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Thursday, March 29, 2012

Change is in the Air...and on the Ground for Temple-Inland

My time in Saratoga last week also brought back some memories of a great company that is changing faces and may not be recognizable in the near future.

One of the engineers at the conference presented a case study of a CHP facility that was built a few years ago for Temple-Inland at its Pineland Lumber complex. I knew the Pineland complex well...I spent a significant part of the 1990's working at the facility. It was a southern pine plywood operation in those days, and it had a chip'n'saw operation that made studs. (Both the wooden kind and the human kind.)

The Pineland mill was a part of Temple-Inland, Temple-Eastex before that, Temple Industries before that, and Temple Lumber Company before that. Temple Industries was the result of a merger between the Temple family's original company, the Southern Pine Lumber Company that was started in Diboll, Texas in 1893, and their expansion venture, Temple Lumber Company, which was started in Hemphill, Texas, and Pineland in 1910.

Wednesday, March 28, 2012

Northeast Biomass Heating Expo 2012

I had the opportunity to attend the Northeast Biomass Heating Expo last week in Saratoga Springs, New York. It was a nice, well-run event, with some excellent speakers and helpful industry sponsors. And Saratoga Springs itself provided me with a few excellent Go Wood moments.

In the 19th century, the noted doctor Simon Baruch encouraged bringing European style spas to the United States, and thus Saratoga Springs, with its wealth of mineral waters developed as a spa, seeing many hotels built, including the Grand Union Hotel that was, in its day, the largest hotel in the world,[4] and the United States Hotel. In 1863, Saratoga Race Course opened and moved to its current location the following year, greatly expanding the city's reputation as a tourist destination.

- from Wikipedia

Monday, March 19, 2012

Optimism is Bursting Out All Over...

After making a couple of posts on the lumber and housing markets last week, I was looking forward to moving on to lighter, and hopefully, more positive topics. But today's news just wouldn't let me drop housing without one more post.

If you watched the presentation I posted last week, you probably caught my comment about misleading signals from the media, and the example I gave of the positive spin put on auto sales back in November. Well, now we have a great example of that bubbly optimism in our housing industry.

For instance, isn't it great to know that "Builders Remain Optimistic About Housing Market"? When I read that headline, I wondered what builders they were talking to. The only silver lining I hear builders and others in the building industry talking about right now is that since others in the industry are still going out of business, business should be good for the survivors if housing ever turns around.

Friday, March 16, 2012

More on the Global Economy and Lumber Prices

The previous post was just a brief glimpse at what lumber prices are currently doing. If you're interested in a more detailed explanation, you may be interested in downloading the full presentation I gave to the Western Pallet Association back in January.

The Global Economy and Lumber Prices in 2012

In this presentation, I give an update of last year's lumber price movements, why they did what they did, and how potential global events could impact lumber prices this year. The presentation is about 50 minutes long. Enjoy.

Wednesday, March 14, 2012

U.S. Lumber Prices Drifting Upward on Supply Shortages

Reuters headline from today:

"Credit crunch an unusual ally in U.S. lumber rally"

U.S. lumber futures prices have soared about 30 percent in the past five months, with bets rising 18 percent since January with help from an odd ally - a credit crunch in the industry.

Lumber distributors -- who channel supplies from mills to end users -- finding it difficult to raise loans to buy lumber in the cash markets are resorting to buying futures as a hedge and to possibly take delivery when a contract expires.

Lumber supplies available to distributors in the cash market have also been shrinking due to a pick up in the housing market in the wake of a mild winter in the country.

"Distributors are having trouble buying lumber in the tight stocks environment and also they can't get capital from banks so they're buying futures," said Brian Leonard, a futures broker and analyst for Leonard Commodities Inc in Chicago.

Open interest in lumber futures is up 18 percent and spot lumber prices are up 12 percent since January, indicating new buyers in the futures market.

The rest of the article goes on to explain the phenomenon we've been seeing since last year...lumber supplies are slowly tightening as mills shut down or cut back on production one by one, and yet lumber brokers and builders are finding credit hard to come by as the warmer than usual late winter has allowed the building industry to warm up a little earlier than usual. Result: a slight upward price pressure on lumber thus far this year, even as the slowdown in the Chinese economy reduces their lumber imports.

I forecast this slight buoyancy in the lumber markets in a January presentation to the Western Pallet Association, and thus far my forecast is right on track.



In the presentation, I described this baseline scenario as a flat lumber market with a little buoyancy provided mainly by upward pressure on oil prices. My modeling logic is that lumber producers are selling lumber into the market near cost, and that oil price fluctuations have pretty much become the main driver of lumber prices in a market of minimal demand. So, under a "baseline scenario" that precludes any shock to the global economic system, lumber prices (as represented by the Random Lengths structural lumber composite) will remain pretty flat, bouncing up against $300/mbf a couple of times this year, but restrained by housing starts data that will continue to disappoint.

However, I've also forecast a "spike series scenario" that attempts to account for any of a number of potential global price shocks to oil and the global economic slowdown that would follow. This forecast is shown below. To use this forecast, you would need to follow the baseline series prices above until the price shock hits, and then use the series below from there on.


Here we see that the spike in oil, which could drive oil prices to over $200/barrel according to even the most conservative of estimates, should drive the structural lumber composite up to around $350 or higher for a very short burst, but then the price will collapse as business spending (and building) crashes to a halt. Under this scenario, lumber will fall to prices that will in real terms represent historical lows.

Let's hope that doesn't happen, for many reasons.

Sunday, March 11, 2012

Japan, One Year Later

People across Japan paused for a moment of silence at 2:46 p.m. Sunday to mark the one-year anniversary of a powerful earthquake and resulting tsunami that killed more than 19,000 people.

