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Montreal-based forestry company wants to send lumber to help Texas rebuild

Montreal-based forestry company wants to send lumber to help Texas rebuild | Timberland Investment | Scoop.it

Texans forced from their flooded homes by unprecedented water levels may get help rebuilding from a Canadian forestry company.

Seth Kursman, a vice president with Resolute Forest Products, has committed to sending a rail car full of lumber to Houston once the storm-battered city begins to recover from the devastation wrought by Hurricane Harvey.

Watching footage from the storm-drenched city hit close to home for Kursman, who moved to Canada from Houston 15 years ago.

"I just can't imagine the devastation," he said, noting he saw images of his old neighbourhood, flooded, on the news. "I was really personally moved."

Wanting to help, he called the Montreal-based company's CEO, Richard Garneau, and suggested they prepare to send a truck filled with lumber to the beleaguered city once the flood waters subside. Resolute's main products are paper and pulp, Kursman said, but he thought lumber would be of more use to the struggling communities.

"He said 'Forget a truck! Send a rail car,'" Kursman said. "I mean, that's a lot of money worth of lumber."

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Oregon Timber Report: Lumber and log prices are high in July

Oregon Timber Report: Lumber and log prices are high in July | Timberland Investment | Scoop.it

Lumber and log prices are both at 12-year July highs. Log prices are unprecedented for summer and may continue to climb as fire season kicks in. Other statistics remain strong or recovering.

The lumber price at $405 has broken $400 per thousand board feet (MBF) for only the second time in the last 12 years. The last time was during the latter part of true lumber market “spring” season — March and April, 2013.

So, why are lumber prices surging beyond already-healthy levels in midsummer? The answer is always supply and demand. This month the new boost in lumber prices is caused by extensive wildfires in British Columbia, accompanied by Canadian mill closures.

Logs also set a new 12-year record with this July’s report of $733 per MBF. (The July report covers June log prices.) In 2005, the second strongest July report in 12 years, the price only reached $679 per MBF. Only fall-winter prices, reported in November, December, January and February, have surpassed $733 in the last 12 years. This strong log price in the summer is truly unprecedented and results from the current log shortage, relative to log demand for lumber production in this highly concentrated and thoroughly modern mills region, the Southern Oregon and Willamette Valley. For all owners of forest land — private, state, and federal — this is a very good time to be conducting harvest and then reforesting.

These strong prices for logs and lumber are finally joined by an uptick in housing starts and building permits, reversing a three-month decline. Not since the beginning of 2017 have the building rates exceeded 1.2 million units per year, seasonally adjusted. The cost of lumber products in a home is small enough that it does not dampen home building. Interest rates do that, and they, too, are now very low, although the recent week price has ticked upward, compared to last month.

Portland’s unsold inventory of homes remains below two months and home prices continue to climb. This month, the national median home price (half of homes above the median, half of homes below) in the U.S. surpassed $200,000, according to Zillow. This is another milestone. The median price of a home surpassed $100,000 21 years ago, in May 1996.

The wildfire effect on lumber prices combines with the effect of log shortage on log prices to create very favorable conditions for log producers, which could continue. The summer fire season in the U.S. is just getting going in earnest.

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Canadian Wildfires Choke Lumber Supply to U.S. Home Builders

Canadian Wildfires Choke Lumber Supply to U.S. Home Builders | Timberland Investment | Scoop.it

Wildfires in Canada are pushing up the price of lumber, threatening the supply to U.S. home builders.

 

Lumber futures have soared in July as blazes spread across the province of British Columbia, leaving many U.S. wholesalers short-handed. Lumber dealers ran down their inventories this year as a trade spat between the administration of President Donald Trump and Canadian officials sparked wild price swings. Then Canada’s wildfires, a threat every summer, turned out to be the hardest on the lumber industry in more than a decade.

 

Now home builders in the U.S., which gets around a third of its lumber from Canada, fear prices might climb even higher as wholesalers try to restock amid the price surge. British Columbia produces nearly half of all Canadian lumber, according to Statistics Canada.

 

“People need wood now,” said Paul Harder, a timber trader at wholesaler Dakeryn Industries in North Vancouver, which sells to U.S. lumber yards. “Little lumber is being offered out there.”

