2016 COFI Convention – 23 Takeaways

  1. Convention buzzwords: competitiveness, rationalize/rationalization, utilize/utilization
  2. “Rationalize” is a euphemism for fewer mills.
  3. In familiar staccato style, Minister of Forests, Lands and Natural Resource Operations, Honourable Steve Thomson’s talked about viewing the forest sector through various lenses. “We’re focused to make sure we have a competitive framework in British Columbia..”
  4. Speaking of competitiveness, the province is well-positioned owing to success in Asian markets. Fibre supply has historically been an advantage but is now under pressure. Delivered wood costs, tax environment, energy costs, and regulatory processes are disadvantages. – Jock Finlayson, Executive VP & Chief Policy Officer, BC Business Council
  5. Highly regarded, impressive newcomer to COFI leadership is CEO and President, Susan Yurkovich
  6. We are in the midst of a long period of strengthening lumber markets, however growth in 2016 will be disappointing. – Paul Jannke, Principal, Lumber, Forest Economic Advisors
  7. “One thing every investor wants is liquidity.” And no matter how manageable, “investors are not interested in material stocks with debt.” Among forest analysts, Daryl Swetlishoff, Senior Managing Director, Raymond James Ltd., Equity Research is a rock star. While noting the forest sector accounts for barely 1% of the TSX Index, Swetlishoff said “opportunities exist because the market is not very efficient.” Uncertainty surrounding the SLA is keeping forestry stocks on the tarmac.
  8. “Investors always ask about two things: the SLA and demand for lumber in China.” – Ted Seraphim, President & CEO, West Fraser
  9. At the 2014 COFI Convention, Ted Seraphim simply told us it was “all about capacity”. And last year, I was critical of the CEO Panel here. This year, the CEO Panel, which also included Duncan Davies, President & CEO Interfor Corporation, and Ron Gorman, President & CEO, Gorman Bros. was a convention highlight. Seraphim was candid throughout, opening up about safety worries, the challenges in accessing high quality cost-effective fibre, and the strive to achieve our potential.
  10. Person at the convention I would most like to have lunch with: Duncan Davies, CEO Interfor. In a refreshingly relaxed manner, he expertly explained all things SLA during the CEO Panel.
  11. I asked the CEO panel “How does the “Canadian Invasion” re. sawmill acquisitions in the U.S. South impact SLA negotiations?” The panel viewed the learning experience as a real positive. With an eye to negotiations, they all agreed it has brought better understanding. Historically, Canadian producers have not seen how the system functions in the U.S.
  12. The first tariff was placed on Canadian softwood lumber exports to the United States in 1872.
  13. U.S. mills are at a competitive advantage because fibre costs are lower in the U.S. than B.C.
  14. U.S. trade laws are designed to protect U.S. producers. Consumers have nothing to do with it.
  15. The U.S. views trade deals as bad deals; blame present economic pessimism on the U.S. election. If a problem seems very complicated, a significant segment of the population doesn’t want a complicated answer. – Bruce Anderson, Chairman, Abacus Data
  16. Changing context – viewing the world as a market – global, inter-connected market – relationships/polarization. Change is not a choice. “If you don’t like change, you better acquire a taste for it.” –  Bruce Anderson
  17. Wood is good. In 1997, public opinion in Canada of the forest sector was 1/3 negative, 1/3 positive, and 1/3 neutral (costs start to rise at 25% negative opinion). Today, only 20% negative, which is low for the sector. Positive perception explains why politicians are embracing the industry. – Bruce Anderson
  18. “Sustainability has gone mainstream” – Ken Shields, President & CEO, Conifex Timber Inc.
  19. Re: the industry rationalization period, “it’s hard to be seeking collaboration at the same time you’re all fighting for a piece of a smaller pie” – Ken Shields
  20. Interesting to learn from Diane Nicholls, Chief Forester that overall, actual cuts are falling short of the Annual Allowable Cut (AAC). In view of midterm timber supply constraints, it was curious to hear that finding ways to maximize cuts to the full extent allowed was a priority. (see Nbr. 21)
  21. “Most of the economically harvestable beetle-killed timber has been harvested.” – Tim Sheldan, Deputy Minister, Ministry of Forests, Lands and Resource Operations
  22. Premier Christy Clark was in full electioneering mode at the Community Leaders Luncheon. It was a friendly crowd, and her excitable keynote address drew a standing ovation.
  23. This was my fourth consecutive outstanding COFI Convention, the location having alternated annually between Kelowna and Prince George. A surprise announcement at the Friday luncheon confirmed the convention will be in Vancouver next year. While convenient for me, how this change influences attendees will be interesting to see. On my travels, and after listening to the mayors of Prince George, Williams Lake, and Cranbrook at the Community Leaders Breakfast session, the Interior and northern communities of this province don’t share the same love affair with Vancouver that Vancouver does these days. In the words of Walt Cobb, Mayor of Williams Lake, talking about Vancouver/Victoria on Friday morning, “They just don’t get it!”

2016-04-07 11.27.02 (1)

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