Tag Archives: lumber market

2018 NAWLA Vancouver Regional Meeting

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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.

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Bigfoot Blame

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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”.

All Aboard! Pennsylvania Station (Baltimore) – 24 Oct 2017
Dakeryn Specialties Manager Brad Taylor with Mike Jones, Hampton Lumber – 25 Oct 2017

Lumber Market Pricing

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“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)

Talk About the Weather

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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)

What’s wrong with this picture?

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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

Robots and Lumber Traders

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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)

Think Harder

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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…

best-damn-photos-beliefs-sign-fit

image source: brobible.com

Q&A – Final Five for 2016

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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

Summer Surprise

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A number of forest analysts were projecting that while we are in midst of a long period of strengthening lumber markets, prices could fade this summer due to increasing production on both sides of the border. The 20% jump year-over-year in U.S. housing starts experienced in Q1 was widely explained by the mild winter compared to 2015. While no one projects another 20% jump in starts this year, homebuilding activity continues to grind forward. Demand for lumber has been surprisingly strong through mid-August. Notably, the Framing Lumber Composite Price is up almost 20% since the Softwood Lumber Agreement expired last October.

The positive correlation illustrated below suggests the “surge” in cross-border shipments during the standstill period to date is largely demand-driven. The chart plots B.C. softwood exports to the U.S. per BCStats vs. the Framing Lumber Composite Price by month per Random Lengths (most recent data for softwood shipments is June; the Composite Price had climbed to $369 by the end of last week).

Export Vol vs Composite Price (2)

Big Tippers

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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.

wolf of wall street

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.