Speaking of Nature

When the forces of nature speak, it’s often with dire consequences. The Nepal earthquake is a stark reminder. Lingering impact of the Northeast winter that was is contributing to skewed seasonal lumber market activity. While the Pacific Northwest basks in the charm of April showers, news of severe drought dominates news out of California. Media reports in these parts suggest that long-range plans to divert some of B.C.’s moisture to drought-stricken parts of the U.S. may resurface. Even so, scientists are cautioning that, while B.C. residents are known to keep an umbrella handy, we could be subject to drought crisis ourselves. In a recent CBC interview, watershed management professor Hans Schreier at UBC discussed these concerns, touching on the economic impact, including significance of water in delivering power.

“If B.C. were to experience a drought, one of the biggest issues Schreier foresees is power. He says California’s drop in water supply cost the state $1.4 billion in reduced hydro power, which they had to replace with greenhouse-gas emitting LNG.

About 18 to 19 per cent of California’s power comes from hydro; in B.C., it’s more like 90 per cent, according to Schreier.

It’s difficult for scientists like Schreier to foresee whether or not B.C. will have a water crisis similar to California’s. He says it’s easier to predict rising temperatures than precipitation.

‘If you look at our reservoirs, we have reasonable capacity if we have snow cover and if we get lots of rain,’ he says. ‘But that’s very hard to predict.’

Scientists are already predicting B.C.’s low snow pack could affect the salmon run this summer. And many local ski hills have been closed most of the winter because of lack of snow.”

And all this, even though some suggest it’s a tad early to begin talking summer wildfire threats in the woods.

Earth Day – 2015

It’s no secret. Celebrating care of the planet makes good economic sense. More than that, we’ve come to appreciate that it’s a matter of survival. The messaging beyond one-liners and slogans is finding roots with a new generation:

  • “A Good Planet is hard to find”
  • “Pollution is not a solution”
  • “Plant a Tree for me”
  • “There’s no Planet B”
  • “May the Forest be with you”

Even in down markets industry recognizes there is more that can and needs to be done. Could it be that in super-saturated lumber markets presently experienced the forest is begging to be left alone for a day or two? Happy Earth Day.

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Photo credit: ejh

New Perspectives

The Art of Marketing Conference promised to “provide a clearer understanding of how marketing has changed, what role marketing now plays in the buying decision, its impact on your business, and ultimately how the consumer views and interacts with your brand in a crowded marketplace.” Billed as Canada’s #1 Marketing and Innovation Conference, five internationally renowned bestselling authors – serious thought leaders – shared their cutting edge research and practical thinking yesterday at the Vancouver Convention Centre.

What a treat! I experienced a day of intense, new marketing insights, lending new perspective to even grinding lumber markets. While the day provided enough mental gymnastics for a thousand blog posts, here’s a handful of takeaways:

  • Dr. Robert Cialdini is an expert on the psychology of influence. He cited numerous case studies based on behavioural science to expand upon each of his Six Universal Principles of Social Influence: reciprocation, liking (identifying commonalities), commitment/consistency, scarcity (loss averse), authority (pointing to genuine expertise), and consensus (reducing uncertainty). The notion that “in the old world we compete to win – in the new world we collaborate to win” struck a chord.
  • Author Nir Eyal shared his Hook model to explain the (scary?) psychology behind what drives user/human behaviour and how apps are built to cater to those needs. Behaviour = motivation + ability + trigger. “What do you want the user to do?” asked Eyal. “The more difficult it is to understand the more difficult it is to do. Where’s the trigger? What’s in your user’s way?” And hey, “Just because it doesn’t cost anything doesn’t mean it’s free. There’s a reason they call it “paying attention’,” notes Eyal.
  • Time Magazine considers Martin Lindstrom one of the World’s 100 Most Influential People. “We have tons of data but no information,” lamented Lindstrom, while confirming 90% of all the information in the world today was created in the last two years. A self-described “observer”, his presentation included a rapid fire assortment of mostly probability studies in revealing his CLUE to building a brand (Culture, Local, Understand, Engage). Who knew having a lot of fridge magnets at home is a reflection of a strong imbalance in your life?! And thanks to all our electronic devices, “we’re rarely truly present” anymore.
  • Jackie Huba shared her customer loyalty lessons gleaned from Lady Gaga. She suggested companies put too much emphasis on finding new customers. Evidently it’s five times cheaper to keep a customer than to get a new one. And existing customers often find new customers. “Don’t underestimate the power of the one per cent,” advised Huba. The ‘one percenters’ are the advocates aka “highly-engaged superfans who drive word of mouth”. Do you know who your ‘one percenters’ are?” asked Huba. Companies should lead with values, build community, and generate something to talk about. “What is your company selling (beside products)?”
  • Chip Heath is a professor at the Stanford Graduate School of Business. He explained how better process leads to better and bolder decisions. Widen your options, reality-test your assumptions, attain some distance, and prepare to be wrong, advised Heath. “Adding distance” with added benefit of clarification through the 10/10/10 rule registered the most. Concluded Heath: “We’ll never be perfect (in our decision making) because the world is full of uncertainty – but we can do better.”
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Chip Heath, New York Times Bestselling Author of “Made to Stick”, “Switch”, and “Decisive” (Apr 15)

