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Random Lengths Through A Knothole In Depth

This section is updated periodically. Last update: May 12, 2017

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Special Reports about scheduled Price Guide Revisions for Lumber, Panel, and Midweek are available here.

In the Through A Knothole section of our full 12-page newsletter are articles of interest to the industry, including production/price trends, new products, trade issues, statistics, and much more. This section provides supplemental information to the stories covered in Through A Knothole.

 


2017 Forest Products Industry Compensation Survey

Comments from the 2017 Forest Products Industry Compensation Survey

To view, download and/or print the comments, go to In Depth > Surveys > Forest Products Industry Compensation.

 

Part 1: Mill sales managers

(The following table is supplementary to an article published in the April 14, 2017 issue of Random Lengths.)

View, download, and/or print the Part 1: Mill sales managers table in PDF format

 

Part 2: Wholesale/distribution managers

(The following table is supplementary to an article published in the April 21, 2017 issue of Random Lengths.)

View, download, and/or print the Part 2: Wholesale/distribution managers table in PDF format

 

Part 3: Retail buyers

(The following table is supplementary to an article published in the April 28, 2017 issue of Random Lengths.)

View, download, and/or print the Part 3: Retail buyers table in PDF format

 

Part 4: Summary

(The following table is supplementary to an article published in the May 12, 2017 issue of Random Lengths.)

View, download, and/or print the Part 4: Summary table in PDF format


Answers to frequently asked questions in the trade dispute

(This Q&A article was published in the September 23, 2016 issue of Random Lengths, and is available on this website on the In Depth > U.S.-Canada Lumber Trade Dispute page.)

Opening paragraph of the article:

When the Softwood Lumber Agreement ended its nine-year run in October 2015, a one-year standstill period when neither the U.S. nor Canada could file a trade case was included in the negotiations.

That period will expire in mid-October, which has generated plenty of questions from traders regarding what the next steps will be in the longstanding trade dispute. Below is the list of the most common questions we’ve heard, and our best attempt to provide the most up-to-date answers.

For the complete article, go to the Random Lengths In Depth > U.S.-Canada Lumber Trade Dispute page.

The U.S. Department of Commerce released its preliminary determination in the countervailing duty case against Canadian lumber imports April 25, 2017. This 12-page report details its findings. (PDF file). Go to the Special Reports page to view current news.


Compensation Survey results revised

(The following is supplementary to an article published in the May 13, 2016 issue of Random Lengths.)

View, download, and/or print the revised compensation survey articles in PDF format

Results from Random Lengths’ annual compensation survey published in three Through A Knothole articles last month contained inaccurate information because of an error in tabulating the data. The correct results follow.

A total of 65 mill sales managers responded to the survey, down from 74 in 2015. An article published April 15 reported 139 participants.

Managers reported average income in 2015 of $122,282, down 17% from $146,471 in 2014. The original article reported a 7% decline in average income among mill managers to $136,114.

Wholesale/distribution sales managers reported average compensation of $151,770 in 2015, up 14% from 2014’s average of $132,892. An article in the April 22 edition reported average wholesaler income of $144,198. The updated average marked the highest total since Random Lengths began conducting the survey annually in the late 1990s, surpassing the 2007 record of $150,906. A total of 178 wholesale managers responded. It was reported earlier that 385 respondents participated.

Seventy retail managers responded to the survey, up from 63 in 2015. The earlier report showed 133 respondents. Retailers reported average earnings of $103,853 in 2015, up 8% from the $96,448 average reported last year. The earlier report showed a 2015 average of $102,750.

Revised reports of the entire series are available on our website at www.randomlengths.com, then In Depth, then Random Lengths TAK In Depth. Or, you can request a printed copy be mailed by sending us your name, company name, and mailing address by fax to (800) 874-7979, or by email: rlmail@rlpi.com. The revised data will also be reported in the Random Lengths annual Forest Products Industry Compensation Survey Special Report, which will be available in June.

