False Creek Sawmills

False Creek looking east from Granville Bridge 1928

False Creek – 1928

Mills and Log Booms on False Creek 1936

1936

In A Short History of False Creek, Sam Sullivan writes: “The first Granville Bridge was built in 1889 connecting the south and north shores and industry, mills and manufacturing began to encircle the Creek. The CPR installed massive rail yards centred around the now refurbished Roundhouse, and to
the north residents began to settle close to the yards where they worked. These men used to work on the CPR in the Fraser Canyon town of Yale and when they relocated to False Creek, the neighbourhood of ‘Yaletown’ was born. By 1891, six of Vancouver’s eight saw mills were on False Creek.”

Living in Yaletown today, it’s hard to believe False Creek was once an industrial waterway lined with as many as 17 sawmills. When Vancouver’s first five-alarm fire destroyed the B.C. Forest Products plant and lumber storage facility on the south shore of False Creek in 1960, it marked the end of an era. Reportedly 200 million board feet of lumber (equivalent today to an 8-hour shift at West Fraser 🙂 ) was destroyed in the fire. A “False Creek Sawmill” search at The City of Vancouver Archives website this week produced over 89,000 results. The old images posted here are but a sample, interspersed with some pictures from a recent stroll.

~Green Shoots~

The Wall Street Journal reports “investors in the lumber market are the latest to be whipsawed by the struggle between two forces acting around the globe: stubbornly sluggish economic growth and expansive central-bank stimulus aimed at jump-starting business activity.” Five bullish takeaways from the article that suggest Lumber’s Set to Build on Its Rally:

  1. The 20.2% jump in new-home construction in April is the biggest monthly gain in percentage terms since February 1991
  2. Lumber futures have rebounded 15% since falling to a three-year low last week
  3. Many countries are cutting interest rates/buying bonds to ease financial conditions and support growth
  4. China has reduced rates three times in the last six months – Chinese demand likely to pick up in the coming months as lower borrowing costs revive home construction
  5. Building permits in the U.S. held steady even when housing starts were weak earlier this year (“all the projects delayed over winter will get done, in addition to everything else that’s scheduled”).

Phobias

They are said to be irrational fears. They are often misconstrued or misunderstood. I heard somebody actually define homophobia as the fear of owning a home. Close enough some might add, with enough evidence in play this week to dispute any notion that lumber super cycle delays stem from a lack of household formation rooted in fears of owning a home.

A report today at HousingWire.com quotes Realtor.com’s chief economist Jonathan Smoke: “The story about millennials not forming households and getting into homebuying is more of a 2012 and early 2013 story. It’s outdated. Our view of 2015 is informed by strong trends and indicators of what’s happening today with millennials.” CNBC confirms millenials are indeed flying the coop. “If you see these numbers with what we saw in household formation at the end of the year, we’re starting to see millennials spread their wings and fly,” said Diane Swonk, Mesirow Financial’s chief economist. “We saw household formation at the end of 2014 surge 1.7 million units after being below 400,000 for much of the recovery. Household formation is key to getting more spending in the U.S. economy.” Meanwhile on this side of the border, The Globe and Mail reports only in Greece do households have more debt than in Canada.

Where’s the evidence of phobia or fear of debt in all this we might ask. I couldn’t actually find a “phobia name” for financial fears. Closest might be “peniaphobia”, which is the irrational fear of poverty. What’s irrational about that, some might question. I’ve heard it said that the fear of debt is called experience. Lumber traders have been known to find peniaphobia to be an effective motivating factor in marketing of lumber – even overcoming any indications of hylophobia, that irrational fear of wood…

household formations

Super Week

In a week leading up to Super Bowl we’re still absorbing implications of variable air being let out of things on both sides of the border. On the Canadian side, weaker oil prompted economic measures aimed at pumping a deflating economy. On the U.S. side, any oxygen in the President’s State of the Union address seemed upstaged by headlines of deflated footballs. The annual NHL All-Star break this weekend garnered little attention with no claims of deflated equipment despite goalie Roberto Luongo’s preference for a softer puck.

Closer to home, B.C. Wholesale Lumber Association President Chris Sainas is pumped to confirm leading real estate marketer Bob “Condo King” Rennie will be the keynote speaker at tomorrow’s BCWLA Smoker in Vancouver. Speaking of sales, it’s reported majority of lumber analysts project benchmark SPF lumber prices to average between $370/M and $375/M this year (up from $350/M average in 2014). With the benchmark SPF price presently at $312/M, permabull Daryl Swetlishoff explains here: “At the core of our forecast is our assumption of total U.S. housing starts, which Raymond James expects to increase 10 per cent to 1.09 million units in 2015. We note this forecast remains conservative relative to consensus at 1.18 million units.”

