Log exports from Russia have plummeted the past five years mainly because of the country’s implementation of a log export tariff of 25% in 2008. Despite having suffered a sharp decline in global market share, Russia is still the largest exporter of softwood logs in the world.

When Russia was accepted into the World Trade Organization (WTO) in December 2011, one of the requirements for the entry into the organization was that the country had to reduce export and import tariffs on forest products.

The not yet official proposal for the amendment of the Russian log export tariff system will lower the tariffs on softwood logs from 25% to 15% for pine logs, and to 13% for spruce logs, according to WRQ sources.

The B.C. lumber industry is predicting additional growth in 2012, making the current situation is difficult. Inventories of wood are piled up in China amid a weakening construction market there, greatly slowing demand for B.C. lumber.

Last December, traditionally the biggest sales month of the year, B.C. sold just $67 million in lumber to mainland China, according to Statistics Canada figures compiled by BC Stats. Sales were down 36% from a year earlier, and December was the second-slowest month of 2011.

Sales have fallen month by month since September of last year, a disappointing end to what was a record year in 2011. B.C. sold $1.07 billion of lumber to China, up 60% from $668 million in 2010 and more than triple sales two years ago.

Under the terms of the transaction, each issued and outstanding share of Temple-Inland common stock has been converted into the right to receive $32.00 in cash, without interest thereon, and less any applicable withholding taxes. Including the assumption of approximately $700 million in Temple-Inland net debt, the total transaction value is approximately $4.5 billion. As a result of the acquisition, Temple-Inland’s common stock will cease trading on the New York Stock Exchange today.

International Paper Chairman and CEO John Faraci said, “We are very pleased to have completed this compelling transaction. The combination of International Paper and Temple-Inland strengthens our North American packaging business and enhances our ability to generate cash flow while maintaining our strong balance sheet. We look forward to working with the employees of Temple-Inland as we successfully integrate our businesses and create an even stronger company with substantial benefits for our customers, employees and shareholders.”

Inland Region Manager Tom Insko said the Arden mill fits well in the region’s operations because it is ideally located and well equipped. “Given that the mill is geographically located near our Kettle Falls operations and is a well-designed, highly efficient facility, it’s a nice complement to our lumber business,” Insko commented.

Insko said Boise will initially operate the Arden sawmill on a single shift, and that its production will integrate well with Kettle Falls lumber output. “But in the longer term, the Arden mill offers us the flexibility to expand production as markets improve,” he added.

Insko also mentioned that Boise has hired the majority of the 52 employees that previously worked at the Arden mill. “We are pleased to have the experienced team with a history of industry-leading safety performance joining our organization,” he said.

“This is a very difficult decision,” Megan McMurray, owner of the mill, said in a statement. “We have a dedicated workforce, some who have been with Seattle-Snohomish Mill Co. Inc. for more than three decades.”

The collapse of the housing and construction industry was a major factor in the decision to close the Seattle-Snohomish Mill, McMurray said. Construction has slowed to a near standstill since the 2008 recession, reducing the demand for timber. For example, roughly 3,907 building permits were issued for unincorporated Snohomish County in 2006, but that number had fallen to 1,189 last year.

President and CEO of the Forest Products Association of Canada (FPAC), Avrim Lazar, says the softwood agreement provides stability and predictability in terms of getting access to Canada’s most important market, the United States.

“The industry is of the view that at a time of ongoing market uncertainty, it is a good idea to extend the deal by another two years to provide a degree of certainty in market access to the U.S.,” Lazar commented.

In a statement released the same day of the announcement, Lazar notes that Canadian forest companies have gone through an economically challenging time with mill closures and job losses in the face of the global recession and the changing marketplace. However, the sector has had significant success in diversifying their markets, especially in Asia. Wood exports to China have increased by 46 times since 2000 and the sector is now the largest Canadian exporting industry to both India and China.

The U.S. still accounts for about two-thirds of the exports of Canadian forest products.

Last year’s export sales to China, with December still to report, are already up 74% from 2010 and 200% from 2009. Sales to China, now with a value of more than $1 billion, make up about 29% of all B.C. lumber exports. Only the U.S., at 42% of exports, is a larger market.

When the province challenged the industry in 2008 to work collaboratively with government to increase export sales, B.C. was shipping about 700 million board feet of lumber to China. The three-way market development program between the province, federal government and industry targeting China and other growth markets for B.C. forest products is paying off. Since 2003, when the program started in China, B.C. sales have surged over 1,300% and more than tripled in the last two years.

While critics have suggested the approach wouldn’t work, the proof is in the numbers. The province is now taking this winning strategy for lumber and applying it to how we market and grow other sectors under ‘Canada Starts Here: The BC Jobs Plan’.

“Over the last decade, the return on investment has been obvious and staggering for our province, and we thank government for their founding presence and continued investment from 2003 to today. As we make the transition to wood frame construction in China, the potential for continued growth is tremendous,” commented Don Kayne, CEO of Canfor Corporation.

The SLA was originally signed by the U.S. and Canadian governments without modification, thereby continuing to give Canadian mills free access to the U.S. market unless softwood prices fall below a certain level, activating export charges and volume limitations.

While the extension seems to be welcomed by the Canadian and U.S. lumber industries, the U.S. Lumber Coalition warned Canadian sawmills to abide by the rules or it would lobby the U.S. government to take enforcement steps.

“The coalition will continue to work with the U.S. government to ensure that this agreement is enforced,” commented Steve Swanson, Coalition Chairman. “If Canada does not comply, then the U.S. government must continue to take appropriate enforcement steps to effectively address trade agreement violations by Canada.”

This development, which became a civil case, evolved from a criminal case that stemmed from a land-for-timber swap. Canal Wood had approached the Fish & Wildlife Service about trading some Canal Wood property adjacent FWS land. The government agency offered timber on the Refuge to pay for the Canal property.

According to a U.S. Dept. of Justice attorney, the FWS became concerned when Canal’s periodic settlement sheets seemed to grossly under-report and under-value the amount of timber Canal was removing from the tract that was to compensate for the Canal property deal. When the Canal forester inquired about accessing additional timber, the government forester then scoped out the timber removal and reported it had significantly exceeded the volume and value reported by Canal.

The government approached Canal Wood about the discrepancy and ultimately Canal Wood forester Markus Gaskins was found to have been “pulling tickets,” according to the attorney. He pled guilty in 2006 to timber theft and received a fine and probation. Canal Wood paid the FWS for the skimmed timber.

Plant Manager Chris Stirk described the upgraded, computerized saw equipment as an “optimized canter line,” which uses a computer to scan a log before cutting it. The scanner determines which direction the log should face, and the computer directs the mechanical rotator to turn the log to adjust for optimal recovery of usable wood. The new equipment will increase recovery by as much as 10% and is expected to pay for itself within two years.

With the upgraded equipment, Stimson will be able to produce the same volume of lumber, using fewer logs, with no jobs lost. Stirk described future upgrades planned for the Stimson mill, such as a computerized resaw and optimized edgers.

“I want the community to know that we’re not done investing in Tillamook County,” commented Stirk. “This is just the first step in becoming a state-of-the-art facility.”