Halloween trick or tweets..

Lumber markets can be scary. So Halloween presents nothing unusual for lumber traders around here. We’re pretty much conditioned against fright. But on this day, as the little goblins get set for fun, some guys tell us they’re ready to join into the “spirits” of things. Eat drink and be scary. But that’s not really where it’s at. In fact we’ve long ago laid to rest the ghosts of lumber markets past.
Now it’s true that some traders have been known to masquerade as market experts year ‘round, so why should Halloween be any different? It’s been said there is nothing that gives more assurance than a mask. But on this evening, we look forward to joining our little ones in fun – maybe tuck a candy bar into the pocket – and carve a thousand smiles into that pumpkin.

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Relative Performance

“If you are building anything with lumber on planet earth, things got 10% more expensive this month. This seems unsurprising to us as the former brakes that were jammed on the housing market prior to the mid-September Federal Reserve meeting have been swapped out for a gas pedal with a brick strapped to it for good measure.” Full Story here at EconoMonitor.com.


Image Source: EconoMonitor.com

Relative Strength

The Relative Strength Index (RSI) is defined at Investopedia as “a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.” Ranging from 0 to 100, an asset is deemed to be overbought once the RSI approaches the 70 level, and oversold if it approaches 30. In Lumber prices limber up for bull run, The Financial Times told us yesterday that the 14-day RSI for lumber is about 66, suggesting “the latest rally is not particularly overstretched.”

Likely of greater interest to lumber traders in the same report: “Over the past ten years, November has been the most bullish month, with lumber gaining an average of 7.9 per cent – though that does include the 31.7 per cent pop off the 2009 lows.”

This year, could this 7.9% average price gain be offset by a 5% reduction in the export tax (to zero) next month? Some might consider that wishful thinking. Heightened caution in the marketplace in recent weeks, in anticipation of a correction next month, may have fueled the fire. With November just days away, we’re told traders now “fret that low inventories will be further denuded by the closure of some Canadian mills.”

“No Warning”

The news reportedly came as a shock to the town of Houston, whose population is just over 3,000. “There was no warning at all,” said Houston Mayor Bill Holmberg. “Everybody’s aware of the pine beetle and reduction in timber that was going to come because of that. But I don’t think anyone expected it quite this fast, even though we knew sooner or later mills were going to have to close because there just isn’t the volume of wood.” The full story from Global News BC is just one of a flurry of reports popping up online this evening concerning the sudden announcement that two sawmills among ‘the majors’ – West Fraser in Houston and Canfor in Quesnel – will close. The impact of the closures in these rural communities will be felt most of all by 434 employees and their families. “Rural economies are rapidly changing” we’re told.

Game Changer?
Short term timber supply constraints in the Interior are clearly intensifying. Salvage logging of MPB wood is in decline. In the years following the 2008 U.S. subprime mortgage crisis, large volumes of surplus production sold offshore provided underlying support for domestic prices. It seems evident this September and October however, that stronger demand for lumber across North America, bolstered by a resurgent U.S. housing market, is the leading factor behind unseasonably high prices.

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Lookin’ good! NAWLA Traders Market, Las Vegas 10-24

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“Sainas in Vegas” 10-25

Fibre Play

As lumber traders across North America land in Las Vegas this afternoon for the 2013 NAWLA Traders Market, there’s plenty of industry news to peruse. For starters, while the majority of B.C. lumber exported to China continues to be low-grade, The Vancouver Sun confirms here today that there has been a 12% year-over-year increase in higher grade shipments for wood-frame construction. “Efforts by B.C. to introduce wood-frame construction – including the use of roof-building systems and infill and exterior walls in apartment construction – are beginning to gain wider acceptance.”

In the same paper, another report here reveals that China’s interior is an untapped market for B.C. lumber. “In the interior you have what the Chinese refer to as small cities of 10 million people where there is virtually no Canadian lumber yet,” explains Wayne Guthrie, Senior VP of Sales at Canfor. “We view that as a huge opportunity over the next five years.” Forbes tells us that the Chinese government is pouring money into interior infrastructure, which bodes well for B.C. “Yes, there is Russian lumber, but it is coming a long way to get to central China,” adds Guthrie.

Speaking of Russia, an explosive report here at NPR leads us to an undercover investigation some might find worthy of 3-D glasses in an IMAX Theatre one day (see video below). With long term projections of scarcity for wood fibre in mind, the growing frequency of these disturbing stories surrounding exploitation of the world forest is apparent.

