West Coast Business Trends – July/August 2022

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Lumber prices are falling. The slow but steady rise of interest rates is sidelining more would be homebuyers, inflation, lack of labor in all sectors, and continued transportation woes have pushed this pricing rollercoaster far from its May peak of last year. The following is what producers on the West Coast had to say:

Brent Brownmiller of Gorman Bros. Lumber, West Kelowna, BC said, “Balance currently is good on both Cedar and ESLP Boards. Price is trending down on Cedar based on where pricing has been, and what alternative products are being sold at. Pine boards are flat. Take away is still very good, but our competitors are a bit more nervous than us, so we are selling at levels much higher ($300-$400). Business climate for the customer base that are 100 percent into specialty products is very good. Availability this year is better than last year so lost sales due to no inventory is non-existent. Climate for customers that sell commodities and specialty is a bit softer. Buying lumber in a falling market with freight challenges delaying those shipments are a killer.” Brownmiller continued, “We are still facing labor challenges. To hire, train and retain employees is still very difficult. The weather has been cold and wet. It hasn’t affected logging, but we are heading into the season where forest fires become the biggest issue. On a scale of 1-10 I would say 8 so far this year. Our pricing is still good. Our takeaway is still good. If freight was not the challenge, we would be having a very nice start to 2022.”

Leslie Southwick of C&D Lumber, Riddle, OR said, “As of the last week, supply has been outpacing demand as pricing is starting to rapidly decline specifically in Doug Fir 2” dimension. It seems to be the same story that we saw last summer with possibly continued weakness throughout the summer months. Cedar products have also been lackluster in a majority of products including decking, but Cedar timber orders continue to be robust. Customers seem very hesitant right now with many only buying if they have a confirmed order. Inflation, gas prices, lack of skilled employees and lack of transportation all seem to be challenges currently.” Southwick continued, “With a mild start to summer in Oregon, logging hasn’t been threatened yet by fire restrictions, but that is always a major concern as we move further into summer. Supply issues have been an issue in manufacturing for certain parts and equipment. Everything seems to be delayed or backordered for months. I would rate this year a 7 so far. It hasn’t been as wild a ride as the first half of last year, but there have been many challenges that have made things difficult at times.”

Aiden Coyles of Gilbert Smith Forest Products, Barriere, BC said, “We are balanced on supply and demand, starting to see prices soften across all widths and grades. Most notably in 2×4 & 2×6 knotty we are still getting good pricing and minimal push back on our wide’s. Seeing some hesitance on already booked orders with some customers pushing deliveries to later dates as they work through their existing inventory. Expect that this will soon result in our own supply being out of balance with demand in the coming months. Overall sentiment is that the takeaway just isn’t what it has been for our customers’ products. Lots of wood in their inventories to work through before they think about taking on new orders. Tough times on the horizon is the theme.” Coyles continued, “Currently our log supply is favorable, however looking into August and September things are going to change, minimal BC Timber Sales and hesitancy on letting go of logs off peoples own tenure means there are limited logs on the market. Labor continues to be a constant battle and with nicer weather and holiday season approaching the summer will be worse. Transportation for us is almost back to business as usual, however, this is not the case for our customer base who are still struggling with railcar and container availability. Weather has been wet with below average temperatures for this neck of the woods. Great for stopping fires but flood risks and washouts in the bush are going to be the next challenge for bringing logs to the mill. So far this year I would give it a 7/10 above average profitability, but lots of stressors (road washouts, old growth deferrals, transportation issues, labor challenges).”

Dean Garofano of Delta Cedar Specialties, Delta, BC said, “Spring is well underway, yet the Cedar market is still struggling to gain any real traction, despite a very anemic log supply so far this year. From Dec. 2021 through March of 2022, the Cedar harvest in Coastal British Columbia was down by about 25 percent in volume, when compared to the previous year. However, with reduced lumber demand and slow takeaway contributing to higher than anticipated inventories, the lack of Cedar logs has had no impact. Seeing such low demand into June, despite the low Cedar log harvest, can seem perplexing but perhaps we should not be too surprised. Cedar has been strong and rising in value for several years now. Shortly after the pandemic hit, we enjoyed accelerated demand and rapidly rising prices, with lumber flying off the shelves in box stores and retail yards. Now with many home projects completed, for those still contemplating a renovation or house purchase, there are many competing factors to consider.”

Garofano continued, “Inflation is running rampant on most consumer goods, none more impactful than gasoline, taking a large bite out of discretionary spending. At the same time, interest rates continue to rise, adding to borrowing costs, while the stock market is in a decline. Consumers continue to hear that ugly ‘R word’ discussed on the news, which decreases consumer confidence. All these factors impact decisions and reduce discretionary funds. For those still willing and able to spend a little extra cash though, often the funds are going towards travel instead of home projects.

“Distributors appear to have ample inventory after the slow takeaway this year. They are being cautious with housing starts declining and the Countervailing Duty on lumber expected to reduce by about 1/3 later this year. We may see duty relief as soon as August or latest November should an extension be needed. Purchases are trending more toward ‘just in time’, which will be challenging with the ongoing logistics problems, particularly with rail car availability. Car deliveries are unpredictable, with yards receiving a fraction of the cars expected on any given switch, stretching out shipments and impacting cash flow for the manufacturers.”

Garofano finished with this, “It should be an interesting summer as we navigate through the changing market dynamics. Keeping supply and demand in balance, even if it is low supply and low demand, will be critical to keeping Cedar price volatility in check and protecting the current inventory of both manufacturers and distributors.”

By Zach Miller

Editor and fourth generation of the Miller family to work at Miller Wood Trade Publications.

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