Maui Rainbow 1-25-14

On the road to Kula, Maui – photo credit: ejh (01-25-15)

Q & A – the 2014 Edition

Of the Top Ten Questions for 2014 posed at Harderblog one year ago, some may have been satisfactorily answered for us; others, not so much.

1) Is there a real shortage of fibre supply looming?
B.C.’s Chief Forester Dave Peterson recently confirmed there will be less timber. “There’s no doubt we’re coming closer and closer to the point where the cuts will be reduced,” said Dave. Cuts are predicated by area, region, species, site conditions, and is specific to sawmills.. seemingly making any generalization regarding a fibre shortage not applicable. West Fraser CEO Ted Seraphim has publicly stated “The industry is smaller today and it’s going to be smaller tomorrow in British Columbia.”

2) Is B.C. doing enough to restore/replant forest that was degraded/destroyed by the Mountain Pine Beetle?
Earlier this week we turned to John Betts, Executive Director of the Western Silvicultural Contractors’ Association. “One of the best answers to that question comes from an internal Wildfire Management Branch discussion paper released recently describing the consequences of climate change and the current state of our forests,” says John. “We can expect widespread wildfires causing environmental losses and huge costs to government and the B.C. economy. Runaway wildfire years will not only upset provincial finances but cause major setbacks to landscape in terms of bio-diversity, abundance and services that influence the quality of air and water and life in general. The remedy to these consequences lies in restoring the landscape. But those mitigative restoration and reforestation strategies are not widespread in proportion to the scale of the threat. Nor are they consistently or adequately funded. I think we could do more to restore/replant forests. In fact we probably will have to in the future.”

3) Is the northern pipeline a relevant issue of interest to forestry in this province?
The real impact is still unknown. It would seem since many aspects of the northern pipeline are still up for negotiation, involving Federal politics,  First Nations negotiations.. many questions still unanswered.

4) Will Canadian Softwood lumber shipments to the United States be ‘duty-free’ for all twelve months in 2014?
Yes. In fact January 2015 will mark the 15th consecutive month that the “Prevailing Monthly Price” has remained above the $355/M tax trigger. The current 2006 Softwood Lumber Agreement expires October 12, 2015.

5) Is there a housing bubble developing in Canada?
CBC reports here “Both federal Finance Minister Joe Oliver and the governor of the Bank of Canada, Stephen Poloz, have acknowledged potential dangers. Poloz worried publicly last week that house prices could be overvalued. But when questioned in New York he said a 30% overvaluation was not a bubble.” While the normalization of interest rates is expected to have an impact, some still anticipate a ‘soft landing’. Meanwhile, vested interests peddle their skewed opinions to suit their own point of view.

6) Will U.S. housing starts reach 1.25 million in 2014?
No. November housing starts data indicates an annualized pace of 1.028 million for 2014. The monthly average through November is 991,000 (CIBC). Year-over-year, single family starts are up 4.4% and multifamily starts are up 16.6%  Severe winter weather saw housing starts down YOY in Q1 – but starts picked up in the 2nd half.

7) What does the emerging Super Cycle mean to lumber distributors in North America?
‘Super Cycle’ may still hold relevance in some pedalling circles, but as far as being part of B.C.’s forestry lexicon, it appears to have faded like lofty oil.

8) Who benefits from lumber and log exports to China?
The largest producers seem to be benefiting most from export growth. North American producers gain price leverage in offshore markets, enhancing the bottom line.

9) Is the gap likely to narrow between Luongo’s income in 2014 and the average lumber trader’s income?
No. Luongo is still being paid big bucks to play in front of Florida Panthers home crowds equivalent in numbers to most medium-sized office wholesale staff.

10)  Will West Fraser and Canfor ship enough wood to China in 2014 to renovate the Great Wall?
Through October, B.C. exports of softwood lumber to China were down 2.6% year-over-year (CIBC). In the month of October, B.C. exports to China were down 17% YOY (CIBC). As any homeowner knows, maintenance tends to be an ongoing process. And so it is with that big fence in China. In the face of China’s fibre deficit, the need for wood from “The Billion Board Foot Club” will be ongoing.

What do you think? Where do you agree/disagree? I welcome your input..

Jerry Howard in the house..

