You are invited to attend the complimentary Webinar with Timber Product Inspection on Tuesday January 18th

Zoom event registration link:  https://us06web.zoom.us/webinar/register/WN_IUFp8E4ASCiqBizqHEVgBA    As part of my Advisor Role with Timber Exchange in Sweden, I would like to invite you to attend our upcoming Webinar with Timber Product Inspection  on Tuesday January 18th at 13:30 Central European time, or 07:30 EST and 04:30 PST (sorry!) A replay will be available later in the week! The event will be a panel discussion with our two guests: David Conner (Senior Vice President Operations, TPI) and his colleague Robin Lillandt (Senior European Representative, TPI). Together they can give a comprehensive overview of the timber grading rules, their history, function, application, sawmill qualification process, inspection and more. This webinar will follow the following structure: What led to the creation of the American Lumber Standard Committee (discussing ALSC’s history and their current day to day function) Why do we have grade rules (discussing the US building code system’s International Building Code (IBC) and the National Grade Rule (NGR))? How are the grade rules created and published (discussing NGR committee and the rules-writing agencies) How are design values established for dimension lumber (discussing ASTM D1990 process) What are the phytosanitary requirements for lumber imported into the US? What is the qualification process? How does a monthly routine inspection work? What does ALSC do during their routine inspection? Followed by a Q&A session with the audience We look forward to your attendance at the Webinar and/or its replay! Register for Webinar: https://us06web.zoom.us/webinar/register/WN_IUFp8E4ASCiqBizqHEVgBA  To stay up to date with developments on timber markets around the world with Timber Exchange Data Hub, where you can find monthly data for Production, Inventory, Logistics and more. Market Data Hub Timber Exchange – Automation Tools | B2B Marketplace   https://www.timber.exchange Timber Exchange is an independent digital platform and toolkit that automates the most time-consuming processes facing companies today. What we provide is not simply a management platform, but an entire ecosystem of Forestry Supply Chain tools that includes a supply chain platform, global marketplace and data hub. Regards Russ russtaylor@russtaylorglobal.com www.russtaylorglobal.com

In case you missed this last week on Lesprom.com…

Russ Taylor: BC government forest policy changes to cause up to 12,000 job loss

Source: Lesprom Interview      Moscow  03:18 AM / December 2, 2021

https://www.lesprom.com/en/news/Russ_Taylor%3A_BC_government_forest_policy_changes_to_cause_up_to_12_000_job_loss_101503/

Many new and substantive forest policy changes in British Columbia have just been announced by the provincial NDP (New Democratic Party) government. These changes are transformative and, if implemented, are anticipated to be negative for the province’s existing forest products industry.

Comment by Russ Taylor, President of Russ Taylor Global, Vancouver  based on an interview with the Lesprom.com  network

There are numerous changes being undertaken by the government as it moves to reshape the forest sector into its vision, as described in their Modernizing Forest Policy In BC: Intentions Paper. One disruptive change is an announced policy to defer timber harvesting in 2.6 million hectares of old growth forests despite having already protected most of these types of forests in the province. The second policy involves an involuntary redistribution of long-term forest tenures or harvesting rights from forest products companies to First Nations, communities and the government’s arm’s length timber auction program, BC Timber Sales (BCTS).

These two policy announcements will collectively be a significant impact to the industry with a potential loss of between 10,000 to 12,000 jobs (my loose estimate), where up to 18,000 jobs for the old-growth deferral alone has been cited by Council of Forest Industries (COFI). The full spectrum of the sector will be negatively affected, from timber harvesting businesses to sawmilling and value-added sectors, to reduced pulp production and impairment in companies’ balance sheets. In essence, the government is attempting to placate a heavily influenced “green-conscience” urban voter base, and at the same time, attempt to shift control of the forests away from major forest product companies and back to government.

I support developing longer-term strategies when they are based on sound methodology to achieve global objectives that are to be used as a compass for future direction. Trying to develop a correct or workable strategy is always challenging, especially for governments and even more so involving public land. It is even more challenging when politicians tend to make decisions more around getting re-elected every four years as compared to creating long term plans that result in good forest stewardship and industry confidence. And this is where BC finds itself.

