout the region, with pockets of particularly high damage caused by relatively fast-growing populations. A spray program based on this population growth model would be used mainly to protect trees in high-value stands by knocking down large, fairly localized populations before significant damage occurs. Historically, this has been the main approach used.

Recent studies have provided tentative support for an alternative model of population growth. The evidence suggests outbreaks may spread from localized, high budworm density “epicentres,” providing a wellspring of dispersing adults that boost surrounding populations. If this model is confirmed, it could provide an “early-intervention strategy.” Treating apparent epicentres early in the outbreak could slow the spread of budworm. However, more research is needed to validate this approach, and to address logistical questions, such as when, where and how early intervention might be implemented, how to forecast the initial rise and subsequent spread of outbreaks and whether such a strategy would be less costly than alternatives.  

Research to examine this early-intervention approach is underway in the Lower St. Lawrence region near Rimouski, Que. The project is being led by CFS scientists from the Laurentian, Atlantic and Great Lakes Forestry Centres, working closely with provincial foresters, private landowners and several industry partners (SOPFIM and Forest Protection Ltd.). This collaboration represents a positive first step towards improving the management of spruce budworm in eastern Canada.

Visit the Natural Resources Canada website for more information: http://cfs.nrcan.gc.ca/pages/50.


Rob Johns and Deepa Pureswaran are researchers at the Canadian Forest Service in the Atlantic Forestry Centre and the Laurentian Forestry Centre.

Sept. 4, 2013, Sault Ste. Marie - The Invasive Species Centre (ISC) is now accepting proposals for invasive species project funding for up to $35,000 per project. This year's themes focus on: managing risk by looking ahead, invasive species impacts, rapid response coordination, detection and management tools and educating youth. Successful projects will demonstrate impacts on policy or resource management goals for Ontario. Project funding proposal applications must be submitted online no later than 12:00 noon, Friday, October 11, 2013

The ISC has also introduced a new internship component to their call for proposals and is now also accepting proposals for invasive species internship projects. Organizations with invasive species projects that require an intern should submit internship proposals to the ISC. Successful internship projects will later be matched with qualified university or college students. Internship proposal applications must be submitted online no later than 12:00 noon, Friday, October 4, 2013.

The ISC, based in Sault Ste. Marie, Ontario, is a partnership-based organization. Its focus is on addressing threats from invasive species by facilitating cooperation, collaboration, coordination, and communication between the wide range of stakeholder groups involved in prevention, detection, and response activities. The ISC operates in three key areas: facilitating linkages between government and non-government agencies working in invasive species; functioning as a clearinghouse for information and knowledge exchange; and funding projects that promote a coordinated, evidence-based approach to invasive species.

Funding quality projects that advance invasive species prevention, detection and response is an important part of ISC's mandate. The projects the ISC fund become part of the information and knowledge resources offered through their network of partners. In addition, these initiatives will help contribute to the ISC's ongoing efforts at communication and outreach about invasive species. Organizations or groups engaged in invasive species research, education and outreach, management, or policy are encouraged to submit proposals. Conservation organizations, non-government organizations, research networks, academia, First Nations, industry, municipalities, provincial and federal government agencies are expected to participate in this call for proposals.

Email questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Aug. 13, 2013, Vancouver- Ainsworth Lumber announced strong financial results for the second quarter ended June 30, 2013.

Ainsworth President and Chief Executive Officer, Jim Lake said, "The second quarter of 2013 was another solid period for Ainsworth. The Company generated adjusted EBITDA of $50.7 million, which represented a $33.8 million improvement versus the second quarter of 2012. We continued to benefit from the early stages of the U.S. housing market recovery, generating adjusted EBITDA of $113.2 million in the first half of 2013 compared to $26.5 million in the same period in 2012."

