Gig Economy

Who knew? A recent study predicted that by 2020, 40 per cent of American workers would be independent contractors. We’re told the switch to gig work is first and foremost about employers moving to what is efficient for them. Here in Canada, 85 per cent of companies recently surveyed figured they will increasingly move to an “agile workforce” over the next few years. It’s part of a “gig economy”.

The “gig economy” is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements. For lumber types, this may conjure images of portable sawmills and seasonal workers in the woods. For some lumber traders, the concept smacks of impermanence and flies in the face of marketing effectiveness that pays homage to building longterm relationships. Even so, the gig economy finds shared identity in today’s world of transactional strategies and realpolitik.

 

~Tricks and Treats~

The coldest air of the season is flowing into Western Canada today, but a beautiful starry night’s in store for Vancouver this evening. At our house, pretty sure we’ve managed to turn our pumpkin inventory 8 times since Labour Day. A quick check of the 25 Horribly Inappropriate Halloween Costumes for Kids confirms Dorothy, Toto, and this Dad are all good to go. Happy Halloween!

Bigfoot Blame

Clearcut logging in BC’s Bigfoot country is the latest explanation ascribed to trackers’ inability to pin down sasquatch in the woods. According to reports in today’s Vancouver Sun, a sasquatch tracker out of Golden, BC aims to take the provincial government to court to prove beyond a shadow of a doubt (or a guy in a gorilla suit) that the legendary creature roams the BC wilderness.

In a civil lawsuit filed in BC Supreme Court on Monday, it’s reported the BC Ministry of Environment and BC Fish and Wildlife Branch is charged with “dereliction of duty pertaining to the interests of an indigenous wildlife species.” The plaintiff suggests that logging played a role in disappearance of the hairy beast’s natural habitat. Some wonder if impending Halloween tricksters might scare the creature into view. Just sayin’.

Meanwhile, for traders returning from back-to-back Forest Products Conferences in the Northeast this week, sometime seemingly invisible realities shaping lumber markets may be coming into view. When the busy LBM Advantage show concluded Tuesday in Baltimore, vendors boarded rail cars for Philly to attend a jampacked LMC Expo Wednesday and Thursday. Key takeaways from the Dakeryn tabletop visits? The market’s hot and the supply chain is fractured. No Halloween costumes can disguise it. Moreover, rumours are swirling the duty timeline is aggressively moving up. Traders wonder if countervailing duties on cross-border shipments will now be in effect as soon as mid-November. In midst of the unprecedented wildfire season in BC, could free-of-char (FOC) lumber be tax-exempt? While perception among some US lumber retailers suggests that duties are beneficial to their bottom line, at least one major dealer struggling for supply described the ongoing softwood lumber dispute as “bizarre”.

Breakfast of Champions

Pure gold. That’s how Ryan Holmes describes customer feedback.

In 2008 at their Vancouver headquarters, Holmes created Hootsuite, the world’s most widely-used social media management platform. He writes here in the Financial Post that while the majority of Hootsuite’s 15 million users pay absolutely nothing, “they mean everything.” Why? Because free users stress-test the company’s platform every day, discovering flaws and demanding new features. The constant feedback these users tweet provide enables Hootsuite to continuously refine their product before focus shifts to landing big clients who pay.

According to Holmes, the best market disrupters learn to listen very closely to their initial users. “Because the barrier to entry is so low.. the only thing keeping (users) tied to the product is its innate usefulness,” says Holmes. Today, we’re told that big paying customers now form the heart of Hootsuite’s market. But Homes argues Hootsuite’s strongest competitive advantage remains the millions of free users endlessly stress-testing the company’s platform every day. At the core of Hootsuite’s business, there rests an underlying acknowledgement of the importance and potential for social media to foster customer feedback in developing customer-supplier relationships.

