By TAVIA GRANT (Globe and Mail Update)
Tuesday, May 17, 2005 Updated at 4:59 PM EDT
Tembec Inc. said it will record a $98.3-million charge as the Canadian forestry-products company closes four manufacturing units in Eastern Canada. The move will affect 459 jobs.
The moves "are necessary in light of the stronger Canadian dollar and other fundamental issues that affect the competitiveness of these mills," Tembec said in a statement. The Canadian dollar has climbed about 22 per cent against its U.S. counterpart in the past three years, making Canadian goods less competitive when sold abroad. While the loonie has weakened this year, for Tembec it appears to be too little, too late.
The announcement comes as Canadian companies are struggling to cope with one of the most difficult periods in the history of forest products. The Montreal-based producer of pulp, paper and wood products reported another quarterly loss last month, sending its shares to a record low. At that time, Tembec warned that the main challenges the industry are the dollar's strength and rising chemical, energy and wood costs.
"After making considerable efforts to stem the significant losses of these mills and find appropriate solutions to the challenges that they are facing, the company came to the conclusion that it had no choice but to shut down these operations," said Tembec president and chief executive Frank Dottori.
Tembec shares fell 4 cents or 1.15 per cent to $3.43 in Toronto.
Tembec will close plants in Saint-Léonard-de-Portneuf, Mansfield-et-Pontefract and Temiscaming, Que., and one in Brantford, Ont. The company's chip plant operations in Temiscaming will continue.
The company expects other closing-related costs of $13.7-million. The after-tax effect of $75.7-million will be recorded in the June 2005 quarter.
In the past year, the facilities generated sales of $112.7-million and negative earnings before interest, taxes, depreciation and amortization of $14.7-million, Tembec said.
Tuesday, May 17, 2005
Saturday, May 07, 2005
A U.S. logger's idea of a 'liquidation' sale
'There's nothing pretty about a clear-cut,' admits timber baron accused of 'rape and pillage' to feed America's demand for wood
By KATHARINE WEBSTER / Associated Press
Saturday, May 7, 2005 Page F3
BERLIN, N.H. -- Logging trucks often outnumber cars on the roads between the Canadian border and this city built around paper, pulp and lumber mills.
But local residents worry that the trucks will be gone in a generation, along with the working forest and the mills, because of indiscriminate logging spurred by fallout from the long-running softwood lumber dispute with Canada.
They also worry about destruction of wildlife habitat and the loss of access to private timberlands for hunting, fishing, hiking, snowmobiling and even blueberry picking.
The catalyst for the debate is T.R. Dillon Logging Inc. of Madison, Me., which bought 9,100 hectares last year in Success, an unincorporated township east of Berlin.
Owner Thomas Dillon, who plans to "commercially clear-cut" about 1,200 hectares a year for three years, also has bought 4,856 hectares in other nearby towns in the past two years.
"He's liquidating the land," says Robert Brown, a member of the Berlin Planning Board who often walks on the land in Success.
"When this guy Dillon is gone -- and I don't blame him personally -- the land's going to be worth nothing. He's going to subdivide it. We know that, and it's tearing people apart up here."
Mr. Dillon's cutting practices in Maine helped to inspire a law restricting "liquidation harvesting," defined as removing nearly all the commercially valuable timber from a parcel. The law, which took effect on Jan. 1, bars owners from selling such land for subdivision within five years.
"A way of doing business here is you buy land, you cut it and you sell it, and if that's a timber liquidator, that's exactly what I am," Mr. Dillon says cheerfully.
But he says he plans to keep the land in Success over the long term and has no plans to subdivide it. "I'm just doing what I need to do as a business person and pay my bills and pay my people," he says. "But say you did want to sell it -- it would be sold as a working forest. To go in and completely butcher, it would defeat your purpose, so it would be bad business."
With clear-cutting rising to meet the demand sparked by the slowdown in wood imports from Canada, neighbouring Maine and Vermont have passed laws to restrict the practice and penalize landowners who cut and run. But the Live Free or Die state places no limits on the amount of timber landowners can cut except in wetlands, buffer strips along lakes and streams and "beauty strips" along town and state roads.
Jasen Stock, executive director of the New Hampshire Timberland Owners Association, says that's as it should be, because good forestry cannot be legislated.
Mr. Dillon agrees. The controversy over his cutting practices "has never really been about forestry," he says. "It's about aesthetics, and there's nothing pretty about a clear-cut."
Berlin Mayor Bob Danderson defends Mr. Dillon as a critical supplier of pulpwood to the struggling Fraser Paper Inc. paper and pulp mills in Berlin and Gorham, which employ about 600 people. He also says the timber man is co-operating with city leaders on economic-development projects.
"Dillon is a logger through and through. He's looking at logging not only for now, but for the future of his family, because his son is in the business. I trust that."
Henry Swan, chairman of Wagner Forest Management Ltd. of Lyme, isn't convinced. Mr. Swan, whose company manages timberlands for private and institutional investors, doesn't think the state should buy land Mr. Dillon has logged.
"I don't like states picking up the carcasses of land that somebody's been able to rape and pillage," says Mr. Swan, who also is state chairman of the Nature Conservancy.
But even his detractors say Mr. Dillon's practices are the result of economic forces bigger than any one landowner: the accelerating turnover of land ownership, new types of owners and vacation-home development.
Over the past two decades, the giant paper companies whose mills lie along rivers in northern New Hampshire and Maine near the Quebec and New Brunswick borders have sold most of their lands to timber investment companies, which have sold to other timber investors or loggers-turned-landowners like Mr. Dillon.
Each new owner must cut more heavily to recover his costs and turn a profit. Once all the commercial timber has been logged from an area, it becomes ripe for subdivision or commercial development, permanently removing it from the working forest and fragmenting wildlife habitat.
"Uncertainty of land ownership and the certainty of land turnover on an unprecedented scale have really rocked this state and this region to its roots," says Jym St. Pierre, of the environmental group RESTORE: The North Woods.
The greatest concerns are probably destruction of deer wintering areas and habitat for pine marten, members of the weasel family and a threatened species that relies on forests that aren't too "clean" or clear-cut to provide prey, protection and den sites.
