20 ideas of 3rd Global Softwood Log and Lumber Conference (Vancouver)

We present some major ideas of 3rd Global Softwood Log & Lumber Conference held in Vancouver on May 8 by one of our media partners, Canadian company International Wood Markets. Full version of the article is available in our Weekly #71, while conference proceedings and registration for the next conference scheduled for 2014 – at the company’s website.

-The super-cycle is still considered to be two to three years away, as current market volatility is tied more into supply chain disruptions than to the longer-term supply/demand gap being forecast.

-Continued stable to strong Chinese demand will be vital in making the super-cycle really “super” rather than just a normal recovery.

-A generally upward trend in lumber prices could last up to five years if the U.S. housing market and global economy recover.

-With interest rates for harvesting running at around 1%, European landowners and North American timberland investors such as TIMOs are opting to literally grow their money on trees, as standing trees can grow in value by 4%–5% per year.

China

-It is uncertain whether the new national government of China will actually refrain from its policy aimed at slowing down the housing boom in the country.

-Canadian SPF lumber enjoys a clear price advantage in China over many other competing species.

Japan

-Japan is the third-largest lumber importer in the world, and continues to be a stable, high-value market for producers in Europe and on the west coast of North America. It is the largest customer of the Finnish sawmilling industry.

-Japan’s challenges in growing its domestic lumber production from its current market share of 30% are aging workforce, inefficient sawmills, fractured land holdings, and inefficient logging practices.

Russia

-Russia currently stands out as a global supply wild card. Confusing and politically opaque new “tax + quota” rules are not likely to boost log exports, even with WTO accession and subsequent decline of export duties.

-Logging costs in Russia have doubled in the past six or seven years, putting many logging firms out of business.

-Some foreign investors have begun (or already completed) plans to pull out of Russia by selling assets. Interestingly, Russian investment capital (mainly from government banks) is replacing the funding gap left by declining direct foreign investment.

-Russia has a “captive market” in some of the eastern CIS countries due to a monopoly on rail access, and as such is able to get better returns on its exports.

Europe

-European producers have been faced with two problems simultaneously: low demand and low prices due to dismal economic conditions (including extreme unemployment in many countries), amid both high log prices and tight supply. These conditions are expected to persist for several years.

-Because of the high level of risk involved (due to volatile lumber prices, and shipping and financing costs), European producers are wary of shipping to North America market in significant numbers.

-North American lumber distributors and European wholesalers try to avoid getting stuck with high-priced inventory in a declining price environment. This will slow Europe’s return to North American markets, and may change the way lumber distributers do business.

US and Canada

-Disappointing unemployment levels and multiple supply chain bottlenecks, e.g., shortages of developed lots and skilled labour, and tighter availability of capital (for both builders and consumers) are hindering housing recovery in the US.

-Mountain pine beetle outbreak in British Columbia will not only lead to sawmill closures, but also to decline in chips, sawdust and shavings output, which will affect pulp, panel and pellet industry of the province.

-Log exports are a necessary component of the British Columbia’s coastal forest industry in that they enable economic harvesting of the wider timber profile which otherwise wouldn’t be financially viable.

-US South’s forests have the potential to harvest an additional 5.1 billion board feet (12 million m3) of logs, which is 32% more than current levels — while maintaining forest inventories at present or even higher levels.

-Rayonier company is implementing advanced silviculture practices (including improved genetic stock, fertilization and thinning), which is raising growth rates by 1.5% per year.