Poll1

Do you think us housing starts will recover this summer (2011)?

View Results

Loading ... Loading ...

Poll2

Do modern timber harvest practices take environmental concerns seriously enough?

View Results

Loading ... Loading ...

Poll3

Does increased paper production in emerging nations like china and india mean the end of the north american and european paper industry?

View Results

Loading ... Loading ...

Poll4

Will china's growing hunger for timber cause a threat to global supply from new zealand's forestland?

View Results

Loading ... Loading ...

Poll5

Will russia eventually develop a thriving sawmill industry?

View Results

Loading ... Loading ...

Forest Lumber Certification Prices

Volume 50 No. 19 – May 12, 2000

Who’s in Charge Anyway?

Read nearly any newspaper story these days involving the forest industry and before you get too far into the article, it’s almost guaranteed you’ll be reading about certification. Not only is certification the hot topic for the media this year, but it has become the killer Strategic Defensive Initiative (SDI) in the environmentalists’ war against harvesting in the west coast rain forest. Of course there are other weapons as well, such as calling B.C.’s coast the great bear rain forest, a seven million hectare area which extends from the northern tip of Vancouver Island to the Alaska Panhandle, but of all the defensive initiatives environmentalists have trotted out, the most effective by far is certification.

Attesting to the potency of this initiative are the latest converts to kneel at the certification alter, Dallas based Centex Homes, and

Kaufman and Broad (K&B) of Los Angeles. They have just agreed to stop buying lumber produced from endangered forests although they haven’t detailed a specific schedule for this action. By endangered forests I presume they mean old growth forests, but I’m having trouble ascertaining why business is convinced these forests are endangered. That seems to matter little, however, since environmentalists’ campaigns have been based on scare tactics that old growth forests are endangered. I can’t speak for the rest of the world, but that’s not the case on the B.C. coast, where these forests are still abundant.

The decision by Centex and K&B to use only certified wood isn’t insignificant. K&B has divisions in Colorado, Texas, California, Arizona, Nevada, New Mexico, and even in France. It is reported this

company built 22,460 homes last year, while Centex claims it built over 18,000 homes. With numbers like these, you can see why the forest industry pays attention. When you combine these declarations with already declared certification supporters such as Home Depot and IKEA, there is little doubt certification is in every forest company’s future.

Could we have peered behind the scene when these retail giants decided on certification, I’m sure we would find it involved a considerable degree ofcoercion. Groups such as Greenpeace and the Rainforest Action Network are known for implementing commando type tactics to coerce lumber retailers into making the certification pronouncement. The only question in every forest company president’s mind now is which certification organization to join.

At present there are three main certification bodies, Forest Stewardship Council (FSC), International Standards Organization (ISO), and, Canadian Standards Association (CSA). The requirements for each are somewhat different, but each is vying for dominance which at this point, hasn’t yet been established. For lumber retailers, this isn’t of much concern, since as long as the lumber comes with one certification stamp or another, their backside is covered. Forest companies, however, face the quandary of which organization to join. Subscribing to the wrong certification body could be a costly decision down the road, especially if that

Directory Ships

The 44th edition of Madison’s Canadian Lumber Directory is now available for immediate shipment. Pre-orders are being filled first. If you would like a copy of the most complete and comprehensive directory on the Canadian forest industry, please phone, fax, or e-mail for an order form. Phone: 604)681-6838 Fax: (604)681-6585 E-mail: madrep@direct.ca

particular body disappears or is otherwise eliminated from the race. That would mean starting the process all over again, and as you can well imagine, obtaining certification isn’t an inexpensive exercise.

I have pointed out before in this column, that certification, along with its inherent involvement by the greenies, is putting Colonel Sanders in charge of the chicken coup. This may sound like b.s. on my part, but closer examination indicates certification could become contrary to the objectives of the forest industry. With the power certification organizations already wield over the lumber retail business, it is an easy step to start insisting on what products can be used for what purpose— a sort of interdiction list, if you wish. For example, plywood could be condemned in favor of composite board, since plywood is frequently produced from old growth wood while OSB comes from poplar; or, builders could be mandated to use finger jointed products rather than solid wood products, to improve utilization and lessen forest depletion.

The scary part, however, is substitution of wood in favor of products such as steel, plastics, concrete, or other materials that may emerge from tomorrow’s technical wizardry. These competitors are already breathing hot on the forest industry’s ass, and with an initiative not based on cost competitiveness, these producers could forge ahead to supplant traditional wood products with products of their own. Steel frame construction is a good example, as are concrete blocks and plastic cladding products.

It’s not difficult to conceive that today’s certification bodies could be determining what our houses will be built from in the future. It’s pretty clear environmentalists want all rainforest logging stopped, and giving them control over which products can be sold opens the door toward that objective. Unfortunately, the forest industry isn’t likely to get much support from building retailers either, since I can’t imagine they really care what building materials they sell, as long as each item shows a profit as it walks out the door.