Charles Niebling, policy director of the Society for the Protection of New Hampshire Forests, says it's time to consider more regulation. His group and the Timberland Owners are collaborating on a survey to figure out exactly how much timber is being cut, and where.
Mr. Niebling also says one thing is clear: What Mr. Dillon is doing is not sustainable and it's not good forestry, and will take much of the land out of timber production over the long term.
"Trees grow back in New Hampshire," he says. "But you're not going to have a mature forest resource for another 40, 50, 80, 100 years." (*)
By KATHARINE WEBSTER / Associated Press
Saturday, May 7, 2005 Page F3
BERLIN, N.H. -- Logging trucks often outnumber cars on the roads between the Canadian border and this city built around paper, pulp and lumber mills.
But local residents worry that the trucks will be gone in a generation, along with the working forest and the mills, because of indiscriminate logging spurred by fallout from the long-running softwood lumber dispute with Canada.
They also worry about destruction of wildlife habitat and the loss of access to private timberlands for hunting, fishing, hiking, snowmobiling and even blueberry picking.
The catalyst for the debate is T.R. Dillon Logging Inc. of Madison, Me., which bought 9,100 hectares last year in Success, an unincorporated township east of Berlin.
Owner Thomas Dillon, who plans to "commercially clear-cut" about 1,200 hectares a year for three years, also has bought 4,856 hectares in other nearby towns in the past two years.
"He's liquidating the land," says Robert Brown, a member of the Berlin Planning Board who often walks on the land in Success.
"When this guy Dillon is gone -- and I don't blame him personally -- the land's going to be worth nothing. He's going to subdivide it. We know that, and it's tearing people apart up here."
Mr. Dillon's cutting practices in Maine helped to inspire a law restricting "liquidation harvesting," defined as removing nearly all the commercially valuable timber from a parcel. The law, which took effect on Jan. 1, bars owners from selling such land for subdivision within five years.
"A way of doing business here is you buy land, you cut it and you sell it, and if that's a timber liquidator, that's exactly what I am," Mr. Dillon says cheerfully.
But he says he plans to keep the land in Success over the long term and has no plans to subdivide it. "I'm just doing what I need to do as a business person and pay my bills and pay my people," he says. "But say you did want to sell it -- it would be sold as a working forest. To go in and completely butcher, it would defeat your purpose, so it would be bad business."
With clear-cutting rising to meet the demand sparked by the slowdown in wood imports from Canada, neighbouring Maine and Vermont have passed laws to restrict the practice and penalize landowners who cut and run. But the Live Free or Die state places no limits on the amount of timber landowners can cut except in wetlands, buffer strips along lakes and streams and "beauty strips" along town and state roads.
Jasen Stock, executive director of the New Hampshire Timberland Owners Association, says that's as it should be, because good forestry cannot be legislated.
Mr. Dillon agrees. The controversy over his cutting practices "has never really been about forestry," he says. "It's about aesthetics, and there's nothing pretty about a clear-cut."
Berlin Mayor Bob Danderson defends Mr. Dillon as a critical supplier of pulpwood to the struggling Fraser Paper Inc. paper and pulp mills in Berlin and Gorham, which employ about 600 people. He also says the timber man is co-operating with city leaders on economic-development projects.
"Dillon is a logger through and through. He's looking at logging not only for now, but for the future of his family, because his son is in the business. I trust that."
Henry Swan, chairman of Wagner Forest Management Ltd. of Lyme, isn't convinced. Mr. Swan, whose company manages timberlands for private and institutional investors, doesn't think the state should buy land Mr. Dillon has logged.
"I don't like states picking up the carcasses of land that somebody's been able to rape and pillage," says Mr. Swan, who also is state chairman of the Nature Conservancy.
But even his detractors say Mr. Dillon's practices are the result of economic forces bigger than any one landowner: the accelerating turnover of land ownership, new types of owners and vacation-home development.
Over the past two decades, the giant paper companies whose mills lie along rivers in northern New Hampshire and Maine near the Quebec and New Brunswick borders have sold most of their lands to timber investment companies, which have sold to other timber investors or loggers-turned-landowners like Mr. Dillon.
Each new owner must cut more heavily to recover his costs and turn a profit. Once all the commercial timber has been logged from an area, it becomes ripe for subdivision or commercial development, permanently removing it from the working forest and fragmenting wildlife habitat.
"Uncertainty of land ownership and the certainty of land turnover on an unprecedented scale have really rocked this state and this region to its roots," says Jym St. Pierre, of the environmental group RESTORE: The North Woods.
The greatest concerns are probably destruction of deer wintering areas and habitat for pine marten, members of the weasel family and a threatened species that relies on forests that aren't too "clean" or clear-cut to provide prey, protection and den sites.
Charles Niebling, policy director of the Society for the Protection of New Hampshire Forests, says it's time to consider more regulation. His group and the Timberland Owners are collaborating on a survey to figure out exactly how much timber is being cut, and where.
Mr. Niebling also says one thing is clear: What Mr. Dillon is doing is not sustainable and it's not good forestry, and will take much of the land out of timber production over the long term.
"Trees grow back in New Hampshire," he says. "But you're not going to have a mature forest resource for another 40, 50, 80, 100 years." (*)
Tuesday, May 03, 2005
Birds flock to Canada's boreal woods, study says
By BOB WEBER / Canadian Press
Tuesday, May 3, 2005 Page A10
Scientists are calling it "the nursery."
A new scientific study shows that Canada's boreal forest is even more important to birds across North America than previously thought -- making it, researchers say, even more important to protect.
The study, sponsored by Bird Studies Canada, an independent research group. suggests that roughly one out of every three birds on the continent peeped its first cheep in a nest somewhere in the vast belt of green stretching across the north of virtually all Canadian provinces and the territories.
The report, released yesterday, is entitled North America's Bird Nursery.
"It is quite extraordinary," said Gregor Beck of Bird Studies Canada.
"It is not extravagant to say the boreal forest is home to billions of birds."
Boreal forests extend across North America, Europe and Asia.
Although it faces increasing industrial pressure, Canada's section of it is the largest intact stand left on the planet. At about five million square kilometres, it covers almost half the country.
