What’s wrong with this picture?

We’re told that “rising material costs” were a significant factor in the wake of 51% of U.S. home builders raising prices last month. This according to surveys conducted by John Burns Real Estate Consulting, noting this ratio marks only the second time in the last 10 years more than half of new home communities raised prices – the highest rate since the dramatic surge in U.S. housing prices in 2013. Meanwhile The Economic Calendar reports here that “cost pressures” can help to explain why housing starts and permits have been relatively uneventful over the past few months. The National Association of Home Builders (NAHB) suggests that this trend of firming confidence in the face of underwhelming housing data is liable to continue due to “supply-side issues.”

Aside from unprecedented seasonal B.C. wildfire impact on lumber markets, restricted fibre supply looms on the horizon. At the same time as questions of housing affordability challenge builders and consumers across the continent, does it make sense for narrowly defined interests of The U.S. Lumber Coalition to seek further price-increasing tariffs on lumber imports?

Some of the groups that are hurt by foreign competition wield enough political power to obtain protection against imports. Consequently, barriers to trade continue to exist despite their sizable economic costs.
The Concise Encyclopedia of Economics

More: Canadian Wildfires Choke Lumber Supply to U.S. Home Builders – WSJ

Close?

While industry spokespersons are being tight lipped about progress in softwood lumber negotiations, rumours abound.

Last Friday, word circulated that Canadian Minister of Foreign Affairs Christina Freeland and United States Secretary of Commerce Wilbur Ross “shook hands” on a ten year Softwood Lumber Agreement restricting market share. This rumour seemed to be congruent with perceived political motivation to achieve a managed trade agreement ahead of potential NAFTA negotiations. By Monday however, a declared state of emergency due to mega-fires in B.C. superseded quota chatter. Then CIBC Capital Markets cautioned that any proposed settlement could be vetoed by the U.S. Lumber Coalition. The rumour fizzled Monday afternoon when in a Madison’s Lumber Reporter follow-up, we were told a source close to the U.S. Lumber Coalition had cleverly confirmed that Minister Freeland and Secretary Ross “surely shook hands” on Friday but “did not shake hands on a deal”. In an update just this afternoon, CIBC Capital Markets noted the framework of the rumoured “handshake deal” was almost identical to a proposal the two sides were reportedly close to agreement on two weeks ago before it was rejected by the Coalition.  CIBC estimates the probability of an agreement between the two countries by the end of August at “greater than 50%”.

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As recently as last Thursday, the only talk about forest fires in this province was about how few were burning (“three or four”). Suddenly 140 fires started Friday, followed by nearly 100 more Saturday, and a few dozen more Sunday. It’s interesting to learn here how a below-average fire season in 2016 and an unseasonably wet spring in 2017 may have made the forest more susceptible to fire, fueling the unprecedented spread over the weekend. Mills watch with anxiety as the wildfire season, just begun, is impacting Interior communities and forest operations. The Vancouver Sun reports West Fraser, Tolko, and OSB manufacturer Norbord are among the companies that have suspended operations around 100 Mile House and Williams Lake, with 1,000 employees from West Fraser alone off work due to the closures.

Lumber Trader’s Witch Hunt!

The Information Age has seemingly spawned increasingly polarized views on pretty much everything – exposing even close ties between supplier mills and wholesalers, some with ties to blogging. Fake news occasionally rears its ugly head. Reg Foot of Carrier Lumber is about to experience this when the B.C. Wholesale Lumber Association (BCWLA) honours him as The 2017 BCWLA Lumberman of the Year this week. We posed ten questions to Reg in advance of Thursday evening’s gala at the Terminal City Club in Vancouver:

1. How did you get into the business?
Started playing squash with Terry Kuzma (previous Carrier Lumber’s Woodlands Manager) about 20 years ago and he asked if I would ever be interested in a career change.. the rest is history.

2. When did you join Carrier Lumber and how long have you been Lumber Sales Manager?
Joined Carrier in September ’99 under the direction of Ron Gettling, Sales Manager and became sales manager in April, 2002.

