RE: Wood studs under pricing pressure - June 22, 2019.
Most of us understand that lumber products are a commodity needed more some times than at other times. As such, the price goes up and down with demand. This is why sawmills have to be always looking for ways to be most efficient and to vary production in line with market demand.
Nova Scotia sawmills that have an agreement to accept logs from the allocation given to Northern Pulp (NPNS) by the province can find themselves in an overstocked position when demand slackens.
The pulp mill wants half of every log as chips to make paper from, even when the lumber these mills saw from each log – about 45 per cent of every log – may not be selling at a steady volume. These sawmills need to supply chips no matter how much lumber is in demand or at what price. Being forced to increase sawn lumber inventory rapidly absorbs cash flow.
Chips for paper production do not bring as high a price as does lumber, despite the fact that wood is as good as lumber wood. Sawmills can soon run out of cash flow followed by bankruptcy. NPNS and its associated stud wood sawmill, Scotsburn Lumber, could be affected by a slower demand for studs as that is the only lumber product from that mill. Some of its waste wood is burned to make heat for the dryers. The rest can go over to the nearby pulp mill as biomass for one of the two boilers there.
If NPNS is closed the sawmills could immediately begin sawing out all the lumber in each log. That would more than double the gross margins of these mills. Logs greater than 25cm can average about 80 per cent lumber. And thus only 20 per cent is waste wood and bark . Sawdust and shavings are always in demand. Some slabs are used in mill lumber dryers. The remaining bark and chips can be sold into several markets including the wood pellet mills along with end cuts. There is currently a small market for biomass for heating, and government has announced a program to install biomass boilers in up to 100 buildings. This greatly reduces the demand for oil and gas for heating and thus reduces the amount of money going out of our economy and increases the local economy for wood products.
Let's remember that several sawmills have biomass boilers that make electric power sold under contract to NSP. These use a massive amount of chips and biomass. They are not very efficient, but are contracted to make power for another 15 or so years.
Closing NPNS could be a net gain for the GDP of the province considering that clear-cutting could cease and only high-value trees are selection harvested. No more gifts to the pulp mill. More tree planting could take place as the many bald forest lots are fertilized and re-planted. Ex-pulp mill workers could be retrained at NSCC for good paying jobs in renewables. Fewer small trees would be cut and left to grow and absorb carbon CO2 as the world tries to slow climate warming.
These are the forests left for our grandchildren. Forest tourism could be quickly increased to increase revenue for owners. Maple syrup production could increase. Hardwood sawmill production could increase.
To be transparent, I must tell you that I am a distributor of smaller wood chip and biomass boilers that heat water for building heat and process heat. Sizes up to 1000 Kw aimed at community heating, hospitals, apartment buildings, manufacturing etc. 50Kw heats a private home.
Don Wilson
Brule Point, N.S.