Financial results

Sales were $127.5 million in the second quarter of 2013, representing a $37.0 million increase over the second quarter of 2012, due to a 45.9 per cent increase in realized pricing that was partially offset by a 3.4 per cent decrease in sales volumes. Adjusted EBITDA was $50.7 million in the second quarter of 2013 compared to $16.9 million in the same period of 2012. Net income from continuing operations in the second quarter of 2013 was $2.8 million compared to a net loss from continuing operations of $11.4 million in the second quarter of 2012. The $14.2 million increase included a $33.9 million increase in gross profit and a $5.7 million reduction in finance expense, partially offset by increased costs of curtailed operations associated with activity at the High Level mill, and fluctuations in non-cash accounting gains and losses and income tax expense.

In the first half of 2013, sales were $269.3 million compared to $175.6 million in the same period of 2012. The $93.7 million increase was related to a 57.7 per cent increase in realized pricing, partially offset by a 2.7 per cent decrease in sales volumes. Adjusted EBITDA for the year to date was $113.2 million in 2013 compared to $26.5 million in 2012. Net income from operations in the first six months of 2013 was $39.3 million, compared to a net loss from continuing operations of $10.8 million for the same period in 2012, representing an increase of $50.1 million. The increase included an $86.8 million increase in gross profit, an $11.9 million decrease in finance expense, and a $2.9 million variation in foreign exchange gain/loss on operations, partially offset by increased costs of curtailed operations, and fluctuations in non-accounting gains and losses and income tax expense.

Margins

Adjusted EBITDA margin on sales for the second quarter of 2013 was 39.8 per cent compared to 18.7 per cent in the second quarter of 2012 (42.0 per cent in the first half of 2013 compared to 15.1 per cent in the same period of 2012).

Benchmark OSB pricing decreased during the second quarter of 2013, but remained stronger than the same period last year, with the North Central price for 7/16" OSB averaging U.S.$347 per msf (an increase of 48 per cent compared to the second quarter of 2012, and a 17 per cent decrease compared to prior quarter). The Western Canadian price for 7/16" OSB averaged U.S.$328 per msf in the second quarter of 2013 (an increase of 41 per cent compared to the second quarter of 2012, and a 22 per cent decrease compared to prior quarter).

For more information, go to http://media3.marketwire.com/docs/fs813ans.pdf.

Heading into 2013, the major lumber consuming regions of North America, Europe, Japan and China are each in a different place in their economic cycles. After three years of historically low housing starts, U.S. housing showed rapid improvements in 2012, particularly in the fourth quarter. Starts are expected to double by 2017 from 2012 levels. In contrast, the current economic turmoil in Europe is forecast to keep housing starts and wood products demand stalled for at least the next two years. China, coming off of a real estate market tear that slumped in 2012, is expected to have flat growth until the second half of 2013 when the results of the new Chinese government’s economic plan phases in. Finally, housing in Japan is also on an upward trajectory, as home buyers try to get their homes built before consumption tax increases start in 2014.

Global Demand and Supply
With the variation of gains and losses throughout the main lumber consuming regions, the total global softwood lumber consumption in 2012 gained about 1% over 2011. For 2013, the global outlook is for an improved but still subdued increase of about 2%. Within the global total, some regions will see more rapid growth than others: the U.S. and Japan are each forecast to grow at about 5% in 2013, whereas European consumption is forecast to shrink by about 1%. With shifting fortunes and price differentials will come opportunities for international trade.


Global softwood production trends mirrored consumption trends in 2012, increasing by a mere 0.7%. For 2013, production is forecast to accelerate slightly, by about 3%. A rebound in North American production (to supply the recovering U.S. housing market) will have the largest influence on global production in 2013. North American production is expected to jump significantly (8% in the U.S. and 5.5% in Canada). European production will also rise slightly, even though consumption is forecast to fall. Increased exports to markets in Asia, the Middle East, and North America will absorb the extra volume.


North American Demand
Good news is the word in North American markets: U.S. house prices appear to have stabilized and are rising in many cities, housing starts (although still very low by historical standards) are well on the uptick, and inventories of vacant homes have been gradually receding. 2012 is now being hailed as the turn-around year, from which point housing growth and wood products consumption is forecast to accelerate over the next five years.