The report finds that 57 per cent of the commonly occurring birds in the U.S. and Canada depend on the boreal forest at some point, either for breeding, migrating or regular habitat.
The breeding statistics, however, may be the most impressive.
About 38 per cent of all waterfowl in North America are born in the boreal.
For land birds, the figure is 30 per cent -- a figure that holds for shorebirds as well.
In total, the report estimates somewhere between 1.7 billion and three billion birds feather their nests in Canada's boreal forest. Birds that migrate as far south as the Caribbean return every year to hatch their chicks.
"The boreal is globally significant," Mr. Beck said.
The report underlines the importance of careful management of the boreal, he added.
Energy development in areas such as the Mackenzie Valley in the Northwest Territories and increased mineral exploration -- in addition to continuing logging across the entire forest -- could threaten habitat.
"There is going to be industrial activity out there, so we need to ensure it's done to the highest standard," Mr. Beck said.
A two-year-old agreement among environmental, aboriginal and industry groups is already starting to show some results in that direction, said Monte Hummel of the World Wildlife Fund.
The Boreal Forest Conservation Framework, signed in 2003, has helped communities in the NWT identify 20 areas involving 12 million hectares to be set aside from development in the Mackenzie Valley, with another 30 million hectares likely.
In the more southern stretches of the boreal, what Mr. Hummel calls the "working forest," four forestry companies and the Forest Products Association of Canada are in discussions involving another 50 million hectares, Mr. Hummel said.
Those discussions would involve both setting areas aside and changing logging practices. (*)
Tuesday, May 3, 2005 Page A10
Scientists are calling it "the nursery."
A new scientific study shows that Canada's boreal forest is even more important to birds across North America than previously thought -- making it, researchers say, even more important to protect.
The study, sponsored by Bird Studies Canada, an independent research group. suggests that roughly one out of every three birds on the continent peeped its first cheep in a nest somewhere in the vast belt of green stretching across the north of virtually all Canadian provinces and the territories.
The report, released yesterday, is entitled North America's Bird Nursery.
"It is quite extraordinary," said Gregor Beck of Bird Studies Canada.
"It is not extravagant to say the boreal forest is home to billions of birds."
Boreal forests extend across North America, Europe and Asia.
Although it faces increasing industrial pressure, Canada's section of it is the largest intact stand left on the planet. At about five million square kilometres, it covers almost half the country.
The report finds that 57 per cent of the commonly occurring birds in the U.S. and Canada depend on the boreal forest at some point, either for breeding, migrating or regular habitat.
The breeding statistics, however, may be the most impressive.
About 38 per cent of all waterfowl in North America are born in the boreal.
For land birds, the figure is 30 per cent -- a figure that holds for shorebirds as well.
In total, the report estimates somewhere between 1.7 billion and three billion birds feather their nests in Canada's boreal forest. Birds that migrate as far south as the Caribbean return every year to hatch their chicks.
"The boreal is globally significant," Mr. Beck said.
The report underlines the importance of careful management of the boreal, he added.
Energy development in areas such as the Mackenzie Valley in the Northwest Territories and increased mineral exploration -- in addition to continuing logging across the entire forest -- could threaten habitat.
"There is going to be industrial activity out there, so we need to ensure it's done to the highest standard," Mr. Beck said.
A two-year-old agreement among environmental, aboriginal and industry groups is already starting to show some results in that direction, said Monte Hummel of the World Wildlife Fund.
The Boreal Forest Conservation Framework, signed in 2003, has helped communities in the NWT identify 20 areas involving 12 million hectares to be set aside from development in the Mackenzie Valley, with another 30 million hectares likely.
In the more southern stretches of the boreal, what Mr. Hummel calls the "working forest," four forestry companies and the Forest Products Association of Canada are in discussions involving another 50 million hectares, Mr. Hummel said.
Those discussions would involve both setting areas aside and changing logging practices. (*)
Sunday, May 01, 2005
Tembec down 15.3%
By TAVIA GRANT / Globe and Mail Update
Thursday, April 28, 2005 Updated at 5:05 PM EST
Tembec Inc. shares plunged 15.3 per cent to a record low Thursday after the lumber producer posted a loss that was larger than analysts had expected.
The shares fell to a low of $2.94 before closing down 47 cents or 12.8 per cent at $3.20 on the Toronto Stock Exchange on trading of 2.2 million shares.
Earlier Thursday, the Montreal-based company said it narrowed its loss to $26.2-million or 31 cents a share for the second quarter ended March 26, compared with a net loss of $93.2 million or $1.09 a share in 2004.
Analysts had expected a loss of 25 cents a share.
The loss comes as Canadian companies are struggling to cope with one of the most difficult periods in the history of forest products. Looking ahead, Tembec said the main challenges the industry is facing are “the strength of the Canadian dollar and rising chemical, energy and wood costs, particularly in Eastern Canada.”
The company reduced its losses from a year earlier on higher sales and a special currency-related gain. Quarterly sales rose to $904.1-million from $887.2-million. Tembec said its quarterly results included an after-tax gain of $14-million on the translation of its U.S. dollar-denominated debt.
After adjusting for this gain and other specific items, the company would have lost $61.8-million, compared with a $73.8-million loss the previous year.
“Although the interim financial results reflect the improvement in operating earnings over the December quarter, margins in our three main businesses remain below trend line levels,” Tembec said in a statement.
“In the case of forest products, the lumber export duties are the primary cause of the reduced margins. While U.S. dollar pulp and paper prices are increasing, their net effect is being muted by a relatively weak U.S. dollar.”
Tembec is one of Canada's largest forestry companies, with sales of about $4-billion and 11,000 employees around the world.
In an interview this week with The Globe and Mail, Frank Dottori — the long-time chief executive officer of Tembec — blasted critics who want him to break up the company and conduct a fire sale of assets.
With files from Canadian Press.
Thursday, April 28, 2005 Updated at 5:05 PM EST
Tembec Inc. shares plunged 15.3 per cent to a record low Thursday after the lumber producer posted a loss that was larger than analysts had expected.
The shares fell to a low of $2.94 before closing down 47 cents or 12.8 per cent at $3.20 on the Toronto Stock Exchange on trading of 2.2 million shares.
