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US Homes Sales, Cascades Paper Mill Sale, Wood Exports Into China, Curtailments and Changes, US Housing Starts, Canadian Housing Starts ,Global Pulp and Paper Industry, Boralex Inc. Posts Huge 3Q Profit Increase, Russian Log Export Tax Cancelled Canadian Railway News,Canadian Exports, Closures Curtailments and Changes, Canadian Building Permits, Mapping a Forest - Fractal Geometry, Market Pulp Price, US Housing
Mysterious new technologies generally take time to be understood, for potential uses to be absorbed by industry, and for practical applications to be put into place. In the case of gasification from wood residue, things could not be moving forward at a more furious pace. Amongst the companies at the forefront of developing this new technology on the global stage is Vancouver’s own Nexterra Energy Corp.
Biofuel
Incorporated in 2003, by 2005 Nexterra already had its first commercial customer in Tolko Industries’ Heffley Creek plywood mill. In the following year the first commercial gasification plant was operational at the Tolko mill, so far saving the company approximately $2 million a year in natural gas costs. The University of South Carolina, Weyerhaeuser and Paprican all jumped on board in 2006 as customers or partners of Nexterra. In 2007, Dockside Green, a large scale development in Victoria, became Nexterra’s third commercial customer, and another parthership was formed, this time with Canada’s Pristine Power. Nexterra is eagerly anticipating announcing a further breakthrough in green energy in early 2009.
Where one short year ago forestry companies across North America, particularly those in remote locations, lamented that the cost of bringing slash and wood residue roadside was higher than revenues from the sale to a processing facility, now the equation has turned decidedly to their favour. Announcements of gasification plant building are popping up everywhere, it seems on an almost daily basis. Europe, particularly the Scandinavian countries and Germany, are already making great strides in using the green energy from this technology, as is Australia.
Projects are underway from as far afield as Namibia, where a request for tender was issued on November 14, 2008 for “Supply, delivery and installation, complete, of a biomass gasifier system and support ancillaries, internal combustion engine and generator set [ . . . ] using manually harvested invader bush wood”. The USDA Forest Service along with the State of Wyoming, the Saskatchewan Research Council, and Alabama Power along with Auburn University, are but a few examples of groups actively putting green energy from gasification to use in North America. Even the District Council of Tofino decided, on October 16 of this year, to use the wood residue at the town’s ‘Stump Dump’ for green energy to offset the land lease costs.
A report by the Canada Bioenergy Association explains that “28 per cent of generating capacity from renewable resources is from biomass.” The report goes on to explain that “Total slash available at roadside is 12.9 million ODt (222 PJ) annually. Several provinces and industry are showing serious interest in utilizing this biomass source for energy.” The report further explains that “A commodity market for biomass does not yet exist, and there is no ‘market’ price”. The full report can be found here.
With its patented gasifier system already working hard in several locations, Nexterra is an industry leader. In short, a large burner is used to reduce the wood residue to clean burning gas, commonly referred to as “syngas”, which can then be used as a substitute for natural gas, fuel oil or propane to produce process heat, steam, hot water and/or electricity using conventional energy recovery equipment. For example the Tolko plywood plant uses the gasifier to dry plywood sheets. The University of South Caroliina uses their gasification burner to power the boiler to heat the school, and the Dockside Green development in Victoria will also use the gasifier system for residential heat and hot water.
When working with the forest products industry, Nexterra has targeted industry leaders with a commitment to reduce costs and lower emissions, ready access to locally sourced wood biomass, and the opportunity for replication. However Nexterra’s partnership with Pristine Power allows opportunity for several facilities to combine their wood residue for a single user. For example, the town of Merritt, which plans to build a golf course/resort community close to town, the three sawmills and several small remanufacturers there could send off their wood residue together to provide heat and hot water for the development.
Nexterra’s gasification system is very efficient, for example Tolko’s Heffley Creek plywood mill only uses 40 per cent of its wood residue for green energy, the rest is sold to a pulp mill. Depending on the cost of natural gas, the gasification system pays for itself in two and one-half to three years in saved natural gas costs. The Tolko system displaces about 235,000 GJs of natural gas per year, which at $6 to $10 per GJ, is a significant cost saving. Another upside is carbon credits, or a reduction in carbon tax charged to a company, for the use of green energy. Tolko’s system reduces greenhouse gas emissions by about 12,000 tonnes per year.