The industry is today in a very ironical position. To stay in business, certification is no longer an option, yet achieving certification could be foreshadowing a much less significant

forest industry in the future. You’ve got to admit, the greenies have played a pretty sharp game. At every turn they have outmaneuvered the forest industry and have now put themselves in position to achieve what no one could possibly have imagined a scant few years ago.

So who’s in charge now? Why, the greenies, of course! Where does that put the future of the forest industry? In jeopardy!

C Starts Drop

April housing starts in Canada dropped an average of 5.4 per cent to an annualized rate of 158,300, down from 167,300 units in March, says Canada Mortgage and Housing Crop. (CMHC). Single family housing took the biggest hit, down 12.7 per cent to 79,300 units from the March level which was 90,800 units. April multiples moved up 4.9 per cent to 55,700 units, which compares to 53,100 units in March.

Despite the drop in single starts, total housing starts are still 9.5 per cent higher than the same period a year ago and up over 10 per cent on a year to date basis. Disregarding the April decline, Canadian housing starts for the first three months of this year have been at their highest level in 10 years. Ontario has lead the parade, with more than half of the national total. CMHC says the housing market remains strong in Canada, due to improving wages and employment levels. Analysts predict 160,000 starts for 2000 and 163,000 for 2001. This compares to 150,000 starts in 1999.

U.S. Housing Declining?

Although not substantiated by government statistics, rumors of declining U.S. housing starts are being blamed for lackluster performance in the lumber market and falling prices for lumber futures. May futures recently fell to US$289.50, while the July contract fell to US$298.40. The market is also reported to have an over production problem, which isn’t helping the situation. Lumber prices are reported down over 14 per cent so far this year and if the rumors prove true, look for lumber prices to slide even further.

Weyco Amalgamates

The Weyerhaeuser company, headquartered in Federal Way, Washington, has decided to merge three Canadian operations into one company called Weyerhaeuser Co. Ltd. The merger includes: Weyerhaeuser Co. Ltd., the MacMillan Bloedel asset; Weyerhaeuser Canada Ltd., the company’s Canadian arm before the MB purchase; and Green Forest Lumber Ltd., of Ontario. Green Forest was owned by

MacMillan Bloedel before the Weyerhaeuser takeover. The Weyerhaeuser parent still has two operations in Saskatchewan, which it plans to continue running as separate wholly owned subsidiaries under Weyerhaeuser Canada. Weyerhaeuser operates in 13 countries around the world and has assets estimated at US$18 billion.

Canfor Cuts Back

Vancouver, B.C. based Canfor Corp., Canada’s largest lumber producer, says it will temporarily close some of its mills between May and August, to conduct routine maintenance and reduce production. The shutdowns are expected to cut approximately 80 million board feet from the company’s total annual production of 2.6 billion board feet. Canfor hasn’t yet announced which mills will take the downtime.

P&T Mill Closes

Portland, Oregon based Pope & Talbot Inc., says it will permanently close its Newcastle, Wyoming sawmill, effective July 7, 2000. This mill, which employs 75 people and produces 30 million board feet annually, was purchased in 1989. The company plans to continue operating its nearby Spearfish, South Dakota sawmill, which produces approximately 120 million board feet annually. Company spokesman Michael Flannery, president and CEO says that over the last four years, the Forest Service has allocated only 75 per cent ofthe planned volume under the Black Hills National Forest Plan, making it impractical to continue operating two adjacent facilities.

MarketWrap-up

WSPF Unmotivated

More of the same old flat, boring, inert market, totaled up to negative motivation at all levels. Tiny blips on Tuesday and

Wednesday were more exciting than they would have been in a normal sales week. Although traders had hoped the slight mid week swell would continue building, they were disappointed.

While inquiry was noteworthy through the dearth of sales in previous weeks, there was no conversation this week that was unrelated to the few

small orders.

What did sell was piece meal; there was no sustained support for any particular product or grade. A couple of off-brand mills ventured to discount small lots, which gave them desultory action—mainly nibbles around the edges. Order files were noticeable by their absence. Mill traders dissembled and padded their order file estimates to stretch to around one week. At the second tier, wholesalers insisted they could get shipment confirmation within 24 hours on just about anything.

Prices were subjectively based on who you were, how much you were planning to buy, and how quickly you expected to move it along. The only consensus was that market price was nowhere near what had recently been printed in several U.S. based lumber market analyses. ‘U.S. print’ was way off—at least $10—and, according to some sources, closer to $20 above the level where orders were being confirmed. What knocked numbers so far off was that mills insisted they were getting their board level numbers on orders, while they were actually discounting freight to preferred destinations by up to $20 on delivered prices. That practice amounted to taking off a $10-$20 counter on quoted mill price.