Like many other voices starting to emerge, it is my opinion that the BC government’s new forest sector strategies have flaws. They do not seem to be based on science, socio-economics or even good forest data, as the proposed policies show a lack of process and understanding about how the existing forest industry really works. The new policies create more of a “feel good” strategy to feed the public, and this comes directly at the expense of forest product companies that have contributed significantly over the decades with long-term capital investments that have helped to build the economy of BC. Now the tide has turned where the objective is the creation of a new social license that will empower others at the expense of the existing investments that were made in good faith around what was thought to be the security of long-term and renewable forest licenses.

Old-Growth forest deferrals in BC

The newly announced government policy on protecting old growth forests was supposed to be based on the best science and data available. An old-growth panel of five experts was selected by the government, four of which had significant ties to the environmental community, including the Sierra Club and other groups. When you have four of the five being environmental-biased members on a committee with a mandate to assess old growth forests, you are going to get a report that does exactly that – preserves old-growth forests. Some of the “science” in the report has been challenged given the perceived bias of the four “experts.” Furthermore, there has been no socio-economic analysis conducted to fully understand the impacts on workers and communities. It really does make it difficult for the forest industry to understand the government’s rationale in making strategic decisions that have huge impacts on workers, communities and companies, but without the real or complete facts. Despite that 75% of existing old growth forests already protected or unlikely to be ever harvested, additional old growth protections are being proposed at the expense of thousands of high-paying jobs.

From the proposed reduction in old-growth timber, one credible forecast is that five to six smaller sawmills would close on the BC Coast. This is where most of the high-valued western red cedar and yellow cedar timber as well as Douglas-fir timber is located. The BC Interior is a much larger industry that produces mainly spruce, pine, and fir (or SPF) lumber and it is forecast that another five to six sawmills could close there. This is not only due to potential old growth timber withdrawals, but also due to other factors that are in the works such as protecting habitat for caribou as well as further reductions from extensive forest fires as well as the mountain pine beetle and other beetles in the province. Nevertheless, the deferral of old-growth timber harvesting will simply accelerate this process and add to the mill closures.

The compounding effect will result in the eventual closure of some 10-12 sawmills along with the loss of thousands of jobs and over C$400 million in annual revenues to the government. It comes at a time when the BC government has incurred massive infrastructure losses in the billions of dollars from the recent 100-year catastrophic floods that have wiped out roads, bridges and rail lines. Nevertheless, the strategy seems to involve shrinking the existing forest industry, creating more unemployment and reducing forest revenues to benefit others, such as the environmental community who are not responsible for creating government revenues. The BC forest industry has contributed about $4 billion in revenues to the government each year .

And because of the lack of fibre, a couple of pulp mills could be negatively impaired with potential closures. The government does not seem to understand all the real implications of how companies and its logging and sawmill workers will be negatively impacted, and if it does, it certainly does not seem to care. The loss of old growth forests will have a negative and direct impact on the value-added sector, which ironically is being proposed as a “new growth sector” by the government.

Government’s proposed policy on forest tenure takebacks

Another major government initiative is to redistribute forests from existing longer-term tenures through legislative reform of the Forest Act. Changes to legislation will enable the government to reduce harvesting rights of established companies that have built up world-class sawmills and plywood mills over the decades. The government’s strategy is to take part of those timber rights away for the purposes of old growth deferrals or reallocation to First Nations, communities and BCTS. The transfer of forest tenures will not be at a fair market price because the government has cleverly changed how it will compensate companies for the reductions to harvesting rights. This is one more way for the government to send out strong signals that investing in BC is now a very high-risk proposition. With little guidance from the government on what the end result of the redistribution of forest tenures will look like, forest companies are left with an almost unprecedented level of uncertainty which will most likely result in a quicker pull-back of capital.

Notion of more value-added industries in BC

The dilemma is that it is very peculiar for the government to say that it wants the BC forest industry to grow and it is looking for capital investments, but it seems to be focused only on the value-added sector. With a reduced timber harvest, it can be understood that producing commodity lumber is not as desirable as the potential from more specialized sawmills that produce higher valued products. However, a healthy commodity industry is still a prerequisite to allowing success to slowly build in other small or specialty businesses over time. By flipping a switch to reduce the forest tenures for established mills with the hope that unproven and under-capitalized smaller sawmills and value-added businesses can grow is a high-risk strategy.

This harkens back to a similar value-added policy initiative that previous NDP governments implemented to allow forest licenses to be bid on by value-added companies in the early 1990s. This resulted in a huge failure throughout the value-added industry, so this new policy has the initial potential to be a repeat of an ill-fated program unless it is reformed to something different. And the government never defines what “value-added” is in its strategy, but they only justify this as a high-value way to utilize scarce fibre.

