Top 15 Questions for 2015

As 2014 draws to a close, here are the Top 15 Questions that Harderblog will be watching in 2015, in search of answers:

1. Will the long-talked about ‘normalization’ of interest rates materialize in 2015?
2. Will Canadian household debt levels eclipse 170% of disposable income?
3. What role, if any, will social media play in lumber distribution?
4. Will $55 oil help or hinder housing starts next year?
5. Who will be the first lumber producer to establish a reload in Cuba? Or will a NAWLA distributor be there first?
6. Will the U.S. market demand for Cuban cigars outstrip demand for legalized marijuana in 2015?
7. Is information technology rendering lumber traders obsolete?
8. Will U.S. politics figure dominantly in lumber trade with Canada in 2015?
9. Will rail rates increase to offset any reduction in fuel surcharges?
10. How will the exponential growth in computer power impact our business in the next 12 months?
11. Is personal integrity in business considered to be less significant, more significant, or about the same as in the past?
12. Will security issues, including concerns over international terrorism, directly impact the lumber business?
13. Where will Interfor stock be priced in 12 months?
14. How many new members will be added to the Billion Board Foot Club next year?
15. Is climate change still mostly about ‘talk’?

……… I invite your comments, suggestions, and input!

Seasonal Security

The question, Virginia, is not whether or not there really is a Santa Claus.
Rather, is that much anticipated visitor really Saint Nick?
Security looms newly big in Santa’s lexicon.
These days no one navigates once friendly skies without clearing security
Not even reindeer!
But who is checking the passport, the ID of S. Clause & Company?
Are added crews of elves clearing parcels through X-rays, metal detectors?
Questions abound.
What truly causes Rudolph’s nose to glow?
Is that accentuated tummy fake?
Does the white bushy beard merely mask a motive sinister?
Do fireplace screens afford adequate screening against ersatz Santas?
Not to worry, Virginia.
In the heart that loves –
That feels loved –
A security system is effectively at work
Identifying the real thing.
We are not alone in searching out a Santa FOHC (Full of Heart Centre).
The Season brings its own promise of security.
Long before wars on terrorism, angels reassured even shepherds
“Fear not”
In the Silent Night – in the calm – there is illumination
That inclines the heart to reveal the true Spirit of Love.
It’s not so much a screening light as it is a leading light.
Seemingly distant, it leads still.
A Star is like that.

– Ernie Harder, Dec. 2002

Pipe Dream?

As year-end projections and valuations come into focus, strong views from the the Pulp, Paper and Woodworkers of Canada and the Wilderness Committee, published over the weekend in the Times Colonist:

“What B.C. needs is legislation that supports an innovative and adaptable forest industry that creates local jobs and moves products up the value chain. Raw-log exports must be banned. Strong laws should also be enacted to protect the ecological values of our working forests for future generations.

Instead of addressing our shortfall in sustainable forestry jobs, the B.C. government is narrow-mindedly fixated on the extraction and export of liquefied fracked gas. It is an unavoidable fact that B.C.’s proposed LNG industry would have to be fed by gas extracted using hydraulic fracturing, or ‘fracking.’

The impact of this industry is already visible all over the province’s former wilderness: In certain parts of B.C., the oil and gas industry clears more trees than the forest industry.”

Trees are the solution that LNG never will be – Times Colonist
(21 Dec.)

Q & A – the 2014 Edition

Of the Top Ten Questions for 2014 posed at Harderblog one year ago, some may have been satisfactorily answered for us; others, not so much.

1) Is there a real shortage of fibre supply looming?
B.C.’s Chief Forester Dave Peterson recently confirmed there will be less timber. “There’s no doubt we’re coming closer and closer to the point where the cuts will be reduced,” said Dave. Cuts are predicated by area, region, species, site conditions, and is specific to sawmills.. seemingly making any generalization regarding a fibre shortage not applicable. West Fraser CEO Ted Seraphim has publicly stated “The industry is smaller today and it’s going to be smaller tomorrow in British Columbia.”

2) Is B.C. doing enough to restore/replant forest that was degraded/destroyed by the Mountain Pine Beetle?
Earlier this week we turned to John Betts, Executive Director of the Western Silvicultural Contractors’ Association. “One of the best answers to that question comes from an internal Wildfire Management Branch discussion paper released recently describing the consequences of climate change and the current state of our forests,” says John. “We can expect widespread wildfires causing environmental losses and huge costs to government and the B.C. economy. Runaway wildfire years will not only upset provincial finances but cause major setbacks to landscape in terms of bio-diversity, abundance and services that influence the quality of air and water and life in general. The remedy to these consequences lies in restoring the landscape. But those mitigative restoration and reforestation strategies are not widespread in proportion to the scale of the threat. Nor are they consistently or adequately funded. I think we could do more to restore/replant forests. In fact we probably will have to in the future.”