View, download, and/or print the revised compensation survey articles in PDF format


2015 Readership Survey Comments

(The following is supplementary to an article published in the September 18, 2015 issue of Random Lengths.)

Random Lengths conducted a readership survey in mid-2015. Respondents were invited to make comments, suggestions, constructive criticisms, etc. Below are the most common suggestions and criticisms, and a few others, along with our responses to them.

‘Actual selling prices, weighted average price reporting, invoice-based price reporting should be used.’

We have heard this suggestion now for many years, since the “dot-com” bubble if not before. Over the years, we have examined this, and spoken with many in the marketplace about it. We have several problems with this approach that stand out. First, how many producers would participate in each product group? If one key player in a market refuses to submit ALL of their invoices, the value of the information generated is lessened substantially. Second, with this system, the following variables in the markets cannot be included in arriving at a reported price: real and perceived quality, size of sale (a one-shot “block sale” by one producer to one large customer to take care of an inventory imbalance would skew the reported price), mill location, transportation mode, and tally in the case of random length loads of lumber. Third, a reporting service must not consider prices from invoices that are from transactions based on any reporting service as they are not open-market transactions. Fourth, “weighted average price reporting” results in a greater lag in the reported prices than the lag in Random Lengths’ reports. Random Lengths is sometimes criticized for “lagging the market.” Our goal is to report the “last established trading level” of an item. In a fast moving market, yesterday’s prices can have little meaning to the current market and price levels. When you are about to purchase stock in a company is a weighted average of the stock’s price during a week something you would base your purchase on? Of course not. You are interested in what the price is currently. Finally, how would one treat information from the buyer side of the market?

‘Random Lengths editors should name their sources, how many sources they contact, rotate sources, list the number of mills and buyers contacted, etc.’

We cannot and will not divulge the names of our sources. This could lead to something we absolutely must avoid: that is, indicating to others the prices of an individual producer. In addition, there are many sources who don’t want to be named. How many sources we have varies from product group to product group, and is a function of how many participants are involved in the production and distribution of each product group. In some product groups the number of mills is easily counted, but the number of their customers is much greater. We try to have a balance between mills and buyers, though this is not possible in some market segments that have only a handful of producers. We do all we can to gather information from market participants who are willing to share information with us, using phone interviews, fax, and email. We do not turn down producers or buyers who purchase directly from mills who want to participate in our market surveys. However, in order for us to be as consistent as possible in our price reporting, we must receive consistent, weekly, or almost weekly, reports from each source.

‘Random Lengths should report ranges for each item.’

We then ask in response: How wide should the ranges be? Should they vary over time? Do we report the lowest and highest prices reported to us? We also believe that we would then have to defend two prices for each item reported instead of one.

‘The costs of Random Lengths’ subscriptions are too high.’

Random Lengths is in a segment of the publishing/information industry that is termed “specialized publishing.” Our subscription rates are low vs. other similar weekly publications/information services. We have kept subscription rate increases modest over time, despite the consolidation that has occurred at all levels in the industry over the last three decades.

‘Random Lengths reported prices lag the actual market prices.’

Of course they do. We take a “snapshot” of the market and the prices in the market. We are reporting history, and never anticipate or predict what prices will be the next day, or even the next hour, after publication. The lag in the reported prices is a function of how quickly prices are moving up or down. Big swings in prices can occur anytime and in a very short period of time.

‘I don’t like that we are using Random Lengths for contracts.’

We are aware that some participants in the market use market reporting services such as Random Lengths in long-term contractual sales/purchasing agreements. We do not promote this practice. The two parties who enter into such contracts make the decision to use a third-party price reporting service in the contracts. We have nothing to do with such decisions. Indeed, it makes our job reporting open-market prices more difficult. We cannot consider prices from contract transactions in our reporting due to legal and ethical considerations.

‘Fold the tent and go away.’