Earlier Thursday, the Montreal-based company said it narrowed its loss to $26.2-million or 31 cents a share for the second quarter ended March 26, compared with a net loss of $93.2 million or $1.09 a share in 2004.
Analysts had expected a loss of 25 cents a share.
The loss comes as Canadian companies are struggling to cope with one of the most difficult periods in the history of forest products. Looking ahead, Tembec said the main challenges the industry is facing are “the strength of the Canadian dollar and rising chemical, energy and wood costs, particularly in Eastern Canada.”
The company reduced its losses from a year earlier on higher sales and a special currency-related gain. Quarterly sales rose to $904.1-million from $887.2-million. Tembec said its quarterly results included an after-tax gain of $14-million on the translation of its U.S. dollar-denominated debt.
After adjusting for this gain and other specific items, the company would have lost $61.8-million, compared with a $73.8-million loss the previous year.
“Although the interim financial results reflect the improvement in operating earnings over the December quarter, margins in our three main businesses remain below trend line levels,” Tembec said in a statement.
“In the case of forest products, the lumber export duties are the primary cause of the reduced margins. While U.S. dollar pulp and paper prices are increasing, their net effect is being muted by a relatively weak U.S. dollar.”
Tembec is one of Canada's largest forestry companies, with sales of about $4-billion and 11,000 employees around the world.
In an interview this week with The Globe and Mail, Frank Dottori — the long-time chief executive officer of Tembec — blasted critics who want him to break up the company and conduct a fire sale of assets.
With files from Canadian Press.
Tuesday, April 26, 2005
Tembec's balance sheet illusions could make investors disappear
Tuesday, April 26, 2005 / GLOBE AND MAIL
In investing, numbers often lie. The numbers say that Tembec, one of the country's largest forest products companies, is among the cheapest stocks money can buy. With a market capitalization that's less than one-third of the company's $1.1-billion in net assets, how can you go wrong?
Don't be fooled. More than $500-million in shareholder wealth has been eviscerated since last summer, and if you watch what the bond market says, more pain lies ahead. Tembec's debt has been tumbling in recent weeks, an ominous sign. On Thursday, the company will report its second-quarter results, which management has already warned will be abysmal. It's rude to say it out loud, but in dark corners people are starting to wonder whether the company may be forced to consider bankruptcy protection.
The sad part is that many of Tembec's woes are not management's fault. Chief executive officer Frank Dottori couldn't have predicted the Canadian dollar would rise from 65 cents (U.S.) to the 80-cent range so quickly, crushing the company's profit margins. He couldn't help the fact that the Brazilians have built hyper-efficient new pulp mills that render Tembec's smaller mills uncompetitive. But it is also a case study for executives and investors on the dangers of foolhardy acquisitions.
Any analysis has to start with the balance sheet, which is rated R and should not be shown to small children or others who are easily frightened. Tembec started out in 1973 by buying and saving one doomed pulp mill in Temiscaming, Que., and steadily got bigger, partly by purchasing other doomed mills. Management bought small assets and tried to pay as little as possible, a strategy that has left it with 55 factories spread out over three continents.
There's nothing wrong with acquisitions as long as you're careful about how much debt you accumulate along the way -- especially in cyclical businesses, where you never know when the cycle is going to turn against you. But Mr. Dottori failed to heed this, with damaging consequences.
With $1.6-billion (Canadian) in long-term debt, Tembec's interest costs run to more than $30-million a quarter. It would be manageable except everything else has gone against them. Pulp prices have been good but not great, and since it's sold in U.S. dollars, price increases have been sabotaged by the rising Canadian dollar and euro. New mills in South America, Asia and Europe are adding millions of tonnes of new capacity and hurting prices.
To make matters worse, the Quebec government has proposed a 20-per-cent cut to the tree harvest in the province, exacerbating a shortage of fibre in Eastern Canada. In Ontario, power prices have gone up. You get the idea. Next week: a plague of locusts strikes. The bright side, if you can find one, is that Tembec doesn't have any huge debt repayments until 2009. But since it's not even covering its interest costs at the moment, a financial crunch could come sooner.
Having lost so much lately -- the stock is down 42 per cent this year -- a shareholder might be tempted to take comfort in the $2.4-billion in fixed assets on the balance sheet. But demand for high-cost pulp mills paying developed world wages is, shall we say, not robust. One forest industry insider, speaking on condition of anonymity, reckons the plants aren't worth half as much as it says on the books. Tembec's $1.1-billion book value is an illusion.
This is starting to dawn on bond investors, who have been marking down Tembec's debt in earnest. Yields on the company's 2009 bonds have jumped to more than 10 per cent, from the low 8-per-cent range at the start of the year, according to Bloomberg data. If the bond guys are getting nervous, you can bet there won't be much left for equity holders if Tembec renegotiates its debts. Is there a way out? If the loonie slides back to where it was two years ago, maybe. But a huge restructuring seems inevitable.
Saturday, April 16, 2005
Forestry profits rising on efficiency gains, survey says
SOURCE: GLOBE AND MAIL / BY PETER KENNEDY / FRIDAY, APRIL 15, 2005 PAGE B10
VANCOUVER -- The trend towards bigger, more efficient sawmills is helping to boost lumber recoveries and make the Canadian forest sector more profitable, according to a PricewaterhouseCoopers survey. The survey released yesterday said profits reported by the top 10 forest companies in Canada soared to $930-million in 2004, compared with $242-million a year earlier.
The biggest winners were the solid-wood producers such as Canfor Corp. and West Fraser Timber Co., the survey said.
This was due in part to high lumber prices and investment in sawmilling technology that sent profits in the British Columbia lumber sector rising to a record $1.5-billion in 2004.
That was up from $340-million a year earlier, according to preliminary estimates by PwC. "We have seen a lot of capital invested on process controls, and lumber recovery to increase capacity and reduce costs,'' said Craig Campbell a partner with PricewaterhouseCoopers in Vancouver.
"Half a dozen significant capital projects, in excess of $50-million each, have been announced or are already under way at sawmills in the interior of B.C.,'' Mr. Campbell said.
