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Logging and Sawmilling Journal October/November 2011

April 2012

On the Cover:

Tigercat’s new 880 machine is proving to be a fuel-sipping processor, while still delivering the goods, at Suncoast Logging on the west coast of Vancouver Island. Read all about the 880 at Suncoast Logging and an 880 purpose-built log loader at Blue Valley Enterprises in B.C.’s Central Interior in the May/June issue of Logging and Sawmilling Journal (Photo by Paul MacDonald).

Spotlight

Fueled by high commodity prices and demand in Asia, a slew of resource industry-related mega projects in B.C. could keep loggers busy doing right-of-way clearing and site prep work for some time.

Rock-steady harvesters

With steady investments in equipment upgrades, Gaetan and Rheal Roussel have developed a rock-solid reputation for high production and consistent harvesting in the New Brunswick woods.

Achieving a sawmill dream

Mardis Forest Products owner Larry Gould has endured the trials of tough business conditions in the forest industry—but is now seeing the achievement of a lifelong dream with his successful custom sawmill in the B.C. Interior.

Managing growth

Alberta’s Timber Pro Logging is carefully managing growth, and making the right equipment decisions—including an investment in some John Deere equipment this past fall—has been key to their success during a time of tight profit margins.

The Edge

Included in The Edge, Canada’s leading publication on research in the forest industry, are stories on FPInnovations, Natural Resources Canada, the Canadian Wood Fibre Centre and Alberta Innovations – Bio Solutions research projects.

Canada’s Leading Lumber Producers

Logging and Sawmilling Journal’s authoritative listing of the Top Lumber Producers, from industry consultants International Wood Markets Group, shows who’s up and down in lumber production.

Performance plus

Operating in remote locations along the B.C. Coast, logger Doug Sladey requires solid, reliable equipment—and he is getting that reliability, and performance, from a fleet of Hitachi purpose-built Foresters.

Re-inventing the forest industry

The economic downturn has led to the forest industry re-inventing itself, says Avrim Lazar, who recently retired from a decade leading the Forest Products Association of Canada.

The Last Word

The horrific January explosion and fire that destroyed the Babine Forest Products sawmill near Burns Lake, is revealing what little we really know about the composition of public forests in the British Columbia Interior, says Jim Stirling.

Tech Update - Forwarders

Supplier Newsline

 

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Lumber market recovery taking holdLumber market recovery taking hold

West Fraser and Canfor continue to hold the number one and two spots in the listing of Canada’s top lumber producers, and the annual survey shows that the lumber market recovery is taking hold.

By Peter Butzelaar

The 2011 annual survey of the top Canadian lumber producers by International WOOD MARKETS Group Inc. provides further evidence that the fledgling market recovery that started in 2010 continued to build on itself in 2011.

With North American lumber demand stabilizing and exports rising, both Canadian and U.S. sawmill owners in 2011 were emboldened to look for growth opportunities.

Within the top lumber producers, there were those who emerged out of creditor protection, went on the acquisition trail acquiring undervalued assets, restarted previously idled mills, and added shifts at mills that had been running below desired operating rates. As a result, there was further growth in total softwood lumber production in Canada in 2011 (and the U.S.), particularly among those on the top 10 list.

Total Canadian softwood lumber output rose from 21.9 billion board feet in 2010 to 22.5 billion board feet in 2011 (+2.5 per cent), while U.S. production grew from 24.9 billion board feet to 26.9 billion board feet (+8.0 per cent).

Although U.S. housing starts were less than stellar at 607,000 units (up from 587,000 in 2010), North American lumber consumption showed modest growth of 640 million board feet, coming in at 43.2 billion board feet for the year. As in 2010, Asian demand (mainly from China) was the biggest factor driving overall market growth.

B.C. producers continued to benefit from China’s expanding demand for North American lumber in 2011. Canadian producers (almost all from B.C.) increased their softwood lumber shipments to China by 1.9 billion board feet – nominal count (1.21 billion board feet – net count) in 2011, achieving total shipments of almost 5 billion board feet - nominal (3.17 billion board feet net). In just two years, Canada has increased its shipments to China by a staggering 196 per cent, to the point where Canada’s exports to China are second only to those of the U.S. and, as of 2011, China equated to 36 per cent of Canada’s softwood lumber exports to the U.S.