Yes, one critical reader expressed this wish. He or she may have gotten burned on a couple of contracts. Virtually all commodity markets have price and market reporting services similar to Random Lengths. There are alternative price reporting services available to the wood products industry. And, if Random Lengths ‘folded the tent,’ the alternatives out there and perhaps new wood products reporting services would jump at the chance to fill whatever void is left.

‘Random Lengths’ staff never sold a stick of lumber. How can they report lumber prices?’

That’s right! None of our staff has been or ever will be involved in buying or selling lumber and/or panels. And, we believe that’s how to best serve the readership. Our reporting staff is made up of trained, professional journalists who take a strict, journalistic approach to their work. If Random Lengths hired people who have ‘sold a stick of lumber,’ those individuals would have been trained as mill salespeople or wood products buyers or traders. As a result, they would have a bias regarding the markets and price behavior. Since Random Lengths serves the entire industry - producers, wholesalers, distributors, and retailers - our staff cannot have a bias with regard to price direction and behavior. We are in the information business, and therefore look for editors/reporters who are adept at interviewing, compiling information, and writing.

‘Random Lengths should contact fewer (or no) wholesalers.’

Wholesalers (often this is more specifically referring to “office wholesalers”) are part of the market. In fact, one large wholesale group is among the top five distributors of wood products in the U.S. We would not be doing our job if we didn’t contact a significant portion of the buying side of the market. The lines of distribution in the middle of the marketplace have been blurred over time. Many “office wholesalers” now carry inventories on a regular basis using third-party reloads to yard their material. And many distributors who manage their inventories in company-owned facilities have traders who, in some transactions, act as “office wholesalers,” speculating from time to time and moving carloads and truckloads directly from their producer-supplier to their customer, with the shipment never seeing a yard operated by the trader’s company. “Office wholesalers” are not the only market participants who take speculative positions.

‘Random Lengths listens too much to mills. Mills’ information is bogus 50% of the time.’

We’d like to put those readers making this type of comment in touch with the readers who make the previous comment! Yes, we get it from both sides. We do our best not to listen “too much” to anyone. We maintain a balance between mills and buyers. We know that each side of the trading table holds biases. If a source of any type is found to provide misleading or false information, we are likely to cease contact with that individual or company. Our staff knows the difference between quoted prices and actual transaction prices; we do all we can to discover the actual transaction prices.

‘Deliver the reports earlier.’

Time constraints dictate the information release and publishing times during the week. Information for the lumber price guide and report is gathered and compiled on Thursdays and information for the panel price guide and report is gathered and compiled on Friday mornings.

‘I don’t like the market letter inserts.’

Random Lengths is a business that offers more than just the weekly market and price reports. We want to inform our subscribers of the other services the company offers. The other offerings help us keep subscription rates to the weekly reports down. While some subscribers believe the market letter inserts are too frequent, they appear just six times per year around the following holidays: Memorial Day, Fourth of July, Labor Day, Thanksgiving, Christmas, and New Year’s Day.

‘I don’t like the copyright reminder.’

While most subscribers don’t need this reminder, some do. And, unfortunately, some ignore it and infringe our copyrights. Random Lengths has been forced to pursue legal remedies against several infringers over the years. This is an effort to keep subscription rates economical for all subscribers. In filing infringement lawsuits, this copyright reminder in each issue of each report is important evidence.


Canadian presence still growing in SYP industry

(The following article was published in the June 28, 2013 issue of Random Lengths.)

Finding adequate, cost-effective timber supplies is a constant challenge for wood products producers, and the face of the Southern Pine industry is changing as a result.

Just in the past month, two more producers operating four sawmills in the South sold out to Canadian companies. And that’s just the tip of the iceberg. Currently, there are 25 sawmills operating in the South that have the capacity to produce approximately 3.5 billion board feet per year that are owned by foreign companies. And that production represents about 25-30% of total annual Southern Pine output.

Most of the new ownership from outside the U.S. is represented by Canadian companies. “The South has the wood basket, and that’s what is attracting companies,” said a mill salesman in the South.