3. Any mentors?
Absolutely.. Gord Wilkinson – my first sales manager when I was in newspaper advertising sales. Gord gave me my first break into sales and taught me some foundational sales techniques that I still practice today. Curt Garland, President of Lomak Bulk Carriers Corp – this was my second job in sales. Curt was instrumental in helping me transition from retail sales to an industrial sales environment. Ron Gettling, retired sales manager of Carrier Lumber. Ron taught me the finer points of mill lumber sales and its time-honoured traditions.

4. Others besides bloggers who have had a positive influence on your career?
My wife Sylvia, for supporting me throughout all the trials and tribulations of the lumber industry and for being my soundboard on the challenging days and helping me stay focused. Bill Kordyban, President of Carrier Lumber, for showing me resiliency, loyalty, and calmness in spite of some major market challenges.

5. What’s the biggest change you’ve seen in the industry?
Technology has really advanced the way we manufacture lumber, allowing us to be competitive in very challenging markets. As far as lumber sales, technology has changed the way we confirm orders, but thankfully it has not replaced the power of a customer-mill relationship. I hope that never happens.

6. What’s the most exotic destination you have shipped lumber to? 
Mongolia

7. How’s your squash game?
Limping along.. literally.

8. What do you fear most about being subject of the BCWLA Roast on Thursday evening?
No one will show up.

9. Can you describe why some consider the Roast merely to be a witch hunt, unlikely to expose positive details of your distinguished lumber career, that, with humility, you have heretofore been seeking to cover up, according to Carl Bernstein?
I am totally OK with a witch hunt. It is more entertaining to hear about a person’s failures than to listen to all the wonderful accomplishments. Just ask TMZ or the National Enquirer for further proof.

10. Please tell us why even an arms-length association you might enjoy with BCWLA distributors should not be a subject of investigation under terms of NAFTA, or, at very least, subject to renegotiation?
???? – next question.

Robots and Lumber Traders

Robots are increasingly being blamed for job losses these days. At the same time its been said that robots can’t perform as well as humans when it comes to “complex social interactions”. According to Science Daily, researchers recently found that personality factors are the best defence against losing your job to a robot.

Humans outperform machines when it comes to tasks that require creativity and a high degree of complexity that is not routine. As soon as you require flexibility, the human does better. The edge is in unique human skills.
– Rodica Damian, assistant professor of social and personality psychology, University of Houston

In assessing the threat therefore that robots pose for replacing lumber traders in the marketing function, could it be that the critical determinant may involve evaluating the degree to which lumber trading is deemed to involve “complex social interactions”?

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We’re told the study’s findings also suggest that traditional education may not be fully equipped to address the rapidly changing labour market. With that in mind, I read with interest Thomas Friedman’s column in today’s New York Times, Owning Your Own Future. Friedman argues that in the face of automation (“accelerations set loose by Silicon Valley in technology and digital globalization”), the self-motivation to learn – and keep learning – has become the most important life skill. He quotes education-to-work expert Heather E. McGowan: “Stop asking a young person WHAT you want to be when you grow up. It freezes their identity into a job that may not be there. Ask them HOW you want to be when you grow up. Having an agile learning mind-set will be the new skill set of the 21st century.”

Political analysts will long debate over where Brexit, Trump, and Le Pen came from. Many say income gaps. I’d say.. not quite. I’d say ‘income anxiety’ and the stress over what it now takes to secure – and hold – a good job. The notion that we can go to college for four years and then spend that knowledge for the next 30 is over. If you want to be a lifelong employee anywhere today, you have to be a lifelong learner.
– Thomas L. Friedman, New York Times (11 May 2017)

Softwood Solution?