It is a great theory, I get it, as you can theoretically obtain more value AND more income from a log by creating more jobs through a value-added facility. In reality, the BC value-added sector has been shrinking steadily for decades – it is certainly not a growth sector, and it is riddled with a graveyard of closed uneconomic and under-capitalized companies. There are certainly some growth opportunities in the BC value-added business. Some of the new policies will assist in allowing some of the existing survivor companies to expand. But the growth opportunities for any new businesses to survive will likely be limited to only a few companies and products, as this is what history in BC suggests.

Where is the government’s Forest Policy headed in BC 

It is too bad that the current NDP government has not chosen to be inclusive in determining its new forest policies with all stakeholders. And if they did a deeper dive and looked more around the world to see which countries or sectors are doing things right, then they would have seen that there are different options to achieve more industry diversity and prosperity as well as strategies to avoid. Instead, it appears that they have looked more at idealistic options that could be heading back in the direction where some previous initiatives failed. It is, perhaps, “easy” for me to make some of these assertions since I travel regularly outside of BC (and to almost all continents) and see what is going on around the world. Consequently, it is easier for me to see that these new proposed changes to BC’s forest policy are very risky and could be heading in the direction of making the province’s sector less competitive on a global basis.

Even before all these announced policy initiatives, the government can also be credited for allowing BC to be positioned as one of the highest cost commodity lumber producing regions in the world, tied to an ill-designed stumpage formula (I have analyzed this topic for a number of years but will leave any further discussion on that topic for another day). Social engineering of the forest industry by the government never really works since you need to have the confidence of investors. Quickly devised social programs that benefit one part of an industry and the expense of another will cause investors to flee.

Nevertheless, the current situation now is very messy, given that the government has chosen to use faulty science, a lack of economic considerations and inappropriate forest inventory data for developing their new forest strategies and policies. This is really a shame to those forest product companies, workers and communities that invested in BC for decades as they will now be on the losing end of a number of socialized forest policy initiatives now being proposed.

For further details on all the recent BC forest policy announcements and other BC wood products industry analysis, as well as ongoing data updates on the BC timber harvest and sawmilling industry, I recommend the very insightful and useful newsletter, View From the Stump https://www.spartreegroup.com/view-from-the-stump by David Elstone. Newsletter extracts as well as past complete editions are posted there. Or contact myself at russtaylor@russtaylorglobal.com and I can put you in touch .

 

Russ Taylor is a Guest on Materials Xchange’s Live Smart Market Call: Friday Dec. 3 at 12:00 CST (1:00 PM EST; 10:00 AM PST)

My colleagues at MX (https://materialsxchange.com/ ) in Chicago have asked me to discuss my latest summary of the Top Global Lumber companies and also how the European sawmills mills will need to maintain and maybe increase lumber exports to help balance out US lumber demand in 2022.

This will be on Linkedin Live and also Youtube at the above time. You may have to wait a few minutes before the broadcast goes live. Here are the links:

Linkedin: https://www.linkedin.com/events/6872336785070985216/about/

Youtube: https://www.youtube.com/channel/UC8PsPNb-TNDiqgkForL5fLA

If you miss it, look for the replay on either channel!

And check out Materials Exchange – a very interesting and progressive company if you are looking to buy or sell lumber on a digital platform!

 

ANALYSIS: Top Global Lumber Companies: December 2021

Updated List Shows Some Massive Lumber Companies

 By Russ Taylor, President, RUSS TAYLOR GLOBAL, Vancouver BC Canada (former President of International WOOD MARKETS Group)  russtaylor@russtaylorglobal.com  and  www.russtaylorglobal.com

 December 1, 2021 – for immediate release

 With lumber companies being flush with cash from record prices in 2020 and 2021, there continues to be several new acquisitions and expansions in the global lumber business. Assuming all the announced transactions are completed, an update of global sawmill capacities provides some insight into the scale of the top companies at the of 2021. There are now 26 companies that have lumber capacities more than 1.6 million cubic meters (or greater than about 1 billion board feet – nominal).

The order of the top global companies remains largely unchanged, but there are a few major exceptions. The top five companies are led by #1 West Fraser (which is also the largest OSB producer), followed closely by #2 Canfor (including its Swedish mills), #3 Weyerhaeuser, #4 Interfor (with its recent acquisition of EACOM as well as four G-P mills), and #5 Sierra-Pacific (with its acquisition of Seneca). Each of these behemoth companies have more than 5 million m3 (3 billion bf) of lumber capacity.

