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Mountain Pine Beetle Attacks the Lumber Industry

Volume 50 No. 47 -November24, 2000

Compliments of the Parks Department

Last week, loggers in the B.C. central interior began ramping up a campaign to wage war on an infestation of mountain pine beetle http://mpb.cfs.nrcan.gc.ca/biology/index_e.html  taking place in an area south of Burns Lake. For those unfamiliar with it, the mountain pine beetle is a fat little black bug, about half the size of your average red ant, that has the potential to reek havoc on monoculture pine forests common in interior B.C. In attacking a tree, the mountain pine beetle, a natural member of the ecosystem and always present to some degree, constructs a series of galleries in the cambium layer, the living part of the stem just under the bark. The tiny, irregular mine-like galleries interrupt the tree’s ability to convey sap and nutrients up and down the stem and within a year, the tree’s future is pretty well toast. Naturally, the beetles prefer fat, juicy, high value trees, which are also the object of the loggers’ desire.

The tree tries to fight off the attack by generating profuse deposits of pitch to entrap the invaders, but over the thousands of years it has been developing battle strategies, the mountain pine beetle has devised an effective way of combating this defense. It has cozied up to a blue stain fungus, which retards the tree’s natural pitching ability and renders it almost defenseless. This blue fungus is also responsible for the blue stain we all know and love so well in lumber sawn from beetle-killed timber.

Although the relationship between the beetle, the blue stain fungus, and the pine tree represents a fascinating symbiotic interdependence and is clearly one of the wonders of nature, nobody in the forest industry is particularly awestruck by it. The mountain pine beetle attack south of Burns Lake, for example, is estimated at about twice the size of Vancouver Island, affecting 30 million to 40 million cubic meters of prime pine timber. Pundits estimate this timber is worth $3.4 billion on the lumber market—no small potatoes by anyone’s measure.

The problem here is that this mountain pine beetle attack didn’t just materialize overnight. It started brewing up several years ago, but nobody did anything about it because the infestation originated in Tweedsmuir Provincial Park. Most parks fall into the liands-off” category, which means come hell or high water or fire, or in this case an insect attack, ‘thou shalt not lift a finger to interfere’. Sound park management is defined as doing nothing at all and letting the surrounding area fend for itself.

On the positive side, the forest industry will enjoy a short-lived benefit from the pine beetle attack. About 3,400 loggers will be employed to log 12 million cubic meters of infected timber, at an estimated cost of $102.5 million. The provincial government is promising to ante up $23.5 million, while the industry is putting up $79 million. Over the next couple of years, there will be considerable activity there as areas are identified and laid out for logging, camps are established, roads are built, and equipment and people move in to conduct the sanitation operation. They don’t call beetle killed timber ‘opportunity wood’ for nothing.

But while it’s comforting to know some thing is being done about the mountain pine beetle attack, there is also a downside to it. Waging war against the beetles means extensive clearcutting, and past experiences with this situation have proven disastrous for the industry. Immediately after I became aware of the Burns Lake situation, I thought of the Upper Bowron River insect attack that took place a few years ago 50 miles east of Prince George. This was a nearly identical situation which resulted in the largest clearcut in B.C. The industry has paid and continues to pay an enormous price for its efforts there, which were undertaken to control the spread of spruce bark beetles.

The situation is similar in that the infestation got started in Bowron Lakes Provincial Park. This time, however, the cause was a series of blowdowns rather than a natural surge in insect populations due likely to warmer winters. Severe wind storms passed through the Upper Bowron in the mid 1970′s, causing considerable windfall damage. Windfelled trees provided the perfect brood habitat for spruce bark beetles and the attack quickly got underway. Left unattended because the Parks Branch didn’t want any logging in the park, the Upper Bowron attack moved quickly to epidemic proportions.

By the early 1980′s, it was obvious something drastic had to be done. Not only had millions of dollars worth of timber been destroyed, but the area was a serious fire hazard. Government turned industry loose with a mandate to clearcut the area, which became the most extensive salvage logging operation ever undertaken in the province. By 1987, the industry had laid bare 52,500 hectares. It had also planted over 60 million seedlings, but they weren’t able to hide the huge clearcut that now dominated the landscape.