We’re not so sure that buyers of Canadian softwood would concur with a rationale contending that increased prices could form part of the solution to the ongoing cross-border trade dispute. Differences in costing our timber resources on either side of the border feed into complexities in resolving the issue. Even so, it’s interesting to hear the many interested viewpoints on the subject, including the following letter to the editor at Kelowna News (HT: Tree Frog News):

I am sure this sounds overly simplistic, but if the U.S. wants our softwood lumber to cost more, I believe we should accommodate them. Raise the stumpage rates and use the extra cash for forest renewal and fire mitigation projects. Canadian mills should raise the price to be comparable with U.S. prices. At least that way the extra money stays in Canada. The U.S. will want to keep the countervailing duties and penalties as they have in the past.
– Gord Marshall – May 3, 2017 / 2:14pm | Story: 196125

In related news, Conan O’Brien asked random Americans what issue mattered most to them during the 2016 election. Surprisingly, their answers were all the same.
Click here.  (HT: Geoff Berwick, Atlantic Forest)

 

Who’s going to pay?

A jam-packed North American Wholesale Lumber Association Regional Meeting in Vancouver last evening heard a panel of experts discuss implications of countervailing duties on softwood lumber announced Monday by the U.S. Department of Commerce. The latest round of the long-running dispute comes amid ramped-up political rhetoric on both sides of the border.

In candid presentations and Q&A session at the NAWLA Regional Meeting, Susan Yurkovich, President and Chief Executive Officer, Council of Forest Industries; Duncan Davies, President and Chief Executive Officer, Interfor Corporation; Jason Fisher, Associate Deputy Minister, Forest Sector at BC Ministry of Forests, Lands and Natural Resource Operations, captured attention of more than 250 industry participants. While Executive Director of NAWLA, Marc Saracco, acknowledged the significant role of lumber distributors on both sides of the border in facilitating efficient continental marketing of forest products, the real question of who pays looms heavily over the ongoing dispute.

Interfor’s CEO, Davies, reminded us that they, like Canada’s other major producers now heavily invested in U.S.-owned production facilities, are not part of the U.S. Lumber Coalition that is once again creating havoc, unprecedented price patterns of volatility and strength in lumber markets. Reports in today’s Vancouver Sun (“Canfor eyes acquisitions amid fallout from new U.S. duties”) confirm Canfor’s optimistic outlook with “well-positioned balance sheet in recent quarters,” with Canfor CEO Don Kayne adding that they see organic growth opportunities worth up to $300 million by 2018.” Sounds great. Meanwhile, it’s the small and medium-sized businesses who don’t own sawmills in the U.S. – the vast majority of Canada’s softwood operators including re-manners – who will be forced to pay the duties retroactively on any shipments made to the U.S. since Feb. 1.

In the face of the United States’ inability to satisfy American demand for softwood lumber with domestic production, the objective of restricting Canadian market share, with underlying aims of enhancing privately-held timber in the hands of select U.S. entities, points to inevitable, further increase in costs for the U.S. homebuilding industry. Ultimately, of course, the consumer pays. Someone tweeting about the issue might simply add:  Sad. Bad.

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Thanks to Tree Frog News for the following images from last evening at The Vancouver Club, posted with permission. Tree Frog’s full report available at this link: NAWLA 2017 Overview.

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BREAKING NEWS

Some of us might wonder if the North American Wholesale Lumber Association risks upstaging CNN and Wolf Blitzer with BREAKING NEWS when the 2017 NAWLA Regional Meeting convenes in Vancouver next week. We can’t be sure of that. Although the anticipated public announcement of the U.S. Department of Commerce preliminary CVD ruling April 25th against Canadian softwood lumber imports is expected to draw a full house to the NAWLA gathering two days later, April 27th. An expert panel’s assessment of implications of the preliminary ruling is sure to attract heightened interest:

  • Jason Fisher, Associate Deputy Minister, Forest Sector at B.C. Ministry of Forests
  • Susan Yurkovich, President & CEO, B.C. Council of Forest Industries
  • Duncan Davies, President & CEO, Interfor Corporation

For more information, visit the NAWLA Vancouver Regional Meeting webpage here.

Update from NAWLA (April 25):  The 2017 Vancouver Regional Meeting has reached capacity and is unable to accept additional registrants at this time. The wait list for this event is also now full. Only those who are on the attendee list will be granted access to this event.