U.S. housing is the key driver of lumber consumption in North America. Based on housing starts, lumber consumption for new U.S. residential construction alone is expected to increase nearly threefold from 2011 to 2017. Demand for repair and remodelling, industrial and commercial applications is also forecast to increase steadily. Total Canadian demand will also increase, but at a much slower pace (given that the Canadian housing market appears to be slowing down).

North American Supply
North American production is expected to grow rapidly over the next two years, chasing (but not quite catching) North American demand. Based on WOOD MARKETS’ demand forecast, total North American production is forecast to grow by about 8% in 2013 and an additional 6% in 2014. The lion’s share of this increase is expected to come from the U.S.: shipments are expected to grow by about 10% in 2013 and 8% in 2014. Canadian shipments will grow too, but will be limited by tightening timber harvests in the B.C. Interior, Ontario and Quebec: total production is forecast to rise only about 5% in 2013 and 3% in 2014.


By about 2016, the production capacity in Canada will be almost 10 billion board feet lower than it was in 2005, while both U.S. and export markets are expected to be strong. This will contribute to higher prices and the creation of a North American lumber “super cycle” – something WOOD MARKETS has been forecasting as early as 2007. An element to watch as the market rebounds will be industry’s schedule for putting curtailed lumber production back online as lumber prices improve; imbalances to the supply or demand side may result in periods of price volatility – prices will go mainly higher, but also lower at times.


Japanese Consumption
Housing starts in Japan have begun to edge upwards since the catastrophic March 2011 earthquake and tsunami. This increase has accelerated the growth in softwood lumber consumption: after several years of steady decline, Japanese consumption grew gently each year starting in 2010. Imports are expected to grow by 5% in both 2013 and 2014.


A major factor influencing housing starts in Japan is the upcoming increase to the value-added (VAT) or consumption tax, rising from the current 5% to 8% in April 2014 and 10% in October 2015. Some housing industry analysts are projecting September 2013 to be the last month in which a buyer could order a new home in Japan in order for it to be completed prior to the first tax hike. For this reason, housing starts are forecast to rise in 2013 and then drop marginally in 2014.

Chinese Consumption
Chinese lumber imports continue to be “headline news” for lumber producers around the world. Chinese housing starts are the highest in the world as they currently dwarf the housing starts numbers for Europe and North America. However, the Chinese housing market slowed in 2011 and then dipped slightly in 2012. After posting double-digit growth every year since 2008, Chinese lumber consumption also slipped in 2012 as the housing market cooled.


Softwood lumber consumption in China dropped by about 2% between 2011 and 2012. A slowdown in Chinese construction is responsible for this decline. For 2013, consumption is expected to recover to 2011 levels, with a larger increase in 2014. However, these growth rates do not include any impact from the new government’s economic plan and some stimulus or investment projects from this plan are expected to allow for higher demand levels than suggested above. Further details are available in WOOD MARKETS’ The China Book: Outlook to 2017.

Europe and Russia
The present economic uncertainty in Europe has hit sawmills hard. As in North America, construction is a key market driver for consumption of sawn softwood, and the housing/building sector in both Western and Eastern Europe is expected to remain very fragile in 2013. However, the potential for increased exports to Asia, the Middle East/North Africa (MENA) region, and the U.S. will allow production to remain relatively flat in 2013, and then rise more significantly in 2014.


Russia joined the WTO in August 2012 and has been in the process of replacing its previous log export taxes with new quota volumes and a lower tariff rate. The new rules, once they are completely phased in, are expected to marginally increase export log availability over the short term. However, Russian lumber production is forecast to increase as a result of some new Russian sawmills starting up and the increasing importance of Chinese mills in Siberia.