One of many highlights from an invigorating week on the road was the opportunity to listen to Jerry Howard, CEO of the National Association of Home Builders (NAHB). What a speaker. LMC Expo 11-12-14And with more than 25 years of lobbying and association experience in Washington DC, to suggest that Howard is ‘in the loop’ is to state the obvious. It’s evident the overriding concerns surrounding polarized political views continue to plague Congress. Some takeaways from Jerry Howard’s speech at the LMC Forest Products & Building Materials EXPO in Philadelphia November 11th:

  • Adaptation is what’s kept builders alive (remodeling, light commercial) – “those who survived the recession were the most adaptable”
  • NAHB had 250,000 members prior to recession; 130,000 today
  • Large, publicly-traded home builders only account for 25-30% of housing market activity – rest of the builders account for 70%
  • Those publicly-traded companies were most concentrated in the hottest markets –  the hardest hit markets in the recession
  • Since World War II, housing has led the economy into recession and housing has led the economy out of recession – but the financial sector collapse of 2008 was unprecedented
  • Policies of the Federal Government aimed at promoting home ownership are to blame for the collapse – “banks found creative ways to get people into housing” – underwriting mortgages = “good policy taken too far”
  • Now “unbelievably restrictive to get a mortgage”.. as result there are “no first-time home buyers in the market”
  • Inability of first-time buyers to get a mortgage is what’s impeding the market
  • Production will only come back when mortgage policy is loosened – Need to search for and find compromise in face of inability of representatives of government to solve differences on issues
  • Availability of credit also big challenge for builders
  • There is pent up housing demand historically that needs to be met – “1.4-1.6 million housing starts = organic demand” – owning a home “still part of the American dream”
  • Millennials want urban living but when they have a family they still want a single family house with a backyard in a good school district
  • Biggest thing home builders want from suppliers is consistency: consistency of product availability, quality, and price
  • “Recession took us for a loop” but “business people who survived the recession will have the wherewithal to see us through”
  • Emergence of “co-located” trade shows post-recession; NAHB International Builders Show and Kitchen & Bath Industry Show combine in January
  • Forecast for “1.2 to 1.4 million” U.S. housing starts in 2015 raised a few eyebrows!

Tall Order

When BC’s BigTree Registry came into the possession of the University of British Columbia in 2010, “it was a mess of paper records” reports The Vancouver Sun. Confirms Sally Aitken, professor of forests and conservation sciences at UBC: “It consisted of several bankers’ boxes of paper records, maps of various sorts and qualities, some photos and then there was just a single list of trees. It was not something that people could really access information from easily.” Access for all is now just a click away at the impressively concise UBC Faculty of Forestry BC BigTree Website which includes a link to the Registry.

Perusing the Registry, it seems safe to presume the giant tree we encountered last month on a visit to Vancouver Island is identified as tree #102. The biggest Coastal Douglas Fir in Cathedral Grove, the registry verifies measurements for tree #102 as: height 70.1 metres, circumference 10.11 m, crown spread 20.7 m. With a “score” of 645, the tree is presently ranked number 8 in the province, species Pseudotsuga menziesii. It was particularly interesting to discover that two Douglas Fir trees located here in North Vancouver are even bigger. With scores of 675 and 673, they presently hold the number four and five rankings on the list of champions.

Updated 10-17:
An email response to this post from BC BigTree Registry confirms tree #102 is not the giant pictured below. In fact the tree below has yet to be nominated: “The receipt of your photo prompted some interesting discussion and it was discovered that tree #102, last measured in 1990, was greatly reduced in size during the big wind storm in 1997.. it is now only 100 feet tall and no longer the largest tree in the grove.. the Registry will be updated to include this new information for tree #102.”

“This you inherit; guard it well, for it is far more precious than money, and once destroyed, nature’s beauty cannot be repurchased at any price.”
– Quote from Ansel Adams
as posted at UBC Faculty of Forestry BC Big Tree Website

img_2370 (2)

BC Big Tree Registry ID #102, Cathedral Grove #1 ??

Remember When

Back in 2011, the North American Wholesale Lumber Association (NAWLA) Regional Meeting in Vancouver featured three excellent speakers: Daryl Swetlishoff (Head of Research, Raymond James Ltd), Oscar Faoro (Special Projects, Canadian Wood Council), and Jim Jia (President, L J Resources Ltd). I recall catching up with Oscar following his informative presentation on multi-family, sustainable densification. He openly laughed at analyst projections that U.S. housing starts would return to 1.4 million by 2014. “It’s not going to happen like that!” asserted Oscar.
… Fast forward to today. Housing starts are at an annual pace of 976,000. The rate of multi-family starts grew by 21% in the first eight months of the year, while single-family starts grew just 2%.