3) Is the northern pipeline a relevant issue of interest to forestry in this province?
The real impact is still unknown. It would seem since many aspects of the northern pipeline are still up for negotiation, involving Federal politics,  First Nations negotiations.. many questions still unanswered.

4) Will Canadian Softwood lumber shipments to the United States be ‘duty-free’ for all twelve months in 2014?
Yes. In fact January 2015 will mark the 15th consecutive month that the “Prevailing Monthly Price” has remained above the $355/M tax trigger. The current 2006 Softwood Lumber Agreement expires October 12, 2015.

5) Is there a housing bubble developing in Canada?
CBC reports here “Both federal Finance Minister Joe Oliver and the governor of the Bank of Canada, Stephen Poloz, have acknowledged potential dangers. Poloz worried publicly last week that house prices could be overvalued. But when questioned in New York he said a 30% overvaluation was not a bubble.” While the normalization of interest rates is expected to have an impact, some still anticipate a ‘soft landing’. Meanwhile, vested interests peddle their skewed opinions to suit their own point of view.

6) Will U.S. housing starts reach 1.25 million in 2014?
No. November housing starts data indicates an annualized pace of 1.028 million for 2014. The monthly average through November is 991,000 (CIBC). Year-over-year, single family starts are up 4.4% and multifamily starts are up 16.6%  Severe winter weather saw housing starts down YOY in Q1 – but starts picked up in the 2nd half.

7) What does the emerging Super Cycle mean to lumber distributors in North America?
‘Super Cycle’ may still hold relevance in some pedalling circles, but as far as being part of B.C.’s forestry lexicon, it appears to have faded like lofty oil.

8) Who benefits from lumber and log exports to China?
The largest producers seem to be benefiting most from export growth. North American producers gain price leverage in offshore markets, enhancing the bottom line.

9) Is the gap likely to narrow between Luongo’s income in 2014 and the average lumber trader’s income?
No. Luongo is still being paid big bucks to play in front of Florida Panthers home crowds equivalent in numbers to most medium-sized office wholesale staff.

10)  Will West Fraser and Canfor ship enough wood to China in 2014 to renovate the Great Wall?
Through October, B.C. exports of softwood lumber to China were down 2.6% year-over-year (CIBC). In the month of October, B.C. exports to China were down 17% YOY (CIBC). As any homeowner knows, maintenance tends to be an ongoing process. And so it is with that big fence in China. In the face of China’s fibre deficit, the need for wood from “The Billion Board Foot Club” will be ongoing.

What do you think? Where do you agree/disagree? I welcome your input..

North Shore Neighbourhood House

The North Shore Neighbourhood House (NSNH) has served the North Shore community since 1939. A not-for-profit registered charity, The House “values and promotes cooperation, respect and empowerment through the provision of programs and services designed to meet the needs of individuals and the community as a whole.” Their support of the North Shore’s most vulnerable children, youth, families, and seniors is a year ’round endeavor. Over the weekend, our Dakeryn families had opportunity for sharing in Christmas food drives for both the NSNH and First United Church in Vancouver’s Downtown Eastside. It was a festive atmosphere when everyone joined in yesterday to put together 40 Christmas dinner hampers, with the ringing of jingle bells replacing the sound of phones that were not.

Low Energy Costs

We’re told that the impact of low energy costs is dramatic in its effect on the U.S. economy. Lumber traders are taking note of reports that suggest resultant U.S. economic tailwinds should give a boost to ‘trade’ winds for wood. While this may not be the kind of impact that the oil and gas industry is greeting with optimism, this link to an interesting summary at Bloomberg certainly lends context.

A Year of World Markets

The volume of softwood lumber traded around the world this year is on pace to to be the highest since 2007, according to the Wood Resource Quarterly (WRQ). A regional summary of the full report from WRQ is available at MarketWatch here. In the ebb and flow, perhaps not surprising that while softwood lumber prices in North America trended downward from a summer peak, the quarterly import volume in China bulged to the second highest on record.  It seems now that, while things are specific by region and mill in terms of both supply and/or demand, there is greater interconnectedness among variables that are at play. Increasingly, therefore, the impact of globalization is apparent in establishing market pricing across the board.

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Near Alexis Creek, B.C. photo credit: ejh