Buried Treasure

These days much of what constitutes Vancouver’s crazed real estate scenario is taking shape around the urban False Creek shoreline. Glassed-in condo towers in various stages of completion compete with new, nearby downtown towers, including one named Trump. This week I chanced upon what’s at the bottom of much of what’s going up around False Creek; buried treasure from years gone by. Logs. Huge logs.

In what was the industrial heart of Vancouver, over a dozen sawmills, planing mills, shingle mills and wood preserving plants once operated on this 66 hectare strip of waterfront land called Pacific Place. According to the BC Ministry of Environment, most of this land was created by filling in False Creek with construction debris, industrial waste, and fill from other downtown Vancouver building sites. According to the Pacific Place Remediation Project, studies conducted at Pacific Place show that the volume of fill material is enormous – more than two million cubic metres (enough to fill two BC Place-sized stadiums to the rim). The fill is up to 13 metres deep in some areas along the existing shoreline.

Construction workers and even one pedestrian lumber trader were amazed to note the size of some of the buried logs uncovered during present excavations for The Arc Vancouver condo tower on Expo Boulevard at the foot of the Cambie Street bridge. Interesting stories abound on the history of coastal sawmills and the forest industry that was the early economic engine in these parts.

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~Musical Refreshment~

Think Harder

Market Minute: Amidst the Canada-U.S. softwood lumber dispute, underlying strong demand on both sides of the border seems to be catching buyers unawares on many fronts. There are reports this week that some mills in B.C. are extending order files to unprecedented levels. In their February 8, 2017 Industry Update, CIBC Capital Markets describes dramatic lumber price increases since February 1 as “an encouraging sign for producers’ ability to pass on duties to U.S. consumers when tariffs are actually imposed.. considering we are only in partial retroactive territory, and we still have no idea how high Commerce will set initial duties..”

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There are many joys in blogging. We appreciate that cyberspace offers bloggers virtually unlimited latitude in expression and range of viewpoints. The medium can be a useful tool in support of business and development of customer relationships. In these days of heightened political sensitivities and polarized opinions, it’s evident that messaging via any medium creates perception of opportunity as well as risk. Measuring effectiveness may call for nuance. It’s interesting to read of the early feedback on the Super Bowl ad of our friends at 84 Lumber.

Of course daily now we’re exposed to direct messaging of folks marching in the streets, advertising a particular point of view or belief on, what is often a hastily-scratched message on cardboard. Through six years, I have found Harderblog to be a positive experience and useful medium for periodic messaging in support of lumber marketing here at Dakeryn Industries. Some might suggest that the messaging here is no more effective than if I decided to march in the streets with a placard advertising personal beliefs in support of the value-added services we provide. But then I took heart in affirmation of my beliefs on that score when I saw the image below. My only suggestion is that if I were a sign-carrying marcher in that parade I’d suggest a small revision to make it read: If you believe in lumber, think Harder…

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image source: brobible.com

Sawmill Shutdowns etc.

“More sawmills will be shut down in BC,”  says Hakan Ekstrom of the Seattle forestry consulting firm Wood Resources International, in the Victoria Times Colonist. “The question is, will it be three, four, five, or six sawmills?”

The report, from the January 19 Western Forest Industry Conference in Vancouver, Washington, cites details on the fallout from the pine beetle infestation, a major factor behind the shrinking sustainable harvest rate/annual allowable cut (AAC) in this province. The most significant impact will be felt in the BC Interior, where it’s estimated 80-90 per cent of merchantable pine was killed. Salvage logging in the region is winding down as the availability of economic, beetle-killed timber peters out. While AAC reductions were anticipated, “it was always somewhere in the future,” said Ekstrom. “Now it is actually going to happen.” BC’s chief forester is expected to announce cutbacks in Quesnel in March, Prince George in June, and Lakes, west of Prince George, in late 2017.

Meanwhile, economic forecasts suggest US housing starts will continue to climb in 2017. In China, softwood lumber imports reached an all-time high in 2016, “fueled by growing demand for use of lumber in the furniture, door, window and finishing segments” (International Wood Markets 1/23/17). At the same time, questions related to how optimism for overall demand will play out in the face of the Canada-United States softwood lumber dispute, as curtailments and shutdowns loom, remain unanswered.

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Anyone know where this tree is located? We can probably rule out Quesnel. Its certainly got a mind of its own, with a natural defence against sawmills bent on producing dimension lumber free of crook.  Update: Solved! The tree is located in Kona, Hawaii, at the Kona Country Club. Thanks to Ian White of Dakeryn Industries, who even shared his own picture of this tree!

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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!”

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Big Tippers

Folklore abounds with stories of Wall Street stock traders and lavish steak dinner lunches. Lumber traders not so much. We’re told that stock traders are sticking closer to their trading desks these days, leaving many of Manhattan’s lunchtime eateries vacant.  Global turbulence in financial markets through the first 60 days of 2016 explains a “re-calibrating” of the Wall Street lunch; the steakhouse slowdown coincided with the S&P 500’s worst-ever start to a year. Even so, it’s reported a recent $1,000 lunch tip left by one regular suggests there are still a few traders seemingly immune to the market’s ups and downs.

In midst of a year without export tax winter, no doubt lumber traders are also spending more noon hours at their desk. Unlike this time last year, when one of the harshest winters on record stifled demand, lumber is even hotter than the weather. It’s reported here that lumber futures is up 22% this month, outperforming stocks, oil, and gold. Out in the field, Random Lengths confirms “producers have kept order files advancing deeper into April” on #2&Btr Western SPF and “moved prices up accordingly”. At the secondary level meanwhile, at least one trader/blogger has characterized activity over the past ten days as “the quietest hot lumber market” in recent memory. With the BC Wildfire Service having just announced early burning restrictions due to dry conditions in the Cariboo, traders will be closely monitoring the day-to-day changing landscape – mostly from their desks.

“There’s nothing like a little bit of a sharp correction to improve our work ethic.”
– John Manley, New York-based chief equity strategist at Wells Fargo Funds Management, which oversees about $233 billion.

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Lunch scene from “The Wolf of Wall Street”

 

~Musical Refreshment~

I recently finished recording sax tracks on two more original compositions by Dave Friend for our Funkify album.


Where’s the Wood?

Construction cranes dot the Lower Mainland landscape where stacks of safety deposit boxes for persons unknown er condo developments abound. Today we get a close look at West Fraser wood being hoisted into place at a condo development next to the Dakeryn office in North Vancouver, confirming reports that not all local production is being shipped to export markets these days..

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Billion Board Foot Club

How many new members will be added to the Billion Board Foot Club in 2015?  For the answer to Question Number 15, we turned yesterday to the analyst who coined the term to classify the largest softwood lumber producers on the planet. Russ Taylor, President of International Wood Markets Group Inc. told us yesterday: “It looks like there will be no companies added to the Club in 2015. The three closest companies (one each from Canada, USA and Europe) were all around 900 million FBM in 2014 and I am quite sure that none were able to increase output by 10 per cent. Back in 2005, there were 22 companies in the Club vs. 11 in 2014! Back in 2005, nine were between 1.0 and 1.2 billion, so when the market collapsed, most of these companies had production declines of 30-50%. So, it takes a long time to build back up production. A few have grown through acquisitions, but all of the 11 in 2014 were also in the Club in 2005.”

Nine members of the Billion Board Foot Club are on this continent: West Fraser, Canfor, Weyerhauser, Georgia Pacific, Resolute Forest Products, Interfor, Sierra Pacific Industries, Hampton Affiliates, and Tolko Industries.

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Source: timber-online.net