Japan's quake was the strongest recorded in its history and set off the tsunami that swelled to more than 20 metres in some spots along the northeastern coast, destroying tens of thousands of homes.

The disaster also unleashed the world's worst nuclear crisis in more than 25 years when the country's Fukushima Dai-Ichi power plant was severely damaged in the quake, causing meltdowns in three reactors and triggering a widespread exodus.

About 325,000 people are still in temporary housing.

Acts of remembrance Sunday included prayers, silence and reflection that recalled the terrible day when the 9.0 quake struck.

Prime Minister Yoshihiko Noda told citizens that they have overcome many disasters and difficulties in the past and pledged to rebuild the nation so it will be "reborn as an even better place."

- http://edmonton.ctv.ca

You probably remember the terrifying video of last year's quake and tsunami on the northern coast of Japan. It was a somber reminder how vulnerable we are to the furies of nature, even in a society that is as well-prepared as Japan.

I found an article in a Japanese newspaper written by a Japanese junior high girl. Even with the rough Google translation, it's a heart-breaking but hopeful message that tragedy can be overcome.

46 minutes at 2 pm, a large swing that does not suddenly, I felt ever has been attacked many times. I am worried about the tsunami, were evacuated by car to elementary school located on a hill in a hurry.

Then after a while, the sound was terrible echoes. Scene is visible from the hill, completely changed in a moment, residential area, we went sunk to the bottom of the sea....



 The sight of reality and do not know I do not think, or what do I express, I just was stunned and just standing (dazed)....

One day is only a few days, my father, was completely changed in appearance, came back to the source of our family. Be useful for people like my father, was kind. Actively participating in school events, at the time of the elementary school, they taught me volleyball. I loved this father....

I have a pain in my heart that even a year later, there are persons whose whereabouts are still unknown.

Early Emperor and Empress, sympathy and encouragement of a lot of people, Thank you for your support....

I think the future, people want to be a little useful work.

Also, I joined forces with everyone for the reconstruction, and want to work hard.

March 11, 2012

Muraoka Misora ​​representative of Fukushima Prefecture

- http://sankei.jp.msn.com


The Japanese have a tradition of honoring wood through their reverence of it in harvest and use. The following video, although it is in Japanese, conveys even to the western viewer the spirit of thankfulness and stewardship used by the Japanese as they harvest wood for their homes.



And this video demonstrates the way the Japanese achieve art even in life's most tedious jobs...in this case, creating a hand planer that shaves wood like paper.



On this day of painful Japanese memories, I hope you'll join me in thinking of the Japanese, their indomitable spirit, and praying and hoping for the recovery of their country.

And perhaps, you're able to contribute to a Japanese relief fund such as this, or even go out and purchase some type of Japanese product. I recommend highly their flat-screen televisions and other consumer electronics.

We're all in this together, these days; and we need to do what we can, however small it may seem. Miss Misora, her family, and neighbors would greatly appreciate it.

Thursday, March 8, 2012

Carbon Emissions and Global Warming...What's the Connection?

Yesterday in the news there was an item reporting that a large solar flare was headed toward earth, and that satellite communications might be temporarily disrupted. What I find especially interesting is that now we have even advanced to the point where we are monitoring solar radiation just as routinely as the daily temperature.

Which got me thinking of an exchange I had last week with a grad student who is doing his Ph.D. work in the field of energy metrics. We are working together to try to improve the way biomass energy can be compared to other forms of energy in use. I mentioned before that I have a personal project underway to make a heating system upgrade to my home...I've made preliminary calculations, but I'm not quite ready to share them here because of other considerations I've had recently. Should have that analysis posted in a month or so, in time for you to consider for next year's heating season.

Anyway, back to the discussion with the student. He was making the case to me that regardless of how we measure it, carbon emissions at any level are detrimental to the earth's atmosphere, and specifically cause global warming. Of course, I encouraged him to express his views, but gently cautioned him that there is historical statistical evidence that average temperature changes precede changes in CO2 levels, not the other way around. He seemed surprised, and I was surprised that he was surprised.

Then came the coincidence that led to today's post. While viewing online videos of this week's solar flare, I came across this excellent video posted about four years ago.



The video gives, I think, a nicely balanced view of the issue...and in doing so, advances the idea that while man-made emissions do in fact contribute to climate variations, they may be a relatively minor impact compared to natural variations in solar radiation, of which this week's solar flare was a noticeable demonstration.

Taking this view, we see that our attempts to reduce carbon emissions might have a beneficial impact, but we are still too early in the scientific investigation process to determine with significant accuracy or precision what the magnitude of that impact will be. But videos such as this one are helping move the science along. Who knows, in a few years, we might be promoting wood biomass energy for its benefit of speeding up the carbon cycle in order to put more CO2 into the atmosphere...so that the Vikings and the giant redwoods can re-populate Greenland.

Thursday, March 1, 2012

An update on the Chinese housing market

I promised to update you periodically on the Chinese "ghost cities", as we struggle to understand how they have impacted our wood industry in the last few years and how they might impact it in the near future.

It doesn't look too good right now. I may have said this before, but their impending housing bubble implosion may make ours look like a hiccup. Here's a video with the latest news, given from a Chinese perspective. The audio is in Chinese, but you can follow the English sub-titles pretty easily.



The end of the video revealed a slightly different twist on their situation. Some seem to be predicting that the implosion will be good for the economy, in the sense that a "real" market will develop for housing as the prices fall closer to what more people can afford. This in effect, they seem to think, will help transfer much of the country's wealth from the rich people and the government (which in China, is pretty much the same thing) to more of the poor, in effect creating a middle class.

So it could be a short-term economic shock, followed by a longer-term slowly rebuilding economy.

Let's hope it works itself out peacefully, without a ripple effect into the rest of the world's economies.