Stora Enso at #6 has 5.38 million m3 of lumber capacity with mills throughout nine countries in Europe as well as Russia. Moving up quickly in the ranks with capacity of 4.8 million m3 is #7 binderholz headquartered in Austria with the strategic acquisitions of the two ex-Klausner sawmills in the US South and BSW’s seven sawmill sites in the UK, one in Latvia and seven other production sites in the UK.

Achieving the 3 million cubic meter threshold is #12 Segezha Group, a very strategic Russian company that has been on a buying spree and recently acquired a major Russian competitor, LLC Inter Forest Rus, which in turn comprises 24 forest industry assets, including some world-class sawmills, and a substantial forest resource base in Siberia.

The other new entry to the list is #25 GreenFirst Forest Products that acquired the six sawmills from Rayonier A.M (RYAM) in Ontario and Quebec, and previously had acquired one additional sawmill in Ontario.

Thirteen of the top 26 companies are based in North America, with the three of the top four based in Vancouver BC. Eight of these North American companies have mills in both Canada and the US. In Europe, there are four to five companies just hovering at or below the 1.6 million m3 threshold and they should make the list soon.

The top 12 companies’ capacities represent 18.4% of 2020 global lumber production, where the total list of 26 companies’ share was 25.7%.

The table of the top 26 global companies is below – this is only available at: www.russtaylorglobal.com/articles. Sign up on our website to get all reports automatically.

Note: The Complete List of the top 26 global sawmill companies is only available at: www.russtaylorglobal.com/articles. Sign up on our website to get all reports automatically at no charge.

Russ Taylor Cell: +1 604 897 5666

By Russ Taylor, RUSS TAYLOR GLOBAL                                                                        November 21, 2021

A super rain and windstorm, the so-called “atmospheric river” that is being called a “100-year storm”, hit BC and Washington State with catastrophic results last weekend. Main roads and bridges that are integral to the infrastructure throughout BC were breached, including on all major highways and rail lines. Also impacted were oil supplies from a critical pipeline from Alberta to BC that is used to produce gasoline and diesel at local refineries – this caused the government to enforce fill up restrictions to a maximum of 30 litres (6.7 gallons) at gas pumps. In fact, Vancouver was logistically cut off by road and rail from the rest of Canada for about 72 hours as all highways and rail lines heading across BC were damaged and/or impassable. Even one week later, only two secondary highways have been re-opened and they are for the exclusive use of emergency and essential service vehicles.

Full details in pictures and videos that show the full extend of the damage in BC and Washington can be found in the excellent summary prepared by the Washington Post: https://www.washingtonpost.com/weather/2021/11/18/british-columbia-washington-floods-climate/

The reality from the storm is that business and logistics operations will not be back to even close to normal levels until well into December and perhaps not until after the New Year. This will mean that the lumber supply from BC, and to some degree from Washington State, will be reduced as supply chains remain in disarray. With the Port of Vancouver currently cut off from road and rail service, lumber export deliveries to the port could be limited as the priority should shift to moving more critical cargos through the port – that may not include lumber, so it will need to be redirected into North America.

Paul Quinn of RBC Capital Markets provided the sentiment of his take on what this means to North American lumber markets in his Lumber Pulse Check of November 21. His comments echo mine:

• The impact from BC and Washington State is that lumber supply could be reduced for an extended period.
• It appears that most traders are preparing for a longer outage, but the service disruption sets up for a challenging winter transportation season.
• Even prior to the flooding, the lack of containers was a material constraint on export volumes and most mills were shifting volume back into the North American market. It is understood that some mills are limiting rail shipments by necessity and instead relying on truck where possible; however, there are a limited number of trucks available, so production is likely to far exceed shipments in the near-term.
• The consensus view among traders is that the increase in US softwood lumber import duties from 9% to 18% around December 1 are a weak reason to increase prices, but because the market is tight, buyers are more likely to pay higher prices if mills ask for it
• This leaves risk firmly skewed to the upside heading into 2022.
• In terms of a lumber market impact, traders are mostly seeing a tighter supply scenario resulting and believe that the price risk is skewed to the upside (i.e., US$1,000/Mbf lumber is now more likely than $550). Random Lengths published prices for W-SPF 2×4 #2 random length (FOB BC Mills) on November 19 was US$620/Mbf, up from the previous week’s $555.

