Continuing the bumpy road through 2020, Canada’s sawmill capacity utilization rates dropped again in October while those in the US remained relatively flat.
Compared to one-year-ago, for January – October 2020 softwood lumber production in the US improved further over the previous year, up another +2.7%, says the latest issue of the Western Wood Products Association’s monthly Lumber Track. In the first ten months of this year, US lumber production volumes were 30,643 mfbm compared to the same time in 2019 when it was 29,838 mfbm. Looking at the month of October against September 2020, US softwood lumber production increased by +7.3%, at 3,225 mfbm in October compared to 3,005 mfbm for September 2020. Last month’s update here: https://madisonsreport.com/2020/12/09/north-america-softwood-lumber-production-sawmill-capacity-utilization-wwpa-september-2020/ While still down, Canadian softwood lumber production for most of 2020 started to recover manufacturing volumes in the latter months of last year. After reaching terrible lows for a large part of 2020, softwood lumber production in Canada recovered further in October. Manufacturing volumes were down -6.2% for the first ten months of 2020, to 19,184 mfbm, compared to January – October 2019 when it was 20,450 mfbm. Reversing improvements of the previous month, comparing the month of October to September 2020, Canada softwood lumber production dropped slightly, down by -1.4%, at 2,099 mfbm for October 2020 compared to 2,129 mfbm in September.
For British Columbia alone, sawmill production volumes for year-to-date 2020 fell yet further, down by another -11.2% to 7,412 mfbm, compared to January – October 2019 when it was 7,412 mfbm.
North America Softwood Lumber Production, Sawmill Capacity Utilization, WWPA: October 2020
US sawmill production as per cent of practical capacity for January to October 2020 continued, at 85%, as it was the previous month and in the first ten months of 2019, said the Western Wood Products Association’s monthly Lumber Track. After improving from July to September Canadian sawmill production as per cent of practical capacity dropped back in October 2020, to 76% compared to September 2020 when it was 86% and compared to October 2019 when it was 79%.
After the New Year’s holiday, many log traders are worried about future market uncertainties, and many softwood prices have begun to rise recently at main Chinese timber markets.
Taking Shandong as an example, the current price of white pine logs is up by 20 yuan/cubic meter (US$3/m3), hemlock logs are up 20 yuan/cubic meter (US$3/m3), and radiata pine logs are up by 10 yuan/cubic meter (US$ 1.5/m3).
In the Chongqing market, the current price of 2m radiata pine logs rose by 60 yuan/m3 (US$9.2/m3), 3m radiata pine logs rose by 20 yuan/m3 (US$3/m3), 4m radiata pine rose by 40 yuan/m3 (US$6.2/m3), and white pine logs in Chongqing timber market rose by 20 yuan/m3 (US$3/m3).
The 3-meter radiata pine rose by RMB 20/cubic meter (US$3/m3) in Tianjin, Hebei.
The CFR price of New Zealand pine logs in China continues to rise. The price of Grade A logs has risen from USD 130 in early December to USD 138. In the past month, China’s softwood log inventories have fallen by about 14% to 3 million to 3.2 million cubic meters. The overall inventory level dropped by about 30% in two months. For the upcoming Chinese market in 2021, price increases are expected to be strong.
Global lumber supplier Northwest Hardwoods secured a Delaware bankruptcy judge’s approval last Wednesday to immediately put its Chapter 11 reorganization into effect, after a more than six-week sprint through the nearly $450 million debt restructuring.
The company entered Chapter 11 with what Judge Shannon said was effectively a prepackaged bankruptcy. Debtors had already lined up a restructuring that would shed about $270 million of the company’s debt, largely through a debt-for-equity swap with noteholders.
In a declaration filed in advance of the hearing, Northwest president and chairman Nathan Jeppson said that deferring the effective date “could detrimentally impact debtors’ relationships with customers, employees and vendors, and could negatively impact value for stakeholders across the enterprise, risks that are unnecessary given the unanimous support for the Plan by voting economic stakeholders.”
Equity ownership under the plan will shift to secured noteholders, who will receive proportional shares of 99% of the reorganized company’s equity and will also hold a new $110 million secured term loan in the reorganized company. The remaining 1% of equity will be distributed to prepetition equity holders.
A new, $100 million asset-based revolving credit loan agreement provided exit financing for the plan, secured by first lien on key collateral and a second lien covering the rest of the company’s assets.
Northwest blamed trade disputes with China and the COVID-19 pandemic for stunting its business and hampering its ability to service its secured debt. Northwest was largely owned by private equity Littlejohn & Co. LLC before filing for Chapter 11 .
The reorganized business was valued between $170 million and $210 million, with a midpoint of $190 million, compared with a prepetition book value of $357.3 million, according to court documents filed ahead of the confirmation.
Straight liquidation of the business would have yielded between $113 million and $162.5 million, with $99.1 million to $135.1 million subject to capture by secured lienholders. Secured noteholders would receive only 23 percent of their claims, compared with a 61 percent recovery under the plan.
Northwest operates from 20 mill locations in America’s West, the Appalachian region and the American North from Wisconsin to Maine, with three combination distribution and warehouse centers and 13 other leased warehouses.
The company reported at the start of the case that it serves 2,000 customers worldwide, providing a variety of domestic hardwood lumber, exotic hardwood lumber, hardwood plywood panel products, and other wood products.
The Japanese SoftBank has saved the US CLT manufacturer Katerra from bankruptcy with a cash injection of US $ 200 million. Now the Japanese investment house is the majority owner of Katerra.
The cross laminated timber (CLT) business in the USA is apparently not easy. As the industry platform Forest Economic Advisors (FEA) reports, citing the Wall Street Journal, the US pioneer for CLT narrowly missed bankruptcy.
It was prevented by an injection of US $ 200 million from the Japanese investment bank SoftBank. In Katerra’s own press release, SoftBank’s new investment is only praised as a measure of “strengthening financial strength”.
In return for its commitment, the Japanese money house receives a further 5% of the shares in Katerra and thus becomes the majority owner. SoftBank had previously invested more than US $ 2 billion in Katerra.
Swedish sawmiller AB Karl Hedin intends to build a new planing mill, extra storage capacity and further timber kiln drying facilities at its sawmill in Krylbo, Avesta.
The sawmiller, which operates four sawmills across Sweden and Estonia, says the expansion is needed due to increasing production rates.
“The planned expansion of the business area and the construction of a new adjusting plant and planing mill are important in order to be able to meet the market’s increased demands for further processing and to maintain a continued positive and long-term development of the business in Krylbo,” it said in a statement.
The Krylbo spruce-pine sawmill has an annual production of capacity of 215,000m3. Karl Hedin currently has around 1,000 employees and a turnover of over SEK4bn.
Its annual production is approximately 700,000m3, of which 180,000m3 consists of planed and processed wood products and approximately 78,000m3 is packaging products.