Lumber futures at the Chicago Mercantile Exchange, an indicator of price expectations for the months ahead, rose above $400 per 1,000 board feet in mid-July. That was near a 12-year high reached in April before the Trump administration accused Canada of unfairly subsidizing its forestry industry and started slapping tariffs as high as 30% on some timber imports to the U.S. Canadian officials deny the allegations

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Donald Trump slams Canada for trade practices in energy, lumber, and dairy

Donald Trump slams Canada for trade practices in energy, lumber, and dairy | Timberland Investment | Scoop.it

U.S. President Donald Trump escalated his attacks on cross-border trade Thursday, repeating his criticisms of Canada’s dairy industry but expanding his rhetoric to condemn lumber and energy.

***

After signing an executive order in Washington that directs his administration to investigate whether steel imports jeopardize U.S. national security, Trump decided to repeat remarks he made earlier this week on Canadian dairy policies. He called them a “disgrace” to U.S. farm workers.

 

Trump then went on to criticize Canadian policies on lumber and energy, and said that Canada, and not just Mexico, has made the North America Free Trade Agreement a “disaster for our country.”

 

“We can’t let Canada or anybody else take advantage and do what they did to our workers and to our farmers,” Trump said. “And again, I want to also just mention, included in there is lumber — timber — and energy. So we’re going to have to get to the negotiating table with Canada very, very quickly.”

***

Lumber has been a trade irritant between the two nations for generations, so it’s little surprise it would be singled out by Trump. Lumber was excluded from NAFTA and its predecessor, the Canada-U.S. Free Trade Agreement. A nine-year lumber trade agreement signed in 2006 eased tensions, but that deal expired in 2015.

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Lumber Price Woes Will Persist, NAHB CEO Predicts

Lumber Price Woes Will Persist, NAHB CEO Predicts | Timberland Investment | Scoop.it

Headaches over the supply and price of North American lumber likely will persist for several years, the CEO of the National Association of Home Builders told lumberyard executives today, adding that one solution he's working on is to promote imports from Chile and perhaps Brazil.

"I think it's going to take four to five years to have a resolution to the Softwood Lumber Agreement (SLA)," Jerry Howard told members of LBM Advantage, a buying co-op, at its annual meeting in Orlando. He was referring to the now-expired trade pact between Canada and the United States that is expected to result in tariffs of as much as 30% being imposed this spring.

In the meantime, "builders are telling me they are having trouble getting commitments for the lumber packages for some of their products," Howard said. "The lumber issue is one that's extremely relevant and is slowing down the spring selling season."

***

Howard said his goal is to have a consistently priced, steady supply of lumber. Given these times, his first preference for achieving that would be for Congress to ease regulations so that more lumber could be harvested from American forests. But the GOP-controlled House and Senate will have trouble opening up as much forest land as would be needed to overcome a reduction in Canadian imports, he said. Thus, his second preference is an agreement that allows sufficient supplies of Canadian lumber to continue to enter the United States.

 

But Howard is hedging his bets on those prospects. He noted that last fall he visited Chile, which ranks only behind Canada for exports to the United States, albeit at much smaller volumes.

 

"I spent 10 days down there meeting with ministers and the industry," he said. "They're very interested in producing Chilean lumber to U.S. standards ... and becoming a permanent solution for Canadian lumber." It might take four to five years for this to happen, he said, but given how long the Canadian impasse is likely to last, "it's worth pursuing Chilean lumber." And by the way: He said he plans to visit Brazil this year.

Sam Radcliffe's insight:

The other side of the softwood lumber controversy. Random Lengths today showed a 10-45% increase in most grades of softwood lumber over the past three weeks.

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Saving the Two-Hearted Forest, One Final Four Floor at a Time

Saving the Two-Hearted Forest, One Final Four Floor at a Time | Timberland Investment | Scoop.it

Most people watching the Final Four tournament this weekend will lock on to their maddened brackets and the warring players. But employees of Connor Sports, the NCAA’s official court supplier, know the unsung hero of the game is the iconic maplewood court itself.
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How this year’s court got to Arizona’s University of Phoenix football stadium is instrumental not only in facilitating athletic feats and ball response, but also in conserving the 24,000-acre Two-Hearted River Forest Reserve in Michigan's Upper Peninsula and promoting larger-scale sustainable forestry.

Like most basketball courts, Connor’s are milled from sugar maple, a long-lasting wood with perfect hardness for dribbling and footwork. Though millers can source from dozens of areas, Michigan is the global epicenter for maple timber. In the Two-Hearted region, however, a history of industrial logging practices and an economic bias for sugar maple has reduced forests to a near monoculture of sugar maple, leaving them dangerously susceptible to pests and diseases that could wipe out the forest and devastate the local economy.