This is part of a broader trend that has allowed the North American sawmilling sector to produce 40 per cent more lumber in the past 17 years, even though the number of mills is down 34 per cent. The B.C. industry, for example, has been able to increase the amount of lumber it can recover from the same amount of logs in the last decade by 1.4 billion board feet.
Mr. Campbell said record earnings in B.C. have helped to offset the impact on Canadian forest sector results of softwood duties, unfavourable exchange rates and an oversupply of newsprint.
Norbord Industries Inc. was the most profitable of the 10 companies included in the survey. The Toronto-based producer of oriented strandboard posted a profit of $424-million in 2004, up from $240-million.
CANADA'S TOP 10 FORESTRY FIRMS
2004 PROFIT (LOSS) IN $ MILLION
1 Abitibi Consolidated -$36
2 Domtar -42
3 Canfor 421
4 West Fraser Timber 212
5 Tembec -1
6 Cascades 23
7 Norboard 424
8 Norske -29
9 Fraser Papers -56
10 Pope & Talbot 14
TOTAL $930
VANCOUVER -- The trend towards bigger, more efficient sawmills is helping to boost lumber recoveries and make the Canadian forest sector more profitable, according to a PricewaterhouseCoopers survey. The survey released yesterday said profits reported by the top 10 forest companies in Canada soared to $930-million in 2004, compared with $242-million a year earlier.
The biggest winners were the solid-wood producers such as Canfor Corp. and West Fraser Timber Co., the survey said.
This was due in part to high lumber prices and investment in sawmilling technology that sent profits in the British Columbia lumber sector rising to a record $1.5-billion in 2004.
That was up from $340-million a year earlier, according to preliminary estimates by PwC. "We have seen a lot of capital invested on process controls, and lumber recovery to increase capacity and reduce costs,'' said Craig Campbell a partner with PricewaterhouseCoopers in Vancouver.
"Half a dozen significant capital projects, in excess of $50-million each, have been announced or are already under way at sawmills in the interior of B.C.,'' Mr. Campbell said.
This is part of a broader trend that has allowed the North American sawmilling sector to produce 40 per cent more lumber in the past 17 years, even though the number of mills is down 34 per cent. The B.C. industry, for example, has been able to increase the amount of lumber it can recover from the same amount of logs in the last decade by 1.4 billion board feet.
Mr. Campbell said record earnings in B.C. have helped to offset the impact on Canadian forest sector results of softwood duties, unfavourable exchange rates and an oversupply of newsprint.
Norbord Industries Inc. was the most profitable of the 10 companies included in the survey. The Toronto-based producer of oriented strandboard posted a profit of $424-million in 2004, up from $240-million.
CANADA'S TOP 10 FORESTRY FIRMS
2004 PROFIT (LOSS) IN $ MILLION
1 Abitibi Consolidated -$36
2 Domtar -42
3 Canfor 421
4 West Fraser Timber 212
5 Tembec -1
6 Cascades 23
7 Norboard 424
8 Norske -29
9 Fraser Papers -56
10 Pope & Talbot 14
TOTAL $930
Tuesday, April 12, 2005
Climate change could sour US maple sugaring
from the April 06, 2005 edition - http://www.csmonitor.com/2005/0406/p11s01-sten.html
By Christa Farrand Case | Correspondent of The Christian Science Monitor
PUTNEY, VT. - In the predawn darkness of Putney's maple-studded hills, Don Harlow begins his mornings by coaxing his truck down a rutted forest path. At the end is a cylindrical tank twice his height into which hundreds of gallons of sweet maple sap have flowed, siphoned through 11,000 taps and 40 miles of plastic tubing.
Mr. Harlow carts the sap up to his sugaring house to boil it down to syrup. It's a ritual Harlow loves, and one his family has performed for more than 100 years - albeit with horses and metal buckets in earlier days.
Despite having one of the most coveted labels in the industry - "pure Vermont maple syrup" - on their products, Harlow and other sugarmakers in the state are struggling to compete with Canada, where maple syrup production has more than tripled since the 1970s.
While much of Canada's syrup boom can be attributed to generous subsidies from the government, as well as its aggressive promotion of maple products, some researchers believe another factor may be coming into play: climate change.
As temperatures rise and weather patterns become more erratic, New England's maple trees are facing growing threats that may eventually force syrup aficionados and leaf-peepers out of the region and into Canada.
When Harlow took over the farm in the 1950s, the US produced 80 percent of the world's maple syrup, with Canada supplying the remaining 20 percent. Now the countries' market shares have flip-flopped, with Quebec alone providing over three-quarters of the global supply.
"Due to changes in both sap collection technology ... and climate ... the maple syrup industry is migrating from New England into Canada," concluded the New England Regional Assessment Group in a 2001 report. The study, spearheaded by University of New Hampshire researchers, also predicted that if current climate projections hold true, New England forests will be dominated by oak and hickory trees - not maples - by the end of the century.
Admittedly, maple trees won't flock northward one spring like Canada geese. Rather, the transformation of New England forests will come by a gradual change in the competitive balance of one species over another, says Timothy Perkins, who is nearing completion of a research project on the impact of global change on the maple sugar industry.
A projected rise in temperature of 6 to 10 degrees F. over the next century could heighten drought conditions, air pollution, and pests - stress factors that affect maples more than oaks or hickories.
But it's difficult to tell the degree to which climate change is affecting New England maples at the moment, says Dr. Perkins, director of the University of Vermont's Proctor Maple Research Center.
But a change that does present an immediate threat to the industry, he says, is a temperature-driven trend toward shorter sugaring seasons in New England but not in Canada.
At Morse Farm in Montpelier, Vt., that meant the sap "crop" was only one-third its usual size this year. The season started late, but winter morphed into spring practically overnight, reducing the number of freeze-thaw cycles that propel sap flow.
Just as air whistles out of a pierced car tire, sap flows out of a tree because the pressure on the inside of the tree is greater than the pressure outside the tree.
When the air temperature drops below freezing, a maple acts as a giant suction system, bringing the sap out of its branches and back down to its roots.
When the temperature rises above freezing, the action is reversed, sending sap surging through the branches - and out of any "wound" in the tree, such as the holes drilled for taps.