Naturally, the environmentalists moved in and made hay of the situation, making sure to point out as many negative aspects as they could identify. They neglected to say, however, that if the area hadn’t been logged, it would likely have burned up, resulting in a conflagration of unimaginable proportions. Today this clearcut still haunts the industry with satellite images, photographs, and testimonials which highlight the devastation and underscore industry’s propensity to rape and pillage the forest given the opportunity.

We could be heading for a rerun of the Upper Bowron scenario with the Tweedsmuir mountain pine beetle infestation. It already covers a huge area and the most practical counter attack strategy is, once again, clearcutting. Can you imagine satellite images of a clearcut twice the size ofVancouver Island? Think how environmentalists will use this example to portray how the forest industry defines sustained yield.

In combating this current mountain pine beetle attack, the industry will enjoy a short term benefit, but the long term results could be quite different. Environmentalists are sure to renew their attacks over things like road construction, ground disturbance, destruction of riparian areas, destruction of habitat, and whatever else they can find to make the industry look bad. In addition, industry will be sporting a new black eye over the large clearcuts it will have to develop to salvage all the infected wood.

One thing everybody is sure to forget, however, is that it was government that caused the situation in the first place with its ‘hands-off park management policy. Weighing the pros against the cons of the strategy now, wouldn’t it have made a lot more sense to log the attack in the park when it first got started?

Kimberly-Clark Expands

Kimberly-Clark has announced it will invest an additional $50 million to increase production at its St. Hyacinthe plant, which manufactures feminine and adult personal care products. Including government grants, this brings the total investment within the last two years to $85 million at this operation. The upgrade will create an additional 45 new jobs in the community of St. Hyacinthe, Quebec, where the plant is located. The company sees adult personal care products as one of the fastest growing segments of the industry over the next 20 years, as the population ages.

Alliance Takes Downtime

Alliance Forest Products Inc., announces it is planning to close four of its Quebec sawmills for an indefinite period, starting November 24. Operations located in Degelis and Lac-des-Aigles will close on November 24 and December 1, respectively, while the Baie-Trinite and Girardville sawmills will close on December 22 and January 5, 2001, respectively. The combined annual production of these mills is approximately 145 million fbm. Alliance says the sawmills are struggling with poor market conditions, high stumpage fees, insufficient fiber supply, and supplemental export costs imposed by the Canada-U.S. Softwood Lumber Agreement. The company says once market conditions improve, the mills will come back on line.

WSPF Small Servings

The stampeding feet of Americans deserting their offices on Wednesday could be heard throughout the lumber business. As is usual for the time around U.S. Thanksgiving, no one expected much this week. Although the market was short-lived, however, what was done in the first two days showed surprising strength. Prices moved up in all high-grade dimensions except 2×12, which lost support from its few customers early in the week. Traders who demonstrated minimal optimism before this week were encouraged.

As more producers announce extended shutdowns and curtailments for the holiday period, the restricted supply is not only bolstering prices, but also stimulating sales activity. While narrows wander around current figures seeking sustained buyer interest through the holiday period, wides are expected to continue strengthening. Decent carry-through is projected in all commodity dimension products, although no substantial increases in prices are foreseen.

In KD R/L Std&Btr 2×4 the price stepped up $5 to $215. In KD R/L #2&Btr, 2×6 located another toonie ($2) to inch up to $230; 2×8 pounced up $10 to $223; 2×10 grabbed a $5 bill to $290. As noted above, 2×12 lost support from its small customer base and drifted down $5 to $365. Utility lumber also gained $2 in 2×4 to $140, while wider dimensions lost $2 on 2×8 to $128, and $5 on 2×12 to $140. Wide economy lumber lost a nickel, down $5 to $90 (CDN f.o.b. mill) on each 2×8 through 2×12.

Studs Winding Down

‘Twas the week before U.S. Thanksgiving, and everyone was buying as little as they could get away with. Deliveries of lumber between U.S. Thanksgiving and the Christmas holiday break are undesirable. If it isn’t already on the way, buyers are likely to wait late enough so new orders will be delivered in the new year. By late Wednesday, orders were tapering down, while customer inquiries dropped toward zero as well. The holiday period is bringing stud mill shutdowns that will be slightly longer than in previous

years. Order files on studs at this point extend into the week of December 4.