It’s easy, even inevitable, for the pendulum to swing too far, however. The scrappy upstart becomes the industry leader. Instead of catering to end users, attention shifts to landing those huge deals. There is an antidote, of course – staying obsessed with the free users. Google, not surprisingly, is a master at this. Today, Gmail’s billion-plus monthly active users dwarf the three million businesses who pay for G Suite. That won’t change anytime soon. But having a focus group that large ensures Google is always miles ahead of its competitors.
– Ryan Holmes, Hootsuite CEO

AAC Reduced in PG

The announcement of a 33 per cent reduction in the annual allowable cut (AAC) in the Prince George Timber Supply Area is no surprise. Back in 2011, the AAC in Prince George was temporarily elevated for salvage-logging operations. Five years later, at the 2016 COFI Convention, Tim Sheldan, Deputy Minister, B.C. Ministry of Forests confirmed that “most of the economically harvestable beetle-killed timber has been harvested.”

According to the news release, the measurable real impact on economic activity is expected to be less significant in consideration of average timber harvests in recent years. The effective cut reduction is 8 per cent. Even so, industry observers and lumber traders could rightly be wondering about longer term implications for markets, domestic and foreign, at the same time as trade issues remain unsettled.

There’s no doubt we’re coming closer and closer to the point where the cuts will be reduced. There will be less timber.
– Dave Peterson, B.C. Chief Forester (21 Nov. 2014)
See: Beetle Boundaries

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Lumber Market Pricing

“What’s going to stop this market?!” is among the questions that lumber traders are pondering these days. Could softwood negotiations be the determining factor? What if the U.S. Department of Commerce throws out the case? More weather-related factors? This time, snow? Salvage logging? Traders taking a position, a stand, …or, a knee?

Back in 1994, when Michael Carliner was Staff VP for Economics at the National Association of Home Builders (NAHB), he wrote What’s Driving Lumber Prices?. In the article, it’s noted that changes in inventory levels create expectations on future levels of activity. It’s accepted that expectations about future supply and demand are key determinants in short-term behaviour of market participants. We’re told that rising prices, such as have been experienced, may of themselves create expectation of further price increases, causing speculative behaviour.

Carliner points out that historically, prices of lumber have not increased gradually with increased demand and constrained supply. Instead, data suggests an erratic pattern of booms and busts that are largely attributable to changes in expectations about future supply. Historically when supplies were not so uncertain, changes in housing statistics and other demand factors were reportedly less pronounced in their impact on short-term market pricing. We’re told that price spikes occurred when market participants were subject to uncertainties in policy, litigation impacting trade, plus the many additional factors that historically impact timing between a tree being felled and being delivered as lumber to market.

What’s different now?

The run-up in lumber prices over the past few months contains some short-term speculative elements, but the underlying trend is toward higher average prices.
– Michael Carliner, Housing Economist (January, 1994)

On this National Tree Day, any image of a tree is music to our ears! Hat Tip: Al Harder (Source: boredpanda.com)

An Accident of Circumstance

Some participants on both sides of the softwood lumber dispute are seemingly struggling to understand basic tenets of supply and demand. A global market is in play in the long run to influence supply and pricing. However, as this Bloomberg report demonstrates, imposition of duties on Canadian softwood lumber is mostly hurting U.S. consumers these days.

This unexpected boon for Canadian lumber producers is essentially an accident of circumstance. The attacks on Canadian lumber exports combined with serious wildfire issues in both Canada and the U.S. have served to reduce lumber supply. Meanwhile, the recent hurricanes that impacted the U.S. have led to a spike in construction – causing lumber demand to soar.

The result of these simultaneous supply/demand pressures has been a sharp surge in lumber prices. According to The Globe & Mail, Canadian softwood lumber producers have seen gains in their share prices of more than 40%. In contrast, U.S. lumber producers are averaging gains of only 10%.

The end result of the latest harassment on Canadian companies is that these companies have become more profitable, while U.S. consumers are paying significantly inflated prices for lumber – even as natural disasters have created an imperative need for new U.S. construction.