2015 COFI Convention – 25 Takeaways

  1. Most oft-used word at the convention: Certainty. Canfor CEO Don Kayne said China wants supply “certainty”. A member of the audience questioned how we provide that “certainty” to China in view of the Tsilhqot’in Supreme Court of Canada ruling. In another session, B.C.’s Chief Forester Dave Peterson said there’s been considerable “uncertainty” since 2000 regarding impact of the mountain pine beetle. “All these pieces of uncertainty are gone.. we’re past the point of doing math.. we know what it has done” (730 million cubic metres of timber killed). In his Forest Minister’s Address, Steve Thomson suggested working toward “certainty” on the provincial land base is a government priority.
  2. Second most oft-used word at the convention: Integrated. Integrated harvest regime, integrated forest bioeconomy etc. etc. “Bioproducts have the highest likelihood of success when integrated with existing primary timber conversion,” said Rod Albers, Manager Energy & Bio-Product Development at West Fraser. Lignin can be “re-integrated” into engineered wood products.
  3. You can make anything with lignin except money.
  4. Third most oft-used word at the convention: Partnerships. A key theme across all panelists.
  5. There’s a looming shortage of biomass in B.C. “We run out in 2023/2024/2025.” (Murray Hall Consulting)
  6. Dr. Trevor Stuthridge, Executive Vice-President FP Innovations confirmed the bioeconomy is the fastest growing economic sector in the world. The title of his presentation “Will Canada and B.C. play a role in the bioeconomy?” remains an open question.
  7. Torrefaction – the process of roasting and toasting – is not unique to Starbucks. Roasting wood into biocoal is now the 2nd generation of wood pellets (Jerry Ericsson, President of Diacarbon Energy Inc.)
  8. Dwindling fibre supply projections/forecasts/assumptions in the B.C. Interior are based on current management/conventional thinking. Are there ways that we can re-define current management?
  9. “More contraction” is a nice way of saying mills shutting down.
  10. “Biomass is everything that’s left over after everybody’s used everything they want” – Murray Hall Consulting. “There is no sawmill waste left – lets stop talking about it as an untapped source of bioeconomy growth.”
  11. Sandy Ferguson, VP Corporate Development at Conifex confirmed substantial work has been completed to resolve the equipment failure at the Conifex bioenergy plant in Mackenzie. Start-up date TBD.
  12. “Look out for China,” warned Brendan Lowney, Forest Economic Advisors. “I’m more nervous about China than I’ve been in many years,” added Russ Taylor, Wood Markets Group.
  13. “I can guarantee you 1.5 million U.S. housing starts but I can’t guarantee when” – Brendan Lowney
  14. “It’s impossible to forecast housing starts” – Russ Taylor
  15. Cost structure is changing in B.C. = rising log costs.
  16. Four shiploads of European lumber set sail for the East Coast in January. Changes in exporting countries FX resulted in 15% drop in SPF #2&Btr prices in China (Nov 2014-Feb 2015). There is reportedly now “little room for lower prices on Russian and European lumber,” according to Russ Taylor.
  17. Ecosystem-based management = balancing economic, environmental, and human well-being.
  18. Dallas Smith, President and CEO Nanwakolas Business Corp, and Nanwakolas Council, is one compelling speaker.
  19. The future of high-rise construction is wood. The proposed 18-storey wood-frame tower at UBC would be the tallest wooden building of its kind in the world.
  20. Oliver Lang, Partner at Lang Wilson Practice in Architecture, was the only speaker who addressed “urban culture” and the trend toward multi-family home construction in this urban context. While the moderator likened Lang’s presentation to “trying to drink water from a fire hose”, it was riveting. While wood is the sustainable, green building material, traditional single-family home construction is not the sustainable model of the future.
  21. “Minimizing waste created by our activity is a primary global environmental and social objective.” – Chief Forester Dave Peterson. “Given future sawlog supply reductions, it’s a very tricky balance point between the interests of existing and potential fibre users.”
  22. “There is no question we have fibre supply challenges.” – Mark Feldinger, Canfor
  23. China used more cement in the last three years than the U.S. did in the 20th century (FEA)
  24. Truck driver shortages are worsening. Only 12% of for-hire drivers are under the age of 30. Canada could experience a shortage of 25,000-33,000 for-hire drivers by 2020. (Matthew May, BST Transportation Group)
  25. This year’s CEO panel discussion featured Ted Seraphim, West Fraser and Don Kayne, Canfor. In a convention packed with punch, count this blogger among many who left that hurried luncheon session disappointed. The seated ‘fireside chat’ was void of any meaningful content beyond vague, shared “optimism” about the future.