As I have been saying for over a year, expect more volatility in lumber markets for the indefinite future!

Global Lumber Prices Resetting

Market Power Shifts to Buyers

September 24, 2021

(Originally published in View From The Stump (Vol. 2, No. 3) by SPAR TREE Group –  https://www.spartreegroup.com/view-from-the-stump); This version includes updated graphs.

By Russ Taylor, President, RUSS TAYLOR GLOBAL, Vancouver BC Canada (former President of International WOOD MARKETS Group)  russtaylor@russtaylorglobal.com  and  www.russtaylorglobal.com

 

The global pandemic has created a wild lumber market since April 2020. We all know the crazy lumber prices that occurred over this time in the US market, but other international regions are seeing somewhat different trends.

Following the peak of US lumber prices in late May 2021 at US$1,630/Mbf (using the benchmark W-SPF 2×4 #2&Better R/L, FOB BC mill; US$1,053/m3, net) and the subsequent price collapse through mid August to US$385/Mbf (US$249/m3), lumber prices have slowly clawed their way higher to US$498/Mbf (as of Sept 24). While no one could have ever predicted this super price spike and subsequent collapse, the outlook is for improving US prices into fourth quarter before a likely correction occurs later in the year. In looking into 2022, prices could be in the US $600/Mbf range at times in Q1 and Q2 before a more balanced supply and demand situation occurs with lower prices. Considering that the peak US lumber prices prior to 2018 was US$470/Mbf (1999 and 2004; nominal prices), current and projected price levels should look extremely attractive to most North American lumber mills. However, not in BC, as explained later.

EUROPE

In Europe, the situation is like the US but with a different price cycle. While US prices took off very quickly at the start of the pandemic in2020-Q3, European prices lagged and grew slowly as domestic as well as offshore market conditions took longer to crystallize. Using Swedish carcassing lumber prices delivered to the UK for perspective (see graph), prices increased about 50% through 2021-Q1, before accelerating and peaking in August of 2021. This is partly due to the nature of the European industry where much of the business involves quarterly with some monthly pricing, and this takes some of the wild fluctuations out of the market. Nevertheless, volatile pricing did occur as buyers and sellers realized that there was an extreme shortage of supply in the market and spot market prices soared.

Like the US lumber market, the European prices for some commodity products peaked in August (especially in Central Europe), some peaking in September (as in Sweden), and non-commodity products will likely peak in fourth quarter. With the European market prices lagging those in the US by about three months, the opportunity for Europeans to continue exporting to the US market (that was active and lucrative for much of the last year) has now vanished. On one hand, this is helping the US market stabilize, as European exports to the US have been reduced from negative export returns. High European prices are keeping more supply in the European market and that, in turn, will accelerate the ongoing drop in prices there.

JAPAN & CHINA

In Asian markets, a somewhat similar trend to Europe is evident in Japan, where are prices peaked two to three months after the US market peak (see graph). Canadian exporters were able to elevate and hold 2×4 W-SPF J-Grade in Japan at very high levels since lumber supplies became tight going into 2021-Q3 negotiations. However, 2021-Q4 negotiations will result in much lower price levels given the huge spread between Japan and US prices currently.

The Japanese have voiced some concerns that the very high SPF prices demanded by exporters for 2021-Q3 may result in a longer-term reduction in the market share of SPF in Japan. Some Japanese buyers were dissatisfied with the prices they had to pay that, in turn, were driven by the spike in US market prices. Japanese buyers were able to find some alternate sources of 2×4 lumber, including Russian and European supply, so the market share dynamics could shift in Japan from this situation. Despite all this, SPF J-grade is still in tight supply.

In China, SPF 2×4 #2&Better prices did theoretically increase by almost 50% (see graph), but very little volume was transacted. The Chinese buyers have diversified their supply to many global sources and were able to find alternatives, including using lumber produced from imported logs at much lower costs than imported lumber. While this did create some supply shortages and low inventories in China at various times in 2021, Chinese buyers were able to avoid the over-priced lumber situation that the Japanese are currently in. Exporters suggest that Canadian exports to China have surged more recently with Chinese buyers back to purchasing imported SPF and other lumber since prices are now affordable.

These price trends highlight how different markets work and how exporters can gain market clout in tight supply situations and, conversely, how the buyers take over when prices get too high, and the market power switches from seller to buyer.

