Truck LoggersBC Magazine Summer 2023
BRITISH COLUMBIA – In my nearly 50-year career, I have watched the evolution of BC’s forestry industry along with the ever-changing provincial governments and their respective forestry policies.
To be honest, I still don’t understand how the government works, especially when it comes to BC forest policy. After attending the COFI conference in Prince George and hearing both ministers and the premier speak, I continue to remain perplexed and concerned about the future of BC’s forest industry. Clearly, politicians are playing with urban voters and their own elections, not with forest industry-based communities that depend on forest industry jobs. A pessimistic view? Maybe. A realistic view? I think so.
Operating logging and wood processing plants in the government-owned forest industry can be a real curse at times, as the forest policies of incumbent governments can be reinvented or reversed. -ad very much to appease their voter base. For investors, and those whose livelihoods are tied to the BC industry, these times are as challenging as one will find. Not only are wood AACs in decline, the decline in wood supply has been greatly accelerated by government forestry policy and set by extremely low prices for wood and OSB.
Moving on to markets and drivers where the story is not so good, there is still plenty of supply in North America as well as around the world that continues to chase volatile demand. Higher interest rates, declining consumer confidence and concerns about a potential recession later in the year continue to be some of the main drivers affecting new starts. of dwellings and more recently, the activity of repair and renewal.
During the COVID-19 period there were many pandemic-driven home projects, but these disappeared as consumers juggled other spending priorities such as trips, summer vacations and restaurant meals. As a result, both companies indicated that their same store sales over the next nine to twelve months could be down 2-5 percent. With renovation and remodeling representing 40 percent of wood consumption in the US, this is not good news. At least housing starts in the US seem to be trending higher, but they are at lower levels than the last two years.
Lumber prices are below cost for BC Interior SPF sawmills as a whole through 2023 and currently remain near the extremely low price of US$350/Mbf, FOB mill for 2×4 random lengths -on board (as of June 9, 2023). The large and unusual premium held by southern yellow pine earlier in the quarter fell from US$175/Mbf to US$46/Mbf, or close to the historical spread of US$50-75/Mbf.
Even the state of emergency forest fire conditions in Alberta along with wildfires elsewhere in western Canada may spark any interest in buying SPF trees in late May. Instead, buyers maintain steady but lean inventories of all SPF widths and replenish from local distributors or wholesalers as needed.
My wood demand outlook for 2023 calls for a 4-6 percent reduction in North American consumption compared to 2022. The one wildcard I’m most concerned about, which doesn’t seem to exist now, is the pending credit crunch in US banks. Even with no more bank failures, there is the potential for a worse second round later in the year that could be an even worse recession with all the reduced demand and losses. of work related to this event. More updates to follow on this pending issue.
With weak demand, supply will see declines in most regions of the US and Canada, except for the low-cost US South. BC production is expected to be lower in 2023, up to 10 percent in the Interior and about 5 percent from the Coast, where other regions should see smaller declines. US offshore imports are already in decline as US prices are now too low to attract any sustained volumes.
To recall, BC accounted for 62.6 percent of Canada’s total output in 1990; by 2023 it will be about 35 percent. Canada averages 32-34 percent of US consumption; in 2023, it will be about 23 percent. These declines stem from a decline in BC production from either a lack of available timber or excessively high delivered timber costs.
Export markets are also flat with Japan, China and Europe all seeing flat to lower demand as there are excess supply volumes which are currently driving down the price of wood products worldwide.
It seems that the prices of W-SPF 2 × 4 will be difficult for the rest of 2023 and fortunately average only US $ 400/Mbf, FOB mill. With BC costs above this level, this could be a boom year for the industry. However, the government will still collect its revenues from the reduced available supply of timber and many companies will have to consider curtailments or closures. I wonder if the government supporters understand anything about the financial benefits, income and jobs that come from harvesting BC’s forests and processing logs into various forest products?
Russ Taylor, President
Russ Taylor Global (former President of International WOOD MARKETS Group) Tel: 604-897-5666
Email: russtaylor@russtaylorglobal.com Website: russtaylorglobal.com
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