Traditionally, northern New England's climate has provided the optimal freeze-thaw patterns for sugaring. But in recent years, the transition from winter to spring has accelerated, leaving fewer days for the mercury to hopscotch across Vermont thermometers' 32-degree F. mark.
In Canada, however, warmer daytime temperatures have increased the number of freeze-thaw cycles there.
Technological improvements have also changed the season's timing in both countries. Back in the day of metal buckets, sugarmakers were wary of tapping their trees too early, when temperatures were liable to drop significantly below freezing for long periods.
"If [the sap] freezes hard, it can bust your bucket," explains fifth-generation sugarmaker Rick Marsh.
But now, with plastic tubing, sugarmakers can tap weeks earlier and get more out of their taps. This is especially true for those who have installed vacuum systems that draw more sap than would drip into a bucket. In Canada, tubing has facilitated greater sap collection in areas where deep snows make it difficult to reach individual trees for daily collection.
In recent years, Canada's booming syrup production flooded the global market, driving prices down and putting the squeeze on US sugarmakers. Five years ago, Harlow ended the season $30,000 in the red, but couldn't raise his prices to cover costs because of the low prices of Canadian syrup.
Jacques Couture, president of the Vermont Maple Sugar Makers' Association, has found himself in a similar position. But he notes that as someone who makes his living off sugaring, "It's pretty hard for me to criticize someone from another country who's doing the same thing."
"To the Canadians' credit, they've put a lot of effort into developing markets - not just in Canada, but in the world," notes Mr. Couture, who has mail-order customers in China, Japan, and Europe.
Back in Putney, Harlow's jovial tone turns somber as he acknowledges his biggest competition comes from Canada.
Is he worried? "Oh no, we can sell Vermont syrup anytime," says the fourth-generation sugarmaker. "The worst Vermont syrup I ever had was fantastic." (*)
Logging firm denied road-use appeal
By Frank Dobrovnik
Source: Sault Star / Tuesday, April 12, 2005 - 09:00
Local News - The Supreme Court of Canada will not hear a British Columbia timber company’s appeal to use a logging road in Lake Superior Provincial Park, effectively ending three years of legal wrangling and what an environmental group calls unsanctioned access.
Calling it “a victory for our protected areas,” a representative for the Wildlands League said Friday’s decision to dismiss leave to appeal, with costs, amounts to Canada’s top court barring the numbered company from continuing to use the road. “They’ve lost every decision and appeal along the way, so clearly they’re supposed to stop using the road,” said Evan Ferrari, director of the league’s parks and protected areas program.
The battle began after a B.C. man, Michael Jenks, bought former Algoma Central Railway land east of the park in November 2002 and Ontario’s Ministry of Natural Resources refused him access via Sand River Road. Most recently, last September the Ontario Court of Appeal sided with the MNR, saying that the 1995 park management plan allows access to Crown land rather than private land.
Although the MNR halted logging operations in the park in the late 1980s, it has allowed Clergue Forest Management to continue to use the road to access Crown land east of there.
The appeals court also granted Jenks’s company a temporary injunction to continue using the road while seeking leave to appeal to the Supreme Court. The Wildlands League, which was given intervener status in the Ontario appeals process, wrote to Jenks and the province last week “to discuss long-term closure of the road,” Ferrari said.
The “bigger issue” is now to “stop anyone from using the road, and possibly changing the forest management plan and park management plan . . . that the right-of-way will be rehabilitated,” he said.
One appeal court judge, in a written decision, said the management plan could have stated more clearly whether the road is limited to access to Crown land.
The environmental group is also heartened by recent moves by the Ontario government to update the Provincial Parks Act. One proposal is to ban industrial activities within parks altogether.
As to whether the ACR was allowed to sell off vast swaths of Northern Ontario to private interests in the first place, “that’s a much bigger fish to fry,” Ferrari said.
“It’s private land,” he said. “We have so many problems with the 85 per cent of Northern Ontario land that is in the public hands . . . as far as the forestry practices are concerned, we have no recourse.(*)
Source: Sault Star / Tuesday, April 12, 2005 - 09:00
Local News - The Supreme Court of Canada will not hear a British Columbia timber company’s appeal to use a logging road in Lake Superior Provincial Park, effectively ending three years of legal wrangling and what an environmental group calls unsanctioned access.
Calling it “a victory for our protected areas,” a representative for the Wildlands League said Friday’s decision to dismiss leave to appeal, with costs, amounts to Canada’s top court barring the numbered company from continuing to use the road. “They’ve lost every decision and appeal along the way, so clearly they’re supposed to stop using the road,” said Evan Ferrari, director of the league’s parks and protected areas program.
The battle began after a B.C. man, Michael Jenks, bought former Algoma Central Railway land east of the park in November 2002 and Ontario’s Ministry of Natural Resources refused him access via Sand River Road. Most recently, last September the Ontario Court of Appeal sided with the MNR, saying that the 1995 park management plan allows access to Crown land rather than private land.
Although the MNR halted logging operations in the park in the late 1980s, it has allowed Clergue Forest Management to continue to use the road to access Crown land east of there.
The appeals court also granted Jenks’s company a temporary injunction to continue using the road while seeking leave to appeal to the Supreme Court. The Wildlands League, which was given intervener status in the Ontario appeals process, wrote to Jenks and the province last week “to discuss long-term closure of the road,” Ferrari said.
The “bigger issue” is now to “stop anyone from using the road, and possibly changing the forest management plan and park management plan . . . that the right-of-way will be rehabilitated,” he said.
One appeal court judge, in a written decision, said the management plan could have stated more clearly whether the road is limited to access to Crown land.
The environmental group is also heartened by recent moves by the Ontario government to update the Provincial Parks Act. One proposal is to ban industrial activities within parks altogether.
As to whether the ACR was allowed to sell off vast swaths of Northern Ontario to private interests in the first place, “that’s a much bigger fish to fry,” Ferrari said.
“It’s private land,” he said. “We have so many problems with the 85 per cent of Northern Ontario land that is in the public hands . . . as far as the forestry practices are concerned, we have no recourse.(*)
Wednesday, April 06, 2005
Forest Industry Needs to Grow
SOURCE: Globe and Mail; Wednesday, April 6, 2005
The fate of Canada's forests has always been determined by the balance of power between the forces of industrialization and conservation.