Today’s MNI News Reality Check here is packed with surprisingly forthright quotes. It’s a good read. In the piece, Paul Jannke of Forest Economic Advisors, a bull in a Bruins jersey at NAWLA Vancouver 2012, now contends that demand for housing will not sustain an upturn in lumber prices. Says Jannke, “If you’re selling 400,000 (homes), why do you need to build 1.4 million? If you look at the actual demand for housing, it’s not as high as people think it is.”
… Could it be that housing starts data has taken on “a different meaning for the lumber industry”, as Shawn Church at Random Lengths suggested here, back in March?

“Lumber producers are making a lot of money producing lumber right now, and what do you do when you make a lot of money? You produce more lumber. It’s unlikely that we are going to see a significant increase in lumber prices.”
– Paul Jannke, Forest Economic Advisors (Sept. 2014)

Home Sweet Home

Inextricably tied into lumber market activity, home values make news on both sides of the border. In Canada, where it’s reported house resale prices are 66% higher than resale prices in the U.S., we’re told real estate now accounts for more of the economy than oil and gas and manufacturing combined. In a blog post this week, former MP Garth Turner confirms, “Canadians have decided there is only one asset they can trust – their homes, regardless of the cost.” Pointing to “artificially cheap money” over the past five years, he says that here in Canada “real estate became a cult, then a mania and finally a religion. As a result, risk has elevated exponentially… Half of us couldn’t survive one missed paycheque and the Millennials can’t climb out of basements.”

I received an email this morning from a personal connection in Southern California who read the same post. He writes, “Them be dire words from Garth Turner and must be most concerning for Canadians who witnessed the U.S. market meltdown. We know the wrath of a market meltdown on a personal basis. We purchased our Murrieta, CA home in September 2001 before the price run-up which was not the case for thousands of homeowners who lost their homes to foreclosure.” He references the assessed values of his house (see below) from the purchase through the bursting of the bubble and to the present, while adding his own comments. He notes: “A lot of homes were sold in our development during the years 2005-6-7 with virtually 100% of those buyers walking away from their underwater mortgage.”

Sept 2001 – $317,000 .. Purchase Price

Dec 2002: – $337,000

Dec 2003: – $377.000

Dec 2004: – $413,000 .. Should we buy that waterfront property?

Dec 2005: – $450,000 .. Lets rather take out a home equity loan

Dec 2006: – $600,000 .. and buy that villa in Spain.

Dec 2007: – $710,000 .. This sure does beat working for a living.

Dec 2008: – $400,000 .. What happened?? Not our best year ever.

Dec 2009: – $325,000 .. Talk about a hair cut!!!!!

Dec 2010: – $300,000 .. Yikes.. Hang on.. this thing’s no joke!!!

Dec 2011: – $310,000 .. Maybe as a greeter at Walmart you say???

Dec 2013: – $450,000 .. The forecast suggests the storm is waning.

Sep 2014: – $420,000 .. Not sure if we can stop holding our breath…yet..

Single Family Shortfall

While the good news in reported U.S. housing starts is an 8% increase year over year, clearly the annual pace of single-family construction is falling well short of early projections. As noted in a February post here, a forecast from the National Association of Homebuilders (NAHB) called for single-family production to reach 822,000 units this year – an increase of 32 per cent over last year. The August data released this morning indicates an annual pace of 643,000 – an increase of just 4 per cent. The data underscores ongoing uncertainties hanging over housing activity despite confirmation of continued low interest rates coming out of Fed reports this week.

Meanwhile, the NAHB confirms softwood lumber prices rose 2.4 per cent in August, but are down modestly from an earlier March peak. In the face of gradually increasing demand for building materials, the NAHB attributes price softness to “additional productive capacity being brought back to the wood products sector”. As one lumber trader was overheard to say, “Nothing solves high prices like high prices”.

Moneyball..

Comes to distribution. “Think of it as a triathlon,” writes ProSales Magazine editor-in-chief Craig Webb. That’s how he characterizes life in the rapidly changing world of lumber and building materials (LBM) distribution since the U.S. housing market crash. Like a triathlete, LBM companies who survived the deep frigid waters have emerged on dry land, only to “climb onto a bicycle and continue the race in a new way”. Success will “hinge on how good your bicycle is,” suggests Webb, before confirming that the bicycle is data. Webb goes on to reveal how some LBM leaders are utilizing information to pull away from the pack. It’s a good read for dealers and distributors alike.
See: Embracing Big Data Benefits Your Business – and Your Customers.

“We still are an industry that’s dealing with technology. We should be dealing with information.”
– Jim Enter, LBM Consultant

“Freight is still the fattest rabbit we’ve got – it’s 4% to 16% of sales.”
– Leonard Safrit, Safrit’s Building Supply

“The No. 1 technology innovation that ProSales 100 dealers plan to invest in this year is mobile applications.”
– Craig Webb, ProSales Magazine