Morice Land and Resource Management Plan

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Conclusion

In 1999, BC generated 90 percent of its electricity from hydro resources with the remainder split between wood, wood waste and natural gas. Due to the limited prospects for developing new large scale hydro projects, incremental growth in generation capacity is expected to be natural gas-fired, but developers are examining other options including run-of-the-river, small hydro plants (less than 10 MW) and wind. Including wind and wood waste projects, “green” options could account for 10 to 20 percent of BC’s incremental generation over the next several years.

The potential development of cogeneration in the region is likely only a matter of time. There is an extensive amount of competition lined up for BC Hydro’s customer based generation call for proposals process, but the pressing environmental issues and the impending burner phase out will have to be addressed eventually. The one possible development that may change the local economics of cogeneration is an alternative use or uses for wood waste, sawdust and chips.

Recommendations to the LRMP Table

Recommendation – Timber harvest levels should not be decreased below that which would produce the 305,000 oven-dried tonnes of wood waste necessary to operate a cogeneration facility. Current levels of harvest are more than adequate to operate such a facility.
Recommendation – Access should be maintained to logged areas containing a high volume of wood waste, until such time as that volume can be extracted.

Establishment of a Medium Density Fibreboard Operation

Overview

Medium density fibreboard (MDF^⁶) is a non-structural panel made of wood fibres bound together with adhesives under heat and pressure. Mill residues and chips are the common feed stocks in existing fibreboard plants. Wood is mechanically refined, and the panels are manufactured using a dry blowline process.

DF has a substantially homogeneous consistency resulting from the uniform distribution of the wood fibres throughout the board. Different characteristics can be produced to meet end use requirements. Smooth and solid edges can be easily machined and finished, and the uniform surface provides an excellent substrate for painting or applying decorative overlays.
This advantage has secured MDF’s solid position in the furniture market. It has been successfully used in shelves, flush doors, television cabinets, wrapped mouldings, cupboards, drawer fronts, table tops, pool tables, office furniture, plaques and shields, game boards, toys, picture frames, mirror surroundings, pedestals for tables, bedroom furniture and bathroom accessories. Thick MDF is penetrating markets for millwork applications such as doorframes, window frames, windowsills, stiles, casings and turnings, as a substitute for solid wood.

Opportunity Analysis

The MDF sector in North America is relatively new. The first plant was started in New York in 1966. In Canada, MDF production is even newer with the first mills built in the 1980s when two facilities were established in Alberta. However, most capacity has come on stream only since the mid 1990s. By 2001, there were 28 MDF mills in North America, 10 of which were in Canada. One of these is located in BC at Quesnel (West Fraser 1996).

Market Analysis

Historical Market Trends^⁷

For North American MDF, production growth rates over the last 20 years have yielded an impressive average annual rate of 18 per cent. From the less than 0.4 million m3 in 1974 when there were only nine MDF mills, production capacity had climbed to over five million cubic metres annually by the late 1990’s. As seen in Figure 3, the number of plants and production capacity grew in step until the mid 1990s when plant sizes began to increase.

also shows that 1980s capacity utilization was well below sustainable levels. As product substitution and demand for MDF climbed product existing producers were able to meet demand - this explains why only three plants were constructed between 1982 and 1992. When capacity utilization peaked in 1995 at 99 per cent, there was another rush to build mills, with 14 coming on stream during the six-year period ending in 1998. Again, this created excess capacity and it has only been in the last two years that North American capacity utilization has climbed back to profitable levels.
In the 1980’s and 90’s, imported MDF supplied, on average, only three to five per cent of total North American domestic usage of MDF in any particular year.

Figure 3: North American MDF Capacity and Capacity Utilization – 1978 to 1998

NA MDF Plants and Production

NA MDF Capacity Utilization

Source: Spelter.

Current Trends

By 2003, the capacity glut that plagued the industry in the late 1990s had been worked off, resulting in improved operating rates and favourable prices. During that time, consumption almost doubled while shipments rose 60 per cent. Import and export activity remain a small part of total consumption (Table 8).

In recent years, imports have surged, with Canada's market share of US imports dropping despite large increases in its exports south of the border. New suppliers of MDF include Germany, Chile and New Zealand. Imports now comprise approximately one quarter of consumption, although increasing exports to offshore markets has offset this. Exports of Canadian MDF are almost totally to the US.

Table 8. North American MDF Activity Measures – 1997-2003, million square feet*

	1997	1998	1999	2000	2001	2002	2003
Shipments	1,718	1,889	2,217	2,223	2,401	2,577	2,732
Exports	260	315	420	430	498	524	540
Imports	198	311	563	600	748	655	672
Consumption	1,654	1,885	2,360	2,392	2,650	2,708	2,864

* 1 m3 converts to approximately 567 square feet (3/4”).
There are now 28 mills in North America. New investments in facilities are again expected - by 2006, total North American output of MDF is expected to reach 5.7 million m3 (Taylor and Associates, 2002).

Market Demand and Price Trend

As MDF came onto the non-structural panel market in the 1990s there was a significant amount of substitution for lumber and particleboard, mostly in furniture, cabinetry, millwork, flooring and mouldings. Although further substitution can be expected if prices remain competitive, the bulk of demand growth has already occurred.

End use demand is five per cent residential, six per cent repair and remodelling, 89 per cent industrial. Exports of Canadian MDF are expected to peak at about 0.7 million m3 by mid-decade and then decline slightly thereafter. Canadian industrial markets will pick up the slack, showing more consistent yearly growth and will surpass export demand in 2008.
Figure 4: MDF Prices, $US/Msf – 2000 to 2004*

* forecast

Source: RE Taylor and Associates, April 2002.
After years of excess capacity, which held prices down, 2001 was the first year that prices moved off the floor. They since dipped, however, but are expected to trend back up in 2004(Figure 4). Prices are buoyant considering the approximately $100 premium MDF enjoys over particleboard.

Future Market Trends

While growth in overall demand for MDF through to 2012 will average almost 10 per cent annually, the rapid growth in production experienced in the mid to late 1990s will not continue. Average annual rates are gradually declining, from more than 30 per cent between 1996 and 2000, to an expected 10 per cent from 2000 to 2005 and a projected two percent or less from 2005 to 2010.

Capacity growth is expected to move up toward production and demand levels and again having a positive impact on operating rates and prices. As Canadian plants again approach the 90 per cent utilization level and prices peak in 2004, some new projects might be expected. There is talk of MDF capacity additions in Alberta, but not BC. Canadian producers are aggressively targeting the US market and have had success, but currency exchange rates and competition from Asia and Europe will continue to compete heavily for market share.