All of Nexterra’s gasifiers currently use wood residue from nearby sources, be they forestry companies or otherwise. Pristine Power intends to build a series of 10 MW power plants based on Nexterra’s gasification technology across British Columbia. With smaller communities around the province madly searching for revenue meanwhile choking in biomass, the opportunities for converting low value wood waste into high value energy through gasification are tremendous. And the best thing is that it’s already a reality, not just theory.
New and existing home sales in the US continued to fall in October. The number of existing-home sales fell 1.6 per cent from one year ago to a seasonally adjusted annual rate of 4.98 million units.
US existing home sales in October are down 3.1 per cent from the annual rate of 5.14 million sales reported in September, but September was unusual in that it showed an increase from August. October new home sales were 433,000 units, down 40 per cent from one year ago. Unsold inventories continued to fall and were off 8 per cent to 381,000 units compared to September, and down 26 per cent compared to the same time last year. There is currently over 11 months supply of unsold homes on the market.
Median price fell 1.6 per cent to $218,000 from September’s $221,700. Compared with a year earlier, all areas in the 20-city survey showed a decrease in prices in September, led by a 32 per cent drop in Phoenix and a 31 per cent decline in Las Vegas. Mounting foreclosures are contributing to the drop in home prices, while adding to the inventory of unsold homes on the market. Lower property values are weighing on household wealth, causing consumers to cutback on spending and increasing the likelihood that the US economy will contract for a second consecutive quarter.
Sales of distressed properties accounted for 45 per cent of last month’s total, up from about 40 per cent in September. Foreclosure filings were up 25 percent in October from a year ago. The drop in home construction has subtracted from growth since the first quarter of 2006. The downturn is likely to remain a drag on the economy until the home sales and prices improve.
After an extended closure, Cascades restarted its fine papers mill in Thunder Bay in early 2008, but had to shut down it again on July 11 due to surplus of inventory and a lack of customers. The mill will be sold following an Oct. 29 Supreme Court hearing in Toronto, ON, that saw the former Cascades Fine Papers Group Inc. mill be placed in receivership due to a $14.7 million debt. The mill has 350,000 square feet of paper mill facilities and 10,000 square feet of office building space located on approximately 200 acres of land in Thunder Bay, Ont. The mill’s three production machines are capable of producing 200,000 tonnes of coated paper annually. The court appointed possession of the mill to Deloitte & Touche Inc., who are currently looking for a buyer with an interest in purchasing all of the mill’s operating assets.
International Paper announced the permanent shutdown of its No. 3 paper machine at its Franklin, VA, Mill on November 23. This will result in the curtailment of the company’s annual paper production capacity by approximately 150,000 tons of uncoated freesheet paper and affect approximately 50 employees. Approximately 60,000 tons of lack of order downtime will be taken out of the company’s US uncoated freesheet paper mills during the fourth quarter as well.
The company also announced the indefinite closure of its currently idled Louisiana Mill in Bastrop, effective immediately. The decision to idle the 100 per cent pulp mill operation is due to the continuing decline in pulp demand from its customers worldwide coupled with a weak economy across the globe. The closure will result in curtailment of the company’s annual pulp production capacity by approximately 450,000 tons. The indefinite closure will affect approximately 550 employees.
Weyerhaeuser announced that it will indefinitely close its iLevel Veneer Technologies facility in Colbert, GA, effective immediately. The announcement will affect approximately 105 associates at the site. “The demand for residential wood products continues to erode and this announcement is a direct result of the business environment we face,” said Cathy Slater, vice president of Veneer Technologies.
Tolko issued lay off notices at it’s Meadow Lake OSB plant in anticipation of difficult market conditions this winter. “Unfortunately further deterioration of our products’ markets and the need to anticipate conditions at least eight weeks from now require us to make this announcement,” said Brad Thorlakson, President, Tolko Marketing and Sales. At full operations, Meadow Lake OSB has 130 direct employees and an equivalent number of contractors providing timber harvesting and forest management services.
US building permits for October were 12 per cent below the September rate of 805,000 - a 23 year low - and 40 per cent below the October 2007 estimate of 1,182,000. Starts were 4.5 per cent below the September estimate of 828,000 - the lowest number since the US Commerce Department started keeping records in 1959 - and 38 per cent below the October 2007 rate of 1,275,000.
