Sounds about right to me. Its unfortunate, but this town rides and falls on the US housing market. I don't see that changing soon.

"The Americans have an over supply of middle and high end homes and they are not going to build low income housing when it costs $200,000 for a serviced lot and they can only get $300,000 with a home on it."

??????? why continue to build single family detached housing on 60 to 80 foot wide lots in such a case? That creates spreadville anyway.

Consolidate the 4 or more lots and build 2 or three times the density in well designed townhousing and reduce the cost of the units by between $100,000 and $150,000 for the property alone, let alone the saving in building fewer exterior walls, including energy savings in on-going house maintenance.

People with money are clamoring to get such houses in in downtown urban USA and Canada. If it is good enough for them, why should it not be good enough for those with less money living on the outskirts of town.

This is not rocket science. We have been through this cycle over and over in the past. What is the expected resistance now? Surely the spin doctors can handle this.

BTW, I wonder when the light will come on in PG and we realize we have an oversupply of middle and high end homes and have been moving further an further out from the centre in the same rut as the rest of North America?

I see houses being advertised as having 3,000 square feet of living space when they have only 2,000 with about 1,000 per finished floor and an unfinished basement of 1,000 sf.

I hope we do not have people living in unfinished basements yet.

As for as I know pellets are made from sawdust, and sawdust is make from cutting lumber. If you do not make lumber, you cannot make Pellets.

Seems to me that if the lumer market drops, so to will the pellet market.

Wood pellets are primarily a by-product of the lumber industry, as you say. However, the demand for lumber and the demand for pellets are independent of each other. The supply of cheap raw product to make wood pellets has, so far, been dependent on the lumber industry. As the production is reduced due to the impact of the MPB, the cost of the byproduct should rise through demand not being met.

There are other players in this scenario as well. One is the lumber and pulping industry which is using the hog fuel to feed their newly installed cogen plants. That should drive prices up.

The other are the countries or parts of Canada that could fill the lumber need as we have a downturn in the supply. They will still have access to the cheap byproduct to provide the market with wood pellets.

Don't forget about Russia in that equation either, although China may be a safer bet.

As I understand it, there has been a large conversion in the western world to wood pellet fired heating systems. That demand will continue, especially since biomass has been given a "free ride" by the bean counters in the greenhouse gas games being played. A stroke of a pen could change that virtually instantaneously.

So, in the short term, the demand for pellets will likely be strong. As they get more expensive due to possilbe shortages, it may be economical to actually cut a tree to be converted entirely to pellets. I suspect that will not last long in the bigger scheme of things.

So, the pellet market is complex, as are most markets. Here is the 10 point spin, some of which can change quite quickly; others which I would question even now.

http://www.pellet.org/Web/Page.aspx?Controller=1&ID=318

When asked what will CANFOR do,they are likely to invest more money in China."

Don't we just have a great economy that makes big bucks for the shareholder from our natural resources and then invest their profits in China. Perhaps we could get them to invest in the airport expansion so they can fly their money out by the plane load.

Cheers

Most of the trees in this area are controlled by the Major Forest Co.,s through tree farm licenses, and of course they also own the Sawmills, Planer, Mills, and Pulp Mills., so therefore the Majority of byproduct that is produced from the Forest Industrie will be utilized by theses Co,s. The trend to-day is to install Co-Generation plants to produce electricity, and thus reduce your costs in producing lumber, and pulp and therefore increase your profits.

These Co-Generation Plants are always built with some sort of arrangement with BC Hydro where the electricity produced is sold to Hydro and then bought back at a rate cheaper than if you bought it direct from Hydro. (Nothing is simple)

As the number of Companies building Co-Generation plants increases the available sawdust and hog fuel decreases. In the final analysis it comes down to where the most profit can be made. Ie; by producing electricity, or making and exporting pellets.

My bet is on Electricity, as all the surplus has been and will continue to be sold to the Americans for huge dollars, and the money is cycled through Hydro into the Government coffers. They get little or no money from Pellet Manufacturers. I beleive that Hydro paid the BC Government something like $200 Million last year.

After production and shipping costs I beleive that the Profits on pellets are marginal as best, and that any major increase in material costs will make it unprofitable.

The first *Dibs* on the available sawdust etc; will go to those who produce it. Ie; The lumber and pulp Co.,s only after their needs are met will their be anything left for the pellet industrie. In addition if there is **big money** in the pellet industrie then the **Big Mills** will move into this area. (They already have in the Vanderhoof area)