For most of our history, the industrialists ruled the roost. We chopped our trees -- or rather, we allowed a handful of big companies to do so -- with alacrity so long as the exercise provided jobs and export income. Pleadings for preservation were like cries in the wilderness.
If there was a turning point -- a moment when the environmentalists moved from the margins to the mainstream and when sustainability became a collective concern -- it probably came in the late 1980s in British Columbia.
For months, the province fixated on the fate of Canada's tallest tree, a 94-metre Sitka spruce in Vancouver Island's Carmanah Valley. By 1990, MacMillan Bloedel, then the province's largest forest company, had badly lost the public relations battle and British Columbia declared most of the valley off limits to loggers.
It would take Quebeckers another decade before they would make sustainable forest management a political hot potato. The turning point came in 1999, when a popular folk singer named Richard Desjardins produced and narrated a devastating documentary, L'erreur boréale, the title a play on the term aurora borealis, or northern lights. The film, which chronicled the systemic overharvesting of trees in Mr. Desjardins' native Abitibi region, made the rounds of the Montreal festival circuit and permeated the collective consciousness. "Horror borealis" became the environmentalists' battle cry.
Jean Charest's Liberals heard them loud and clear while campaigning in 2003 and promised a top-to-root review of forest management practices once elected. The result of that promise -- the creation of a provincial commission chaired by former Hydro-Québec head Guy Coulombe that tabled a damning report in December -- will change Quebec's forest industry for good. And for the good.
Unfortunately, the situation will first get much worse for the forest companies -- and especially for the 245 Quebec communities that depend primarily on them -- before it gets better.
At the end of March, the Charest government passed legislation implementing the Coulombe commission's principal recommendation -- an immediate, 20-per-cent reduction in the estimated sustainable yield of Quebec's softwood forest that will translate into similar-sized cuts in companies' logging rights for the three years that began on April 1.
The axe comes just as Quebec's forest industry, which generates $15-billion in annual shipments and is responsible for at least 90,000 direct jobs, is showing the rot of decades of mismanagement. The fault is not entirely that of the industry. Successive provincial governments encouraged overexploitation of the forest with low stumpage fees -- the industry paid gross royalties of an underwhelming $390-million last year, even though that's a big improvement from $150-million a decade ago -- and incentives to keep inefficient, labour-intensive mills operating.
For decades, the promise of jobs in hard-pressed regions gave the industry the long end of the branch in bargaining with Quebec City. In fact, until 2001, the provincial government relied on data supplied by the companies to calculate the maximum sustainable yield, or the amount of trees that can be cut each year without sacrificing the forest's ability to regenerate (with the help of replanting) on a long-term basis. Needless to say, the industry did not err on the side of caution.
Years of overharvesting has meant that the diameter of trees cut today is substantially smaller than it was two or three decades ago.
Hence, it takes more trees to produce the same amount of lumber, paper and other wood products. This has made Quebec an increasingly expensive place to operate, despite relatively low stumpage.
With 20 per cent less wood to process in coming years, guess where the axe falls next? As it is, dozens of Quebec's saw mills are already operating at below 50 per cent of their capacity. And lofty lumber prices won't save them.
Although it produces 25 per cent of Canada's softwood lumber, and virtually all of its hardwood products, the Quebec forest industry is still primarily known as a paper maker. The province accounts for 45 per cent of Canada's newsprint production and Canada is the world's biggest supplier of newsprint.
Bowater, Kruger and Abitibi-Consolidated -- the biggest of the bunch and the biggest newsprint maker on the planet -- are household names in Quebec. Unfortunately, their names are not always uttered with affection. Indeed, Abitibi offers a case study of what has gone wrong in the province's forest industry.
In January, Abitibi finally announced the permanent shutdown of its Port-Alfred newsprint mill. There were days of local protests. But it shouldn't have been a surprise. The first of the mill's four paper-making machines was installed in the 1920s. How could a Model T be expected to outrace a Mustang GT?
Indeed, the average age and capacity of Abitibi's 20 newsprint-making machines in Quebec do not make it the envy of the industry.
Quebec, over all, is the newsprint-making jurisdiction with the oldest machines on the planet. In parts of the United States and Scandinavia, recently installed paper-making machines surpass 350,000 tonnes in capacity, compared with Abitibi's Quebec average of 130,000 tonnes. The bigger machines mean fewer fixed costs and less labour for the same amount of output.
The Quebec industry has no choice but to improve productivity. But replacing an old, low-capacity machine with a modern, high-output one, or one that uses recycled fibre, costs at least $500-million.
To its credit, Abitibi has just spent $210-million to switch its Alma, Que., mill from producing newsprint to a higher-grade alternative offset paper. Still, more than a quarter of the $385-million in capital expenditures Abitibi made in 2004 was related to the construction of its joint venture newsprint mill in China. Its Quebec operations are shrinking.
In January, in the face of the Coulombe report, a $219-million operating loss in 2004 and a crumbling share price, Abitibi CEO John Weaver said "new realities" in the North American newsprint market have forced the company to undertake a "strategic review" of all its operations.
Abitibi is not alone in its misery. The balance of power in Quebec's forest has shifted from the industrialists to the environmentalists. But it just might be what the industry needs to save itself from itself.
Friday, March 11, 2005
Transgenic poplars in China
from the March 10, 2005 edition - http://www.csmonitor.com/2005/0310/p14s02-sten.html
Now, bioengineered trees are taking root
Transgenic poplars could make China a big player in lumber. But some experts worry about effects on nature.By Mark Clayton | Staff writer of The Christian Science Monitor
Scattered across at least seven provinces in China are more than 1 million common poplar trees with an uncommon bite. They can kill the insects that nibble their leaves. Their unusual defensive system is a genetically engineered bomb: Bacillus thuringiensis, or Bt, a naturally occurring toxin inserted into the tree's DNA. Other such transgenic species, such as the larch and walnut, are in the works, Chinese researchers report.
