The Woods Industry Is About To Explode
Tuesday, February 12, 2013 @ 3:45 AM
We are heading into a new decade of prosperity in the woods industry in this region. It has been a long time coming but with the signs on the horizon the central part of BC is on the cusp of some very interesting times.
If we can obtain the amount of fibre that we will need in order to fill the markets that will come looking for our product, the rest should be a slam dunk.
The US is expected to see a sharp increase in housing starts in the next 24 months. Add to that an already growing Chinese market. That spells increased prices and the mill owners are suggesting that the prices will hit new record highs.
Now on the other side of the ledger, Hakan Ekstrom of Wood Resources International is reporting in his latest bulletin that pellet exports from the two primary markets in North America, the southern USA and BC have reached a new record of 860,000 tons. That adds a growing dimension of what will be required in the fibre industry.
While we have not kept pace with the USA in the increase in pellet manufacturing, it is only a matter of time before we in this region look around and see the opportunities.
If pulp remains steady, and there is every indication that it will, the next decade looks very good from a local point of view in the base industry that has been the back bone of this city for the past many decades.
While the number of people who are required to operate these facilities has been dropping with the move to more automation, the sheer growth will more than offset that.
I’m Meisner and that’s one man’s opinion.
Comments
This is good to hear. Hopefully this will bring a new prosperity to Prince George and it can shed some of it’s bad reputation.
Now only if we had some trees!
Probably not the most well thought out headline.
If there is a boom I doubt it will impact PG that much. We have no wood and the mills are mostly gone.
While I truly do hope this rosy expectation of the wood fibre industry comes to pass, I do wonder how much of this “fibre” will simply be raw log exports to the US and China.
“While the number of people who are required to operate these facilities has been dropping with the move to more automation, the sheer growth will more than offset that.”
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No, it will not. The move will be towards FURTHER automation, and the ‘growth’ will be limited by the availability of fibre.
The increase in price will result in the further loss of market share for sawn wood products in favour of substitutes that are currently not competitive in price, but will be if lumber prices rise and remain high.
We are not the only place in the world that grows trees, and the setting in place of international free trade agreements will open our traditional North American market to increased imports from offshore, often from countries that have a considerable currency exchange rate advantage over Canada.
In addition, the USA has built up a vast volume of new growth in National Forest timber over the last third of a century as their lumber industry in the western States collapsed under Environmentalist sponsored timber tie-ups, and finally a complete choke-off, of US Forest Service timber sales.
With the US now in a serious deficit situation internationally, there will be increasing pressure to begin using this timber again, create American jobs, and reduce dependence on imports.
All is certainly far from the ‘doom and gloom’ of the depths of the recent recession, but to expect that a rise in lumber prices is going to be the great panacea for ‘jobs’ and the BC economy it was in days of yore is simply dreaming in technicolour.
The day of the ‘job’ as being the sole source of an income capable of providing a living for the majority of citizens is passing. And it only takes a comparison of the flows of overall incomes in comparison to that of overall price generation to see that. As witnessed by the constant rise in Consumer, and overall indebtedness, we are collectively going behind financially, not coming ahead.
What we are collectively distributing in incomes through employment is NOT, and CAN NOT, with a continual rise in automation displacing labour, ever be fully capable of liquidating the OVERALL costs of production through prices by itself. The sooner we wake up to this FACT, the better the chance we’ll have to be able to deal with it. But if we’re continually determined to hitch our economic wagons to the falling star of ‘job creation’, we’ll end up without forests, trees or jobs, and still be broke.
There are many many factors that will have to be taken into account before we get any long term benefit from the increases in prices for lumber.
1. Lumber prices rise and fall on the open market. They should stay up for sometime.
2. There are no new mills coming on board with the exception of Burns Lake, which will be a few years in the making., So the only way we can increase production is to go to two or three shifts with the present mills. This is probably already happening.
3. With the increase in prices in the US, the sales of lumber to China will begin to decline, mainly because the Chinese will not pay top price for 2×4’s. The lumber bought by China is D grade and used for concrete forming. Loaded exports of containers were down in Prince Rupert for the Month of January and I would assume this is because of decreased exports of lumber.
4. With the huge increases in natural gas around the world, and especially in BC, one would think that natural gas would become the main producer of electricity, and replace the need of pellets to some extent. So as we see the exports of LNG increase we could see a decrease in the export of pellets.
In any event the rise in prices on lumber sales to the US and the rise in housing starts is a good news story for the BC Lumber industry.
We may not be keeping the same growth pace as the US in terms of pellet manufacturing but strictly looking at one companies growth in the BC market place, Pinnacle Renewable Recourses (otherwise known a Pinnacle Pellet) has opened a new mill in BC (predominatley in Northern BC) in 2004, 2006, 2007, 2008 & 2011. Each of these mills is running 24/7.