The results were the lowest on government records dating back to January 1959. However, the more quickly housing activity declines, the quicker excess inventory will be cleared off the market and the housing sector can normalize, experts say. The declines last month were led by a 31 per cent drop in the Northeast, where construction of single-family homes fell to a record low.
Home starts dropped 13.7 per cent in the Midwest, but rose 7.5 per cent in the West and a 1.5 per cent in the South. Single-family home building fell by 3.3 per cent to 531,000, compared to the previous month’s 549,000. Even worse, single-family permits declined 14.5 per cent in the month, falling to 460,000 in October from September’s 538,000.
On Tuesday, the National Association of Home Builders/Wells Fargo Bank survey of homebuilders showed confidence in the housing construction sector at an all-time low, falling to nine from the previous record low of 14 in October. The survey number is an index calculation and anything below 50 means more builders have a negative outlook concerning the sector’s economic prospects than hold a positive opinion.
The five largest US homebuilders reported a combined $1.09 billion in losses in their most recent quarters as prospective buyers had difficulty obtaining mortgages. US foreclosure filings in October jumped 25 per cent from a year earlier, compared with average monthly gains of about 50 per cent so far in 2008, according to RealtyTrac. Filings increased 5 per cent from September after California passed a law delaying foreclosures for some borrowers.
US house prices fell by a record nine per cent in the third quarter of the year, to $200,500, compared to the same quarter last year. By way of comparison, homes in Canada sold for almost $290,000 in September, down 5.4 per cent compared to $309,000 for the same month last year. Worse still, as much as 40 per cent of the sales in the three months were distress sales, mainly banks selling repossessed homes. That factor tends to put pressure on prices to drop further rather than provide a bottom below which prices will not fall.
Housing starts in Canada were 211,800 units in October, down from 218,600 units in September.
The seasonally adjusted annual rate of urban starts eased 4.2 per cent in October, compared to September. Urban multiples declined in October by 6 per cent to 115,300 units. Urban single starts decreased 1 per cent to 69,300 units in October compared to September.
For the first ten months of 2008, actual starts in rural and urban areas combined were down an estimated 1.6 per cent, compared to the same period last year. Year-to-date actual starts in urban areas have decreased by an estimated 1.3 per cent over the same period in 2007. Actual urban single starts for the January to October period of this year were 16.3 per cent lower than they were a year earlier while urban multiple starts were up by 11.6 per cent over the same period.
In October 2007, the average price for a Canadian home was $312,024, according to the Canadian Real Estate Association. Canadian home prices never reached the stratosphere achieved by other markets. Home prices in Ireland, for example, jumped 167 per cent between 1997 and 2007, compared to 61 per cent in Canada. In Spain, for instance, the average home in 2007 was worth 156 per cent of the household’s income. In Canada, that ratio stood at 134 per cent for the same year.
Another flurry of pulp mill closures across Canada, in addition to a continued sharp downturn in paper demand internationally do not bode well for the short term future of the industry.
North America
There is no longer any question that North America has been left behind when it comes to the fast-changing global market pulp industry. Where once our high quality long fibre northern softwood pulp was the vanguard, new technology has catapulted Brazilian and New Zealand Eucalyptus pulp into the forefront of the marketplace. At a recent timberland investment conference in Portland, OR, Madison’s enjoyed a quiet chuckle at the impressed gasp of the audience to a presentation showing a stand of spindly, skinny eucalyptus trees which had been grown in nine years. A question posed to the presenter about the relative quality of so-called Euco-pulp compared to our softwood pulp was brushed off with a glib statement about low production costs therefore more sales, which brought higher revenue earnings for the company.
The southern hemisphere is taking over the traditional market pulp business, and there is nothing we in North America can do about it. There is, however, significant opportunity to capitalize on demand for high-quality textiles, ethanol and other products made from long fibre pulp. Cedar chips, for example, are highly sought after by manufacturers of surgical gowns. This week European softwood pulp continued its cyclical price downturn by US$15 from last week, and US$110 from the beginning of the year, to US$761 per metric ton according to FOEX. The US price also fell, by US$6 from last week and US$42 from the beginning of the year, to US$823 per metric ton. Besides being part of the regular two year cycle, the drop was blamed on continued reduced demand for newsprint in the key European and American markets. Despite ongoing pulp mill closures, there continues to be enough pulp supply in the pipeline to enable significant spot buying. Without having to resort to contracts, customers are keeping pulp prices soft by purchasing only what they currently need, according to FOEX.