To help prevent such a catastrophe, the Nature Conservancy — which manages the forest along with more than 5 million other acres nationally — has partnered with Connor to single-source their courts from 500 of the Two-Hearted’s local maples. That collaboration enables the careful thinning of the forest that opens up the canopy and creates space for new, competing tree species like white pine that will diversify the forest.
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For Michigan-based Connor, the partnership means building FSC-certified, sustainably harvested basketball courts, and it’s the first time they’ve single-sourced lumber whose origins they know precisely — some 200 miles from their Amasa mill — and which they can visibly track from forest to floor. For the Nature Conservancy, it promises that other state and federal forest managers take note and implement practices that keep forests from over-harvesting and retain important jobs in small towns.

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U.S., Canada Approaching Trade Dispute Over Softwood Lumber

U.S., Canada Approaching Trade Dispute Over Softwood Lumber | Timberland Investment | Scoop.it
The U.S. and Canadian governments are approaching the end of a one-year standstill that could erupt into a trade dispute over timber imports that industry officials and federal lawmakers say are hurting Montana mills.

Trade representatives from both countries have until midnight, Oct. 12 to reach a new deal before industry leaders can file complaints in court against Canada.

The U.S. timber industry says Canadian producers are benefiting from an unfair cost advantage by exporting subsidized softwood products that are undercutting U.S. producers. Canada is one of the world’s largest producers and exporters of softwood lumber, which is used to build homes, and the U.S. is the largest market for Canada’s softwood products.

A nine-year softwood lumber agreement between the two countries expired in October 2015 followed by a one-year grace period to allow both sides to negotiate a new deal before any trade complaints could be initiated.

Barring an 11th-hour deal, it appears the two countries are headed for a trade battle that could include new tariffs on Canadian lumber imports.
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Lumber Trade War Brewing as Hope of New Canada-U.S. Deal Fades

Lumber Trade War Brewing as Hope of New Canada-U.S. Deal Fades | Timberland Investment | Scoop.it
A trade dispute between the U.S. and Canada over softwood lumber is escalating, raising the specter of higher tariffs as officials downplay the likelihood of reaching a deal before an October deadline.


President Barack Obama and Prime Minister Justin Trudeau directed their governments at a June meeting in Ottawa to push forward and reach accord on the issue, long a thorn in relations, while acknowledging “significant differences” remain. Officials began two days of talks in Washington on Wednesday, the fourth round of negotiations since the leaders met.


Optimism is fading. Canada’s Ambassador to the U.S., David MacNaughton, and the country’s chief softwood lumber negotiator, Martin Moen, have each said this month the sides remain far apart. Trade Minister Chrystia Freeland signaled the same, saying Canada would rather go past the October deadline than settle for a bad deal.


“We’re not going to be bound by any particular deadline,” Freeland said in an interview on Tuesday. “We’re going to try and reach an agreement, and we’re working hard now in the fall to do that.”

If the deadline is missed, the U.S. is expected to begin a process to enact new tariffs, which would be a barrier to Canadian producers including major players such as Canfor Corp., West Fraser Timber Co. and Interfor Corp. Exports from Canada accounted for most of the increased lumber demand from U.S. builders this year through April, Bloomberg Intelligence estimates.


The previous softwood lumber deal -- which included export quotas for Canadian producers -- expired in October, triggering a one-year standstill that includes a tariff freeze. Monthly softwood exports to the U.S. are up 23 percent on average, on a seasonally adjusted basis, since the pact expired, data compiled by Bloomberg show.


The value of softwood lumber exports to the U.S. is up 25 percent to C$3.6 billion ($2.8 billion) in the first six months of 2016, compared with C$2.9 billion in the same period last year, according to trade data compiled by statistics Canada. In 2015, Canada exported C$5.9 billion to the U.S.

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MetLife Agricultural Finance Forecasts U.S. Housing Starts to be 16 Percent Below Consensus, Reaching Only 1.5 Million by 2020

MetLife Agricultural Finance Forecasts U.S. Housing Starts to be 16 Percent Below Consensus, Reaching Only 1.5 Million by 2020 | Timberland Investment | Scoop.it

The huge Millennial generation has not yet reached home-buying age and credit remains tight, causing MetLife to predict that housing starts will reach 1.5 million by 2020, 16 percent below consensus. The resulting weakened demand for lumber will continue to weigh on pricing and demand over the near term. However, emerging supply shortages will bolster U.S. timberland investments, according to Millennials, Housing, and the Timber Recovery, a new study by MetLife Agricultural Finance.
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The study also finds that:

  • Timberland values have been surprisingly resilient, despite low timber prices. More than a decade of low interest rates and the more than 30-year timberland investment time horizon explain the resilience in timberland values. Over thirty funds currently manage more than $57 billion of timberland assets for investors who cite the long term investment horizon, low correlation with the general economy, biological growth regardless of economic conditions, and a relatively stable stream of cash flows as appealing characteristics of the asset class.
  • Despite short-term headwinds, the long-term outlook for U.S. timberlands as an asset class is positive. A slowdown in the annual acreage growth of planted forests, supply issues in British Columbia, Canada, and new global demand drivers suggest the potential for a growing timber supply deficit. MetLife Agricultural Finance believes that the U.S. timberland asset class is particularly well positioned to meet the world’s increased demand for wood and wood fiber, making investments in this sector attractive for investors with long-term horizons.
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U.S., Canada lumber talks stalled, litigation looms

U.S., Canada lumber talks stalled, litigation looms | Timberland Investment | Scoop.it

Talks between Canada and the United States to resolve a dispute over exports of softwood lumber are making little progress and the matter likely will return to the courts, sources familiar with the negotiations said on Friday.

 

U.S. producers complain that Canadian softwood lumber is subsidized, and have in the past launched trade challenges that resulted in the United States imposing billion of dollars in tariffs.

 

The most recent round of arguments ended with a 2006 deal that expired in October 2015. Both sides agreed to take no action for a year after that, but without a new agreement, U.S. firms look set to file new damage claims.
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As the U.S. economy recovers, Canadian firms could benefit from more home construction. Exports of softwood lumber totaled US$5.9 billion in 2015, up from US$5.5 billion in 2014, according to Statistics Canada data.

 

The 2006 agreement said that if prices fell below a certain level, Canadian firms could pay export taxes or agree to quota limits while paying lower tax rates.

 

One challenge for Canada is that domestic lumber producers are split over the best strategy, say officials in Ottawa. Firms on the west coast — who have diversified operations by boosting exports to Asia — are more likely to agree to a deal limiting exports, while those in central and eastern Canada want no restrictions.

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New softwood duties inevitable, forestry conference told 

New softwood duties inevitable, forestry conference told  | Timberland Investment | Scoop.it
Canadian forest companies are no longer debating whether they will be hit with a softwood lumber duty, but how much pain the duties will cause, forest products analyst Paul Quinn told an international wood products conference Thursday.


Although Canadian Prime Minister Justin Trudeau and U.S. President Barack Obama told negotiators last March that they have 100 days to resolve the lumber impasse between the two countries, Quinn said that mid-June deadline is likely to pass with no resolution.


“I am pretty pessimistic on them finding a deal,” he said. “The history on this file is very difficult, and there are lots of issues.”

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Housing Starts, Southern Yellow Pine Prices Surge in February/March

Housing Starts, Southern Yellow Pine Prices Surge in February/March | Timberland Investment | Scoop.it

February 2016 housing starts were at a seasonally-adjusted annual rate (SAAR) of 1,178,000, or 5.2 percent above the revised January estimate of 1,120,000. This number is also 30.9 percent above the February 2015 rate of 900,000. Additionally, single-family housing starts were at a rate of 822,000, which is 7.2 percent above the revised January figure of 767,000.
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After some initial zigzagging, the price of southern yellow pine lumber has trended up during 1Q2016; it finished week 12 at nearly $361/mbf, which is nearly 11 percent above its January 2015 starting point of $326/mbf. Based on this data, it’s evident that housing starts helped to buoy the price of SYP during February.

 

On the other hand, existing home sales for February were disappointing: The National Association of Realtors wrote yesterday that existing home sales dropped 7.1 percent to an annual rate of 5.08 million units, the lowest level since November, 2015. This is a potentially troubling sign for America's economy, which has otherwise looked somewhat robust thanks to steady housing numbers.

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Russian Lumber Export Sets New Record

Russian Lumber Export Sets New Record | Timberland Investment | Scoop.it
With a rapidly declining rate of the ruble and falling domestic consumption, the Russian export of lumber is increasing to new record levels. Exports increased by 17% in November 2015 compared to same month of 2014. During January-November the export increased by 6% compared to 2014. This means an increased competition in some markets for among others; Swedish, Finnish and Canadian sawmills, says Jenny Wessung, CEO of research company Woodstat. Egypt is now the largest pine lumber market for Swedish sawmills and the exported volume is now nearly twice as large as the volume to United Kingdom.
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Canadian Lumber Stocks Tumble On Report US-Canada Timber Trade War To Escalate

Canadian Lumber Stocks Tumble On Report US-Canada Timber Trade War To Escalate | Timberland Investment | Scoop.it

Canadian lumber stocks are diving this morning following a report from BMO analyst Mark Wilde who writes that "prospects for a near-term settlement of the U.S./Canadian lumber dispute have faded", prompting him to downgrade the main players in the space. The report has sent the stocks of West Frasier Timber (WFT), Canfor (CFP) and Interfor (IFP) as much as 6%, 4.6% and 6.2% lower, respectively.

