Lone Ranger

“Responding to a tip about possible ‘tree-poaching,’ RCMP Constable Cameron Kamiya and a fellow provincial investigator climbed up a steep, rugged trail, surrounded by a mix of new and old-growth forest and dense brush. Then they heard the unmistakable crash-thud of a felled tree. Two men near the scene at first claimed they were just hiking. But things didn’t add up. Who wears gumboots hiking? Moments later, two more men popped out of the bushes — one was covered head-to-toe in sawdust. They were busted.”
Full story in The Ottawa Citizen here.  My first post regarding the increasing frequency of tree poaching in B.C. here.

Log Ride

When a tree falls in Oregon, what happens in China?
That’s the intriguing question answered here at The World, when a senior resource manager from Plum Creek decides to follow his company’s log shipment right across the Pacific. The smog he encountered upon arriving in Beijing (“I could taste the air”) served to remind me of my own trips to Beijing back in ’04 and ’05. What he encountered from there, from hi-speed unloading at a monster port all the way to an 80-acre complex with 80 individual sawmills, is fascinating.

Pigging out?

There’s little debate going on over relative value of wholesalers’ contribution in creating and facilitating effective distribution of lumber. Perhaps the real value might never be fully appreciated, until that day when, or if, (horrors of horrors) a real shortage of lumber traders became evident.  This is the dire situation the National Pig Association has drawn to the world’s attention today, with an announcement that we are on the verge of a significant bacon shortage. It seems that a shortage of pork products is now “unavoidable”. Apparently there are fewer pigs at the trough. It is no longer cost efficient to raise pigs. Evidently this is a serious economic issue – no time to ham it up.
We acknowledge that there’s no underestimating the relative value that pigs bring to the table when it comes to serving up a good breakfast. While the chicken makes a significant contribution, let’s not forget it’s the pig that makes a real commitment.

Seasonal Reflections

A break from starts might ‘permit’ broader focus, to a time of year when the fall colours brighten even shortened days.  Images below are from Atlin, B.C. – “The Little Switzerland of the North” – where this time of year means, among other things, it’s time to check your snow tires. One of the quaintest and most colourful little towns, Atlin sits on the eastern shores of the largest natural lake in the province.

Closer to home in B.C.’s beautiful Okanagan Valley, as October approaches it means the Fall Wine Festival is near.  With over 165 events planned over ten days (Sept 28 – Oct 7),  it’s reportedly “the only festival in North America to happen at the heart of harvest.”  Must be something in the wine.

Got a seasonal image from your neck of the woods?  Send it to me, perhaps I can post it here..

Underlying Strength

Mark Kennedy is Executive Director, Forest Products Equity Research at CIBC World Markets.  Through this blog, I had the good fortune of connecting with Mark last spring. I always look forward to our occasional chats to learn more about the big picture in terms of forecasts, and the U.S. housing market in particular.  As the U.S. housing market continues to show signs of recovery, Mark notes forecasters are beginning to increase their housing start expectations in the United States. At CIBC, estimates are 900,000 starts in 2013 and 1.05 million in 2014.  Estimates elsewhere indicate 1.5 million starts in 2015.

While growth in U.S. lumber demand appears likely, sometimes I wonder whether U.S. housing starts in the years ahead will follow such a predictable trend higher. Volatility and uncertainty is the ‘new normal’ it seems.  With so many conflicting forces at play throughout the world, market sentiment is more erratic than ever. And all this at a time when industry is monitoring serious concerns about sustained fibre supply. When I questioned the pattern of projected housing starts during my chat with Mark yesterday, he pointed to a familiar string of positive housing market indicators – but also drew my attention to a bullish Reuters article suggesting accelerated jobs growth in manufacturing, spurred on by a surge in U.S. exports.

With evidence of an abundance of factors influencing supply and demand predicted to intersect at some point in the future, it’s interesting to contemplate the ‘when’ and ‘how’ – and magnitude – of what may unfold in our industry. For now, there’s little debate the underlying strength in lumber prices appears set to continue.

“Moisture means money”

While years of salvage-logging here in B.C. now find us somewhere past the peak of accessible beetle-killed wood, to the south, the effects of last year’s terrible drought and wildfires in East Texas have ignited yet another race to harvest before it’s too late. “East Texas, a 41-county region stretching from Red River County to the Gulf Coast, with 12.1 million acres of forestland, contributes more than two-thirds of the statewide industry’s production.”

Timber losses from wildfires alone in East Texas would have produced “enough lumber to build a 6-foot-tall privacy fence around the world 1.5 times.”  Drought losses, an “unfinished tally” are estimated at 500 million trees. Meanwhile, burned or drought-stricken trees are flooding the market, driving prices lower. “They’re trying to get something for their trees, and it’s flooded the mills,” District Forester Hays said. “It’s supply and demand, and right now with the building start numbers like they are, it’s hurting everybody.”

Full Story

Logging Indicators

“It is understood the company is willing to commit to rebuilding the Babine sawmill at a cost of approximately $100-million, but will only proceed if it believes it has a sufficient supply of wood fibre to feed the facility, which employed about 250 people before the explosion and fire. That supply of timber could come from an increase in the amount of forest land Hampton is allowed to log or from other existing forest licence holders in the area willing to provide fibre to the mill. As well, the provincial government could increase the region’s allowable annual cut and create new forestry licences that would drive a further expansion of logging near Burns Lake. For example, the government could loosen restrictions on the cutting of old-growth forest areas and reduce certain limitations on logging in other areas.”

Full Story

Letter to Hampton Affiliates outlining government’s commitments here

“A critical market”

“Without sales of 3 billion board feet of wood a year to China, we’d have considerably lower prices.”  Wayne Guthrie, Canfor (Bloomberg News 9/7)

The impact of global markets – supply/demand balances – on the local economy suggested in this quote no doubt explains our staying tuned to what’s happening around the world at the moment.

“A whole new ball game”

“The building spans 1.6 hectares alongside the Fraser River, and can store enough wood to fill 30,000 containers a year. That’s enough lumber and panelling products to make 90,000 new homes a year. Fed by a railway line, production from 10 of Tolko’s Interior mills is funneled to the site, where Tolko has easy access to containers that arrived full from China. Instead of going back empty, they are now going back loaded with B.C. wood.”

“Now we are seeing, with Tolko building a reload centre, confirmation that this is not a flash in the pan. This market is going to be part of the big picture going forward. Given the situation we have, in terms of the recovering U.S. market, and the prospects of a diminishing timber supply in the B.C. Interior, it is sure going to create an interesting dynamic in the future.”  – David Elstone, ERA Forest Products Research

Full Story