 BC SITUATION

What does all this mean for BC? For BC Interior SPF mills, they are now rebuilding order files and trying to move prices higher. Late September and early October are usually weak periods for lumber prices, so the fact that prices are moving higher in mid-September is good news. However, the cost structures of the BC interior sawmills are the worst in North America right now, mainly driven by the government’s timber pricing formula (i.e., stumpage) and lag that does not yield fair stumpage during periods of volatile end-product prices.

My estimate of BC Interior breakeven EBITDA prices at the lowest cost mills during 2021-Q3 is in the US$500 to 550/Mbf range on a 2×4 SPF #2&Better basis (print price); cash costs for these best mills would be up to 10% lower, so around current prices. However, on October 1st, stumpage rates on crown forest licenses are expected to increase by around $10/m3 and in December, the US import duties are scheduled to rise from 9% to about 18%. This means that the SPF 2×4 breakeven print price could rise to between US$550 and $600/Mbf. As a result, BC mills may be facing further curtailments in 2021-Q4 unless prices rise by up to US$100/Mbf, or until stumpage corrects to much lower levels starting in 2022-Q1.

BC Coast mills are also negatively impacted by higher government stumpage rates. After high volume shipments to the US market in the last year, Coast mills are shifting to their more traditional domestic and offshore markets and will not feel the full bite of lower US lumber prices (and avoiding US duties) as the Interior is facing.

Contact: Russ Taylor

russtaylor@russtaylorglobal.com

PH: +1 604 897 5666

Web:    www.russtaylorglobal.com

This article is available first to those that are signed up on my website for the latest news!

 

  Greetings from Timber Exchange & RUSS TAYLOR GLOBAL!

https://us06web.zoom.us/webinar/register/WN_cwwvzGz3QD-OYuIrZTMRgA

We would like to invite you to attend our upcoming Timber Exchange Webinar on North American Lumber Market this week! The panel discussion will be with Russ Taylor (President, Russ Taylor Global, Vancouver) and Christian Provost (VP, Boscus, Montreal) who combined have a thorough understanding of the North American lumber market and the complex implications it has on the global scene.

This complimentary webinar will be held on Thursday September 30 at 07:00 Pacific DT; 10:00 Eastern DT; and 16:00 Central European time.

Discussion points and Q&A will include, but not limited to, the following topics:

• SUPPLY: Where does the US get its wood and where is it consumed (and is there enough)?
• DEMAND: how is demand and consumption trends today and into 2022 in the US market?
• CHANGE DYNAMICS: What are the key factors impacting supply & demand?
• What is the role of EURO spruce/SPF in the US market?
• What do offshore companies interested in exporting to the US market need to consider?
• LUMBER PRICES: How do you expect prices to develop?

Looking forward to meeting you at the Complimentary Webinar!  Sign up/Register Here

https://us06web.zoom.us/webinar/register/WN_cwwvzGz3QD-OYuIrZTMRgA

To stay up to date with developments on timber markets around the world, go to the Timber Exchange Data Hub where you can find monthly data for Production, Inventory, Logistics, Prices and more here:

https://www.timber.exchange/global-price-index

For further information on the companies, please visit:
Timber Exchange www.timber.exchange
Boscus Canada Inc. http://www.boscus.com/en/
RUSS TAYLOR GLOBAL http://www.russtaylorglobal.com

 

Announcement: Russ Taylor has been retained by Timber Exchange as its Global Strategic Advisor

Russ Taylor and RUSS TAYLOR GLOBAL will be assisting Timber Exchange to expand its business beyond it core regions in Europe and the Middle East.

Timber Exchange ( https://www.timber.exchange/ ) is a supply chain platform and B2B marketplace built specifically for the unique needs of the global lumber export industry. The software package features 90 smart tools in 5 languages to cover all steps in export sales, from the customer inquiry until the lumber arrives at destination. This allows colleagues and counterparties to manage sales, logistics and legal obligations from a central workspace that automatically creates tasks, schedules and warnings – all features that make the integrated platform unique.

This means that 40% of normal administrative work in export sales processes can now be automated, reducing shipment delays and avoiding fines due to incorrect shipping documents or missed updates.

The platform also includes a rich market data hub which covers country statistics, inventories, global prices in key exporting countries as well as shipments and logistics from key markets across the globe plus container line on-time ratings.