Such moves are shaking up the twin worlds of forestry and environmentalism. Transgenic trees are reaching the threshold of commercialization - a point bioengineered crops reached in the 1980s, observers say. This time, though, it's not the United States leading the charge, it's China.
Though little reported in the West, China's swan dive into large-scale transgenic forestry is essentially the first commercial-scale deployment of genetically engineered (GE) trees in the world, experts say. That could one day mean a potent new competitor to the lumber and paper industries. It also may mean that cutting-edge GE tree research in the US will fall behind, hobbled by regulation and public protest. It also puts decisions about a controversial - and, some say, potentially dangerous - technology into the hands of an authoritarian government, with less oversight and fewer technical controls than in the West.
"What the Chinese have done, planting [genetically engineered] trees across hundreds, maybe thousands, of acres, hasn't been done anywhere else in the world," says Yousry El-Kassaby, a forest geneticist at the University of British Columbia in Vancouver. "It marks a shift in the center of gravity away from the US, where there's a lot of genetic engineering tree research, but much of it is restricted to the labs or very regulated small field trials."
The case for GE trees seems straightforward. Faster-growing species can produce more lumber and paper in shorter time, which makes them a cheaper raw material. Supertree plantations could also mean less disturbance of natural forests - an environmental plus.
Scientists can "develop faster-growing trees, trees that produce more biomass that can be converted to fuels, and trees that can sequester more carbon from the atmosphere or be used to clean up waste sites," said Spencer Abraham, then US secretary of Energy, last fall.
Proponents also tout the technology as something that can be used to return vanishing species such as the American chestnut to the American landscape, by modifying its genetic makeup to defeat a devastating blight.
A problem with pollenBut there's a big catch, experts warn. Trees are perennial plants that produce large quantities of pollen released far higher into the air than ordinary crops. This "gene drift" in crops has caused problems as large seed companies have sued US and Canadian farmers for illegally using GE seeds. The farmers claimed their crops were contaminated by drifting pollen, but to no avail. A study last year by the Union of Concerned Scientists found that seeds of traditional varieties of corn, soybeans, and canola "are pervasively contaminated" with low levels of DNA from genetically engineered varieties of those crops.
If DNA can spread so broadly from GE crops a few feet high, there's no telling what will happen with pollen from trees 50 to 100 feet high or more, experts say. For example: Pollen from GE conifer trees can blow more than a thousand miles, new research at Duke University shows.
The potential for genetic contamination of forests - and potential rewards from using GE trees - are enormous, experts say. "For the first time, we have the ability to put a bacteria or even a fish gene into a tree," says Robert Jackson, professor of biology and director of Duke University's Center on Global Change. "Some make that a moral issue. Is it morally right? Another question is: Is it smart - or, maybe, is it dangerous?"
Indeed, the idea of releasing GE trees into the wild sends shudders through Alyx Perry of the Southern Forests Network, a coalition of loggers, landowners, and environmentalists. "Our conclusion is that the genetically engineered trees will inevitably contaminate nongenetically engineered stands of trees."
That, in turn, could lead to millions of acres of infertile private timber, possibly lacking enough lignin (a wood-strengthening substance) needed to be saw timber, Ms. Perry says. Combined with internal pesticide production in pine and poplar trees in the wild, it could lead to forests unable to reproduce, produce food for animals, or create marketable timber.
In the US, at least 69 field-test permits are in effect for three GE tree species - pine, poplar, and walnut. Most of those occupy two acres or less, says the US Department of Agriculture. Under USDA rules, such trees are closely monitored and not permitted to reach the flowering and pollination stage. So far, just one GE variety, a Hawaiian papaya, has been approved to be grown commercially. But commercialization is moving forward. In January 2004, the USDA announced its "intention to update and strengthen" biotechnology regulations for GE organisms, which some say is a key shift. And field research trials for GE trees in the US, including those conducted by ArborGen, a forestry-research firm in Summerville, S.C., have surged since 1997. ArborGen has been approved to conduct dozens of field trials with pine and poplar species genetically engineered for altered fertility, lignin levels, and other features, USDA database records show.
"We certainly see that genetic engineering in a plantation setting ... could play a big part in meeting world demand," says Les Pearson, ArborGen's director of regulatory affairs. ArborGen's first tree is at least seven years away from commercialization, he adds. Others see GE trees coming sooner.
"Government and industry are basically looking at what they can do to finalize regulations to streamline commercial release," says Neil Carmen of the Sierra Club. "We're talking about potentially millions of acres of genetically engineered trees."
Insight from papayaAt least two other transgenic tree species, a plum and another papaya, are undergoing USDA review. More than 30 species of GE trees - including 20 species valuable for timber or paper and pulp - are being developed, Dr. Carmen says. Ironically, Hawaiian farmers say the approved GE papaya has already contaminated groves, he adds.
"The regulation of this whole thing is lagging the technology," says Roger Sedjo, director of the forest economics and policy program at Resources for the Future, a Washington policy think tank. "A lot of countries are pursuing research in the area and some of it is coming to fruition. What we don't have is a global standard."
In Brazil, for example, researchers have embarked on large-scale research to develop a GE eucalyptus tree. The idea is to make the slow-growing Australian native mature faster and resistant to disease.
"We're certainly not ready to understand all of the risks yet," says Duke's Dr. Jackson. "There is immense commercial pressure to move ahead with this. And frankly, it's pretty easy to outline the economic benefits, but much more difficult to outline the long-term costs and what they will be - and how long they'll last if things go wrong."
A forest of factsTrees are the world's largest and oldest plants. They cover nearly a third of the world's land surface (excluding Antarctica and Greenland). They blanketed two-thirds of the surface before humans began to farm.
• The double-coconut palm in the Seychelles boasts the largest tree seed: 50 pounds.
• California boasts the world's tallest trees, the redwoods, and the oldest, bristlecone pines. The former can grow 360 feet tall. The latter have been known to live more than 4,000 years. The average city tree lasts eight years.
• By turning carbon dioxide into oxygen, trees replenish the atmosphere. Two mature trees can produce enough oxygen for a family of four.
• Over one year, a tree can absorb the carbon created by a car driven 26,000 miles.
Sources: World Book; United Nations; Earth Policy Institute; International Society of Arboriculture
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