Survey Says?

In a January 22nd post, we asked “Where will the price of 2×4 WSPF #2&Btr be closest to, per Random Lengths Print, on March 28th?
At that time, 2×4 print was $376/M. An overwhelming majority, over 80% of those who responded, anticipated that print would be significantly higher today. Print today sits at $354. At the same time, the Framing Lumber Composite Price has fallen from $403 to $378.

The Random Lengths Weekly Report dated January 24th begins: “The sharp fall in prices during the second quarter of 2013 continues to play a major role in traders’ buying decisions as 2014 gets under way.” While few could have foreseen the impasse in Q1 activity largely attributed to one of the coldest winters on record, the cautionary international outlook outlined by Random Lengths in that same issue, so far, seems prescient:

“North American and overseas traders will look to the U.S. as a key indicator of global prospects in 2014. North American suppliers gained price leverage in offshore markets (last year) as domestic buyers consumed larger volumes, tightening supplies available for export. This trend is most evident in Japan, with Western SPF J-Grade prices shattering records. Demand caught fire, especially in the first half, as builders scrambled to keep pace with a robust housing market. Meanwhile, Canadian producers shipped larger volumes to the U.S., forcing Japanese importers to match those returns.

Japan’s housing market is forecast to cool in 2014, partially because of a coming increase in the country’s consumption tax. The extent to which demand eases from 2013, and the success of government efforts to make the country’s wood products industry more self-sufficient, will determine demand for imported lumber this year.

Demand is expected to remain strong in China, but importers have intensified their search for alternative suppliers as prices of North American stock increase. Competition for Chinese market share will be fiercer than ever in 2014, which could hinder North American suppliers’ efforts to increase shipments.”

COFI Convention 2014

Next week’s COFI Annual Convention, in Kelowna this year, is coming up fast (April 2-3). The convention is described at the Council of Forest Industries website as “the largest gathering of the forest sector in Western Canada.” It will be a tall order indeed to match the star-studded lineup last year in Prince George, which I reviewed in three parts: Part 1, Part 2, Part 3.

While scrolling through the program for Kelowna, I booked my ticket upon seeing this group of panelists in Session #8:

  • Ron Gorman, President & CEO, Gorman Bros. Lumber Ltd.
  • Ted Seraphim, President & CEO, West Fraser Timber Co. Ltd.
  • Anne Giardini – President, Weyerhaeuser Company Ltd.

We’re told the group will engage in an open forum discussion tackling questions presented by the moderator and from the audience. Each will be asked to present their vision on where the industry is going and how they are positioning their companies to meet changing consumer demands and markets. One panelist is to discuss the issue in context of the Asian market, one to discuss it in light of American market considerations, and one to broach the topic from a B.C. viewpoint. It’s suggested that the discussion would include such things as “potential partnerships”. Stakeholders in all levels of the industry including sawmills and wholesale distributors will anticipate hearing what the panelists have to say with respect to “potential partnerships”. No doubt interested participants will be asking questions aimed at discerning their own role, adding value in the industry’s future.

 ~Bulldozers and Bullwhips~

“Bulldozers work because they are incredibly heavy. It’s fine that they’re slow, they’re powerful indeed.
Bullwhips work because they are incredibly fast. The superlight bit of leather at the end of the whip travels faster than the speed of sound, hence the crack.
Organizations often thrive because they have huge mass, they are irresistible forces, going where they are pointed. But they don’t get there quickly. On the other hand, it’s quite possible to make an impact by being fast, light and quite focused.
Important to not confuse which you’re using, though. Trying to make your bulldozer go faster might not work out so well. And you can’t build a road with a bullwhip.”

– Seth Godin, 3-22-14 (HT: @lumbertribe)

Auditorium, Prince George Civic Centre

Auditorium, Prince George Civic Centre

Magical Thinking

“We do find premiums and penalties associated with numbers that are thought to be lucky or unlucky in the Chinese culture,” says lead author Nicole Fortin, a professor at UBC’s Vancouver School of Economics, in this report at the Financial Post. According to the report, a recent study has uncovered significant differences in property values attributed to “magical thinking” in neighbourhoods with high concentrations of Chinese residents. Researchers discovered that in areas whose share of Chinese residents exceeded the metro average, houses with address numbers ending in ‘4’ were sold at a discount while those with numbers ending in ‘8’ were sold at a premium. We’re told that the number four is associated with death in Chinese culture, and the number eight with prosperity. Perhaps that explains why here in Vancouver, ‘eights’ are also a prerequisite of any new listing price (eg. $8,888,888).