ABOUT TIMBER EXCHANGE & ITS PLATFORM

The company behind the Timber Exchange platform is based in Sweden. It has a team of 32 with extensive experience in production, logistics, trading, trade-finance, analytics and technology.

If you are already digitised and automated, then you know all about it! If not, read on…

Timber Exchange provides many tools for managing trade and logistics for those in the lumber export business. Like shared folders (i.e., Dropbox or One Drive), there are efficiencies in a digital supply chain for tracking cargo online, submitting applications to port officials for document issuance, and lots more. As a result, huge efficiencies, time savings and better customer service are just some of the advantages.

Timber Exchange’s software mirrors exactly how companies and lumber professionals conduct their business. This allows users to create their own digital tools and workflows to integrate with leading technologies such as electronic documents and cargo tracking. And more features and benefits continue to be added.

The Timber Exchange software allows manual processes and operations that are spread out, such as in Excel and Word, to be replaced by automation in a single system. Timber Exchange offers more than 90 tools that fit the needs of all parties in a trade, including agents and forwarders, but also allows customers to login and see their own data and deal with their suppliers. This reduces phone tag and delayed communications, as everything in a trade is on the digital platform.

As an overview, Timber Exchange does it all:

• creates multiple ways to manage and drive business
• manages, tenders and books logistics
• generates, approves and issues documents
• tracks shipments, responsibilities and deadlines
• analyses the performance of your business and supply chain

Contact me for more information or visit the Timber Exchange website to get moving with the latest technology and start gaining efficiencies!

Russ Taylor, RUSS TAYLOR GLOBAL: russtaylor@russtaylorglobal.com  (and sign up to be on our distribution list!)    PH:+1 604 897 5666

Timber Exchange:  mai@centersource.io or jessica@centersource.io – for a demo or more information, and visit: https://www.timber.exchange/ for full details.

…And stay tuned for further announcements!

ANALYSIS: A Perplexing Puzzle – Provincial Stumpage Rates in Canada

BC, Alberta and New Brunswick, have different methodologies of setting stumpage rates for provincial sawlogs that can disproportionately impact sawmill operators

By Russ Taylor, President, RUSS TAYLOR GLOBAL, Vancouver BC Canada (former President of International WOOD MARKETS Group)  russtaylor@russtaylorglobal.com  and  www.russtaylorglobal.com

As a forest industry analyst for over 30 years that has worked within the global industry for over 45 years, it is evident that some elements of public forest management can be quite different to how private forests operate. When it comes to trying to analyze how public timber stumpage prices (or returns to the standing trees for the forest owner) are set by some provinces in Canada for companies holding forest licences, this can be a real puzzle. Three provinces, British Columbia, Alberta and New Brunswick, have different methodologies of calculating and setting stumpage rates for provincial sawlogs that can disproportionately impact sawmill operators, as summarized below.

New Brunswick has held its rates at the same level as was set six years ago. Despite skyrocketing lumber prices in the first half of 2018 and then the super-cycle price rally from the pandemic starting in 2020-Q3, New Brunswick has held rates steady for sawlogs and stud logs at about C$27/m3. While a flat stumpage price may work in normal market conditions, recent lumber price volatility suggest that, in hindsight, this may not be an equitable approach. Consequently, the provincial government may have foregone millions of dollars in public timber revenues in the last four quarters.

Alberta has taken the other extreme where timber stumpage prices are tied in a formula to monthly lumber prices for the previous four weeks. This means that during the recent lumber price surge, sawmills in Alberta paid huge stumpage rates – as high as C$166/m3 in June 2021 just after lumber prices peaked. Alberta’s system also includes a lower rate (by about 50%) for smaller timber sales that are below 107,296m3.  In contrast to New Brunswick, Alberta appears to have captured its fair share on the value of its crown timber.

In the middle is British Columbia with a third approach on stumpage, and one that has turned out to be messy at times for forest operators when lumber prices are volatile. Like Alberta, stumpage rates in the BC Interior are tied to the lumber prices as well as several other variables (including competitive log sale prices from BC Timber Sales), but the stumpage formula features what is a problematic 3-plus month lag to lumber prices. This means that when lumber prices are rising, stumpage lags and companies can benefit with reduced delivered log costs (along with favourable lumber prices). But when lumber prices quickly move lower for longer periods, stumpage rates can keep going up for 3 to even 6 months due to the lag effect built into the formula. This was the case in the second half of 2019, where dozens of BC Interior sawmills had to curtail as lumber prices slumped, but stumpage prices kept going higher.

