Year-end Answers

As we approach year-end, you’ll recall 19 questions for 2019 we posed one year ago at Harderblog:

1. Will the railways be better prepared for winter weather conditions?
If lumber prices are any gauge, yes. In 2018, extreme cold temperatures in Q1 severely reduced rail capacity, driving lumber prices to all-time highs in Q2, 2018. In Q1 2019, comparatively muted lumber prices suggest overall network capacity improved.

2. Will the extreme price volatility in lumber markets this year persist in 2019?
No. In 2018, the Random Lengths Framing Lumber Composite Price peaked at $583 (June 5) before shedding a whopping $245 over four expensive months riddled with false starts, before finally bottoming at $338 Oct 30. In sharp contrast, this year the gap between the composite high ($378 in Feb) and low ($320 in June) was narrow. The composite currently sits at $373. Random Lengths recently described lumber markets through much of 2019 as “challenging and fickle” (Dec 20).

3. Will Justin Trudeau still be Canada’s prime minister after Canada’s federal election scheduled on or before October 21, 2019?
Yes, barely. Canada’s Liberal party under Justin Trudeau’s leadership won 157 seats to form a minority government and lost the majority they had won in the 2015 election. Trudeau’s Liberals formed a government while receiving less than 35 per cent of the national popular vote, the lowest percentage of the national popular vote of a governing party in Canadian history. The Conservative Party remains the official opposition with 121 seats. The Bloc Quebecois won 32 seats. The New Democratic Party won 24 seats.

4. Will Donald Trump still be America’s president by the same date?
Yes.

5. Will Beto O’Rourke or Joe Biden emerge as the leading Democratic presidential nominee for 2020 by the end of 2019?
Beto bid the race bye bye November 1 while polls still consider Biden the nervous front runner.

6. Will the 12 months of 2019 provide conclusive evidence that trade wars are “easy to win”?
Au contraire! Ongoing reporting reaffirms damaging, costly, induced complexities in play. While baby steps on resolving trade issues are reported, what’s been described by year end as a cold war on trade with China is evidence that “trade wars are not easy to win”.

7. Will noise about the border wall on the U.S. southern border have lessened by the end of 2019?
Yes, at least based on news reports beamed north of the 49th. Or, perhaps it’s simply being drowned out by ongoing competitive, attention-seeking noises spurred on by politics.

8. Will progress be reported in solutions for solving the opioid epidemic?
A US Center for Disease Control (CDC) spokesperson said provisional data and other reports signify that “progress is being made” in the opioid epidemic. According to the agency, the turnaround is said to be due to multisector efforts at the federal, state, and local level. USA Today reports progress here in the form of awareness. In BC, it’s reported here that through the first eight months of 2019, there was a 33% decrease in illicit drug toxicity deaths over the same eight-month period in 2018 (690 vs 1,037). Fentanyl was detected in more than 85% of overdose deaths in BC in 2018 and 2019. 

9. The American Psychiatric Association says anxiety levels jumped 7 per cent from 2017 to 2018. Will 2019 see a reduction in anxiety levels among the American general population?
No. For the second year in a row, about two in three Americans say they are extremely or somewhat anxious about keeping themselves and their family safe, paying bills, and their health, according to a new national poll here by the American Psychiatric Association (APA).

10. Will 2019 see a reduction in anxiety levels among continent-wide lumber distributors?
A survey of at least one lumber distributor’s office personnel revealed that lumber traders’ cheerful, positive disposition has been subjected to anxiety levels at least comparable to the stresses of a year ago.

11. Will Canadian softwood lumber exports to China (dropping each year since 2014) continue to decline?
Yes. In discussions last week with Russ Taylor, Managing Director, FEA Canada, he reported while exports to China were up 5.7% in the first nine months of 2019 YOY, shipments slowed down significantly in Q2 and Q3 due to high inventories. Taylor projects Q4 shipments in 2019 to be off roughly 50% YOY, resulting in a 5-10% decline overall this year. “For 2020, I see further declines in Canadian softwood lumber exports to China. Not only are there reduced volumes of low grades from BC, the huge surge in European log exports from the massive salvage program (wind-damaged and beetle-killed) to China (about 6.5 million m3 expected in 2019 vs 1.5 million m3 in 2018) is expected to saturate the construction lumber market by lumber produced at domestic Chinese mills. Not only will this depress construction (low grade) lumber prices, the huge volumes of damaged European logs will also keep imported log prices at low levels. Already the BC Coast logging industry is shut down for cost and market reasons – the market reasons are the surge in European log shipments to China that have pushed higher priced (and costed) hemlock logs out of the China market.”