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So with no near-term resolution to the ongoing lumber dispute between the two NAFTA neighbors, the alternative is a steadily progressing trade war. As a result, as Wilde writes, "we anticipate a period of  countervailing and anti-dumping duties on Canadian lumber imports as well as continued litigation around those duties." As regards the 3 abovementioned stocks, the analyst notes that at current stock price levels, "we think the big risk is downside disappointments. Thus, we are downgrading West Fraser, Canfor, and Interfor to Market Perform. We are also downgrading Weyerhaeuser and Rayonier ratings to Market Perform. The key issue in timber is continued soft pricing on southern sawlogs. We are not making any changes to our price targets."

 

 

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West Fraser Acquisition of Gilman Continues Trend of Canadian Expansion in the U.S. South

West Fraser Acquisition of Gilman Continues Trend of Canadian Expansion in the U.S. South | Timberland Investment | Scoop.it

On July 26, 2017, West Fraser announced an agreement to acquire Gilman Companies, a major producer of southern yellow pine lumber with six sawmills in South Georgia and North Florida comprising 700 million board feet (MMBF) of capacity. The acquisition continues the trend of consolidation of softwood sawmills and strengthens the growing position of Canadian lumber producers in the U.S. South. The deal will allow West Fraser to overtake Weyerhaeuser as the largest lumber producer in the region.

The total capacity for operating softwood lumber mills in the South currently stands at 19.6 billion board feet. West Fraser owns 15 southern mills with total capacity of 2.4 billion board feet, or 12% of the region’s total capacity. Once the acquisition is complete, West Fraser will control 3.1 billion board feet, or 16% of the region’s capacity. If we look at the two other major Canadian companies in the South, Interfor and Canfor, the total portion of southern softwood lumber supply that is produced by Canadian companies is 27% (5.2 billion board feet) and will increase to more than 30% after the deal is complete. Canada’s significance to the South will increase further after Conifex opens its refurbished sawmill in El Dorado, Arkansas later this year.

The influence of small and mid-sized regional sawmill companies has diminished in recent years, but they still account for more than 40% of the South’s softwood lumber production. With the acquisition of Gilman, Westervelt (560 MMBF) and Hood Industries (555 MBF) will take the lead as the largest regional lumber producers in the South, with Rex Lumber (400 MMBF) and Jordan Lumber (345 MMBF) not far behind.

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Canadian Lumber Tariffs Impacting Southern Yellow Pine Prices

Canadian Lumber Tariffs Impacting Southern Yellow Pine Prices | Timberland Investment | Scoop.it
With the recently-announced tariffs on Canadian softwood lumber imports into the US, a lot of unanswered questions are floating around the market: How will the tariffs affect supply in the US? Will manufacturers ramp up production to meet seasonal demand? Will sustained high prices dampen US housing starts during peak building months? Will added costs discourage potential first-time home buyers?


Forest2Market’s lumber data has showed steady price decreases since the new tariffs were announced at the end of April. Prices increased steadily through January and February before peaking at a 12-year high in April—perhaps in preparation for an impending tariff—which could account for the leveling of prices we’re seeing now. 

Forest2Market’s data also shows a significant volume increase in #1 and #2 dimension products when comparing January to April. Even if lumber demand and prices were to spike in the coming weeks, the latent capacity at mills and the amount of domestic supply would keep the market from sustaining any kind of long-term price increase.

In March, housing starts declined an unexpected 6.8 percent, with multi-family units declining the most. While April’s decrease was not as severe (-2.6), it was not a standout month to kick off building season. The initial decline in lumber prices could be reflective of the lackluster housing starts numbers, which essentially caused mills to push more inventory to market in anticipation that prices would continue declining after the tariff implementation. 

Reaction to the new lumber tariffs from in the forest products industry and beyond has been mixed, as expected. US homebuilders are not the only ones potentially affected by the tariff; it is speculated that single-family home prices will increase at a rate much higher than they have in the recent past. This compounds the challenges for new home buyers—particularly millennials—who are finding household formation increasingly difficult.