Last week Madison’s printed announcements of another round of Canadian pulp mill closures by Canfor, Tembec and Domtar. Also at that time Finland’s Metsä-Botnia, which is jointly owned by the Metsäliitto Group and UPM-Kymmene, announced that it is considering the closure of its pulp mill in Kaskinen next year. The Kaskinen pulp mill was established 35 years ago, which means that in the pulp industry it is just a middle-aged plant, and its capacity of 450,000 metric tons annually makes the Kaskinen mill a medium- sized plant. Difficulty in sourcing chips was cited as the main reason for the possible closure.
Another 700 Finns are about to lose their jobs when UPM closes its Kajaani and Tervasaari pulp mills by the end of this year, although the Kajaani saw mill and Tervasaari paper mill will continue to operate, said a company announcement last week. The move will result in a 170 million Euro write-off of fixed assets, while the redundancies and other closure costs will be 30 million Euro, with the cash impact mainly felt during 2009. The company explained that the high price of wood fibre has reduced the profitability of pulp production in Finland. It seems like a ongoing litany of bad news, but it is important to keep in mind that a lot of these closures are not permanent. Many of these mills will come back, with admittedly reduced production, when market conditions improve. However such a drastic drop in pulp demand does suggest developments in new markets and new technologies is warranted and probably necessary.
For example, the just re-opened Harmac Pulp Mill in Nanaimo, now run by an employee group together with a few west coast wood products companies, is looking at diversifying into high-grade cellulose pulp on top of its NBSK product, as well as using the by products of pulp production to produce ethanol.
“Lignon (a chemical compound that comes from wood) which is usually just a waste product at operations like Harmac can also be used in the making of tires and it is of high value,” said David McDonald, the vice-president of research and development at FPInnovations in a statement to the Nanaimo Daily News. “The federal government has invested $70 million over the last year-and-a-half into new technologies for forest products that could help companies like Harmac diversify into any number of areas.”
The need to diversify Harmac’s product line for the mill to be successful was identified as a requirement when the mill went up for sale last spring after its previous owner, Pope & Talbot, went bankrupt. Grant Brebber, of new mill owner Nanaimo Forest Products, said NFP is interested in diversification at the mill and is studying FPInnovation’s ideas.
Another change coming is the switch to making rayon from pine chips rather than from cotton, due to the inexpensive fibre and cheapness of the chemicals needed for the production process. Given the scope of reduced North American pulp production and mill curtailments, any new product development, especially that likely to be in high demand by an increasingly ‘green conscious’ consumer, is welcome. Especially if it generates a by-product that can be inexpensively turned into green energy.
Power producer Boralex Inc., which develops and operates power stations that run on renewable energy, with 21 generating stations in Quebec, the northeastern United States and France, posted 3Q profit of $5.7 million, up from $1 million a year ago, as revenue from energy sales rose 42.3 per cent to $48.8 million.
The revenue improvement was the result of higher renewable energy certificate sales, improved production volume in its wood residue and hydroelectric-driven power producing segments and higher energy selling prices.
“The diverse nature of Boralex’s assets and its aggressive position in the wood-residue market, particularly with respect to (renewable energy certificates), proves once again that we have made the right strategic decisions which have led to these strong results,” president and CEO Patrick Lemaire said in a statement.
China, Scandanavia and large parts of Europe celebrate as the previously announced 80 per cent export tax on raw logs out of Russia was abruptly cancelled this week by President Vladimir Putin. Citing pressure from importing nations and the volatility of the credit market, not to mention the current global economic crisis, Putin put an indefinite hold on the export tax, saying the issue will be revisited sometime next year.
EU leaders have lauded Russia’s decision to postpone the increase in tariffs, while Nordic paper makers and the European Union trade chief praised the move. The wood duties have been one of the points which have kept Russia-EU trade talks in a stalemate. The European Commission had also previously said the timber duties could hamper Russia’s negotiations to join the World Trade Organization.
