Recipe Highlights for lumber trader’s survival. A delectable turkey side dish of current lumber market opinion. Mix a peck of prudence with an abundance of caution. Stir in a pinch of patience. Flavor to pain tolerance. Mask temptation to taste before allowing adequate cooling. Stand back and stand by. Happy Canadian Thanksgiving!
Where, oh where has the market gone? This is the mournful lament intoned on lumber trading floors spooked well in advance of Hallowe’en this year.
Conditions testing the resilience of experienced traders are drawing comparisons with the global financial crisis and US housing market collapse of a decade ago. Today’s geopolitical landscape seems besieged with instability amid crises, including international trade concerns, rising interest rates, financial market volatility, and looming US elections.
Seasoned traders seek to offer reassurance and calm aimed at validating longstanding customer-supplier relationships. While financial analysts scramble to make sense of conditions in the face of seemingly disparate economic data, it seems timely to explore tips for dealing with the biggest lumber market meltdown in history.
Google has advice for handling times like these. One link offering “28 positive things you can do when business is slow” suggests a slow period is just another name for opportunity: “ask for help, take some down time, take a course, take up a hobby, network, develop new offerings, rethink your business model and processes, strengthen important relationships, write, teach, volunteer, exercise, study another industry.” Some guys have even been known to enthusiastically take up coaching – not one – but two girls’ soccer teams.
Another column suggested eating lots of leafy green vegetables to keep your cognitive abilities sharp and on high alert. Even so, we’re told Canada’s legalized cannabis should not be seen as a tool for alleviating anxiety in current market milieu.
Where, oh where has the market gone?
Like a saucer of yesterday’s beer.
I don’t wanna be short,
I don’t wanna be long,
In fact Duthie, I don’t even wanna be here.
– Ernie Harder, singing live at the 1995 British Columbia Wholesale Lumber Association Roast honoring Duthie Welsford, BCWLA Lumberman of the Year (recording below)
Breaking up is hard to do. Certain market segment’s love affair with record high lumber prices appears to be over.
Image Source: finfiz.com
Is the lumber market ripe for picking? Who knows. Unfortunately this week’s picking readiness signalled by my backyard apple tree’s bumper crop offers little guidance. Unlike apples dropping from a tree, falling lumber prices can’t be sure of where ground level support intervenes.
Wait for a couple of apples to fall from the tree. Apple trees naturally drop their apples when they are ripe in order to self-seed and reproduce. Watch for an apple or two to drop from the tree to determine if they are ready to pick.
When your apples are ripe, they should be fairly easy to pick from the tree with a simple upward twist of the apple. Try to avoid picking an apple by pulling the fruit straight down and tugging.
If otherwise healthy fruits begin to fall off the tree, they are probably beginning to get a little too ripe and should probably be harvested as soon as possible.
Now if only Google could offer up unambiguous harvest-time signals for lumber inventory managers.
We’re in for a heat wave. Wildfires threaten our woods, with B.C. Interior areas contemplating evacuation alert notices. It’s a stress-inducing situation that has even lumber traders wondering how to keep cool. Uniting in nudity is suggested as a solution by some. We read of a Newcastle, UK based marketing company who once decided to have a naked Friday, “to boost team spirit and improve employee morale.” Business psychologist David Taylor called it “the most extreme technique” he’s ever used. After a week of counselling and office activities aimed at building courage, most of the co-workers agreed to strip down to work in the buff for a day in an effort to boost production (and probably for a chance to be on TV). The ‘naked event’ is said to have turned around the company’s fortunes.
We’re told that Canada’s first and largest legal, clothing-optional beach, Vancouver’s Wreck Beach, is so crowded this week, there’s a lot of jostling going on to find room to park your fanny pack. It’s reported that at Wreck Beach, named among the world’s top 10 nude beaches, the atmosphere is very stress free. “When you shed your clothes, you shed the stress. It also helps you keep cool”. With lumber prices continuing to peel off this week, it may have some traders dedicated to serving supplier and customer needs from behind office desks wondering.
The tensions of upsets in World Cup soccer matches are enjoyable. Market corrections that create upsets and tension, not so much.
The market adage that “nothing goes up forever” is presently shaping harsh realities in lumber prices. After peaking at $583 June 5th, the Framing Lumber Composite Price in the June 19th Random Lengths Midweek Report softly logged in at $562. Lumber Futures down $120 since the May contract expired (HT: @LumberTrading). Buyers and sellers of wood are experiencing Isaac Newton’s 400 year-old law that “an object in motion tends to stay in motion unless an external force acts on it.” Traders may be wondering what external forces will come into play to reverse the market’s present downward motion. Will it be another summer of devastating wildfires? Curtailed production? Underlying strengths of construction activity? More transportation woes?
