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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Q&A – Final Five for 2016

Answers to the five remaining questions from the Harderblog Top Ten Questions for 2016:

6. Is oil in the $20’s an inevitable reality?
No. In early January, crude prices had plunged to $34 in the face of oversupply, a level not seen since the early 2000s. But that would turn out to be the low for the year. Most recently, a curtailment deal between OPEC and rival producers was expected to further tighten supply in midst of growing demand.

7. How low can the loonie go?
The low of the year was January 20, when one Canadian Dollar was worth 0.6854 US Dollar.

8. Where will Conifex stock be priced in 12 months?
See TSE:CFF. Conifex Timber Inc. has risen over 30% since December 31, 2015.

9. Is this the year 3-D printers stationed in Fraser Lake begin mass production of 2×10-14’s and 16’s?
While there is little evidence of 3-D printers mass producing 2×10-14’s & 16’s at Fraser Lake this year, there is evidence that technological developments in production of new wood products are making a profound impact on many fronts. The opportunity to spend an afternoon touring the 18-storey mass timber hybrid structure pictured below at UBC was one of the highlights of the year. See High on Wood.

10. Will the Chicago Mercantile Exchange implement circuit-breakers to tame volatility in the lumber futures market?
According to reports that regularly publish updates on lumber futures activity, it’s generally acknowledged that what happens in the lumber market is a microcosm for the entire commodities asset class. However the factors behind volatile changes are felt much more acutely in lumber, than, say, crude oil, because the market/volume is so small. This week we posed Question #10 to Stinson Dean, Broker & Risk Manager at Tall Tree Lumber Company, who confirms volume/open interest is especially low in lumber right now. “Below 4,000 open contracts is very low. Lumber used to have 10,000 in open interest back in 2012-13. When there are limited participants, there are limited sell orders and buy orders. When bullish news is announced, there aren’t enough sellers in the market to absorb an influx of buyers and we get locked limit-up. Buyers are forced to go higher and higher to find sellers.” He adds, “Random Lengths noted that 2014 was one of the least volatile years on record. That’s been followed by two very volatile years. The difference between 2014 and the two most recent years is non-commercial speculator participation. 2014 was a trendless year, 2015 was a bear trend, and 2016 was a bull trend. Funds, in particular, love trends. ‘The trend is your friend’. So, when that group recognizes a trend, they start to pile on. And that starts a chain reaction.” According to Stinson, the funds are out of the market right now; it’s anticipated they will step back in long in the new year.

brock-commons

UBC Brock Commons

Updated August 10, 2016: Video of the final panel, flown into place August 9, 2016.

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The following images offer beautiful hi-res peeks at construction of the towering 18-storey student residence at UBC. One of the tallest wood buildings in the world, Brock Commons will house 404 students in 272 studios and 33 four-bedroom units, and feature study and social gathering spaces. The images are posted with permission from Leda Chahim, Government Affairs Director, Forterra.

I look forward to learning more about the UBC Brock Commons project, mass timber solutions, and new opportunities for dimension lumber upon scheduled visit in September with Oscar Faoro, wood-WORKS Project Leader, Tall Wood Structures Initiative, at the Tall Wood Building Education Centre.

Selling Wood

Some might suggest that the emotional appeal of 2×4 is generally thought to be somewhat limited, unless you’re a lumber trader, who has been known to fall in love with a truckload order from time to time.

But developing ads for the consumer market of industrial products no doubt poses creative challenges. Dimension lumber or plywood doesn’t lend itself readily to poetry. Beyond rhymes of “Plywood, plywood on the wall, who’s the fairest of them all?” there’s not a lot of published lumber-related light verse. Although when the U.S. celebrated Arbor Day in April there were many derivations of Joyce Kilmer’s famous “Trees” poem that came to light in lines such as: “I think that I shall never see a billboard lovely as a tree.”  It does seem though that once the tree has been through the mill, questions about rendering the finished wood product fit for a TV ad is something quite different.

So it was especially fun to see a new ad campaign for wood products profiled in today’s Ad of the Day at Adweek. The set of four “deadpan gags”, for California-based Humboldt Redwood, stars a talking redwood puppet named Timothy McTimber. His ventriloquist is a builder. Together, they admire the various redwood features of a home – a wall, a deck, a post and a beam. “It only makes sense that the spokesperson for a redwood company would be a talking plank, and boring in the best way possible,” writes Gabriel Beltrone in his five-star review at Adweek. “The voice actor, comedian Ross Brockley, gets outsize credit for his on-point delivery.” These 30-second commercials are hilarious!




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

Growing Lumber

We’re not sure if Gavin Munro will figure out how to coax trees to grow limbs shaped like 2×10 floor joists. Some believe it would render sawmills obsolete. For now this botanical craftsman is enjoying success in growing furniture (HT: Mark Kennedy).