Following the announcement, other wood producing countries are worried about Putin’s lack of a clearly-defined deadline. Canadian lumber makers had hoped the tax would choke off the more than 60 per cent of China’s log imports that have been coming from Russia. and would create a fierce new hunger for Canadian wood.
In a perhaps fortunate twist of timing, BC’s Minister of Forests and Range Pat Bell heard of the announcement just after stepping onto a plane headed for China with a delegation of a dozen Canadian lumber industry insiders. A quick change of approach had to be made, but in the end there is no question of huge potential for future import of wood products into China.
“It’s disappointing, but it is not by any stretch of the imagination the end of the world,” Bell said in a telephone call to the Vancouver Sun from Beijing. “But the mission is still on.”
“The Chinese are pushing us hard to be here, saying they want to work with us. Likely what will occur now is a more orderly phase-out of Russian wood and a phase-in of Canadian wood.” He stressed to the Vancouver Sun that the Chinese desire for a secure supplier into the future, rather than focusing on the sudden growth he expected before boarding the plane Wednesday.
In a week that saw Canadian National Railway Co. post strong 3Q profits, the company is putting pressure on US regulators to make a decision on its drawn-out purchase of Illinois’ Elgin, Joliet & Eastern Railway Co. Meanwhile Canadian Pacific Railway said Thursday it plans to chop its capital spending in its operations, and those of its recently acquired Dakota Minnesota & Eastern Railroad.
CP Rail’s net income for 3Q 2008 was $173 million, down from $219 million on year ago. A 40 per cent profit plunge in 2Q results sparked a concerted campaign to cut fat at the company, which in July the company named a new chief financial officer. On October 20. 2008 CP Rail celebrated the first day of operational control of recently acquired Dakota, Minnesota & Eastern Railroad Corporation and its subsidiaries: Iowa, Chicago & Eastern Railroad and Cedar American Rail Holdings.
In sharp contrast, CN Rail has once more requested US regulators to make a quick decision on its own deal to purchase the EJ&E rail line. The company said Tuesday that the US Surface Transportation Board should allow the deal to close by the end of this year. The recent decision by the United States Court of Appeals for the District of Columbia Circuit denying CN’s petition for an order compelling an immediate STB decision on the merits of the transaction prompted the renewed call for a decision.
Meanwhile CN Rail posted a significant jump in 3Q profit Tuesday of 14 per cent to $552 million, including a onetime tax gain, compared with $485 million for the same period last year. Canada’s largest railway also said it was confident its results positioned it for a strong finish to 2008 and into next year despite the current economic uncertainty.
A new report released last week by Stats Can demonstrates a radical shift in Canadian exports. Until recently, export of Canadian goods into the United States rose on a year to year basis, but since 2006 American demand has been dropping. Meanwhile a new customer has emerged, with exponentially growing demand for Canadian goods, in particular forest products. In the first half of 2008 China imported almost as much lumber and pulp chips as it did for all of 2007, effectively overtaking Japan to become Canada’s third largest customer of wood products.
The euphoria of a newly elected President in the United States, widely anticipated to usher in an ‘era of change’, is wearing off as people put away thoughts of election campaigns and return to business. The economic situation in America is not good, and not expected to immediately improve. Rumblings of a potential merger between the big auto makers, if not the outright collapse of General Motors, is keeping the atmosphere of fear and uncertainty strong in the workforce. Where two short years ago Americans just wanted to spend and buy, they now fear for their very jobs. No extravagant vacations, new cars, or home buying. Rather, concerns dwell towards simply putting food on the table and gas in the car. So where else can exporters of Canadian goods look to sell their products?
Forest Products
A new report from Statistics Canada points a finger directly at China. As well, British Columbia’s Minister of Forests and Range Pat Bell will be leading a delegation of a dozen industry representatives on a trade mission to China for the week of November 12 to 18, 2008. The delegation will review progress on BC marketing and demonstration projects, strengthen relationships with construction agencies and government officials, and pursue new sales opportunities. Despite recently suffering its own economic setbacks, there is no question that China will be providing a seemingly endless emerging market for North American wood products long into the future. Working to develop trade there is certainly a better option than sitting back, waiting for the US housing market to come back.
