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Logging and Sawmilling Journal November 2014

february 2015

On the Cover:
Thanks to a low Canadian dollar, and a modest rebound in U.S. housing starts, Canadian lumber prices are at reasonably healthy levels, resulting in sawmills keeping busy. The Council of Forest Industries (COFI) will be looking at how to keep those mills busy at its upcoming convention in Prince George, B.C. in April. See the special pre-convention coverage beginning on page 44 of this issue of Logging and Sawmilling Journal (Photo of the new Lakeland sawmill in Prince George by Doug Hlina of Mill Tech Industries)

Renewable fuel oil can help fuel a sawmill’s bottom line
Ontario “liquid wood” producer Ensyn Corp. is ramping up production of its renewable fuel oil and has put the welcome mat out to the forest industry, noting that its biofuel facilities—when attached to an existing sawmill—can help to improve the economics of a mill.

High yield mill investment
A $30 million rebuild at EACOM’s sawmill in Timmins, Ontario, was a major undertaking for the company, but it’s expected to yield a production increase of as much as 20 per cent.

Have wood—will move it
Logging contractor Hec Clouthier & Sons harvests a wide assortment of logs in the areas they work in, in eastern Ontario. Typically they sell wood to 13 mills—but after a significant blowdown, they were able to sell wood into a staggering total of 38 mills.

Early woodlands adapters
Both Quebec logging contractor Mario Gauthier and forestry co-op Forestra have adapted well to new regulations that amended the fibre allocation system in the province, thanks to Gauthier’s solid equipment and Forestra’s focus on developing fibre markets.

Timber/beam specialists
B.C.’s Hyde Sawmill has found a successful market niche producing high quality timber and beam products using three Wood-Mizer band saws, and a Mahoe circular saw from New Zealand.

Timber price tracking
B.C. company WoodX offers a market intelligence data service to prospective timber buyers to help them make prudent and competitive bids in the BC Timber Sale program.

High performing mill iron
Every efficient sawmill needs a fleet of high performing millyard wheel loaders and the Fornebu Lumber operation in New Brunswick is finding its Hyundai equipment —which includes the big daddy of the fleet, a Hyundai 770 with 300 horsepower—fits the bill very nicely.

The Edge
Included in The Edge, Canada’s leading publication on research in the forest industry, are stories from the Canadian Wood Fibre Centre and Alberta Innovates - Bio Solutions.

Plenty of issues front and centre at COFI convention in April
Our special pre-convention coverage

The Last Word
The outlook for Canadian lumber producers over the next several years is positive—meanwhile, the outlook for Canadian pellet producers is positively rosy, says Jim Stirling.

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Outlook is positive for Canada's lumber producers

By Jim Stirling

Canada’s recent lumber and wood byproduct marketing diversification strategies should help the more progressive forest companies weather the next two or three years. Two recent reports lead to that conclusion.

The International Wood Markets Group in 2014 took the brave step of preparing its five year lumber demand forecast. The company’s intelligence estimates the bellwether U.S. housing starts will slowly climb from a little more than one million units in 2014 to 1.46 million by 2019. International Wood Products predicts British Columbia lumber production of 12.6 billion board feet in 2015 (up from 12.3 billion last year) with a price of U.S. $362 per thousand.

The trend is predicted to continue its improvement in 2016 with B.C. lumber production of 12.8 billion board feet and a price of U.S. $377 per thousand. But unlike the past, B.C.’s sawmills won’t have the luxury of simply ramping up production to meet the U.S. lumber demand peaks. Instead, the mountain pine beetle’s bite will sink deeper. The sawlog fibre quantities simply won’t be there.

As a consequence, International Wood Markets expects B.C.’s lumber production to dip to 12.5 billion board feet in 2017 and prices will reflect the fibre situation, reaching about U.S. $425 per thousand. By 2019 and the end of International Woods Products’ time frame assessment, B.C. producers’ share will have shrunk to 11.8 billion board feet, although the price will remain high, at U.S. $400 a thousand.

A non-beetle factor affecting predicted prices comes from Quebec. The company said the provincial government there has reduced Crown timber harvesting levels to meet its conservation goals.

Interestingly, although not specifically mentioned in International Wood Markets’ analysis, the possibility exists in B.C. of an opposite move to Quebec’s. The B.C. Liberal government has indicated it might consider removing areas of timber currently under varying levels of protection from industrial activity to help counter the fibre shortage impacts of the beetle infestation.

Fortunately, B.C. is no longer a one trick lumber market pony. There’s Asia and hard work to thank for that. China especially has forestalled some interior mills from closure. Chinese lumber demand is not what it was, rating lateral to dipping. But it maintains a significance.

Japan, Korea and other regional markets have their issues but will likely help B.C. lumber producers who have done their homework in the region and proven themselves reliable shippers of quality products.

All in all, according to International Wood Markets Group’s analysis, market-wise, the outlook is short term positive for Canada’s lumber producers.

Meanwhile, the export outlook for biomass energy production looks predominantly rosy for the next several years.

“The markets are growing at a tremendous rate. It looks like global consumption is going to double in the next few years,” pointed out Gordon Murray, executive director of the Wood Pellet Association of Canada in a report late last fall.

The demand is being driven by political resolve in Europe and latterly in Asia. Some European countries are committed to weaning their industries off a traditional reliance on coal-fired power in favour of renewable sources. Some European countries have signed on to European Union commitments to reduce greenhouse gas emissions by 20 per cent from 1995 levels by 2020.

Generous European subsidies help make the importation of wood pellets from jurisdictions like B.C. a viable option, despite the formidable transportation challenges. B.C.’s wood pellet manufacturers have been quick off the mark to capitalize on the situation. Currently, 13 wood pellet manufacturing plants produce approximately two million tonnes of product annually, mainly for export. Cheap natural gas drives the domestic Canadian heating market despite wood pellets’ availability and advantages.

Canfor Corp. will add to B.C.’s wood pellet manufacturing capacity when its new plants in Chetwynd and Fort St. John come into production. The plants, adjacent to the company’s existing sawmills at each location, will manufacture wood pellets from sawmill residues and capitalize on surplus capacity to generate electricity for the B.C. grid, thereby creating an additional revenue stream.

Korea and Japan are following Europe’s lead toward more renewable power and wood pellet shipments. While these shipments are relatively modest today, these countries have air quality targets that auger well for Canadian pellet manufacturers.

The wood fibre is available in B.C. to support the predicted growth. The trick is to secure access to a steady supply of low grade fibre at prices acceptable to major licencees and the biomass industry. The B.C. Ministry of Forest, Lands and Resource Operations has said it will introduce supplemental forest licences to help facilitate the process. Timber allocated under the licences would be classified as uneconomic for lumber production. The licences would, among other advantages, give the wood pellet manufacturing industry a bargaining chip when negotiating with licencees for long term fibre supply contracts.

The Canadian forest industry is however never short of issues that can derail the best of predictions. Last year’s Supreme Court of Canada’s decision in the Ts’ilhqotin Nation claim could prove a case in point. What the Court’s decision means for the day to day functioning of the forest industry remains unclear. The possible ramifications range from minimal to catastrophic. Most First Nations groups are wisely holding their counsel and assessing their options.

But what is clear from the Court’s decision is that failure to show deference and respect to First Nations on land access and use issues will have its consequences.