Pine beetle epidemic will have continent-wide economic impact: report

Posted by Rumin Mann
March 31st, 2010

Interior sawmills will start running out of good timber within three to five years because of the mountain pine beetle epidemic according to a comprehensive report on the beetle’s economic impact.

2453416.binA new report on the mountain pine beetle epidemic describes it as one of North America’s largest natural environmental disasters that will put an estimated 16 major sawmills out of business in B.C. and lead to long-term lumber shortages in the United States.

Canadian lumber production is not expected to recover for the remainder of the century, one of the report authors said Thursday.  “We sort of think lumber production has peaked forever, at least relative to our lifetimes and our children’s lifetimes.” said Russell Taylor, president of the International Wood Markets Group. The Vancouver-based consulting company is one of three consultants who prepared the report for lumber industry clients.

Interior sawmills are expected to start running out of good timber within three to five years according to the report.  Coupled with reductions in the Ontario and Quebec timber supplies, the pine beetle epidemic is expected to reduce Canada’s share of the U.S. lumber market by 50 per cent. Lumber prices are expected to soar.

However, lumber volumes in B.C. will never recover to the 2005 levels, when a booming U.S. housing industry fuelled expansion in this province, Taylor said. The report forecasts a long-term sawlog supply from the B.C. Interior that’s roughly equivalent to the volume harvested in 2009, a year full of market-driven sawmill closures that’s widely considered to be the worst year in memory for the forest industry. Lumber production will pick up this year and continue to rise until 2013. But by 2015, it will have peaked, and begin falling again as sawlog-quality pine becomes scarce.

Taylor said the U.S. will face a lumber shortage that will send prices higher, benefiting those mills that survive as well as leading to previously marginal timber supplies, such as B.C.’s northwest, becoming economic to log.

The pine beetle is expected to kill a billion cubic metres of B.C. timber. An intense salvage program has been underway for 10 years but the approaching end of sawlog-quality wood means the industry will be hit by supply curtailments at a time when the demand for lumber is climbing.

“After some expected gains in the lumber markets between 2010 and 2013, the B.C. Interior lumber industry will need to begin reducing production,” Taylor said. “This impact on the U.S. market will soon be profound.”

Jim Girvan, one of the study authors, said in a news release that sawlog shortages caused by the mountain pine beetle could trigger the permanent closure of about 16 large primary mills in the B.C. Interior by 2018.

While the salvage program has been underway, the economic impact has been forestalled until now but eroding log quality, poorer conversion economics and shorter shelf-life of the dead timber will all result in a much smaller B.C. industry.

Sawmill and plywood plant closures will have “significant and direct consequences expected for rural B.C. communities,” states the report.

Quesnel Mayor Mary Sjostrom said Interior communities have been preparing for reduced timber supplies for several years.  “We are in the heart of pine beetle country,” she said in an interview. “I think the shelf life of pine beetle wood is going to be significantly less than we expected.”

The region has formed a pine beetle action coalition of local governments and stakeholders to develop alternative economic strategies.  “When you are challenged like this, you look for opportunities,” Sjostrom said, noting that investments in bioenergy and agriculture are already coming into the region.Read More

B.C. Forest Minister Pat Bell’s Response to the Report:

B.C. Forest Minister Pat Bell is optimistic about the future of forestry in Interior B.C., despite a recent report by the International Wood Markets Group.

According to the group’s study, up to 16 major sawmils in the region could be shut down as a result of a major decline in harvestable timber starting in 2013. The report predicts Canadian lumber exports could drop by 50 per cent – causing a shortage of lumber in North America until the next century.

“Although the (International) Wood Markets Group report accurately reflects the risks if we don’t do anything… as a government we’re committed to doing everything we can to mitigate the mid-term downfall in timber supply,” Bell said.

The report is also based on older data on the usable life of pine beetle-killed wood, he added.

“I’ve seen logs as old as 20 years going through sawmills,” Bell said. “Last year we harvested about 41 million cubic metres (of timber). It’s important to know that, at a minimum, we’d hold that size.”

B.C. is investigating many options to increase the mid-term timber supply, with an objective of reaching zero net loss in timber supply, he said.

As the demand for lumber, pulp, paper, wood pellets and bioenergy increases, areas previously thought uneconomical to harvest will become viable.

Currently in the Prince George Forest Service Area, a large and economically significant area affected by the mountain pine beetle, stands with less than 180 cubic metres of lumber per hectare aren’t harvested.

“If we reduced that (threshold) to 165 cubic metres per hectare, we can mitigate half of the mid-term’s supply downfall,” Bell said. “The cost of harvesting that stand goes up a little bit – $1-2 per cubic metre.”

In addition, there is a potential to capitalize on the growing carbon economy to invest in silviculture, improving seed stocks and fertilization, he said.

By accelerating and increasing forest growth, the trees are capturing more carbon dioxide from the atmosphere than they would in a standard regrowth. The difference between the natural and accelerated growth carbon consumption could be sold as carbon credits, he said.

Rapidly growing demand from China for B.C. lumber will drive up prices, allowing loggers to travel further from mills and harvest marginal stands economically, he added.

In 2009, China purchased 1.63 billion board feet of lumber – doubling the previous record of 784 million board feet set in 2008. Last year China bought 18 per cent of B.C.’s wood exports, making it the second-largest market for B.C. wood after the U.S.

China bought $327 million of wood products from B.C. last year, nearly triple the $113 bought in 2007.

“(And) the January numbers for this year are four-fold what we did in the same period last year,” Bell said.

On Friday Bell will arrive in Beijing to sign a memorandum of understanding with the Chinese ministry of housing to build a six-storye, wood-frame apartment building.

“They build a significant number of six-storey apartment buildings per year,” Bell said. “Several years ago it was estimated that if half the six-storey buildings had the top four storeys made of wood, it would consume 25 billion board feed per year.”

If the project is a success, it could open up the world’s largest construction industry to wood products.

“Half of the wold’s construction in the next decade is going to be in China. A lot of that is going to be densification of their cities.”

B.C. lumber will be competitive in China up into the mid-$300 range per 1,000 board feet, he added. The cost of transporting Russian logs to China by train and processing them puts the cost over $400 per 1,000 board feet.

Source: Omineca – March 25, 2010

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