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Industry News (September 01, 2007)

FORESTRY

PINE BEETLE SPREADS LIKE WILDFIRE IN ALBERTA

EDMONTON, AB — The mountain pine beetle is turning its wrath on

Alberta, and the effects are spreading.

The number of beetle-attacked trees in the western province has drastically increased from 19,000 a year ago to more than three million today. The inflated number is largely the result of a massive flight of beetles from B.C. to the Grand Prairie and Peave regions of northwest Alberta in July 2006. Substantial beetle populations are also in southwestern Alberta.

Surveys of over-winter survival rates of beetle larvae conducted this spring point to a continuing threat to the province’s pine forests, particularly in the southwest.

The Alberta government has been monitoring the spread of the insect and is undertaking single-tree cutting and burning projects. Forest companies have been asked to change their harvesting schedules to focus on infested and at-risk pine stands. The province has also replaced some of the older pines with younger trees that are less vulnerable to attack.

ENVIRONMENT

SINO-FOREST HELPS PUSH CHINA TO GREEN

TORONTO, ON — Sino-Forest Corporation is working with the State Forestry Administration in its effort to mitigate greenhouse gas emissions in China. July 20 marked the official launch of the Great Hall of the People in Beijing, PRC, through which the Asian country will work to curb GHG, while encouraging the development of carbon credit trading and forest biofuels.

As one of the founding members and the only member representing the forestry sector, Sino-Forest is collaborating with the administration to organize large-scale tree plantations, sustainable forest management that increases the absorption of carbon dioxide and to promote and facilitate carbon credit trading in China.

“This is a first for China and an important milestone as it plans to develop carbon credit trading and efforts to mitigate greenhouse emissions through the development of environmentally friendly and sustainable initiatives,” said Allen Chan, chairman and CEO of Sino-Forest. “We are excited to be able to cooperate and contribute our expertise towards the integration of forest resources and biofuel development.”

CAPITAL EXPENDITURES

TOLKO UPGRADES

KELOWNA, BC — Tolko Industries is pouring $13.4 million worth of capital upgrades into its Kelowna, BC, plant.

According to a recent report by Kelowna Capital News, $8 million of the allotted sum will go towards machinery designed to make the facility’s log line more efficient, while the remaining $5.4 million will upgrade the planer mill.

The report further confirmed that the upgrades will make it possible to make better use of beetle-killed timber, which now makes up 40% of the pine used in the mill.

MILLS

MERGER APPROVED BUT HURDLES REMAIN

LOS ANGELES, CA — The biggest hurdle has been overcome, but several challenges remain to the successful implementation of the AbitibiBowater merger.

Abitibi-Consolidated and Bowater shareholders both voted in approval of the merger, however, as a recent report by Forestweb noted, difficulties imposed by overseas competition, labour negotiations, debt, fibre and energy costs, all compounded by the tireless strengthening of the Canadian dollar, are sure to serve as stumbling blocks along the path to consolidation.

‘Theoretically, the company should be better able to manage excess production capacity and inventories,’ the Forestweb report said. ‘By combining, the two companies hope to realize annual synergies of US$250 million within two years.’

The new company will start off with a total of 32 pulp and paper mills and 35 wood product facilities. Questions concerning whether or not the sheer size of AbitibiBowater will be too big to compete with more efficient Asian and European facilities. Further complicating matters are looming expiration dates for collective agreements, and as Forestweb highlighted, the company is expected to push for concessions. A heavy debt load is also a matter of contention.

GOVERNMENT

GOVERNMENT PROGRAM TARGETS FOREST SECTOR

GREEN HILL, NS — A new program launched by the Federal government is expected to help forest communities create stable economies.

The Forest Communities Program, announced by the Honourable Peter MacKay, Minister of Foreign Affairs and Minister of the Atlantic Canada Opportunities Agency, on behalf of the Honourable Gary Lunn, Minister of Natural Resources, is intended to help forest communities develop stable local economies as they deal with the impacts of economic challenges facing Canada’s forest sector.

“We’ve learned from experience that the best solutions are often those developed by the local community,” said Minister MacKay. “The Forest Communities Program is designed to foster collaborative community efforts to help communities take advantage of new economic opportunities from forest resources.”

The new $25 million five-year program will fund 11 FCP sites across Canada. Each year, the funding will support community-level partnerships and national partnership activities and operations. Natural Resources Canada will negotiate funding terms and conditions with the 11 successful FCP applicants.