Peak Foliage

Much has been written about “peak lumber” (try typing super cycle in the search bar at top right corner of this blog).
But have you heard about “peak foliage”? It’s reportedly big business this time of year, attracting tourists from around the world to prime color regions like New England, Michigan, and Wisconsin. Fall foliage hotlines and extensive reports from the U.S. Forest Service even help improve the odds for serious leaf peepers in the crap shoot known as prognosticating peak foliage (it’s said that “one person’s peak is another person’s near miss”). The U.S. Forest Service tells us here that three factors influence the timing of autumn leaf color: leaf pigments, length of night, and weather.

NBC News recently listed the 11 best places to see fall colors: Vermont, New York, Canada :-), Colorado, West Virginia, Tennessee, Missouri, Wisconsin, Texas, Oregon, and California. While most all of my customer trips to the Northeast U.S. have been in summer and winter, I was fortunate to catch the earliest pockets of brilliant colors one September, on a long rolling drive through Upstate New York. What a glorious sight.

North of the border, Eastern Canada rightfully “gets all the credit when it comes to exploring the fall colors”. Still, this site offers eight places to enjoy autumn’s beauty in and around the Lower Mainland.
Early last evening, I captured the images below at the end of my foggy street in downtown Vancouver. Has your neighborhood reached peak foliage? Wherever you live, I invite you to send me your colorful autumn photos for sharing. Update: Images added at bottom from the Lake George Region, Adirondack Mountains, NY (with thanks to J. Miller). Update: image at bottom of post added – UBC 10-23-13 (Photo Credit: A. Harder)


On Exports and Limits

Softwood lumber exports from B.C. to China this year are on pace to surpass the high water mark established in 2011 (CA$1.1 billion or US $1.07 billion). WantChinaTimes.com reports here that B.C. softwood lumber exports to China through Q3 were CA$760 million (US$735.8 million), a 27% increase over the same period last year. Perhaps more surprisingly, it’s reported that B.C. holds a 53% share of the entire softwood lumber market in China. That impressive stat confirmed by Steve Thomson, B.C. minister of Forests, who was interviewed at the airport Wednesday prior to embarking on the latest provincial trade mission to China and Japan. Added Thomson: “We’re not going to see the continued exponential growth that we’ve had in building the market, but we feel there’s great opportunity particularly in mid-rise, residential construction to build value for the industry. I think the market is going to continue to grow. China is still on a very significant urbanization, so we’re going to continue to see growth in the market there.”


  • “Why is futures up limit?” With reports of at least one wholesaler filling his shorts yesterday, that was the question, after traders awoke to their screens locked green. Sleepy cash markets caught fire. “In this low Open Interest, illiquid environment, you can sneeze and it’s up and away,” explained Jamie Greenough, Commodity Futures Representative at Global Securities Corp. “Someone looking to sell 100 contracts might just as quickly take things down limit.”
  • “Our business model is simple. Find a way to give our customers what they need, when they need it, at a competitive price.” Check out the whole President’s Message – and more – at the flashy new Dakeryn site here.

“River Logs” – Fraser River, B.C. Photo Credit: ejharder

China Effect?

I read with interest an October 8th post at stockhouse.com here. In stark contrast to Q2’s “earnings beat parade”, it’s reported that at least one stock analyst expects lumber company earnings to underwhelm in Q3. Pointing to the resistance evident in China to current prices, we’re told that lumber supply could be backing up in North America. The expectation, according to the article, is that “lagging pricing on offshore lumber shipments will result in negative earnings revisions and earnings misses”. B.C. stumpage rate increases and the U.S. export tax are also cited as contributing factors to the weaker outlook.

Earlier today I asked Mark Kennedy at CIBC for his take on the “China Effect”. Mark tempered the negative outlook in the article, arguing “the bigger question is what will demand in China be in 2014?” He said that shipments offshore are projected to at least match, and perhaps even surpass, 2013. In the face of the surprising surge in China’s forest products imports earlier this summer, that’s saying something.

Closer to home, Mark anticipates the gradual improvement in the U.S. housing market will continue, leading to a strong North American lumber market through 2015. He cautioned that short term, the current U.S. government shutdown could begin to take a bite out of U.S. housing market activity.