Increasing Prices, Shifting Trade Flows
The global balance between supply and demand is expected to shift over the next few years, from an oversupply of lumber to an undersupply. While European lumber consumption continues to struggle, North America’s rapid recovery, Japan’s steady consumption, and China’s economic growth engine will drive overall global consumption upwards. North American mills are forecast to increase production, but are not expected to completely keep the pace with increasing demand in housing and repair/remodelling. The increase in North American lumber prices began in 2012, rising from near cost levels near the beginning of the year to a six-year high price by December. Partly as a result of rising prices in the U.S., U.S. export growth slowed in 2012; it is forecast to decline from 2013 to 2017, as higher prices keep more wood in domestic markets.


Canadian production and exports will increase to meet the increasing U.S. demand. Indeed, with prices now above the US$355 Softwood Lumber Agreement threshold (based on the Random Lengths Composite Framing Index), Canadian lumber began entering the U.S. duty-free in January 2013. However, annual allowable cut (AAC) reductions in the timber harvest in Ontario, Quebec, and increasingly, the B.C. Interior, will limit Canadian lumber production to marginal gains in output and nowhere near its pre-recession levels. Toward the middle of the five-year forecast, as North American, Asian, and possibly even European demand all rise, total Canadian production and exports will actually begin to decrease. This tightening of supply precisely when it is needed the most is expected to create an even greater price increase than seen in the 2013-2014 period.


WOOD MARKETS’ lumber forecast to 2017 predicts two distinct price spikes. The first, as discussed in this article, will be driven by demand increasing faster than supply through 2013 and 2014 as the supply chain struggles to keep enough production moving to customers. As high prices attract additional production and imports, supply and demand are expected to more or less balance out by 2015, putting downward pressure on prices in seasonally slow periods. However, continued demand growth in the U.S. and Asia, coupled with a further recovery in Europe and maxed-out production in Canada, will lead to a second supply/demand imbalance as production is once again unable to meet supply. This will lead to a true lumber super cycle in 2016 and 2017 – at a time when prices could really go through the roof.


Excerpted from WOOD MARKETS 2013 - Outlook to 2017 (8th Edition), which offers an overview of current issues in the global lumber trade with outlooks to 2017. The report is published by International WOOD MARKETS Group Inc., Vancouver, B.C. (www.woodmarkets.com).

The prospects for the North American panel industry – OSB, plywood, MDF and particleboard remain firmly tied to the U.S. economy and particularly the housing industry. With housing stalled since 2007-2008, and with only modest gains likely in 2012, the fortunes of the panel industry will be similar to what has been seen since 2009: too much capacity chasing too little demand.

The greatest impact has been on the OSB sector, where an unprecedented level of OSB mill curtailments and permanent closures has occurred since 2006, with over two dozen mills out of commission. In parallel, the particleboard and plywood industries have seen similar levels of closures, but the downturn in these sectors started in the late 1990s and not the early 2000s. MDF has seen only a few closures, but it is also the smallest sector and has not been immune to the housing crisis.

A summary of the forecasts for OSB and plywood to 2013 is provided, excerpted from WOOD MARKETS Group’s recently released report, WOOD MARKETS 2012 – the Five-Year North America Lumber and Panel Outlook: 2012-2016.


OSB and PLYWOOD

Demand Drivers
The main drivers that continue to influence the fortunes of OSB and plywood include the recovery of the U.S. economy, and especially housing markets, along with the return to a healthy U.S. financial and credit sector. The WOOD MARKETS 2012 economic forecast continues to foresee a slow recovery in 2012 and into 2013 as a result of some slow changes in foreclosure rates, housing prices, unemployment rates, and new and existing home-inventory levels (which have limited new residential starts). U.S. housing starts were mired in the range of 550,000 to 600,000 units between 2009 and 2011, and modest gains are forecast in 2012.

As in its last three annual forecasts, WOOD MARKETS 2012 continues to forecast a slow recovery in housing starts, calling for a slower buildup to 2014, and then greater acceleration to 2016. The WOOD MARKETS 2012 forecast believes that housing starts in the current decade will be considerably lower than other forecasters are predicting, and below those of the 2000s, due to the direct impacts of fundamental structural changes in U.S. credit markets, housing markets and buyer sentiment.

