What’s wrong with this picture?

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

Close?

While industry spokespersons are being tight lipped about progress in softwood lumber negotiations, rumours abound.

Last Friday, word circulated that Canadian Minister of Foreign Affairs Christina Freeland and United States Secretary of Commerce Wilbur Ross “shook hands” on a ten year Softwood Lumber Agreement restricting market share. This rumour seemed to be congruent with perceived political motivation to achieve a managed trade agreement ahead of potential NAFTA negotiations. By Monday however, a declared state of emergency due to mega-fires in B.C. superseded quota chatter. Then CIBC Capital Markets cautioned that any proposed settlement could be vetoed by the U.S. Lumber Coalition. The rumour fizzled Monday afternoon when in a Madison’s Lumber Reporter follow-up, we were told a source close to the U.S. Lumber Coalition had cleverly confirmed that Minister Freeland and Secretary Ross “surely shook hands” on Friday but “did not shake hands on a deal”. In an update just this afternoon, CIBC Capital Markets noted the framework of the rumoured “handshake deal” was almost identical to a proposal the two sides were reportedly close to agreement on two weeks ago before it was rejected by the Coalition.  CIBC estimates the probability of an agreement between the two countries by the end of August at “greater than 50%”.

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As recently as last Thursday, the only talk about forest fires in this province was about how few were burning (“three or four”). Suddenly 140 fires started Friday, followed by nearly 100 more Saturday, and a few dozen more Sunday. It’s interesting to learn here how a below-average fire season in 2016 and an unseasonably wet spring in 2017 may have made the forest more susceptible to fire, fueling the unprecedented spread over the weekend. Mills watch with anxiety as the wildfire season, just begun, is impacting Interior communities and forest operations. The Vancouver Sun reports West Fraser, Tolko, and OSB manufacturer Norbord are among the companies that have suspended operations around 100 Mile House and Williams Lake, with 1,000 employees from West Fraser alone off work due to the closures.

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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BREAKING NEWS

Some of us might wonder if the North American Wholesale Lumber Association risks upstaging CNN and Wolf Blitzer with BREAKING NEWS when the 2017 NAWLA Regional Meeting convenes in Vancouver next week. We can’t be sure of that. Although the anticipated public announcement of the U.S. Department of Commerce preliminary CVD ruling April 25th against Canadian softwood lumber imports is expected to draw a full house to the NAWLA gathering two days later, April 27th. An expert panel’s assessment of implications of the preliminary ruling is sure to attract heightened interest:

  • Jason Fisher, Associate Deputy Minister, Forest Sector at B.C. Ministry of Forests
  • Susan Yurkovich, President & CEO, B.C. Council of Forest Industries
  • Duncan Davies, President & CEO, Interfor Corporation

For more information, visit the NAWLA Vancouver Regional Meeting webpage here.

Update from NAWLA (April 25):  The 2017 Vancouver Regional Meeting has reached capacity and is unable to accept additional registrants at this time. The wait list for this event is also now full. Only those who are on the attendee list will be granted access to this event.

Alternative Facts?

Revised data that corrects a “massive” disparity in Canadian softwood lumber shipment volumes to the United States in 2016 could significantly impact countervailing and/or anti-dumping duty cases. According to Random Lengths, statistics gathered through the U.S. Census Bureau had reported that imports from Canada were 16.065 billion board feet in 2016. Figures from Statistics Canada indicated Canadian shipments to the U.S. were 14.954 billion board feet. “The gap between the two sets of data of 1.11 bbf, or 7%, was massive by historical standards. The discrepancy surfaced late in the first quarter last year, and grew as wide as 10%” (Random Lengths International Report, March 15). We’re told a number of downward adjustments released yesterday by the U.S. Census Bureau which included SPF, Western Red Cedar, and Douglas Fir shipments, brings the U.S. import statistics in accord with Canadian export data.

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!

best-damn-photos-twisty-palm-tree