Sprucing up Old Spice

I forwarded K-Mart’s eye-catching ‘ship my pants free’ ad here to my dad, who suggested it’s all about raising eyebrows – before asking “What’s a few million hits on YouTube worth?” He then expanded upon a recent Old Spice announcement unveiling new brands of ‘manly scented’ bar soap:

Risking raised eyebrows? No problem. It’s raised grain lumbermen don’t like. Procter & Gamble’s new flavors of soap will come in Old Spice’s three most popular scents: “Fiji”, a “summery scent”, “Pure Sport,”  a “fresher, clean scent”, and “Swagger”, which is “slightly musky”. Notice all this target marketing is about smell. Lumber wholesalers know the smell test for new product line investment aims for return of ‘one hundred scents’ on the dollar. If P&G were to involve traders in testing future Old Spice new soaps, not only would they find them to be squeaky clean to begin with, it might raise the bar of soap to new heights as far as industry personal hygiene is concerned. As to scent that sells, how about “Cedar Shavings” to “Shiver your timbers”? They’d love it on the coast. “Got that raised grain feeling?” Consider a new line of “Old Growth” for a “High, Ho Sliver”, clear-cut option for sweet space on your face that overcomes stubble with a freshly dressed stud feel. Hey, P&G, your testers looking to sniff out potential of a good idea?  In olfactory expertise lumber wholesalers can usually tell if an offer smells, or, if it’s something else.  In the business of attracting customers, the Dakeryn traders would remember that bearded Movember experience fleshed out the limits of old growth appeal. A woody aura has potential for new product sales, not to mention its advantage over new car smell in attracting the ladies. How about ‘sprucing up’ Old Spice product line with “Debarker”, the linebar that restores puppy love. Add a little promotional poetry to stave off shrinkage claims with: “Plywood, Plywood on the wall, Who’s the fairest of them all?” Get over kiln-dried shrivel with “Pine”, the bedtime soap bar that brings lumber to your slumber. No wonder it’s been said that lumber wholesalers are more versatile than the Arabian horse. Expertise in appearance grade lumber means we naturally have a nose for this stuff. Shipping it free like K-Mart?  That’s for another post.  – Ernie Harder

“Temporary”

A real estate site called Property Abroad points to, among other things, the rising cost of construction in explaining the unexpected drop in U.S. homebuilder confidence in April. Perhaps more telling, the confidence survey also indicates the drop this month is regarded as “temporary”.
Many themes thoroughly explored at the recent COFI Convention and NAWLA Regional Meeting in Vancouver are evident in the article:

  • “The National Association of Home Builders (NAHB)/Wells Fargo index of builder confidence dropped to 42 from 44 in March, the lowest reading since October 2012 and the third monthly fall in a row. ‘Many builders are expressing frustration over being unable to respond to the rising demand for new homes due to difficulties in obtaining construction credit, overly restrictive mortgage lending rules and construction costs that are increasing at a faster pace than appraised values,’ according to Rick Judson, the group’s chairman.
  • The report showed builders grew more concerned over sales and buyer traffic. That indicates that demand has cooled along with the rest of the economy. Nevertheless demand remains high compared with recent figures and residential construction companies were more optimistic about the future than at any time in the last six years.
  • NAHB Chief Economist David Crowe said that ‘supply chains for building materials, developed lots and skilled workers will take some time to re-establish themselves following the recession, and in the meantime builders are feeling squeezed by higher costs and limited availability issues.’ Mr. Crowe went on to say, ‘builders’ outlook for the next six months has improved due to the low inventory of for sale homes, rock bottom mortgage rates and rising consumer confidence.’
  • Jeffrey Mezger, Chief Executive Officer of KB Home, a countrywide developer, said that although ‘the pace of the housing market recovery is gaining momentum, it is important to keep in mind that we are still in the early stages of the recovery, and there’s a long way to go before the industry reaches normalized activity levels.’”