MSR Deserted

Nobody wanted to talk about MSR this  week. Potential buyers were in holiday  mode. They were too busy on the phone  booking plane tickets to find time to talk  with lumber traders. In spite of a lack of  activity, the MSR market held relatively  firm. The tone was more than decent in 2×6  high grades, which rose $10 on both 2100f  and 2400f to arrive at $385 and $415, respectively.  Order files were at approximately  two weeks.

Cedar Forecasting

Looks like 2001 is going to be a very  good year for cedar producers. As the U.S.  economy slows down, new housing starts  are expected to give way to renovation and  remodeling. Builders won’t be driving the  market as the number one consumer of  lumber products. Retail and buying groups  which supply do-it-yourselfers and independent  R&R contractors, will take over as  the arbiters of taste at the consuming end.  Finish and premium woods like cedar decking,  panel, bevel siding, and boards will  gain substantial ground in an R&R driven  market. That said, the world’s largest cedar  makers are working quickly to match  their forecast production with what they  already know of direct and distribution  sales. Forward positions look very good for  the first quarter of 2001. The big variable in  this market is the resolution of the quota  issue, which could come in March.

Fir Poky

Narrow dimensions enjoyed less than  brisk activity this week; in fact, one trader  described the fir market as “poky”. Wides  are scarce and increasingly pricey, however,  in all white wood species. Traders  continue to be bullish on wide hem/fir,  which is undervalued and a bargain compared  to other western species.

OSB & Plywood

Winter arrived unexpectedly in central  Canada this week. The sudden arrival  of snow and cold temperatures made it  difficult for construction in southern Ontario.  With the huge  U.S. Thanksgiving  holiday all but removing demand from south  of the border, it would be easy to conclude  OSB prices would soften. About all that  happened, however, was that the pace of  price increases slowed down. Stocking  wholesalers reported they were busy in  spite of the weather. Inventories are low.  Said one trader: “No one wants to wait,  even in this weather.” 7/16” Toronto is  selling this week for C$260, up $5 from last  week. Order files are out to mid-December.  Out west, weather was not a problem.  Producers said there was strong U.S. buying  from California, Idaho, Oregon and  Washington on Monday and Tuesday.  “Retailers don’t have enough stock to last  past mid-December. They will have to buy,”  said one producer. He added, “ L-P is shutting  down for the last half of December. The  continuing mild weather in Minnesota is  preventing access to fiber supply for OSB  mills in the region. That’s more than 40 per  cent of total OSB production. There’s no  downside to prices.”  On Thursday, the asking price for  7/16” Vancouver was C$265, up $5. Large  volume buyers could expect 1 per cent off  this level. Order files are through the week  of December 4 and into the week of December  11.

Cargo & Reload

Lumber activity in the U.S. northeast

ground to a halt by midday Wednesday,  with all but a few traders heading home for  the usual four day Thanksgiving holiday  weekend. Until the trek home began, lumber  activity was surprisingly good. Retailers  were looking ahead to the period after  Thanksgiving and were planning their purchases  accordingly. Buying, for many,  turned out to be not as easy as expected.  For the first time in months, it took several  calls to find the lumber required. On-ground  inventories were generally tight and mill  offerings were sparse, so when the required  tallies were found, price was often a  secondary issue.  Scarcities of six through twelve still  abound, with stocking wholesalers reporting  green fir selling prices firm to higher.  Traders note that buying is focused on the  period up to mid-December, with a slow  down in activity expected for the last half of  the month. After that, weather begins to  call the shots on activity. January is anybody’s  guess, said one trader, and since  winter usually arrives in February, lumber  buying will be strictly for immediate needs  until late March.

Announcements

Paul McElligott has been appointed  the new President and CEO of TimberWest  Forest Corp., replacing Scott Folk, who  left the company this week. TimberWest  will be under the direction of Ed  Daughney, chairman of the board, until  late January, when McElligott assumes his  new position. McElligott’s appointment is  seen as an indication the company is shifting  its strategic focus. The company is  deferring its plans to expand into the U.S.  market and now plans to concentrate on  delivering value to its unitholders from its  B.C. operations. Daughney says the company  will leverage its position as B.C.’s  largest private timber landholder.  McElligott comes to TimberWest from B.C.  Rail.

Refer to Madison’s Lumber Reporter for the latest news in the lumber industry.

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