Super Stuff

In 2010 and 2011, attendance at the NAWLA Vancouver Regional Meeting averaged 150. In 2012, there were 170 registered attendees. April 2nd marked the third consecutive year that attendance has blown past 200 in a packed Grand Ballroom at The Vancouver Club. During the evening networking session, many attendees remarked how much they enjoyed the diverse themes offered up by our professional presenters at the afternoon meeting: Bob Lenarduzzi (Vancouver Whitecaps FC), Peter Woodbridge and Kim Marshall (Woodbridge Associates), and Gavin Dew (Trans Mountain Expansion Project).

Of note, forest industry and wood product consultants Peter Woodbridge and Kim Marshall left attendees buzzing about their “Super-Saturated” chemistry analogy to describe present market conditions. According to Woodbridge Associates, there are seven factors fueling today’s over-supply of softwood lumber:

  1. China Lumber Supply, diverted to the U.S. market
  2. China/Asia Log Supply, diverted (in part) to the U.S. market
  3. Currency-Fueled SPF lumber (C$), muting the intended impacts of Softwood Lumber Agreement (SLA) supply management
  4. Currency-Fueled Euro Lumber (Eu) diverted from the MENA market
  5. Currency-Fueled Russian Logs/Lumber (RUB), selling into Asia/Europe
  6. Low Tax-Rated Canadian public timber, partially offsetting rapidly rising structural wood costs in many parts of Canada
  7. ‘Coming of Age’ of U.S. South Southern Yellow Pine industry, as dominant supply region and price setter. 87% of 2014 production growth = U.S. Mills.

Woodbridge suggested “Super-Saturated Supply” will continue to dominate lumber markets and ‘hold-down’ lumber prices this year. And while too early to declare a trend in critical Texas, they cited Q1 warning signals in lumber demand, ripple effects from the oil price collapse. Their in-depth analysis charting multi-family vs single family home building, particularly in the South, was eye-catching.

At the same time, Woodbridge cautioned that Super-Saturated Supply is temporary, confirming predicted lumber super cycle fundamentals are “alive and well”; super cycle timing has simply been “pushed forward”. Also of note, in Woodbridge’s view, the SLA will be renewed (October 2015), but with a ‘kicker’ in the form of a ‘re-calibration’ which will be priced into Canadian SPF from 2016 onwards.