Today almost 30% of Vancouver’s inhabitants are of Chinese heritage, representing one of the highest concentrations of ethnic Chinese residents in North America.  At the same time, in Vancouver’s most expensive, historic west side neighborhoods of Kerrisdale and Shaughnessy, predominant household language averages closer to 35% Chinese (Source). As reported here, analysis by the Conference Board of Canada says China’s influence on Vancouver’s housing market trumps domestic factors such as mortgage rates, employment, and population growth. However, anyone in search of hard data is often reminded that “unlike most countries, cities, and jurisdictions around the world, neither Metro Vancouver, British Columbia, nor Canadian government agencies keep public records on foreign ownership of real estate”. At least one immigration lawyer noted recently here that “within the last six months, if a west side Vancouver property sold in the $2 to $2.5 million range, the odds are strong that the purchaser was Asian”.

In accordance to a promise..

While we learned last week that China’s log inventories have doubled in Q1, turns out that country’s impressive inventory of planted trees is seemingly on the same trajectory. In fact The Vancouver Sun reports here that in the last five years, China has planted a staggering 13 million hectares of new forest – roughly the same area as Greece – or about four times the size of Vancouver Island. We’re told “China is committed to increasing forest cover to more than 23% of its territory, in accordance to a promise made at a United Nations climate change summit in 2009. That process, officials say, is currently 60% complete.”

Meanwhile here in B.C., 35 million hectares of forest were devastated by the Mountain Pine Beetle. A quick search of this blog’s archives confirms that of an estimated two million hectares that urgently need to be replanted, the government plan calls for just 400,000 hectares to be replanted over the next 20 years. In this Vancouver Sun report here, it’s suggested we simply don’t have the sufficient checks and balances in place here to ensure the long-term sustainability of our forest. “The province has cut back the ranks of professional foresters by more than a quarter in the past five years, which is reducing its ability to monitor logging and enforce forest practices,” we’re told.


“Forest Greens” – photo credit: ejh


The Huffington Post reports “when speakers take the stage at the TED Conference in Vancouver, they’re standing on an innovative and proudly B.C. piece of craftsmanship.The (community) stage for the sold-out conference, being held in Vancouver until March 21, was built by local architect Michael Green with donated B.C. wood from Interfor.” The stage was reportedly designed and built with a group of architecture students from UBC, BCIT, Kwantlen, and Emily Carr.

I placed a call this afternoon to Karen Brandt at Interfor, Director, Public Affairs & Corporate Communications for permission to post the following images. Photo credits: Basia Opiol and Michael Green.

Market Directions – Clear as Mud!

Conflicting forces at work in shaping lumber market forecasts continue to perplex:

  • A column today at The Globe and Mail makes for interesting reading. At the same time it does little to clear up the state of confusion dominating lumber markets of late: “Brutal winter weather straight out of a Charles Dickens novel has caused a sharp divergence in the price of lumber and home-builder stocks, making it difficult to discern the health of the U.S. housing market.” See How can home builders be surging while lumber tanks_ – The Globe and Mail
  • In the face of the Port Metro Vancouver strike, the ‘fractured’ supply chain might now be considered broken in two. Ken Shields, CEO of Conifex Timber Inc, reports lumber shipments will lag production by 20% in Q1. Full video of his informative interview on BNN this morning: Timber Tripped up by Truckers.
  • An acknowledged import shift in China amongst offshore traders, from lumber to logs, is backed by recent data: China’s log inventories have reportedly doubled in Q1 (from approx two million m3 in Dec 2013 to over four million m3 in March 2014 – HT Mark Kennedy, CIBC).


Reality Check report today suggests there are “growing doubts in the lumber market that U.S. housing starts will hit the widely forecast 1.1 million level for 2014 because construction has effectively been on hold since the start of the year.” While many of the talking points (transportation bottlenecks, stagnant prices, etc.) are familiar in the report, there are a couple of interesting outtakes:

  1. Bob Berg, lumber economist at RISI, suggests housing starts are actually in better shape than the latest data would suggest. The December data topped one million despite poor weather, and was revised up in February, says Berg. He argues that January’s data (909,000 starts) should not be taken as a true indication of demand because it is distorted by a seasonal adjustment factor that is designed for average winter conditions rather than the severe season that is now ending: “I think we have probably already broken the one million mark.”
  2. Shawn Church, editor at Random Lengths, submits that with more people moving into the cities and away from suburbs, long-term demand for lumber could be cut by an increase in the construction of multifamily homes at the expense of single-family homes. We’re told a typical multifamily unit uses only about one-third the amount of lumber as a typical single-family home. Church suggests that with multifamily construction taking an increasing share of overall housing starts, the closely watched annual rate takes on a different meaning for the lumber industry than it did a few years ago: “1.1 million units is not 100% akin to 1.1 million units five or six years ago.”