Chaos is a Tool

As is tradition here, a team from the mighty Dakeryn joined almost 50,000 other runners yesterday in the 29th Annual Sun Run. It was one of those brisk but sunny Vancouver mornings. All that fresh air, with crystal clear views to snow-capped mountains, seemed to make the 10K race more invigorating than exhausting. Soon after the finish line, we all met for a great Italian lunch on Commercial Drive. While we dined, ominous dark clouds suddenly rolled in, which soon gave way to an intense downpour. Change in the weather. One couldn’t help but draw parallels to markets of late.

Last week I overheard a guy talking on BNN, the Business and Financial News Channel. Not sure who he was, but he said something which triggered a thought related to wholesale lumber trading. He said that in his business he thinks of volatility as a tool, not a risk… which is something analogous to how wholesale lumber traders make a living – by creatively interpreting market change to advantage. Of course it seems like these days the variables that contribute to market supply/demand are more intense and more international than ever. And more of these variables are at play at any given time – more chaotic, more rapid in impact. As a fellow lumber wholesaler told me in the midst of chaotic markets last week, “This business is not for the faint of heart!”

A Timely Presentation

Mark Kennedy is Executive Director, Forest Products Equity Research at CIBC World Markets (see Underlying Strength 9-21-12).
Mark’s presentation at the NAWLA Regional Meeting in Vancouver April 11 was entitled The U.S. Housing Market Recovery and Implications on Lumber Demand. His talk lent perspective amid turbulent and perplexing market signals. As one of three featured speakers at the meeting, he captivated a jam-packed Vancouver Club audience in delivering a reassuring message, suggesting that the optimistic outlook for the B.C. lumber industry is supported by strong economic data. With the use of visuals and charts, he effectively showed how the U.S. housing market is “on a slow road to recovery” – while noting that the biggest determination of future strength is U.S. jobs growth.

Mark offered the following conclusions re. U.S. housing:

  • It could still be three years before we get back to “normal”
  • Affordability is compelling
  • Pent-up demand is significant
  • Prices are modestly improving and modest is good
  • Housing starts will most likely see modest growth in 2013 and 2014 before accelerating in 2015
  • If jobs growth accelerates, the U.S. could actually see housing shortages in 2016
  • Jobs and credit availability could really kick housing demand into high gear.

It was intriguing to hear Mark describe 1.4 million U.S. housing starts as “the new 2 million” – explained by the fact that “the North American lumber industry does not have the same production supply capability for the U.S. housing market that it had in 2004-06.” Mark’s presentation certainly had ever-wary lumbermen feeling encouraged.

Excellent presentations were also delivered at the NAWLA Regional by The Honourable Pat Bell (B.C. Minister of Jobs, Tourism, and Innovation), and Don Demens (President, Western Forest Products).

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  • I was privileged to have the opportunity to listen to Mark elaborate on aspects of his presentation over dinner, along with other members of our NAWLA Organizing Committee
  • One particular visual Mark shared during his presentation really perked the attention of all in attendance. The Clock Work Progression Cycle was coined by Mark; his accompanying chart is posted below with permission. Click on the image for larger view.

The Clock Work Progression Cycle

Boston

There are no words that adequately express the horror of what transpired at the Boston Marathon Monday. We’re left to share sorrow at the senseless act of terror – trusting the perpetrators will be brought to justice. Some may wonder if the exhilaration that accompanies this iconic Boston event can ever be the same. Anyone who knows Boston can relate to what President Obama said Monday evening: “Boston is a tough and resilient town.” No doubt the marathon and everything it encompasses will be back.

Limit Up

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The Speakers: Hon. Pat Bell, Don Demens, Mark Kennedy

While turnout for the NAWLA Regional in Vancouver has grown in recent years (the last two years were sold out), the biggest crowds are normally reserved for long after the meeting has ended, at the evening social. What we witnessed at yesterday’s meeting was dramatically different than any year in recent memory. The 3:30 p.m. start of the meeting was delayed to almost 4:00 p.m. while a long line, snaking through the elegant halls of The Vancouver Club, patiently waited for the chance to get in. Perhaps a sign of trader optimism and healthier markets – and all-star speakers – it was standing room only in the packed UBC Room. Stay tuned for a full report on three excellent speeches: The Honourable Pat Bell (B.C. Minister of Jobs, Tourism, and Innovation), Don Demens (President, Western Forest Products), and Mark Kennedy (CIBC Forestry Analyst).

