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

View Results

Loading ... Loading ...


Do modern timber harvest practices take environmental concerns seriously enough?

View Results

Loading ... Loading ...


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 ...


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

View Results

Loading ... Loading ...


Will russia eventually develop a thriving sawmill industry?

View Results

Loading ... Loading ...

Home Lumber Wholesalers Sales Prices

Volume 52 No. 5, February 1, 2002

A Reflection of the Facts

With the new year barely underway, predictions on the forthcoming performance of the economy are emanating forth like meteor showers on a hot August night. One headliner after another makes its brief appearance at the podium, then in true meteoric fashion, fizzles into oblivion in a dwindling streak of light. Such annual predictions are particularly apparent now because forest companies are reporting their fourth quarter, and in many cases, annual financial earnings and the results are neither favorable nor optimistic.

The most pressing issue is a solution to the Canada-U.S. lumber trade dispute and, depending on the individual situation, progress is either nonexistent or retrograde. The players seem divided into three camps: the overly optimistic that want to fight at the WTO and decide what to do once a decision is rendered there—a decision they feel will favor Canada and give the Canadian side more clout; the pie-in-the-sky group that wants completely unfettered free trade and hopes not to pay anything; and the hang-dog group that has already accepted the inevitable and just wants the penitence finalized so they can get on with it.

Of the three, I side with the hang-doggers. We’ve been to the WTO before and won before, but it didn’t make any difference then and I can’t believe it will make a difference now. Subscribers to the pie-in-the-sky group are living in a dream world if they believe they can win on the basis of free trade alone. That isn’t going to happen. The Americans are big, overbearing trade protectionist bullies, and with the size of the lumber trade bee they’ve got in their bonnet this go-around, there isn’t a snowball’s chance in hell they’ll acquiesce. Free trade? Phooey! That leaves just the hang-doggers whom I believe are the realists.

As ridiculous as this sounds, we might as well accept the fact that the Americans are going to make us pay to sell our lumber there, and until we find an alternative market elsewhere, we’d better just put on the best smile we can muster and pay up. Naturally that’s under the caveat that we can ever meet their terms—which are getting more far fetched and ridiculous all the time.

Were the lumber trade issue the only difficulty confronting the forest industry, a return to better times might still be within our grasp, but unfortunately, it isn’t. There is still too much lumber floating around and that situation, in addition to a few other factors, is keeping lumber prices in the toilet. With low lumber prices comes low profits, and this reality is being reflected in company financial reports across the country. Producers everywhere are having to face up to the same problem, but it is probably more apparent on the B.C. coast.

With profits having been down over the last several years, operators have been reluctant to spend money upgrading their conversion facilities. It’s hard to justify investing in new equipment when simply meeting the fixed costs takes all the money you can make. Unfortunately, that deferral option has just about run its course. No doubt coastal operators were hoping the Japanese market would make a miraculous comeback, or their situation would somehow improve before they had to start laying out big capital for big plant revisions, but neither condition has come about.

With no coin in their pockets and fiscal prospects not overly optimistic under the

best of scenarios, coastal companies are in for tough negotiations with their lenders. Tired iron has no vale to a banker. In this situation, the boys will be separated from the men and likely more coastal mills will either go the way of the Dodo, or be picked clean by the buzzards who wait patiently for the carcass to drop. Regardless of their financial situation, not a few coastal mills will have to retool if they expect to still be in the game a couple of years from now.

Anyone can be pessimistic, but the trick is to find that odd bright spot amid the doom and gloom and, fortunately, there are a few such prospects that fall into this category.

For instance, the economy is on the improvement list. Every time we get statistics on economic performance, the results are better than expected. If we could just get rid of all those damn economists, the world would be a better place. I’m convinced every economist has as his main objective in life, a deep seated desire to create negative self-fulfilling prophecies, but this time at least, it didn’t work. Housing starts are stronger than expected; new home sales have just set a record for the year. The economy is rallying despite all the dire predictions.

There are other favorable indications as well, but the housing sector is the life blood of the forest industry and any positive news is greeted warmly. This reaction is not without good reason, since housing is one of the main forces that lead both the industry and the economy. In addition, financial results on both sides of the border are pointing to a shorter than expected economic downturn in favor of more optimistic predictions. This time, Pop didn’t abandon his lemonade stand, he didn’t listen to his educated son, he kept on selling his lemonade, and the predicted disaster was averted. Damn the economists—full speed ahead. (Be sure to see next week’s Letters to the Editor.)

Another reason for optimism—in B.C. at least—are forthcoming changes to the provincial stumpage system. If ever there was a contentious issue, stumpage is it, but hopefully this time we can rid ourselves of some of the warts. The B.C. government is promising a more market based system and while I’m sure the changes won’t resolve all the problems, there is optimism they will at least make the system more workable.

If I haven’t convinced you already, let me say clearly that I’m an optimist at heart. Not only because there is nothing to be gained by wallowing in self pity, but also because it’s extremely difficult to make advancements while in a state of depression. Of all the tools we humans utilize to move ourselves forward, a positive mental attitude is surely the most effective. There’s no question the industry will pull out of this morass. Times will get better again; coastal mills will upgrade. We’ve all got to hold onto these thoughts. Of course there will be changes—there are always those, but we will pick up the pieces and get back in the race, because there isn’t any alternative.

New Home Sales Up

Despite theU.S.recession, the commerce department reports December new home sales rose 5.7 per cent to post a record for the year. Seasonally adjusted figures pegged new home sales at 946,000 for December, compared to 895,000 in November. With a December forecast of 925,000 units, actual sales were ahead of expectations.

A 35.1 per cent increase experienced in the West accounted for the entire gain. New home sales fell 9.6 per cent in theMidwest, 1.4 per cent in the Northeast, and 1.1 per cent in the South.