There is no question that current lumber prices are still high compared to previous years, but the downward trend—or at least some kind of equilibrium—will likely be the norm over the next few weeks. Until the market adjusts to both the new tariffs and the reaction from the homebuilding industry, producers will continue to operate in an uncertain environment.

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Lumber Futures Surge In Latest Inflationary Signal

Lumber Futures Surge In Latest Inflationary Signal | Timberland Investment | Scoop.it

Lumber futures rose to nearly $415 per thousand board feet last Monday, a level unseen since March 2005, soon after homeownership peaked here in the U.S.

 

At issue is a mini-trade war between U.S. and Canadian loggers. For some time now, the American lumber industry has blamed its Canadian counterpart of unfairly dumping lumber in the U.S. that’s far below market value. Now, several factors are pushing timber prices higher. Chief among them are the likelihood of duties being raised at the Canadian border, possibly as early as next month; President Donald Trump’s calls to renegotiate NAFTA; and growing demand for new homes following the housing crisis as consumer optimism improves and millennial buyers finally seem eager to enter the market.

 

Shares of Canfor Corporation and Western Forest Products, Canada’s number two and number five lumber producers by annual output, have had a good three months, advancing 25.5 percent and 16.8 percent respectively as of April 12. 

Sam Radcliffe's insight:

This is one of several stories that portray the rise in lumber prices as a harbinger of general price inflation. While that relationship may have been true in the past, I think the recent run-up is due more to the special circumstances around the US/Canada softwood lumber dispute, and any price inflation will be restricted to that sector. US lumber companies benefit but US homebuilders and consumers have to take one for the team.

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Trump's Building Promises Energize Lumber Prices

Trump's Building Promises Energize Lumber Prices | Timberland Investment | Scoop.it

The lumber markets are off to a robust start in 2017, as U.S. housing data show that the number of new homes available -- along with the sale of new homes -- are rising, according to the National Association of Home Builders. Home builders are employing more people and their purchasing orders of raw materials are increasing, particularly in lumber.

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Technical assessments of the monthly trends in random length lumber strengthen this argument. The chart below represents the current Random Lengths Framing Lumber composite price. The data compile the previous 11 years of monthly average price history, and the graph displays that data in five-year trends. The trend definitively points upward.

 

There are also fundamental reasons why lumber continues to look attractive. First, U.S. mortgage rates, while rising, are still close to historic lows. As of March 30, a 30-year fixed mortgage is 4.01 percent APR, while a 15-year is 3.18 percent.

With the market expecting at least two more Federal Reserve interest rate hikes this year, buyers are eager to purchase homes now rather than wait, because mortgage lenders are setting their rates based on their expectations for future inflation and interest rates. And from a seasonal standpoint, the U.S. is now in  its post-thaw construction season that should help lumber prices in the short term.

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Finally, if President Donald Trump is successful at getting his policy initiatives passed, lumber prices should rally further. It seems increasingly likely that the North America Free Trade Agreement won't just get “tweaked,” according to recent meetings with the administration's choice of U.S. Trade Representative, Robert Lighthizer, who previously served in the Reagan administration. At his Senate confirmation hearing, he said softwood is “at the top of the list.” 

 

Pushing for a new deal, Lightener stated that U.S. companies want “quantitative restraint” -- a limit on Canadian lumber entering the U.S.: “It is a very serious, intractable sort of problem. It has enormous political consequences on both sides of the border.” Limiting Canadian wood to the U.S. serves to drive up domestic prices.

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Residues Becoming a Problem for Northeastern Mills

Residues Becoming a Problem for Northeastern Mills | Timberland Investment | Scoop.it

Every mill is unique, but a decent rule of thumb is for every thousand board feet of lumber produced, two tons of residues are produced—one ton of clean chips, and another ton of bark and sawdust. Precise statistics are hard to come by, but New England sawmills produce somewhere on the high side of 1.3 billion board feet of lumber annually. Region-wide, about two-thirds of the production is softwood—spruce, fir, white pine and hemlock. Maine is responsible for the lion’s share of this production, but New Hampshire and Vermont check in with respectable production, and all states in the region have sawmills.

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Since the beginning of 2014, Maine has lost over 4 million tons of low grade market—most of which were pulps mills (which use mill chips), with some biomass market loss as well. While pulp mills in the state still use somewhere around 7 million tons of wood annually (pulpwood and mill chips), softwood has taken a huge hit. Over 1.5 million tons of softwood market have vanished in the past few years. Shuttered pulp and paper mills in Bucksport, East Millinocket, Lincoln, and Madison were all softwood consumers, and are now gone. Other pulp mills have cut back production levels.