Aptly described in this article at Gizmag as “a man with a great deal of patience,” Munro has reportedly spent the last ten years training trees to become chairs, tables, and sculpture. Check out the many beautiful images which includes his Furniture Field (Tuscan vineyard?) posted at the company’s website (“each piece is an expression of patience and collaboration with nature”). A large furniture harvest is projected for 2016-2017. Would this be nature’s contribution to rudimentary 3-D printing?

Fg_chairs_just_cropped_at_hopton

Photo Credit: fullgrown.co.uk

Straw Houses

A favourite bedtime story these days for our three and five year-old daughters is The Three Little Pigs. You’ll recall that the first little pig built his house of straw. And you probably recall what happened when the wolf came and he huffed and he puffed and… well.. it was a sad end to the first little pig.

Now we hear that in some places, they’re still resorting to straw for home construction. But nowadays these little porkers are outsmarting the big bad wolf. They’ve found ways to safely use straw by encasing it in good, solid wood to make sure little girls and boys are kept safe from intruding wolves and even fire. Now, if only the second little hog, who used sticks, explored options for sorting and remanufacturing them sticks into appearance grades of dimension lumber – he’d be well protected against any huffing and puffing. All this being said, the pigs would then have no need to consider the third pig’s choice of heavy, costly bricks. And that, dear children, is why daddy goes to the office early each day, to not only bring home the bacon, but also to help grow a better, safer world with reliable shipments of lumber for building homes that are safe from big bad wolves. Now GO TO SLEEP! (and NO, there’s NOTHING in the story suggesting the little pigs inquired about price or affordability).

~Musical Refreshment~

At the risk of putting dear readers to sleep, I played Ave Maria by Schubert yesterday at church. That’s me on tenor sax, accompanied by Christine on piano.

Super Stuff

In 2010 and 2011, attendance at the NAWLA Vancouver Regional Meeting averaged 150. In 2012, there were 170 registered attendees. April 2nd marked the third consecutive year that attendance has blown past 200 in a packed Grand Ballroom at The Vancouver Club. During the evening networking session, many attendees remarked how much they enjoyed the diverse themes offered up by our professional presenters at the afternoon meeting: Bob Lenarduzzi (Vancouver Whitecaps FC), Peter Woodbridge and Kim Marshall (Woodbridge Associates), and Gavin Dew (Trans Mountain Expansion Project).

Of note, forest industry and wood product consultants Peter Woodbridge and Kim Marshall left attendees buzzing about their “Super-Saturated” chemistry analogy to describe present market conditions. According to Woodbridge Associates, there are seven factors fueling today’s over-supply of softwood lumber:

  1. China Lumber Supply, diverted to the U.S. market
  2. China/Asia Log Supply, diverted (in part) to the U.S. market
  3. Currency-Fueled SPF lumber (C$), muting the intended impacts of Softwood Lumber Agreement (SLA) supply management
  4. Currency-Fueled Euro Lumber (Eu) diverted from the MENA market
  5. Currency-Fueled Russian Logs/Lumber (RUB), selling into Asia/Europe
  6. Low Tax-Rated Canadian public timber, partially offsetting rapidly rising structural wood costs in many parts of Canada
  7. ‘Coming of Age’ of U.S. South Southern Yellow Pine industry, as dominant supply region and price setter. 87% of 2014 production growth = U.S. Mills.

Woodbridge suggested “Super-Saturated Supply” will continue to dominate lumber markets and ‘hold-down’ lumber prices this year. And while too early to declare a trend in critical Texas, they cited Q1 warning signals in lumber demand, ripple effects from the oil price collapse. Their in-depth analysis charting multi-family vs single family home building, particularly in the South, was eye-catching.

At the same time, Woodbridge cautioned that Super-Saturated Supply is temporary, confirming predicted lumber super cycle fundamentals are “alive and well”; super cycle timing has simply been “pushed forward”. Also of note, in Woodbridge’s view, the SLA will be renewed (October 2015), but with a ‘kicker’ in the form of a ‘re-calibration’ which will be priced into Canadian SPF from 2016 onwards.

Pipe Dream?

As year-end projections and valuations come into focus, strong views from the the Pulp, Paper and Woodworkers of Canada and the Wilderness Committee, published over the weekend in the Times Colonist:

“What B.C. needs is legislation that supports an innovative and adaptable forest industry that creates local jobs and moves products up the value chain. Raw-log exports must be banned. Strong laws should also be enacted to protect the ecological values of our working forests for future generations.

Instead of addressing our shortfall in sustainable forestry jobs, the B.C. government is narrow-mindedly fixated on the extraction and export of liquefied fracked gas. It is an unavoidable fact that B.C.’s proposed LNG industry would have to be fed by gas extracted using hydraulic fracturing, or ‘fracking.’

The impact of this industry is already visible all over the province’s former wilderness: In certain parts of B.C., the oil and gas industry clears more trees than the forest industry.”

Trees are the solution that LNG never will be – Times Colonist
(21 Dec.)