New home sales for the entire year 2001 were 900,000 units, compared to 877,000 units for 2000—a 2.6 per cent increase. The 900,000 sales figure is the highest level since the commerce department began gathering statistical housing data in 1963. Sales in 2001 surpass the previous high of 886,000 units achieved in 1998.

Despite last year’s downturn in theU.S.economy, new home sales have remained strong. This is attributed to low interest rates and lack of inventory. The Federal Reserve cut interest rates 11 times last year, but at the last meeting, rates were not adjusted further. This has led to speculation theU.S.economy has turned the corner and is on the road to recovery.

Old Home Sales Up

The National Association of Realtors (NAR) says that although sales of existing homes in theU.S.dropped 0.8 per cent in December to 5.19 million down from 5.23 million annually in November, aggregate sales for 2001 were up 2.7 per cent over those of 2000, setting a new record. Projections for December were pegged at 5.18 million units. At an annualized rate of 5.25 million units, sales of existing homes in 2001 exceeded the previous record of 5.21 million annualized rate set in 1999.

With mortgage rates at historically low levels, NAR expects future activity in the housing market will continue at or near present levels. This week, the national average for a 30 year, fixed rate mortgage rose to 6.96 per cent, up from 6.83 per cent the previous week. The inventory of homes for sale fell from 4.8 months in November to 4.2 months in December. Median price of a home increased in December to US$151,400 from November’s US$147,100.

Pulp Static

While pulp prices fluctuate up and down slightly, it is generally selling in the range of US$450-465 per tonne. The benchmark price declined US$3.75 to US$461.95 per tonne.

WSPF Party is Over

After a good run of several weeks, the party ended for western spruce. Inquiry dropped to the lowest levels since the holidays and wholesalers found them-by Zara Heartwood selves holding the bag. Mills pulled back to regroup; moved prices up slightly to establish new floor levels; then refused to budge. Meanwhile wholesalers unloaded at reduced prices, which undermined any sales the mills had lined up. Sharp pencils rule in a two tier market and this week the secondaries ran the show.

Based on the wholesale level where sales were actually happening, and not quoted levels where few sales took place, KD R/L Std&Btr 2×4 slid off $3 to $245. In KD R/L #2&Btr, 2×4 gained $2 to $262; 2×6 drifted down $1 to $240; 2×8 subtracted $3 to $240; 2×10 held at $260; and 2×12 slapped on $7 to $340.

Studs Settle Down

Traders saw the end of a six week run of decent sales in studs. Overall, the tone was positive, but the volume of new orders was minimal. Order files were into the week of February 18. Prices on KD 2×4-92-5/8” PET studs peeled off $10 to $245. Truck transportation slowly recovered from the dearth of northbound trucks after the holidays. Shipping to theU.S.andAlbertaresumed a normal pace.

ESPF Whispers

Whispers were easily heard across trading rooms in eastern spruce. Wholesalers trounced producers on price. All was quiet and few sales were made at the mills. Prices remained firm in light of three-week order files.

MSR Meager

Truss manufacturers formed the bulk of the buyers for MSR, although they were a meager lot. The week ended with a smaller total than in the past several weeks. Order files were into the range of two weeks.

Cedar Depleted

On-hand inventories remain depleted at the mills. Popular products are almost non-existent; decking, timbers, pattern stocks, are all hard to source. Prompt deliveries are unheard of except on S1S2E boards. The incredible beginning-of-the-year spurt has now tapered off. Prices are flat with no give in either direction. New orders for most items are now scheduled for delivery into March and the second quarter.

KD Fir Digesting

Orders jumped up for a hard buy in the previous two weeks. This week, however, wholesalers needed to unload. Prices at the mills remained within a few dollars of the previous week, in spite of pressure from second tier sellers. All took a wait-and-see attitude.

OSB & Plywood

Late Thursday, winter arrived in centralCanada. Temperatures weren’t that low, but the snow and frozen rain was enough to persuade some panel wholesalers to close their offices early and head for home. The arrival of winter weather was too late to slow construction activity and too late to stop another increase in OSB prices. OSB producers report that order files have stretched to over three weeks. Producer shipments are still late and there is little on-ground inventory. Panel wholesalers see little chance that demand will slow unless there is an extended period of cold and snow. This week 7/16”Torontosold for C$261, up $7 from a week ago.

It was a quiet week in westernCanada, with cold temperatures inAlbertaand wet snow in the B.C. lower mainland. Wholesalers have been buying steadily during the past several weeks and it is now time to digest the inventory build-up and assess how the market is going to behave between now and spring. 7/16”Vancouveris priced this week at C$240—unchanged from last week. Order files are reported to be into the week of February 18. Plywood is still scarce, particularly in the strong central Canadian region. Sheathing prices are higher for both fir and CSP.

Cargo & Reload

The mood at last week’s NRLA convention was upbeat enough to convince some buyers in the U.S. northeast that when they got back to work on Monday, they had better buy some lumber. Not all wholesalers benefited from the buyer enthusiasm, but Monday was the best business day of the week. There has still been no winter, say traders. After hitting 70 degrees Fahrenheit early in the week, temperatures began to fall, but nowhere low enough to discourage buyers. As reported last week, most of the business comes from smaller yards. Large buyers aren’t active. They still have inventory and are watching mill prices to see if there will be further price reductions.

West coast fir mills backed off their green fir delivered prices this week because of declining sales toCalifornia, but direct car sales to the northeast continue to languish. Selling prices for green fir were in a wider range this week, but were generally little changed from a week ago. Stocking wholesalers don’t see much upside for prices until near the end of February. Cautious buyers expect more cold weather and lower prices.

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.