By comparison, only a handful of the top U.S. companies set up to export to China; their growth opportunities were not as advantageous as they were for their Canadian counterparts. In total, U.S. firms exported 660 million board feet - nominal (420 million board feet - net) to China, for a percentage change over 2010 of +190 per cent. This increase moved China ahead of Canada as the U.S.’s largest export market for softwood lumber in 2011.

CanforIn 2011, the top 10 Canadian lumber softwood lumber producers saw their combined production increase by over 850 million board feet to 14.5 billion board feet (an increase of 6.3 per cent over 2010) versus the rest of the Canadian industry which saw its collective production contract by over 300 million board feet to 8.0 billion board feet (-3.7 per cent; table 1). As mentioned, the Canadian industry’s total production was 22.5 billion board feet in 2011, an improvement from 2010 but still less than two-thirds of 2004’s peak of 35.1 billion board feet.

For the second consecutive year, the top 10 Canadian companies increased their market share of Canadian lumber production, rising from 62.2 per cent in 2010 to 64.5 per cent in 2011 (table 1). Furthermore, the capital expenditures made by these companies came online in 2011, so it could soon be that the top 10 match or surpass the peak share they held in 2005 (just as the market began to contract with the housing bubble).

In 2011, the order of the top five lumber producers in Canada was unchanged from 2010: West Fraser, Canfor, Tolko, Resolute FP (the new name for AbitibiBowater after re-emerging from creditor protection) and Tembec. These five firms produced a total of 11.0 billion board feet (49 per cent of Canadian lumber output) versus 10.3 billion board feet (47.1 per cent) in 2010. West Fraser retained its top position with output of 3.41 billion board feet, 15.1 per cent of total Canadian softwood lumber production, and the same share as in 2010.

The three largest volume gainers were Canfor (+243 million board feet), Conifex (+194 million board feet, more than doubling last year’s production), and Resolute (+183 million board feet).

West Fraser easily retained its position as the largest producer of softwood lumber in North America at 4.91 billion board feet (10 per cent of total output). With Canfor having purchased Tembec’s two sawmills in B.C., it may be enough for the former to be North America’s second largest lumber producer in 2012.

SUMMARY

Top 10 softwood lumber producersFrom a market perspective, the main demand driver affecting the North American lumber market in 2011 was not from a significant uptick in domestic demand. Instead, the growth came amid rising demand for North American lumber and logs from Asia (mainly China, but also Korea, Taiwan and Japan). As in 2010, offshore exports played a pivotal role in shifting the North American market from one awash in lumber and depressed prices to one in which mills had alternative off-take markets to absorb excess supply and allow domestic prices to return to more economically viable levels. Demand out of Asia for North American logs from the West Coast proved to be a boon to timberland owners in the U.S. and Canada, and those Canadian firms with special licences to export logs from public lands. However, with fewer logs available, U.S. and Canadian sawmills struggled at times with log prices rising faster than lumber prices.

With China and the rest of Asia expected to continue to depend on North American logs and lumber to support their own growing domestic consumption, demand for North American fibre in lumber and logs should continue to rise through 2012 and 2013.

Moreover, as the U.S. housing market works through the backlog of unsold and foreclosed homes, the eventual resurgence in new homebuilding activity could result in North American sawmillers scrambling to keep up with lumber demand.

Based on the prevalence of merger and acquisition activity that took place last year, it would appear that several of the larger Canadian and U.S. firms are preparing now for this anticipated “super-cycle” in demand. It will no doubt lead to interesting developments in next year’s list of the top sawmill producers in Canada. Stay tuned!

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This article was summarized from WOOD Markets Monthly International Report (March 2012 issue) by Peter Butzelaar, vice-president, WOOD MARKETS Group.

International WOOD MARKETS Group Inc. is Canada’s largest wood products consulting firm. Its consulting team has provided industry and market expertise in the solid wood products field to its industry clients since 1993. The company provides market research, new business development and business plan/strategy as well as other consultative services to wood product companies in North America and around the world. The firm also publishes a number of strategic industry multi-client reports including its landmark WOOD Markets Monthly International Report (since 1996) and monthly China Bulletin. Further information is available at www.woodmarkets.com




 

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