Demand Trends
Since OSB consumption remains heavily correlated to housing (especially single-family) demand, new residential construction normally accounts for more than two-thirds (and up to three-quarters) of all OSB usage. However, this has been averaging only 45% to 46% between 2009 and 2011 — a level at which it is forecast to remain through 2014 — due to reduced total housing starts and declining single-family starts.

Plywood continues to be impacted by a decreasing market share of sheathing panels in floors, walls and roofing as lower-cost OSB increases its share in all three segments. However, plywood is more diversified in other end-use segments, e.g., industrial and remodelling, and is less dependent on sheathing products.

U.S. structural panel consumption reached 41.7 billion sf in 2005, an all-time high, and bottomed out in 2009 at 20.9 billion sf. WOOD MARKETS 2012 forecasts steady increases for U.S. structural panels, with demand in 2011 expected to be near 21.0 billion sf (actually lower than 2010’s 21.6 billion sf), rising to 22.0 billion sf (+4.8%) in 2012 and higher in 2013 (to 24.5 billion sf (+11.4%), led mainly by growth in OSB).

Canadian structural panel consumption should recover from a low of 3.3 billion sf in 2009 to 4.1 billion sf (+6.0% annually) in 2013.

U.S. OSB Production Outlook
U.S. OSB production peaked in 2005 and 2006 at over 14.9 billion sf, and bottomed out at 9.6 billion sf in 2009. This 36% decline (5.3 billion sf) is equivalent to the full production of 10 modern OSB mills (or a higher number of smaller ones). It is estimated that OSB production declined from 10.3 billion sf in 2010 to about 10 billion sf in 2011, and is forecast to rebound to 11.5 billion sf in 2013 (not far off its lows in 2009–2011).

Canadian OSB Production Outlook
From just 4.5 billion sf in 2009 and 5.0 billion sf in 2010, production is forecast to rise slowly, reaching over 6 billion sf in 2013. Canadian OSB exports to the U.S. bottomed out at 2.75 billion sf in 2009 and were up marginally in 2010 at 2.8 billion sf; they are forecast to be close to 4.0 billion sf in 2013.

Plywood Production Outlook
Like OSB, U.S. plywood output is tied directly to the rebound in housing/R&R and is forecast to recover slowly (from 8.6 billion sf in 2009 and 9.1 billion sf in 2010) to reach about 9.5 billion sf in 2013. The U.S. South is projected to grow its market share of domestic plywood while the U.S. West struggles with higher log and operating costs relative to market prices.

Canada’s plywood output at remaining mills should rise slightly, moving from 1.6 billion sf in 2009 and 1.77 billion sf in 2010 and 2011, to over 1.8 billion sf in 2012 and 2013.

Relative flat prices are expected in 2012 and 2013 – details are in the full report as well as WOOD Markets Monthly International Report.


MDF and Particleboard

After a third straight year of rock-bottom demand, non-structural panel producers face a long, slow recovery in 2012, 2013 and beyond.

MDF and PB Demand Trends
The year 2011 was the toughest one yet for North American non-structural panel manufacturers. From the peak in 2005, consumption of particleboard and MDF in the U.S. and Canada dropped by about 40% to 2009, where it has remained basically unchanged ever since. North American particleboard consumption decreased slightly from 3.3 billion sf in 2009 and 2010 to 3.2 billion sf in 2011. It is forecast to increase only slightly to 3.3 billion sf in 2012 (45% below its 2005 peak).

MDF consumption has remained static at 2.4 billion sf from 2009–2011 and is forecast to reach over 2.5 billion sf in 2012 (32% below its 2005 peak). The trend toward MDF taking an increasing share of the non-structural panel market continued in 2011. The growth in the laminate flooring and mouldings sectors — both heavy users of MDF — has offset the decline in the North American furniture and other industrial markets.

