Lumber prices dropping.
It looks like we may not be totally immune to the housing market woes in the US - In the previous thread Freako posted this link: Lumber prices are down almost 25% from a year ago. How much of the BC economy is based on wood trade with the US?
March 28th, 2007 at 7:45 am
50% of BC lumber is exported to the U.S.
Not only do the forests directly employ 6.5 percent of the British Columbian workforce in the logging and processing industries, these are also among the highest-paying jobs in the province, second only to those of the mining industry. When indirect employment is included, the forest industries are the source of livelihood for almost 20 percent of the province’s labour force.
The Forest Resources Commission found that over 200 communities in British Columbia are primarily dependent on the forest industry. Another study found that one in five jobs in Greater Vancouver could be directly or indirectly attributable to the forest industry. Silviculture is very labor-intensive and has high potential for employment creation.
March 28th, 2007 at 8:00 am
March 28th, 2007 at 8:28 am
However according to that graph we were at this price 6 months ago. I heard of some “temporary” mill closures the other day, but nothing catastrophic, yet.
millionpitfall,
I know you didn’t write it, but stuff like “Another study found that one in five jobs in Greater Vancouver could be directly or indirectly attributable to the forest industry.” annoys me… something accounts for a certain % of our economy, fine, but don’t give any “butterfly flaps its wings in singapore” crap.
March 28th, 2007 at 9:39 am
I know of mills in the Interior that have almost run out of room to store their inventory. Unless the US housing market improves, (which I don’t see happening) mills will close.
Softwood Lumber Agreement
March 28th, 2007 at 9:40 am
First, the 50% figure is BC’s estimated share of all Canadian softwood exports to the US. BC actually ships about 70% of its lumber to the US.
Second, the current prices for framing lumber are at a level which represents break even for the most efficient SPF plants. Less efficient operations would be running at a loss.
Third, the industry faces a triple whammy in regards to the US market. Despite depressed prices and faltering demand, the industry is under the gun to mill as much lumber as possible to minimize forest and fibre degradation due to the pine beetle. This output gets added to supplies in the US which are already well into overload levels, which will keep prices depressed. On top of this, US new home sales continue their downward spiral.
You can argue the exact statistics about the lumber industry’s importance to BC but you cannot argue the fact that it is critical to our economy. We are already feeling the effects of the US housing market in BC however we have yet to encounter these in full magnitude.
March 28th, 2007 at 9:43 am
Actually, it’s more like 75% of BC lumber is exported to the US
March 28th, 2007 at 11:05 am
http://tinyurl.com/yuvfad
So if and when the US housing market does recover, there’s no guarantee they’ll be buying BC lumber
March 28th, 2007 at 11:27 am
World Class
Olympics
Real Estate is local market driven
Strong Economy
We’re different from the US
It’s different this time
Oops……trouble ahead?
March 28th, 2007 at 12:52 pm
March 28th, 2007 at 2:43 pm
An article in the March 13 issue of Business in Vancouver has some interesting things to say about the Russian forest industry. The article is only available to subscribers, but the gist of it is
“Moves in Russia to create a modern forest industry could open the door for increased demand for B.C. softwood logs and spur demand for its solid wood products.
A new export tax on Russian logs is set to be in place by July and could rise as a high as 80% by 2009, curtailing exports by Russian producers and forcing Asian buyers to look elsewhere for their supply.”
It’s too soon to tell whether this will make us less dependent on the US, but there are other things afoot, such as a move to use pine beetle-damaged trees for alternative fuel sources, that could have a positive impact on the BC economy.
March 28th, 2007 at 3:34 pm
March 28th, 2007 at 3:56 pm
Its a huge deal and the predictions you’ve heard or read about are accurate.
The pine beetle infestation is spreading South, well beyond the areas originally predicted and at a faster rate. In addition, recent findings indicate that there are more threats to the integrity of wood fibre, pre and post milling, than originally assumed.
The industry will survive however it will go through a period of contraction before its next period of expansion.
March 28th, 2007 at 4:38 pm
See the rather gloomy article in today’s Edmonton Journal:
“One report cited in the study says that within five years, beetle-killed stands start falling over, with up to 50 per cent of trees fallen within nine years and 90 per cent knocked down after 14 years.”
The good news is, Canada’s forests should be back to normal in “171 to 190 years”.
March 28th, 2007 at 4:50 pm
The solution is to put into place a program to use all the surplus resources to work, the downside:
Substantial drop in inflated real estate values in the lower mainland, but we are cool with it, the voters, and homeowners in the rest of the province won’t mind a bit.
PS. Do you guys and gals, have any messages you would like me to pass along at the party?
March 28th, 2007 at 5:15 pm
If you don’t mind, could you get Gordon to autograph this image?