Updated 10/15:

China Forest Products Import Data Released for September (CIBC)

Lumber – In September 2013 China imported 2,200,000 m3 of lumber at an average cost of $279 per m3. Lumber imports are up 31.7% compared to Sept. 2012 when they were 1,670,000 m3. YTD lumber imports are 17.540 million m3 compared to 15.260 million m3 in the prior period (up 14.9%).

Logs – In September 2013 China imported 4,270,000 m3 of logs at an average price of $204 per m3. Log imports are up 30.2% compared to Sept. 2012 when they were 3,280,000 m3. YTD log imports are 33.260 million m3 compared to 28.570 million m3 in the prior period (up 16.4%).


Back behind the desk today after a wonderful week in Palmilla, near San José del Cabo, Mexico.. where clouds in the sky proved to be as scarce as trucks for Midwest lumber deliveries. Our almost two, and soon to be four-year-old daughters blossomed in the warm crystal waters – what memories – they even ‘encountered’ dolphins! In fact we were quickly reminded just how magical a time it was, when precisely upon touching down back in Vancouver, the clock seemingly struck the last note of midnight for our little angels. Yes, if you happened to be one of thousands in the Customs and Immigration line-up at the airport Saturday evening, that suddenly exhausted-looking couple attempting to mitigate simultaneous toddler meltdowns (while waving off security officers) was my wife and me. Perhaps it’s no coincidence I found myself at the Dakeryn office half an hour earlier than usual this morning..


Few would deny that gratitude is one of the finest attributes in humankind – and also the rarest. As Canadians celebrate Thanksgiving today, there is much to be thankful for.. unless you’re a turkey. Happy Thanksgiving, eh!

“Although nearly all Canadian holidays are the same as the American ones, Canadian Thanksgiving is held a month early since Canadians don’t have so much to be thankful for. The Canadian Fourth of July falls on the first of July, so that Canadians have a couple of extra days to get ready for the tourists. But whatever the season, American visitors are as welcome as the flowers in June.”
– Jack McIver, journalist and contributor to National Lampoon, writing in The Canadian, 29 Dec 1973

On Resets and Reinventions..

The season brings new beginnings. If you’re talking hockey, around here the Vancouver Canucks refer to the beginning of their season tomorrow under new head coach John Tortorella as a “reset”. At the same time, forest industry interests call their beginnings under new COFI President and CEO James Gorman a “redesign and re-invention” to keep pace with demands of an industry in transition. The Prince George Citizen reports that Gorman, previously a deputy minister in both the Education and Advanced Education ministries, earned the position over a number of industry-connected candidates. Says Nick Arkle, chair of the COFI board,”We’ve got an industry coming out of the worst recession it has ever seen. It is redesigning and reinventing itself. Maybe it’s time to re-engineer our own organization. The timing was perfect.” Adds reporter Frank Peebles, in the full story here: “With the Canada/U.S. Softwood Lumber Agreement up for renewal soon, harvesting tenure models to reform, a looming labour shortage, Asian markets to maintain and grow, emerging uses for wood from energy pellets to microscopic wood-plastics research leading towards a new set of forestry products, technological advancement in sawmilling, and the short-term timber supply numbers to crunch in the aftermath of the Mountain Pine Beetle, Gorman has plenty of issues to haggle over with any number of mayors and ministers.”
Going forward, COFI confirms above-all, short-term timber supply is the priority.. with tenure reform an attached secondary issue.


– The Williams Lake Tribune reports here that the forestry blockade in the Chilcotin by First Nations has been lifted, allowing Tolko and West Fraser to continue their work. It seems the blockade was lifted probably mostly in deference to moose hunters, leaving only the moose unhappy.
Updated 10/3/13: Link to video clip of Mark Kennedy, CIBC Forest Products Analyst, on BNN this morning here.
Harderblog will be off on vacation break through October 13th. Olé !

“October is the loveliest Canadian month. For some time frosts have been stealing down at night from the north and forcing that sad crisis in the woods – the death of the leaves. Nothing in nature is more memorable than the transformation which then takes place. The funeral rites of the Canadian trees are celebrated with pageantry of startling gorgeousness. Gradually the dark, sultry green of the summer foliage is changed into many lighter, gayer, more vivid hues. Each day the wonder grows until in the first half of October it reaches its climax.”
– Malcolm MacDonald, British High Commissioner to Ottawa (1947) 


Butchart Gardens, Vancouver Island