 

Forest2Market benchmark data confirms this trend. As evidenced in the two charts below, product categories that make up the residuals market have all decreased in price since Q12015 despite a few temporary spikes along the way. Hardwood total fiber has dropped 13 percent, softwood total fiber is down 10 percent and fuelwood has been hit the hardest with a 23 decrease in price.

 

In addition to pulp mill markets lost, many of the remaining markets aren’t exactly on firm footing. Biomass power plants in the region are struggling with (relatively) low wholesale electricity prices, as well as renewable energy certificate (REC) prices that have lost half their value since 2015. Two biomass plants reopened and two more were given a lifeline with $13 million in funding from Maine, but that provides only a temporary reprieve. The region’s pellet mills—which in this region sell to homeowners and businesses for heating—are competing against lower heating oil prices and still recovering from a very warm winter last year and sluggish sales this winter. 
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Sawmills are critical to the success of the entire forest products industry in the Northeast (and every other region as well). In Maine, which has long been thought of as a “pulpwood state,” the most recent figures from the state’s Forest Service suggest that sawlogs represent about a quarter of the volume harvested, but two-thirds of the stumpage paid to landowners.

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Today, sawmills (and the entire forest products industry) in the Northeast need to pay careful attention to moving residues as efficiently as possible in order to assure their continued operations and profitability.

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Ottawa blames U.S. protectionism for softwood lumber spat

Ottawa blames U.S. protectionism for softwood lumber spat | Timberland Investment | Scoop.it
Trade Minister Chrystia Freeland said growing protectionist sentiment in the United States risks escalating a trade dispute over softwood lumber.

Ms. Freeland, speaking in an interview with Bloomberg TV on the sidelines of the G20 summit in Hangzhou, China, said there’s a chance the two sides won’t be able to reach a deal before an October deadline, raising the spectre of higher U.S. tariffs.

Ms. Freeland said she discussed the matter Sunday with U.S. Trade Representative Michael Froman, and plans to meet with him again in the next two weeks.

“There is no guarantee we are going to get to a deal that works for both sides,” she said. Coming to an agreement “is harder in this protectionist, anti-trade climate.”

The spat over lumber between two of the world’s closest trading partners highlights the extent to which support for trade agreements is faltering globally. It’s a worrisome trend that is requiring policy makers to show trade is widely beneficial, Ms. Freeland said.
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Real Estate Is Going Higher. Just Ask Lumber.

Real Estate Is Going Higher. Just Ask Lumber. | Timberland Investment | Scoop.it

When it comes at the cost of lumber, one can glean a lot of useful information about the state of the home building market, particularly in the United States. It turns out that market for wood provides robust confirmation of trends or at times can signal a market top or bottom or pending reversal of fortune in particular sectors of the housing market.
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Lumber has traded in a range between $214.40 and $338.70 per 1,000 board feet since the beginning of 2015. It closed last week around $325. As the weekly chart of lumber futures that trade on the Chicago Mercantile Exchange highlights, the price of lumber has appreciated since September 2015. The move in lumber has been slow and steady with the commodity making higher highs and higher lows. The weekly historical volatility, a measure of the variance of the lumber market, currently stands at 17.44%. Considering this metric was at almost 38% in February 2016, and was at over 40% in October 2015 and June 2015, the current level price volatility in lumber is comparatively low. Lumber is now trading at close to the highest price since 2014, but the price of wood has crawled higher. Higher lumber prices are a confirmation of a trend that we see in the housing markets across the United States.
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The price of wood peaked in 2004 at $464 per 1,000 board feet and began a multi-year slump. While the housing market crashed in 2008, lumber had already been falling for four years by the time the mortgage-backed securities issues caused massive headaches for homeowners and banks alike. Lumber futures had dropped to under $300 by 2007 while the buying and lending merry-go-round continued to send home prices to astronomical heights Lumber was screaming at markets that the housing bubble was about to burst. While markets were reeling from the aftereffects of the financial crisis of 2008, the price of lumber bottomed in early 2009 amidst a flurry of mortgage defaults as property prices dropped below loan values. The lumber price has appreciated steadily since, even as foreclosures and the aftermath of the crisis played itself out.

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Global softwood lumber trade up 15%

Global softwood lumber trade up 15% | Timberland Investment | Scoop.it

Global softwood lumber trade reached an all-time high in 2015 when, according to estimates by the WRI, 118 million m3 was traded internationally. This year has started out with even higher volumes being traded around the world; the 1Q/16 shipments were approximately 20% higher than in the first quarter of 2015, according to the Wood Resource Quarterly (WRQ).