MDF & PB Production Trends
Collectively, North American particleboard and MDF shipments are projected to hit a new low of 5.0 billion sf in 2011, after two years (2009 and 2010) of hovering around 5.1–5.2 billion sf (levels not seen since the late 1980s). Combined U.S. and Canadian output is forecast to slowly rebound from the lows achieved in 2011, reaching near 5.5 billion sf in 2013.

The market for panel products is significantly impacted by U.S. housing start numbers.

Product-wise, particleboard took a harder hit than MDF, with shipments dropping by 4% in 2011 versus 0.5% for MDF. In 2012 and 2013, MDF is expected to recover about twice as fast as particleboard. Canadian production declined by 9% in 2011, compared to a 0.4% drop in the US. For 2012 and 2013, both countries’ production is forecast to improve at about the same rate.

WOOD MARKETS 2012 concludes that North American panel manufacturers are facing ever-increasing materials costs, both for wood fibre (such as sawdust and shavings) and for resins. With increasing competition from the bio-energy sector for fibre to feed wood pellet plants, the costs of sawdust and other wood waste materials have been rising. The costs incurred for resins are also going up, due partly to an overall increase in resin prices (caused by higher petroleum prices) and partly to a need to shift to pricier resins to meet Phase 2 of the California Air Resources Board (CARB) formaldehyde emission standards (required in all U.S. states). The cost crisis is dealing with some of the uncertainty surrounding the new Boiler Maximum Achievable Control Technology (MACT) rules, which should impact panelboard mills less than originally expected.

Outlook
WOOD MARKETS 2012 predicts that the operating environment for 2012 and 2013 will continue to be tough. However, it is after 2013 when market dynamics should turn – a super-cycle for wood products is expected, but the precise timing will remain the major question.


By Russ Taylor, President; and Alice Palmer, Consultant, International WOOD MARKETS Group Inc., Vancouver, BC Canada
a Extracted from WOOD MARKETS 2012 — The Five-Year North America Lumber & Panel Outlook 2012–2016 - see http://www.woodmarkets.com/p_wmbook.html

Detailed summaries appear in WOOD Markets Monthly International Report.

Installing a new fingerjoint line for solid sawn flange production and a new cold press has given Roseburg’s massive engineered wood products facility the ability to bring five process centres under one roof: drying and grading, hot press, an I-joist line, fingerjoint line and cold press.

Big things have been happening in the southwestern corner of New Brunswick, especially for anyone interested in reducing production costs at medium density fibreboard (MDF) plants while also improving ambient air quality conditions.

A few years ago during a review of its purpose and mission, the Tacoma, Wash.-based Engineered Wood Technology Association (EWTA) adopted a new marketing tagline: “Strength Through Connections.”

For many businesses, being flexible enough to quickly respond to changing market conditions can be a crucial component to success. That has been the case at the SmartPly Oriented Strand Board (OSB) mill near Waterford in the Republic of Ireland, where employees have become particularly adept at efficiently developing new ways to stay on top of changing customer requirements and needs.

The old cliché of  “if you can’t beat them, join them” took on a whole new meaning earlier this year when two struggling plywood mills in northern Ontario joined forces to create a single viable company. But it wasn’t a simple case of one mill swallowing up, or being joined by the other. It was a true merger that capitalized on creating synergies, sharing technology and a skilled workforce, and melding together a varied customer base.

Times may be tough out there for both solid and engineered wood products manufacturers but you wouldn’t know it walking through the DRIcore plant in the Toronto, Ont., suburb of Mississauga. The company, which is a wholly-owned subsidiary of Montreal, Que.-based Kruger Inc., is a major hive of activity where 4 ft. x 8 ft. sheets of oriented strand board (OSB) are converted into 2 ft. x 2 ft. panels for engineered subfloor systems.

Six years ago John Greenwood put his entrepreneurial spirit and business background to good use when he took over the helm of Nisku, Alta.-based Millennium Decking and its parent company, Wood Composites Technologies Inc.

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