This is now a similar situation now facing the BC Interior industry in the third quarter of 2021, as stumpage rates are reported to be increasing by about C$30/m3 starting on July 1 for timber, just as lumber prices had crashed by a whopping 75% from all-time highs. These increases will start to hit sawmills as they bring new logs to their mills. And stumpage rates are forecast to move even higher in October – by another $10/m3. Then in December, the US import duty is expected to double from 9% to 18%.

Sawmill curtailments are all but inevitable in the BC Interior (and some are now occurring). The estimated EBITDA breakeven lumber price resulting from rising stumpage prices for many sawmills is moving well above US$550/Mbf (on a 2×4 #2&Better price basis) in 2021-Q3 where SPF 2×4 #2&Better lumber prices have recently (late August) moved below US$400/Mbf. In 2021-Q4, the breakeven EBITDA price (on a 2×4 #2&Better price basis) for BC mills could be over US$600/Mbf as higher stumpage rates and the US import duties kick in.

Meanwhile, Alberta mills seem to be doing fine and unlikely to curtail due to the flexibility and responsiveness of log prices to lumber prices within its stumpage system. And New Brunswick mills can simply carry on as they have.

What happens in BC during the rest of Q3 and the next quarter remains to be seen: will sawmill keep operating with huge cash losses (using up the windfall gains from the first half of 2021), or will they curtail for periods of time? Higher lumber prices would be one part of a solution, which will occur, but will they be high enough? Market forces cannot guarantee breakeven lumber prices at all.

Nevertheless, BC’s stumpage dilemma continues to be somewhat of a complicated mess with no easy fix. BC politicians and bureaucrats administer or tinker with the formula as they can  – one that was developed to appease the Americans – with the adage that “things will eventually average out.” However, if BC mills do curtail, sawmill workers, contractors, suppliers and those in smaller communities all take a direct hit, so things do not ever “average out” for everyone.

The outcome of public forest management and policy changes in BC, coupled with the devastating mountain pine beetle epidemic, is that BC operators have found other operating areas outside of the province where they can grow their business in transparent or more stable price environments – typically where sawlogs are priced to more current market or anticipated conditions with little to no lag.

Pricing timber on public forests does not have to be complicated for forest operators and sawmills, as Alberta and New Brunswick demonstrate. Why these three provincial stumpage systems are so widely different – and why BC’s timber formula lags the reality of lumber market prices – is a real puzzle. How then are the Americans supposed to assess these different provincial stumpage formulas as all being equitable, especially when the negotiations on the next US-Canada softwood lumber agreement take place?

“Pfeifer Talk” Free Webinar: “Global sawn timber markets in transition”
Thursday June 10 – 16:00 Central European Time (10:00 EDT; 07:00 PDT)

EXCLUSIVE TO THOSE ON THE RUSS TAYLOR GLOBAL “market news” list:

“Global sawn timber markets in transition” is the title of the next “Pfeifer Talk” on 10 June. The mix of speakers have been organized by the Pfeifer Group in Europe and the webinar features both the round and sawn timber market as well as the packaging sector, including what lies ahead in these turbulent times.

Webinar participants will listen to analyses by:
• Lars Schmidt (Managing Director DeSH – German Sawmill Association);
• Russ Taylor (President, RUSS TAYLOR GLOBAL, Vancouver Canada – global consultant/analyst and former owner of the International WOOD MARKETS Group); and
• Leonhard Scherer (Managing Director, Euroblock (Pfeifer)).
The event will be simultaneously translated into English and Italian.

Complimentary Registrations can be made here: https://lnkd.in/e_nwp3d

ABOUT THE PFEIFER GROUP:
For 70 years, Pfeifer and wood create a link, from which passion for innovations constantly grow. Our 2,000 employees transform the wonderful raw material into a clearly structured product portfolio. As family business, we look at the wider picture – this is our nature.
• SHUTTERING PANELS: The Market leader in Europe
• PALLET BLOCKS: The Market leader in Europe
• SAWN TIMBER: Among the TOP 3 in Central Europe – 4 million cubic meters of round timber– 2.1 million m3 (900 million bf, net) of sawnwood is processed annually in its 5 sawmills
• PELLETS: Among the TOP 3 in Central Europe
• FORMWORK BEAMS: Among the TOP 3 in Central Europe
• GLULAM: Among the TOP 5 in Europe
For further details, see: https://www.pfeifergroup.com/en/