All countries on the “top-10 import list” increased their lumber importation during the first few months this year with the biggest changes in import volumes being in the US, China and Egypt. Some of the regions covered in the latest report from WRI include;

North America

There was mostly upbeat news about the US lumber market in the first few months of 2016; housing starts in March were the highest for that month since 2007, lumber consumption in early 2016 was 14% higher than the same period in 2015, lumber imports in January-April were up 42% as compared to early 2015, and lumber prices in May reached their highest levels in over a year. Despite increased domestic wood demand, lumber production on the US West coast actually fell about four percent during the first four months this year.

Canadian production was sharply higher during the first three months of 2016 as compared to the same period in 2015, with an increase of 19% in the Eastern provinces and eight percent in British Columbia.

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Judge rules softwood lumber checkoff unlawful

Judge rules softwood lumber checkoff unlawful | Timberland Investment | Scoop.it
A federal judge has ruled the USDA violated the law in creating the softwood lumber checkoff, which raises money to promote the use of wood in construction.

Companies that manufacture more than 15 million board-feet of lumber a year — enough to build 1,000 homes — must pay an assessment of 35 cents per 1,000 board-feet to fund the program.

U.S. District Judge James Boasberg in Washington, D.C., has decided the threshold of 15 million board-feet, or 15 mmbf, was “arbitrary and capricious” in violation of federal administrative law.

“Nearly every calculation upon which the agency relies has significant mismeasurements or inaccuracies, and many of the agency’s explanations across its original rulemaking process, its briefings and its two responses to the court’s remand orders contradict one another,” Boasberg said.

Resolute Forest Products of Montreal, Canada, filed a lawsuit against the softwood lumber checkoff in 2014 seeking to void the program, stop the USDA from collecting funds and return the money that’s already been spent.

Although the judge has now ruled the checkoff program was “promulgated unlawfully,” the implications for the program’s future aren’t certain.

A hearing has been scheduled for June 1 “to discuss the appropriate next steps concerning the remedies sought by plaintiff.”
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A Look at Lumber Prices and a Timber ETF

A Look at Lumber Prices and a Timber ETF | Timberland Investment | Scoop.it
The Guggenheim Timber ETF (NYSEArca: CUT), which features exposure to global companies that own or lease forested land and harvest the timber for commercial use and sale of wood-based products, is off 6.5% year-to-date. If some predictions about lumber price declines are accurate, CUT could be in for some more trouble.

Lumber prices have been strong to this point in 2016 and although the commodity is overlooked relative to gold or oil, it is viewed by some savvy market veterans as an accurate gauge risk appetite and sentiment. The problem for CUT and timber stocks is that lumber prices could be turning lower.

“The relative weakness has triggered a bearish crossover between the MACD indicator and its signal line (shown by the red circle), which could be an early indication of a move toward the long-term support of the 200-day moving average ($257.98). Bullish traders may want to remain on the sidelines for the next several weeks to see if the support levels near $260 can hold,” according to Investopedia.

The improved housing number provides support for the timber market as home construction makes up 40% of U.S. lumber demand. Consequently, traders and analysts believe the recent surge in housing activity could extend the rise in lumber prices.
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U.S., Canada vow to fix long-standing softwood lumber dispute

U.S., Canada vow to fix long-standing softwood lumber dispute | Timberland Investment | Scoop.it
The United States and Canada on Thursday vowed to settle a long-standing dispute over Canadian exports of softwood lumber which could erupt again this October when an earlier agreement on the problem expires.

U.S. producers complain that Canadian softwood lumber, which tends to come from government-owned land, is subsidized. A 2006 deal that ended the last dispute expired in October 2015 but both sides agreed to take no action for a year after that.

Faced with the prospect of the U.S. timber lobby pressing for penalties when the grace period runs out this October, President Barack Obama and recently elected Canadian Prime Minister Justin Trudeau asked officials to work out possible solutions and report back within 100 days.

"This issue of softwood lumber will get resolved in some fashion ... undoubtedly to the dissatisfaction of all parties concerned," Obama told a news conference after holding Oval Office talks with Trudeau.

"Each side will want 100 percent, and we'll find a way for each side to get 60 percent or so of what they need, and people will complain and grumble, but it will be fine," he said.

Trudeau said he was confident both sides were "on the right track towards a solution in the next weeks and months to come".

Major companies operating in Canada which could be affected if the U.S. lobby pushed for higher duties on lumber include Canfor Corp, Tembec Inc, Resolute Forest Products Inc and West Fraser Timber Co Ltd.
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