COFI Convention Report Part 3: Timber Supply

The session on Timber Supply featured three panelists who examined “how the value and security of B.C.’s changing fibre supply basket can be maximized for the benefit of industry, communities, and the province in a post-Mountain Pine Beetle world and in the context of global fibre supply trends.” Moderator Jim Girvan of MDT Ltd. introduced the three speakers:

Mark Feldinger, Sr. VP Forestry/Environment & Energy – Canfor
Mark’s presentation focused on maximizing value of the Interior fibre supply. With the MPB epidemic, U.S. housing market crash, and global recession, he suggested we are now emerging from quite possibly the five most difficult years in industry history. Where MPB -killed wood is concerned, he confirmed that we are now entering the end of the “salvage phase”. This shift means the challenge now is to maximize value from varied mixed stands/species with both dead and green components. Mark also drew attention to global supply chain challenges “from forest to customer” and the skilled labor shortage.

Gerry Thiessen, Mayor – District of Vanderhoof
My notes tell me that Gerry likened the province’s outdated forest inventory to “a 20 year old vehicle that gets you to and from work but that’s about it”. His greatest concern in his community is the threat posed by forest fires. “The fires are coming – what will the response be?” Short of those notes, I put my pen down early in his passionate presentation because I simply wanted to listen. Gerry’s talk offered the single biggest takeaway for me from this convention in terms of broadening one’s understanding and thinking. He emphasized that the ongoing challenges in a small northern town like Vanderhoof are concerned especially with building community, attracting and keeping skilled labour, while enhancing the well-being of families who choose to live there. It’s evident that seemingly small decisions made by government in Victoria can have big impacts elsewhere in the province. Government initiatives are often not necessarily congruent with the needs of smaller towns in the north.

Dave Petersen , Chief Forester and ADM – Province of B.C.
Who better to turn to for an accurate and up to minute picture of timber supply than the Chief Forester? Dave hit us with ‘the numbers’ right out of the gate:

  • B.C. Forest = 17.372 billion cubic metres
  • 4.5 billion cubic metres is bio mass
  • 4.6 billion cubic metres saw log supply in the timber harvesting land base
  • 8 billion cubic metres is outside timber harvesting land base (“marginally economic”)
  • 53% of pine in B.C. has been attacked by the Mountain Pine Beetle
  • 723 million cubic metres killed on the timber land base
  • 400 million cubic metres killed in parks
  • rate of attack has been falling steadily since 2004 (peak year)
  • end of the MPB infestation estimated in the year 2020
  • by 2020, 58% of pine in the province will have been killed (impact less than earlier feared).

Dave also touched on carbon sequestration before confirming the greatest risk where future timber supply is concerned is climate change. He suggested that “adapting to that change in climate” is the most pressing priority in resource management. I had a chance to speak with Dave one-on-one at the “Networking Reception” Thursday evening. I was appreciative of how much time he made for me. Perhaps an obvious answer to others, I asked why only 5% more pine in total will be attacked by the end of the MPB infestation in 2020. He explained that the “easy” stands of pine, in the Quesnel region for example, rapidly reached the point of total saturation from the MPB. Stands still vulnerable to attack are more mixed and scattered, separated by valleys etc. He said that he first encountered the MPB in the 1980’s – twice – in each instance they were wiped out in 30 below temperatures. He also touched upon the evolving story of the beetle in Cypress Hills, Alberta. Finally, in repeating a question CBC Radio asked me last fall, I asked him if it was just “bad luck” now that global demand appeared to be recovering at a time when we are now past the peak of salvageable beetle killed timber. He agreed it was unlucky that B.C. timber supply is constrained at a time demand is returning in the U.S. but noted that in my role as a lumber trader perhaps that might be viewed as good luck, reflected in rising prices.

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This concludes my three-part report on the 2013 COFI Convention. The opportunity to attend this informative convention reaffirmed that at Dakeryn Industries we recognize the importance of staying connected to industry developments critical to interpreting market dynamics.

Updated 4-24-13: all speaker presentations are available for download via COFI here.