March 28th, 2007 at 6:18 pm
To “some temporary mill closures” you may want to add just a few of these permanent closures (some of which have already been demod.) that someone posted on Chipmans blog a few weeks ago:
Silvertree - Vancouver
White Pine - Vancouver
Evans Products - Vancouver
Flavelle Cedar - Port Moody
Hammond
Fraser Mills
Interfor - Squamish
Island Phoenix - Nanaimo
Mayo - Nanaimo
Western - Tahsis
Weyerhaeuser - Vavenby
Weyerhaeuser - Kamloops
And here’s another one (the Queensborough mill) that shut down permanently just 3 weeks ago, although it was quite small compared to some of the others, as it only employed about 300 workers.
March 28th, 2007 at 7:13 pm
March 28th, 2007 at 8:10 pm
Hey, not to worry, we can put twice as many people to work building condos on the sites and selling them to the rich Albertans, Olympic spectators, etc…..
March 28th, 2007 at 8:16 pm
…assuming all this global warming stuff will blow over.
March 28th, 2007 at 8:24 pm
March 28th, 2007 at 8:38 pm
March 28th, 2007 at 11:20 pm
I believe the question of how much lumber [and logs] we export to the US [85%] and the corresponding silly answers is a disappointing display of a complete lack of knowledge of BC economics. The number one above ground industry here is forestry. 50% of all the BC economy activity is forestry based.
The coast forestry has been destroyed [log export] by the federal conservatives and there imposed soft wood lumber agreement. The interior forestry is on a path to a trade and industry catastrophe.
The pine beetle kill has left timber that is not merchantable, that is to say the trees are not salvable due to Checks. The high speed mils can process timber with one check but 2 renders but splinters. The 10-15 year window has closed early.
3 years is the outside for the interior forestry. Then 30% unemployment will be the norm for anything north of Kamloops.
The Russian question is nonsense, do the research, there lumber market is not North America.
March 29th, 2007 at 1:23 am
March 29th, 2007 at 5:54 am
Correct me if I am wrong, but isn’t aren’t the wood chips that are turned into pulp a byproduct of attaining lumber, at least in part. I doubt we put the good stuff into paper. AFAIK we don’t have stands of fast growing decidous in B.C. that are turned into pulp. If I am right, and lumber and pulp prices diverge, won’t that leave B.C. short of wood chips?
March 29th, 2007 at 6:14 am
The number one above ground industry here is forestry. 50% of all the BC economy activity is forestry based.
Do you have some real stats to back that up? It seems quite ridiculous.
If by “forestry based” you mean that because our houses are made of wood and our economy runs on paper based money, you may have something.
March 29th, 2007 at 6:30 am
Is this a proclamation? ‘Cause it sure ain’t anything even remotely resembling a comment that induces one’s mind to a greater understanding of the issues.
March 29th, 2007 at 9:14 am
as of 2005 forestry accounted for approximately 14 billion in exports from BC and other exports were at 22 billion and the gap was increasing. BC Economy article on Statscan
I was going to go through a few more statscan articles to find good info but I have work to do today, there’s lots of good stuff and it’s pretty unfiltered if you want to look for yourself.
March 29th, 2007 at 9:24 am
“The shift in the composition of British Columbia’s commodity exports parallels a switch in their destination. Since 2001, the US share has fallen from 70.0% to 64.0%, while Asia has jumped from 20.5% to 24.0%. As a result, British Columbia is less dependent on the American market than the rest of Canada. Conversely, its orientation to Asia is nearly five times greater than the 5% in the rest of Canada.”
Interesting. We’re not immune to the US economic situation by any means, but we are better diversified that other areas of the country.
I looked up BC Stats and came up with this historical GDP link:
GDP by industry
Adding up the categories related to forestry and wood processing I get about $10.5b out of a total 131b GDP.
March 29th, 2007 at 10:15 am
I would call 64% exposure a lot less than immune. But whether this 2×4 from this province goes to this or that country is irrelevant. Global demand, global supply and global prices are what matters.
March 29th, 2007 at 12:29 pm
The BC Liberals disagree with you according to their latest budget. Very little was devoted to downturn risk and how it would affect what they could spend.
March 29th, 2007 at 3:28 pm
Well, lumber is not exactly like oil, where a country that doesn’t export oil to US directly influences the price of oil in US. The effects of both US housing slowdown and Russian log export on BC are kinda complicated. US largely buy lumber from Canada, and they are pretty much the only buyer of BC lumber products, as people tend to build homes with bricks in Asia. Major competitor for BC lumber seem to be US producers only. On the other hand, China mostly imports pulp from BC, for its paper industry. On that front, North America is competing with Scandinavia, Brazil, and Russia. So far, global price of pulp have been holding, likely due to high energy prices. Although potential flood of supply is looming in the horizon, with Russia and Brazil ramping up production. In Russia, environmental regulation is weaker. In Brazil, they can grow trees 3 times as fast as BC. Overall, the future doesn’t look very good, but most threats have not yet materialized.