To Everything a Season

To everything there is a season. A time to laugh a time to cry. Seasons of elections are not a time to negotiate trade agreements. So, it might be the time to cry as we read more reports of fading hopes for a Softwood Lumber Agreement (SLA 5) to be reached.

In their May 16th Industry Update, CIBC World Markets projects, “At some point (maybe late June/July), negotiations will simply cease due to the upcoming U.S. elections. Such a freeze is unlikely to be lifted until a new U.S. president takes office and even then, potentially only after a new U.S. trade representative is confirmed by Congress (maybe March/April 2017). With the window for reaching a deal closing, we expect the U.S. industry will petition for a trade case in five months when the standstill on litigation ends on October 12, 2016, after which Canadian producers could then get hit with 25%-30% preliminary duties as early as February/March 2017.”

In today’s Vancouver Sun, Vaughn Palmer reports Americans prefer a quota on Canadian softwood imports to the U.S., while Canadians prefer an export tax tied to lumber prices and exchange rates.

FEA analyst Henry Spelter has addressed exchange rates here: “This world we are living in – this nightmarish world where you have to focus on every nuance and accent on the part of central bankers and how they are going to control the exchange rate – is having a huge impact on business profitability. It obviously has disadvantaged the U.S. producers of lumber and greatly advantaged Canadian producers of lumber. This development is totally independent from everything else.”

So this season too shall pass; although unlikely before October.

“No matter who is the next president, the incoming administration will have to show it will be tougher on enforcement. And it will be completely disorganized and unfocused for months into 2017. The U.S. Lumber Coalition will have an unimpeded run down the field until the countervailing duties rates and AD margins are announced, and maybe thereafter. The pressure to negotiate and compromise is entirely on Canada. The Coalition benefits from any delays.” – Peter Clark, iPolitics.ca (15 May 2016)

Mega-fires..

Lumber traders are used to following with interest the impact of seasonal wildfires on lumber markets. The devastation and widespread impact of the Fort McMurray mega-fire is causing all of us to expand focus to broader concerns beyond seasonal gauging of forest fire effect on lumber prices.

This article today by Mark Hume in The Globe and Mail draws attention to the growing threat that mega-fires pose for their “deep and long-lasting social, economic, and environmental impacts”.  It’s pointed out that the increasing frequency of those very large fires is of real concern. A climate change wildfire action draft plan by the B.C. Ministry of Forests predicts that in the near future, the average size of fires will more than double in size. We’re told fire severity is projected to increase by 40 per cent in the spring and 95 per cent in the summer, and the length of the fire season is expected to increase by 30 per cent. It’s suggested that the solution, according to fire experts, is to reduce fuel loads in the forest before they explode. “That means more controlled burns and the creation of ‘fuel breaks’ by widening roads or logging strategically around communities.”

In the face of projections for increased number of mega-fires, we’re also told this report last year by B.C.’s Forest Practices Board (FPB) found the program has fallen short in preventative measures. “Unfortunately, over the past ten years, only 10% or less of hazardous forest fuels have been treated. Funding to protect at-risk communities in B.C. by removing interface fuel sources is inadequate” stated the report.