In KD R/L Std&Btr 2×4, the actual price at the mill inched about $1 higher to $276 by Thursday morning, then spiked downward sharply $6 to $270. KD R/L #2&Btr 2×6 hung on to the $275 where it had been pegged the previous week. In #2&Btr wides, 2×8 eroded $2 to $276; 2×10 slashed $10 to $320; 2×12 spelunked $20 to $340. Announced shutdowns and production cutbacks among western spruce mills are bringing little relief from the deluge of production. Specifically, during the period from May to August, Canfor will reduce production by 80 million board feet and Weldwood will snip off 15 million board feet of production during the week of May 22.

Studs Fly Trapping

Grandma said: “You can catch more flies with honey than you can with vinegar”. Stud producers followed that rule this week, as they rolled back prices slightly to catch a few orders. They didn’t get much more than a flutter from one buying group, but that gave a much needed sign there is still life left in the old market. One trader assured us: “There are orders to be had if you hit the right numbers at the right time”. Wednesday was the day the phones rang; the silence of the tomb pervaded the other days. Order files were into the week of May 22 on most items. Truck traffic was lean going east to Alberta reloads, but presented little problem to creative shippers in the west.

MSR Liquid

Brisk activity in MSR was a bright spot for western spruce producers. Traders ran to keep up after they hit a mother lode. New sales were stimulated by a price roll back. Customers responded by rolling out the purchase orders. Mills weren’t happy with the price levels, but thought the lighter numbers could prime the pump. Order files were into the week of May 22.

ESPF Pushable

Eastern producers let customers push prices down on random lengths. Small order files made traders more amenable to $10 (and deeper) counter offers on commodity dimension items. Studs were closer to firm because of decent order files of two weeks and longer.

Cedar Tidy

Word is that the cedar business is ‘just okay’ so far this spring. Nothing fancy, but continued steady sales on the high grades. Low grades are dragging but not causing any worries at this time.

Batteries Not Included

A gradual droop in the prices of fir demonstrates the need for longer lasting batteries in mill managers’ calculators. If they looked out the window, maybe they’d notice the lumber pile is growing and nobody is buying. Might they conclude increasing production will drive prices further down? Nope. They’ve got Marlboro man clones running the mills. They’ll do this with no hands and their eyes closed. Those saws will run flat out as long as they’ve got cheap logs. Guess they’ll make up the difference on volume.

OSB & Plywood

It’s gloom and doom among Canadian OSB traders this week. In Toronto, the concrete drivers rejected what was described as a decent offer from employers and the strike continues. Construction activity throughout eastern Canada has been adversely affected by the dispute, even though OSB producers have been actively seeking price levels that will attract some business. Warm sunny weather and lower prices didn’t do much for business on the Canadian side, but some U.S. buyers were attracted. This week, 7/16” Toronto prices were down $25 to C$340. There is no take away, say traders, and inquiry levels are awful. Order files are out to the week of May 22. In western Canada, the market is no better. Tuesday was a good day for one OSB producer, but even then, order files were barely out to the week of May 22. Unseasonably cold weather has slowed construction activity in B.C., and like their eastern counterparts, OSB producers are selling mainly to buyers in the U.S.

Cargo & Reload

Traders in the U.S. northeast say it is anyone’s guess how much longer market activity will continue declining. The weather has turned warm, and construction sites are busy, but lumber production has all but overwhelmed buyer demand. Talk of production curtailments continues, but actual curtailments are so small their effect on the market is zero. “Business is up a little one day, down the next, and sideways the day after,” said one discouraged trader. “There are too many rollers to buy, and too many mill offerings,” said another. This is a buyers market, and most buys are small, frequent, and highly specified. The abundance of lumber available from mills in the U.S. west has prompted one large wholesaler to drop selling prices for green fir 2×10 and 2×12 by $30 and $20 respectively. This offers buyers a spread of $40 in selling prices for these two items. Selling prices for other items are down by $10 to $15.

Announcements

Saying it was time to pass the baton, the 77 year old CEO and founder of Slocan Forest Products, Ike Barber, stepped aside at the company annual general meeting May 5, to be replaced by current company president, Jim Shepherd, who will become CEO July 1. Although he is retiring as CEO, Barber expects to continue as chairman of the board, as well as chairman of an executive committee studying strategic directions for the company. Barber started the company in 1978, by taking out a mortgage on the family home. Last year, Slocan reported sales in excess of $1 billion. We regret to report the passing on May 10, of John Furman, the founder of Furman Lumber. He was 83 years old. One of the best known names in the industry, Furman remained active in the lumber business until recently. Mr. Furman was a valued and reliable source of market information for this newsletter and we at Madison’s will miss his knowledgeable insight and expertise.

Refer to Madison’s Lumber Reporter for the latest news in the lumber industry.

Related Articles:


To vote on this article click on the below bar (make sure to choose vote before clicking):
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading ... Loading ...

You must be logged in to post a comment.