– Stockhouse Newswire 09-20-2017

Talk About the Weather

On the heels of the worst wildfire season in memory, a continent braces for reportedly the most dangerous hurricane ever. There’ll be time later to cast all this talk of weather in relation to climate change. For now, the impact on human lives is of foremost concern. Even so, lumber traders try to make sense of the variables that shape lumber markets thrown into unpredictability by virtue of trade talk uncertainties and subject to more volatility by forces of nature.

The reporting of Random Lengths since July (see excerpts from Random Lengths Lumber Market Reports below) suggests that traders sensed greater downside market risks heading into September. Pricing trends in evidence this week suggest the opposite to be true. We’ll share buyer caution in interpreting the changes that shape lumber markets this fall. Hazarding pricing forecasts seems especially risky for the remainder of this year. A recent posting we noted on a Vancouver church sign this week might have been aimed as a caution at bloggers and lumber reporter forecasters: “If pride comes before a fall, we should see humility by winter.”

July 21
“Some traders pointed to the gap in the application of the preliminary CVD on Canadian imports that starts August 26, hoping that prices would ease with no CVD in place.”

July 25
“While some quicker loads developed, mills widely quoted shipments for the weeks of August 14 and 21. Buyers were leery of booking into or beyond those weeks. They cited the coming pause in the countervailing duty, a steep discount in September futures, and quicker shipments from secondaries.”

July 28
“But the coming pause in collection of countervailing duties starting in late August, and the possibility of a lumber trade deal between the U.S. and Canada, left traders sensing downside price risk in the weeks ahead. Many turned to secondaries to fill holes in inventories.”

Aug 1
“With the preliminary CVD only in effect through August 25, buyers of Canadian S-P-F showed an increased fear of downside risk. The futures market’s huge discount to cash gave buyers another reason for caution.”

Aug 4
“Buyers maintained the view that purchases at current levels in advance of the onset of the gap in the countervailing duty carried risk. Producers, meanwhile, were largely content to limit sales to the U.S. until the gap starts, if not stack production until then.”

Aug 8
“Buyers anticipated downside in Canadian lumber amid the gap coming in the CVD. Reports circulated that shipments could be CVD-free as early as August 14.”

Aug 11
“Trading slowed as buyers’ sense of the market turned more bearish. Numerous factors weighing on the market generated uncertainty, which in turn led to a cautious approach. Topping the list was the coming pause in the countervailing duty, and anticipation that Canadian mills could lower prices with the nearly 20% CVD suspended.”

Aug 15
“A bearish tone grew more prevalent in softwood lumber and structural panel markets. Near record prices in many markets kept buyers only purchasing enough to fill in inventory, amid increasing fears of downside risk. Traders awaited next week’s countervailing duty gap period.”

Aug 18
“Dealers, distributors, and office wholesalers were reluctant to purchase more than immediate needs. They cited current price levels, the suspension of the preliminary CVD, and a slowdown in consumption as key reasons to hold back.”

Aug 22
“Buyers grew more concerned about downside risk and delayed purchases as long as possible. The pause in the countervailing duty on Canadian shipments to the U.S. takes hold at the end of the week, causing further fear.”

Aug 25
“Buyers anticipated opportunities to buy Western and Eastern S-P-F at lower levels with the August 25 arrival of the CVD-free period. Producers, however, proved to be far less vulnerable than buyers anticipated.”

Aug 29
“Monday’s announcement by the Commerce Department of a two month delay in the final determination of the countervailing and anti-dumping duty cases drove many buyers to the sidelines, waiting to determine a market direction.”

Sept 1
“Activity in S-P-F markets picked up Wednesday and Thursday once buyers digested news on the CVD case and returned to the market.”

Sept 8
“Many buyers.. scrambled for coverage, having held off for weeks in anticipation of a pullback once the pause in the countervailing duty on Canadian shipments to the U.S. commenced. Many were wary of booking loads past September at current prices.”

Log flume – Lower Seymour Conservation Reserve (North Vancouver, BC)