Advice to Forestry…Beware the Super Cycle
Friday, April 5, 2013 @ 3:58 AM
Prince George, B.C.- The stars are aligning for the forestry sector.
Market analysts have told the delegates at the COFI convention in Prince George that China’s demand for wood is increasing, Russia has a multitude of issues which prevent it from increasing its log exports to China, the US housing market is coming back on line, all at a time when saw log timber supply is reduced because of the impact of the Mountain Pine Beetle infestation. The analysts say the added problem is that with so many mills closing during the downturn, there simply isn’t enough manufacturing capacity to meet the growing demand.
The combination of factors has market experts predicting lumber prices could hit $500 to $600 dollars possibly as early as next year. It is, what analysts have termed a “super-cycle”.
B.C. has been successful in diversifying its exports and its markets say the experts, but there is reason to be cautious.
Peter Woodbridge, President of Woodbridge Associates, says home builders in the US are not happy about the rising price of lumber, that they set their pricing in the fall, and by the time the next building season gets underway, prices could be 30 -40% higher “They don’t like it, they cannot pass through those price increases, so home builders find themselves between a rock and a hard place and they don’t like it”.
In the short term, Woodbridge says business will be very good for lumber companies “Enjoy the sunshine guys, it’s going to be fantastic, but watch out, because there are things that are happening that should be taken care of now, rather than later.”
He says higher prices for lumber will force homebuilders to do things differently, including making better use of the lumber that would normally be wasted at a job site. He says that will drive the move to engineered lumber wood products.
Comments
What he’s saying is that substitute products will take over market share from sawn lumber if prices rise too high. And that’s exactly what will happen.
Just look back at all the various products once made from sawn lumber that have already been replaced by other products.
What will continue to be made, so long as they are cost competitive, are basic lumber products like studs. How many employees does a modern stud mill have?
And elsewhere on Opinion 250 there are people yapping about an impending ‘skills shortage’, as if legions of people are going to be employed once they have the right skills?
Sure, there will be SOME employment. But the trend continues unabated towards MORE product output with LESS labour input, no matter how much skills training we provide for the labour force.
When are we going to wake up to this FACT?
We keep striving for 100% full employment, which may be a laudable goal in having something for everyone to do, but it sure doesn’t make any sense trying to do it the way we’re trying to do it where the people who are employed have to work ever harder and longer just to get themselves deeper into debt they can never get out of.
Good one socredible. Its time we got away from the idea of pricing what the market will bare and look at the cost of the product.
Cheers
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