I’d would venture to say that someone has realized the growth potential and is putting a lot of money into our local communities.
I will believe it when I see it. Not before.
And what will happen to Pinnacle in a couple of years when the dead pine is no longer salvageable? There’s no other wood available for most of their plants.
We need to be building natural gas plants in BC to produce elecricity in addition to exporting this Gas.
We do not need Site C.
We need site C before it becomes too expensive to build. Site C will outlast natural gas.
I agree that there is an equilibrium out there which will readjust to conditions. There are much faster growing cellulose fibres available to provide paper products as well as pellets to stoke the heating plants. Those are typically grown in more southern climates. Perhaps newer plant versions will be hardier and could be grown in northern range lands.
I see the main logistic to overcome in producing wood fibre products being the transportation to these mega plants we have been building. I do not know what the total production cost from standing timber to sawn lumber and pulp/pellets is, but I would think that the transportation component has increased significantly proportionately over time.
As far as pellet plants go, they are relatively cheap compared to other plants.
I believe a 10 year lifecycle is enough to pay it off and move on. I would not rely on them for sustainability of a community.
I would take the US housing start prediction with caution. The US is in big fiscal trouble and it can’t be sustained through borrowing and printing money. Just can’t see the first world debt crisis ending well.
Logs are being moved on HWY97 in both directions for hundreds of kilometres. A waste of money and certainly if one considers the wear and tear on the highways, it gets even worse. That should be outlawed. Bring them to the nearest rail, create small transfer stations on sidings and move them to the plants.
I agree with respect to the US housing NEEDS. They have to change the WANTS to aligne more closely with the NEEDS otherwise they will simple get stuck in the same rut.
Besides, the wood industry has exploded already. We had two of them close by.
I am one to think that one of the factors which caused the explosions is cost saving measures during tough times.
Palupo said:
2. There are no new mills coming on board with the exception of Burns Lake,
Just to add to that;
Canfor is investing 21 million or so into their Mackenzie Sawmill, that seems to indicate they are confident about the future of the solid wood business.
Another issue; pellet plants. They are not limited to dry pine as a base material. There are many sources of fibre that are suitable for pellet manufacturing. There may be more of a future for that business than some seem to believe.
metalman.
“Another issue; pellet plants. They are not limited to dry pine as a base material. There are many sources of fibre that are suitable for pellet manufacturing. There may be more of a future for that business than some seem to believe”
exactly – the mobile grinder business for wood waste in the bush was just starting to get rolling before the ‘cutbacks’ around 08 or so. There isnt enough money to warrant trucking of the chips so it is back to piling and burning…
I agree with the Canfor Mackenze Sawmill expenditure, however this will still not put any new mills into production, however Im sure all the present mills will ramp up production and go to three shifts, or two 12 hours shifts, or whatever it takes.
At the end of the day, with the shortage of fibre, I doubt if we will see any new mills. In fact I would think that they will have trouble finding employees for the increased shifts.
We could have a mini boom in the area, with a shortage of workers. Not a good thing.
In addition if everything runs true to form, once the mills start shipping at capaqcity, we will run into a rail car shortage.
So lots of problems comes with increased business..
Have a nice day.
“There are many sources of fibre that are suitable for pellet manufacturing”
Yes. And most countries have those sources and have been using them for some time. Try coconut shell pellets for example …. :-)
Even though the modern pellet was invented in the USA, several European countries have been the largest adopters.
Lumber at $ 390.00/thousand fbm and the industry is only returning $ 0.25/cubic meter(420 fbm) for fibre to the coffers in Victoria? Prior to the mountain pine beetle infestation in 2005, the coffers would have seen about $ 20.00/ cubic meter.In other words $ 1100.00 to the coffers per truck load versus $ 18.00 per truck load today.The forest industry is the back-bone in this province I just ask they pay a fair share for the fibre
The pellet business throughout North America is about as hyped up now as the OSB business was a few years back, and pulp mills were some time before that. All these things depend on CHEAP sources of fibre, in volume, and when the price rises and the volumes get tighter, they just don’t make ‘enough’ money to keep going. We’re too stupid to learn from past mistakes. We’ll overbuild, again, flood the available market, and still be too high cost to enter any new ones profitably. Such is the fate of any place that thirsts after ‘jobs’ to the exclusion of any other considerations.
Value of,Softwood lumber exports to China.
2011, $1,080,000,000.00
2012, $1,065,000,000.00
Decline in Value even though the prices rose. $15,000,000.00
Value of Softwood lumber exports to USA
2011, $1,598,000,000.00
2012, $2,001,000,000.00
Increase in value (sales) to US $413,000,000.00
This trend will continue as long as the price of lumber stays up.
Goodbye China, Hello USA.
Who’s your daddy now.
Numbers for exports to China and USA are from BC Origin points only.
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