In 2000, Canada exported almost $43 billion in forest products, accounting for 10 per cent of total exports. Forest product exports shrank to just over $33 billion in 2006, and $29 billion in 2007 which accounted for just over six per cent of total exports. It is important to point out that in 2000 almost 84 per cent of Canadian exports went to the US, while in 2007 just 77 per cent went south of the border. From 2006 to 2007 exports to America fell by 1.6 per cent while exports to all other countries rose by 16 per cent, bringing total Canadian exports up 2.1 per cent. Put in different terms, 41.9 million cubic meters of lumber were produced across Canada in 2005, compared to just under 40 million cubic meters in 2006 and barely 24 million in 2007.
While change is slow to happen this increase is significant. The US remained Canada’s largest export destination last year, followed by the UK. Exports to China were responsible for over 17 per cent of Canada’s total exports growth, a surge which elevated China to become Canada’s third largest export market, ahead of Japan. According to Statistics Canada, forestry products, notably wood pulp for paper and cardboard, comprised an important export. Overall, exports to China increased 21 per cent in 2007, surpassing the $9 billion mark and nearly doubling its value in 2003. Meanwhile, 2007 was the second straight year of export decline into the US, with the main contributors being exports of automotive products and softwood lumber, which combined accounted for losses totalling $7.3 billion.
As for this year, a press release from the BC Ministry of Forests explains that sales data from January to August 2008 show that British Columbia has already exported 689,576 cubic metres of softwood products to China, 3.5 per cent of the total BC exports to that country, and just shy of the record 727,750 cubic metres exported to China in all of 2007. “Our long-term objective and main focus is encouraging China to adopt North American wood frame construction in ways that fit the unique mix of housing styles in China,” said Forests Minister Pat Bell in the same release. “China is the second-largest wood import market in the world and represents the fastest-growing market for BC wood products.”
Madison’s is in complete agreement. While practically every country in the world is beating a path to China in search of new customers, Canada has the distinct advantage in existing relationships, established trading and strong Chinese population on the west coast which is very active in the business community.
British Columbia, through Forestry Innovation Investment and in conjunction with the Canada Wood Group has been working over the last several years, along with the Government of Canada, to diversify BC’s markets by demonstrating new uses for softwood products. The value of such efforts can not be ignored, especially considering it may be several years before dimension lumber demand in the US returns to pre-2005 levels. Even when US home building resumes, customers will first buy from American mills before looking to Canada for lumber.
Domtar Corp. said it will permanently shut down its paper machine and converting operations at its Dryden ON, mill, eliminating 195 jobs. The company booked 3Q net earnings of $43 million, compared with a year ago profit of $36 million. The paper and lumber producer’s sales for the quarter were $1.6 billion. Excluding one-time items, Domtar said it earned $51 million, up from $32 million a year earlier.
Tembec Inc. said Tuesday it would curtail production at three pulp mills in British Columbia and Quebec. The mill in Temiscaming QC, will curtail production by shutting one line of production until Nov. 30, the Chetwynd BC, operation will shut down from Nov. 15 to Dec. 1, and the Matane QC, mill will shut down from Dec. 1 to 27. It also said its softwood kraft mill in Skookumchuk BC, will shut down for two weeks from Nov. 9 until Nov. 22. Tembec will also take “market-related downtime” for a minimum of two months at its La Sarre and Taschereau sawmills in Quebec starting Nov. 14.
Canfor Corp. announced a production curtailment at its Taylor Pulp mill from Nov. 10 to 18, citing falling demand and prices in Asia over the past four weeks. Canfor said it will take advantage of this downtime to perform maintenance work. Canfor’s production from January to September 2008 was 23 per cent lower than the same period last year.
Reynold Hert, president of Western Forest Products, stepped down in an unexpected announcement Tuesday. Dominic Gammiero, on Western’s Board of Directors, will temporarily act as President and CEO until a permanent replacement can be found. Brookfield Asset Management, Western’s majority shareholder, has been disappointed with the company’s financial results. Gammiero is a managing partner of Tricap Partners Ltd. and a former president of Fraser Papers, both of which are controlled by Brookfield.
In a brief statement, Western said Hert will continue to assist the company to ensure an orderly transition. “The Board thanks Reynold for leading Western through a difficult four years,” said John MacIntyre, Chair. “Reynold oversaw our acquisition of Cascadia Forest Products and the Englewood Division of Canfor and has been a key contributor to the Company.”