12. Will an old-growth protection strategy be established in B.C.?
Maybe next year. According to a BC government report Oct 23, “As part of government’s new approach to managing old growth in British Columbia, a two-person, independent panel is engaging British Columbians to get input and hear perspectives on managing the province’s old growth forests for ecological, economic, and cultural values.” In July, the government protected 54 old growth trees by placing a meagre buffer zone around each of them. The action, considered to be more symbolic than symbiotic here, was described by BC Forests Minister Doug Donaldson as “the first step in a broader old-growth plan.” The public, organizations, and professionals are encouraged to share their thoughts by January 31st here.  

13. Will the accelerating rate of climate change evidenced in 2018 be exacerbated by global climate patterns experienced in 2019?
This week the Canadian Press dubbed climate change the news story of the year. The tell-tale signs and impacts of climate change – such as sea level rise, ice loss, and extreme weather – increased during 2015-2019, which is set to be the warmest five-year period on record, according to the World Meteorological Organization (WMO) here. Greenhouse gas concentrations in the atmosphere have also increased to record levels, locking in the warming trend for generations to come. Alluding to the challenge of meeting emission targets in a report this week here, Catherine Abreu, executive director of Climate Change Action Network Canada states “If we continue to ignore the root cause of climate change – extraction and combustion of fossil fuels – we’re going to keep missing the mark.”

14. Will the U.S. repeat as the FIFA Women’s World Cup Champions?
Yes. The U.S. defeated the Netherlands 2-0 in the most-watched FIFA Women’s World Cup match ever (82 million viewers). Over the 52 matches played in nine host cities across France, the average live match audience was over 17 million viewers, more than double the 8.39 million average of Canada in 2015.

15. Will the record number of homeless people identified in the City of Vancouver’s 2018 Homeless Count be broken again in 2019?
Sadly, yes. Volunteers counted 2,223 homeless people in the city this year, the highest number since the annual count began in 2005.

16. Will 2019 have seen an economic recession?
A recession is defined by a fall in trade and industrial activity in two successive quarters as measured by GDP. So while a UN flagship report in September signaled a slowing economy being fed largely by binge deficit spending, no ‘recession’ was declared in 2019. The UN’s trade and development body, Unctad, said 2019 will endure the weakest expansion in a decade and there was a risk of the slowdown turning into outright contraction in 2020. Source

17. Will Brexit status be significant in determining whether Britain is “better off” at the end of 2019 than at the end of 2018?
The majority Conservative electoral win earlier this month was significant to the degree that it allowed PM Boris Johnson to put in motion UK withdrawal Agreement from the EU set for January 31, when the post-Brexit transition period will begin. For 11 months, the UK will still follow all the EU’s rules and regulations; it will remain in the single market and the customs union, and the free movement of people will continue. The challenge for the government will be to get all its new rules and policies in place by the end of 2020. The answer as to whether or not Britain is “better off” remains unclear.

18. Will European lumber deliveries to the U.S. decline in 2019?
“Interesting dynamics here,” said Russ Taylor last week, with Q4 data TBD. “Through September 2019, European imports are 4.3% below the pace of 2018 and slowed down significantly in Q3 vs Q2 this year – probably as a result of weak US prices. However, with the China market getting over supplied and US lumber prices rising in Q4, I expect European imports to increase. If they matched Q4 levels in 2018, that would put them even with 2019. However, with a glut of moderate quality logs and rising US prices, I expect that Q4 European shipments will be up significantly over Q3 levels, and even higher than Q4 levels from 2018, resulting in a small increase for 2019. In our just-released Global Sawmill Cost Benchmarking Report, the cost structure of the German and Czech mills has dropped by US$100/MFBM due to lower log costs (and more at some mills), allowing for easy access to the US market at very profitable levels. So I expect Central European exports to soar in 2020, especially if lumber prices improve (FEA forecasts a 10% increase over 2019).”

19. In view of lower lumber prices, will we see movement in the Canada-U.S. softwood lumber dispute?
No significant movement reported. When reached for comment, Susan Yurkovich, President and CEO of the BC Council of Forest Industries, confirmed “Sadly no. Litigation will continue.”

View from The Observatory, atop Grouse Mountain (early evening 27 Dec 2019)