In the meantime, we’ll look forward to teeing it up with distinguished representatives from Canfor, Carrier, Conifex, Dunkley, Hampton, Interfor, Millar, Sinclar, and Teal-Jones – all joining local retailers and staff members here tomorrow – for the mighty Dakeryn Golf Tournament at Riverway Golf Course in Burnaby, BC. — “FORE!!”
The sidewalks were deserted, the lobby was the same;
The place looked dark and dreary, except one window pane.
Behind it sat a weary man, his head held in his hand;
His face was steeped in anguish as he peered across the land.
He saw the blue Willamette that glimmered from afar,
But his mind was sorely burdened by an unsold transit car.
He snapped it up in early May when things were looking right,
And got the mill to ship it, but not without a fight.
It was a steal at seventy-two, his hopes were raised on high;
But lo when first he offered it, the dealers passed it by.
He shrugged and bade the railroad boys to slow her down a twist,
Then doubled up his efforts to get it off his list.
– Excerpt from “The Office Wholesaler”
(Author unknown – can anyone identify? circa 197_?)
Hat Tip: Ian White, Dakeryn Industries
Unfortunately our field trip for Thursday to Tupper Secondary for woodworking has been cancelled. The supplier for the wood has run out of supplies! So we will have to cancel. Thank you to all the parents who offered to take the time to drive us!
– Evie’s Grade One teacher (via email, May 23)
On the topic of dwindling fibre supply, it’s reported the B.C. Interior accounts for more than 90% of the province’s softwood lumber exports to the United States. So far this year, the significant decline in B.C. lumber shipments to the U.S. (down 20% in the first quarter according to the article) is widely attributed to transportation bottlenecks and export duties. However a bleak report here from The Globe & Mail this week serves as stark reminder to post-beetle, mega-fire, fibre scarcity realities – a land base “ravaged in turn by pests, fire and drought”.. a province with “barely enough timber now available to meet legal commitments to its major forest license holders”. After a recent fly over, B.C. Minister of Forests Doug Donaldson likened the Chilcotin Plateau, 60 kilometres west of Quesnel, to “a moonscape”. Never mind the missing trees; in some places we’re told, firestorms consumed even the soil.
In a report in February, the chief forester noted that the 2017 wildfires in B.C. affected over 1.2 million hectares, the largest impact on record (in about 100 years of record-keeping) for a single fire season. Most of that – about one million hectares – was in the Cariboo region. The fires consumed or damaged almost one-quarter of Quesnel’s timber supply. That is on top of the devastation wrought by the Mountain Pine Beetle epidemic, and sustained drought conditions that had led to fire bans in April – remarkably early. “We just cringe now when we see lightning,” Quesnel Mayor Mr. Simpson said. Now, a growing fir beetle infestation that somehow eluded last year’s wildfires is putting the remaining timber supply at risk. “There isn’t a tree species or a plantation that isn’t under stress due to increasing maladaptation to the current climate,” Mr. Simpson said.
– The Globe and Mail (21 May, 2018)
Meanwhile, Random Lengths reports lumber output in B.C. was down almost 8% in February from the same month a year ago; through the first two months of 2018, production in B.C. was down over 3%. On the bright side, according to Random Lengths, late-shipping railcars are beginning to roll into destinations more readily – welcome short term relief no doubt for razor-thin inventories at distribution yards and North American dealers starved for wood.
Of course in the long run, a global market is in play to influence supply and pricing. When demand for lumber increases, prices climb. When production ramps up, the supply/demand balance swings the other way and prices come off. What happens when production can’t ramp up?
The lion’s share of increased North America lumber production will need to come from U.S. mills.
– Russ Taylor, Forest Economic Advisors (FEA) Canada (19 Jan 2018)
The U.S. labour force is the single biggest constraining factor in U.S. sawmill production.
-Paul Jannke, FEA (5 Apr 2018)
Another sell-out crowd packed The Vancouver Club’s Grand Ballroom yesterday afternoon for the annual North American Wholesale Lumber Association (NAWLA) Regional Meeting. Vancouver’s Lumber Marketing Event of the Year also celebrated NAWLA’s 125th year “dedicated to growing and nurturing every aspect of the lumber industry.” NAWLA’s Executive Director Marc Saracco opened the meeting. Presentations by three featured speakers were all very well-received:
Jennifer Cover, Executive Director, WoodWorks USA – Wood Products Council
Russ Taylor, Managing Director – Forest Economic Advisors (FEA) Canada
Derek Orr, Business Development Manager, Carrier Lumber Ltd
Thanks to Tree Frog News for the following images posted with permission.
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”.
“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)