February U.S. starts data is scheduled to be released tomorrow morning.

Activity Postponed?

On a morning when many are digging out yet again from a snowstorm sweeping much of the Midwest and Northeast, we’re told here that once the U.S. finally does thaw out from this unusually long and harsh winter, some “spring economic surprises” could be in store. Count Andrew Grantham, CIBC World Markets among those economists anticipating a strong rebound from the icy impasse. “While we’re far from the first to blame the weather for Q1 weakness, our results point to a much more decisive rebound than the market has priced in,” he said in a note to clients. “As more seasonal temperatures return in Q2, and the economy catches up with postponed activity, the data flow will strengthen and second quarter growth could easily surpass consensus expectations.”

Some traders have described lumber markets this winter as “aggressively sideways”. This characterization of market activity brings increased focus to trading at wholesale distribution level, where the wholesalers’ function of interpreting market changes finds added value in prevailing ‘choppy’ conditions. Of note, when the first snowstorm arrived in early October, the Random Lengths Framing Lumber Composite Price was $383. Over five months later, in the Midweek Report dated March 11, the composite stands at $388.

Link to Daily Port Activity Updates:

Industry Trends

Discussion involving the future of B.C.’s forest industry acknowledges the need for all stakeholders to be engaged in management of our forests. In a recent interview, a couple of industry experts voiced their views on issues critical to the industry’s future prosperity. In answer to one of the questions, COFI Vice President Douglas Routledge cited four keys to B.C.’s forest industry remaining competitive:

  1. Timber supply certainty – “The Mountain Pine Beetle epidemic and the forecasted decline in the Annual Allowable Cut has made this a challenge.”
  2. Market diversification – “Both in terms of the customers we serve around the world, and in terms of the suite of forest products we produce.”
  3. Skilled labour – “We need to be positioned as the industry of choice for skilled workers.”
  4. Transportation infrastructure – “A modern transportation infrastructure that allows us to efficiently serve our customers around the world.”

Full Story (HT: R. Falletta)


“Forest Fascination” – Photo credit: ejh


In Chinese philosophy, the concept of yin-yang, which is often called yin and yang, is used to describe how seemingly opposite or contrary forces are interconnected and interdependent in the natural world; and, how they give rise to each other as they interrelate to one another.

In this year of the Horse, the usual supply/demand factors that shape lumber markets are seemingly in pause mode. But! Traders are casting a wary eye over the slow simmer that presently characterizes lumber market activity. In the face of a harsh winter, opposing tensions are brewing. Is the market “loading the slingshot” for a significant spring rally or, is the stage being set for a significant correction? Here at Dakeryn the trading floor weighs in with some arguments in support of either scenario.

Lumber prices will collapse this spring because:

  1. When lumber prices climb, global fibre supply increases, capping the price ascent
  2. Customers have been buying from sources outside B.C. Pent up demand is not what it seems.
  3. Sawmill output is increasing. There will be ample supply to meet demand.
  4. The recent tumble in U.S. housing starts and permits will continue. In a compressed building season, starts cannot catch up to projections (for a 20% increase over last year).
  5. The market has so far been propped up by lack of car supply. Lumber supply will overwhelm the market when rail cars return.
  6. Offshore demand will falter.


Lumber prices will erupt this spring because:

  1. The gradual recovery in the U.S. housing market will continue. Forest stock analysts forecast higher highs and higher lows in lumber prices through 2015 – the trend is your friend.
  2. Rail car supply will continue to squeeze shipments. April wood will not arrive until May. Look out.
  3. A major announcement concerning sawmill shutdown/curtailment due to dwindling fibre supply/fractured supply chain will ignite a feeding frenzy
  4. Hand-to-mouth buying patterns = lean field inventories; dealers and wholesale distributors are under-bought.
  5. A demand surge will see freight costs skyrocket.
  6. Offshore demand will shatter the record volumes of softwood lumber and log shipments achieved in 2013.


“Winter weather, late rail cars, high prices relative to the last 6 years, and accountants calling the shots on inventories have the market myopic and unable to look past tomorrow’s needs.”
– a Midwest lumber wholesaler this week.