The program is based on the successes of Canada’s Model Forest Program, which began in 1992 and ends this year. The FCP will encourage the development of knowledge, information tools and best practices to help forest communities meet the challenges of transition in the forest sector. The program will additionally help communities to capitalize on emerging resource-based economic opportunities. The FCP will foster new approaches to accommodate competing land uses, establish demonstration projects for innovative forest management approaches and create community ventures based on new types of forest products. These solutions will be shared with other forest communities across Canada and internationally through the Canadian Model Forest Network, the International Model Forest Network and similar organizations.

FINANCIAL

FPAC CALLS ON BANK OF CANADA TO REVISE RATE

OTTAWA, ON — The Forest Products Association of Canada is calling on the Bank of Canada to consider the economic and regional implications of its decision to increase its overnight interest rate.

“Those that say Canada’s manufacturers are suffering because they hid behind a weak dollar are simply wrong,” an official release from FPAC stated. “For example, Canada’s wood products sector has been a Canadian productivity leader, recording a rate of labour productivity growth double that of its U.S. counterpart since 1997. Add to this the fact that Canada is the most successful forest products exporting nation in the world, and we can confidently say that we have been striving to succeed in global markets,” said Avrim Lazar, president and CEO. “But, as in other trade exposed sectors of our economy, even world-class mills in the forest products industry are struggling to remain economically viable due to the dollar rising 45% over five years.

“The Bank of Canada must act in the interests of the Canadian economy more broadly and expand its focus to more fully consider other economic and regional factors,” Lazar continued. “With the Canada-U.S. exchange rate already at a generational high, we believe that the Bank is not giving adequate consideration to the economic well-being of hundreds of communities across large regions of Canada.”

Lazar also took aim at federal and provincial governments, emphasizing a need for policy reform at all levels of government to make Canada more competitive in global markets. “Governments in Canada have been slow to adjust economic policies to take into account the rising dollar and increased global competition. It is industry’s job to adjust
so that we can compete with low-cost countries, but government must move much more quickly to create world class competitiveness conditions. Taxes that penalize investment, out-of-date mergers policies and uncompetitive transportation, fibre and energy policies, which were simply disadvantageous when the dollar was lower, have become damaging to Canadian jobs with the high dollar. The result is severe and potentially irreversible damage to Canada’s economic base.”

FORESTRY

PROTECT THE BOREAL, SAYS ForestEthics POLL

TORONTO, ON — A poll commissioned by ForestEthics found that nine in ten Ontarians are in favour of protecting more of Ontario’s Boreal forest as a shield against global warming. A total of 67% of respondents strongly agreed that the Ontario government should do more to protect the Boreal, while another 23% somewhat agreed, with women over the age of 55 as being the most in favour.

“These findings reinforce that Ontarians want the Boreal forest protected as part of the response to global warming,” said Tzeporah Berman, strategic director at ForestEthics. “Unfortunately, only 10% of Ontario’s Boreal is under protection and not a single acre has been protected in the last four years.”

FORESTRY

INTERNATIONAL PAPER’S THIRD PARTY

MEMPHIS, TN — International Paper has earned third-party certification for its U.S. pulp and paper mills and container plants.

The certification, provided by SFI & PEFC Standards for Sustainability, allows the company to move forward with its commitment to forest stewardship.

“Customers have choices in today’s marketplace,” John Faraci, chairman and chief executive of IP said. “We want our customers to know we are committed to making high-quality paper and packaging from sustainable sources. Independent, third-party certification is an important step in demonstrating that commitment.”

International Paper has also confirmed plans to pursue Forest Stewardship Council chain-of-custody certification.

“The signs of infestation are going to be very visible — trees attacked and killed last year by pine beetles are fading and turning red,” provincial mountain pine beetle coordinator Dan Lux confirmed. Lux also noted that the offspring of beetles that attacked Alberta pine trees in 2006 are now emerging and are flying in search of other trees to infest. Each beetle-attacked tree contains enough insects to infest between five to ten more trees.

PAPERCLIPS

COOLING THE FOREST WITH THE TREES

They’re significantly cheaper, they don’t rattle, and they don’t require trying to fit an unwieldy piece of Plexiglas into a window frame.

According to the U.S. Department of Agriculture, trees have a significant leg up on the modern air conditioner.

“The net cooling effect of a young, healthy tree is equivalent to ten room-size air conditioners operating 20 hours a day,” the report confirmed. “Trees properly placed around buildings can reduce air conditioning needs by 30% and can save 20-50% in energy used for heating. The planting of trees means improved air quality, resulting in less runoff and erosion. This allows more recharging of the ground water supply. Wooded areas help prevent the transport of sediment and chemicals into streams.”

Something to think about when you open your next electricity bill…

Source: U.S. Department of Agriculture