Western, which has been hard hit alongside other forestry firms by a drop in lumber prices due to the US housing collapse, reported a 2Q loss of $19.3 million. That compared to a profit of $17.6 million for the same period last year. Sales in the quarter ending June 30 totalled $237.8 million, down from $301.1 million.
Brookfield reported 2Q 2008 earnings of $307 million, compared to $348 million for the same period last year.
Municipalities issued $6.5 billion in building permits in September, up 13.4 per cent following an 11.7 per cent decline in August. September’s increase was the result of gains in all three components of the non-residential sector. In the non-residential sector, the value of permits rose 41.7 per cent to $3.2 billion. This increase was generated by a substantial gain in institutional permits, and lesser increases in the industrial and commercial components. Major increases occurred in Ontario, Saskatchewan and Alberta.
In the residential sector, the value of permits fell for the second month in a row and the sixth time in nine months. Housing permits declined by 5 per cent to $3.3 billion, the result of lower levels of permits for multi-family dwellings in six provinces.
After two consecutive monthly declines, the value of institutional permits more than doubled in September to a record $986 million. The increase came mostly from planned medical and educational building projects in Ontario and Saskatchewan. Construction intentions for commercial buildings rose by 11.7 per cent to $1.5 billion after three consecutive declines.
In the industrial sector, contractors took out $679 million in permits in September, more than 50 per cent above the average value recorded in 2008. This was a 64.4 per cent increase, which more than offset a 16.8 per cent decline in these permits in August. The increase came mostly from maintenance buildings in Ontario and utility buildings in Alberta. Municipalities issued $1.2 billion in multi-family dwellings in September, down 11.6 per cent from August and the second consecutive monthly decline. Ontario and British Columbia accounted for most of the decline.
At the same time, permits for single-family dwellings fell 0.7 per cent to $2.1 billion, a third consecutive decline. The overall number of residential units approved fell for a second consecutive month. Municipalities approved 16,134 new dwellings in September, down 3.5 per cent from August.
Imagine being able to estimate the potential wood products yield, or carbon absorption, of an entire forest by simply measuring and examining one tree. Its not such a far-fetched or futuristic idea if you use fractal geometry. Agencies and organizations are researching the using of computer models to be able to look more closely at forested landscapes in ways never done before.
Fractal Geometry
Fractal geometry is a way of describing complex, irregular shapes that repeat themselves in nature. Take a leaf on a fir tree, for example. The leaf itself is a mini version of the whole tree. Da Vinci claimed that “All the branches of a tree at every stage of its height when put together are equal in thickness to the trunk (below them).”
Perhaps the most noteworthy aspect of fractal geometry is the enormous range of natural objects and systems it is capable of describing. A partial list includes: mountain landscapes, clouds, rainfall patterns, snowflakes, frost patterns, island formations, sea coasts, river basin patterns, tree branching, arteries, veins, bronchioles, and stock market fluctuations. Trees and ferns are fractal in nature and can be modeled on a computer by using a recursive algorithm. This recursive nature is obvious in these examples — a branch from a tree or a frond from a fern is a miniature replica of the whole: not identical, but similar in nature. The connection between fractals and leaves are currently being used to determine how much carbon is really contained in trees.
Benoit Mandelbrot coined the word fractal in 1975 from the latin fractus, which describes something broken up and irregular. Fractals are geometrical shapes that, contrary to those of Euclid, are not regular. They are irregular all over and they have the same degree of irregularity on all scales. A fractal object looks the same when examined from far away or nearby - it is self-similar (the parts resemble the whole). As you approach it, however, you find that small pieces of the whole, which seemed from a distance to be formless blobs, become well-defined objects whose shape is roughly that of the previously examined whole.
The most fascinating discovery made recently on this subject is that the fractal patterns of one tree match exactly that of the entire forest. Trees do not branch endlessly, and whole trees are not part of supertrees. Research teams are working in various rainforests to measure the CO2 absorption of one leaf, and are then able to extrapolate absorption levels for the entire forest. In a new world of carbon credits, cap and trade, and carbon credits tradingon the Chicago Mercantile Exchange, knowing the exact value of a forest’s absorption can be extremely lucrative.
Fractal geometry can be regarded as a unifying theme in biology because it integrates scale-related phenomena and complexity into the description of patterns. The dependence of length on measurement scale allows an estimate to be made of the complexity of shape of a natural form, namely its fractal dimension. There has been an intense use of fractal geometry to describe the complexity of various characteristics, from leaf shape to tree crowns, in plant ecology. The diversity in leaf shape has been interpreted as a function of environmental variability.
A 1994 study published by the United States Forest Service states that, “A tree can be modeled as a fractal, predicting total wood volume, stem surface area, and number of branch tips, Damage patterns in forests and arrangements of tree crowns are fractals.” Later on, the same report explains, “A real tree branches for eight binary steps. Beyond that, the twigs bear leaves with another fractal structure. And at the other end of the scale, an individual tree belongs to a forest, another fractal.”
Thus a fractal structure has bearing on the relationship between the local scale and the global scale. If a tree, and all its parts, is measured in great details, fractal geometry can be applied to computer models which will determine all manner of data, including wood volume and carbon absorption. In addition, if applied to old-growth forests the key to developing practices of sustainable forestry can be found. With measures of fractal dimension as a basis, managing timber harvests can lessen the ecological impact in oldgrowth areas. As well, fractal geometry may help explain the effect of landscape pattern on the spread of natural disturbances such a fire or insect damage.
Northern Bleached Softwood Kraft pulp shipments were almost 6 per cent lower in September 2008 compared to one year ago, according to FOEX. The European price fell almost US$10 from last week to US$812.29 per metric ton, which is down US$58.87 from the beginning of 2008. (SOURCE: foex.fi) Continued lower demand for newsprint is blamed for the ongoing price slide.
Global pulp markets are finally showing signs of a slowdown after three years of rising prices. According to FOEX, global newprint demand fell by 8.5 per cent in September, down 9.4 per cent from one year ago. European newsprint prices are down by 35 Euro per metric ton from the beginning of 2008, to just under 500 Euro per metric ton. However US newsprint prices are up significantly, by US$175 from the beginning of this year, to US$741. The strengthening US dollar is blamed for the discrepency in price direction.
The European paper industry has for years suffered from overcapacity which has kept a lid on prices, while increasing costs of wood and energy have eaten into already low margins. “In 2009, output and exports of paper in Finland will decrease by 4 per cent due to capacity cuts,” said the Finnish Forest Research Institute Metla in a report released this week. Finland’s paper industry accounts for about 20 per cent of the country’s exports.
Output and exports for the industry would fall about 6 per cent this year, the study also said, and 6,000 jobs in the country would go. In the third quarter, paper and board production in Finland fell by 7 per cent, the Federation of Forest Industries said in a separate statement. International Paper’s 3Q 2008 profit slid 31 per cent in large part due to falling demand for paper and packaging products in North America.
Declining prices for pulp in both North America and Europe will combine to lower fourthquarter results, the company said. Canfor Pulp Income Fund’s stock has declined 40 per cent from its highs since last year despite rising pulp prices, as high energy costs, rising fibre costs and the strong Canadian dollar have weighed on the company results
New home sales in the US rose 2.7 per cent to 464,000 units in September, above the revised August rate of 452,000. This is 33 per cent below the September 2007 estimate of 694,000. The number of new homes for sale shrank to 394,000 units in September, down from 425,000 units in August. At the current sales pace, there was a 10.4 months’ supply of unsold new units on the market, versus an 11.4 months’ supply in August 2008. Meanwhile, the median number of months that completed new homes have been on the market moved up to 9.1 – a new record.
Regionally, sales activity gained 23 per cent in the West and 0.7 per cent in the South in September, but at the same time declined 21 per cent in the Northeast and 6 per cent in the Midwest. The pace of new home construction has plunged more than 60 per cent from a peak in early 2006.
Lumber producers, who sell up to 45 per cent of their product to home builders, have yet to fully adjust to the steep drop-off in demand. The sales increase may be short-lived after the collapse of Lehman Brothers Inc. in the middle of last month led to a slump in lending among banks, making it harder to get a mortgage. Tumbling stock prices and mounting job losses signal some prospective buyers may walk away from their purchase contracts. The median sales price of new houses sold in September 2008 was $218,400, the average sales price was $275,500.
On a positive note, builders cut inventories at a record pace. The number of homes for sale fell to a seasonally adjusted 394,000, the fewest since June 2004. The 7.3 per cent decline from August was the biggest since record keeping began in 1963.