Henry Spelter, an analyst with Forest Economic Advisors, said, “Two things are driving it from the point of view of the Canadians. They are dealing with the Mountain Pine Beetle, and there is the difficulty of the Pacific Northwest mills dealing with the U.S. Forest Service, and that is driving capital to the South.”

Log prices in the West have recently hit historical highs, partly due to a robust export market. “The potential in the South hasn’t been fully explored yet,” Spelter said. “The timber constraint is least binding in the South.”

B.C.-based West Fraser has the largest Canadian presence in the South. They are currently operating 12 sawmills in the region with the capacity to produce about 2 bbf per year.

Canfor and Interfor, both based in Vancouver, also have a large and growing presence in the Southern Pine industry. They recently expanded operations in the South. Canfor is in the process of acquiring three sawmills from Scotch & Gulf Lumber in Mobile, Fulton, and Jackson, Ala. The three mills have a combined capacity of 440 million board feet. Canfor already operates sawmills in Camden, Conway, and Darlington, S.C., and Graham, N.C.

Interfor recently reached agreement to purchase Keadle Lumber in Thomaston, Ga. The mill currently produces 80 mmbf annually, but Interfor plans to eventually double output to 160 mmbf. That is in addition to the three sawmills Interfor recently purchased from Rayonier in Baxley, Eatonton, and Swainsboro, Ga., that have a combined production capacity of about 370 mmbf.
Southern Pine mill ownership also extends outside North America, as Tolleson Lumber’s sawmills in Perry and Preston, Ga., are now owned by the Russian company Ilim Timber. That trend could expand as Austria-based Klausner Group has announced plans to build massive sawmills in Suwannee County, Fla., and Enfield, N.C.

The permit applications for both mills listed annual production capacity of 700 mmbf at each mill. The company has also received permits to construct a similar plant in Orangeburg, S.C., but has not announced whether it will proceed with that project. A company spokesperson declined to give an update on Klausner’s plans to expand to the South.

The influx of Canadian mill ownership in the South also has some questioning if that could impact the U.S.-Canada Softwood Lumber Agreement. “It makes you wonder about SLA negotiations down the road,” said a mill salesman in the South.

The SLA doesn’t expire until October 2015. “While these developments certainly do not go unnoticed, they do not change the fundamental issue when it comes to U.S.-Canada softwood lumber trade,” said Zoltan van Heyningen, executive director of the U.S. Lumber Coalition. “Nor does it affect the ability of U.S.-owned companies to bring trade cases. As such, it really has little material effect on the file or any potential negotiations.”

 TABLE: Foreign Ownership of SYP Mills Growing

Company Purchased  from  Location  2013 Capacity*
West Fraser International Paper Maplesville, AL 115
West Fraser International Paper Opelika, AL 95
West Fraser International Paper Leola, AR 160
West Fraser Plum Creek Huttig, AR 202
West Fraser International Paper Whitehouse, FL 80
West Fraser Plum Creek Joyce, LA 210
West Fraser Armour Riegelwood, NC 215
West Fraser International Paper Seaboard, NC 110
West Fraser International Paper Newberry, SC 140
West Fraser International Paper Henderson, TX 140
West Fraser International Paper New Boston, TX 155
West Fraser International Paper Augusta, GA 135
Canfor New South Graham, NC 135
Canfor New South Camden, SC 170
Canfor New South Conway, SC 155
Canfor Chesterfield Lumber Darlington, SC 100
Canfor Scotch & Gulf Jackson, AL 65
Canfor Scotch & Gulf Fulton, AL 130
Canfor Scotch & Gulf Mobile, AL 115
Interfor Keadle Lumber Thomaston, GA 80
Interfor Rayonier Baxley, GA 160
Interfor Rayonier Eatonton, GA 90
Interfor Rayonier Swainsboro, GA 123
Ilim Timber Tolleson Perry, GA 140
Ilim Timber Tolleson Preston, GA 225

Source: Forest Economic Advisors *millions of board feet


Random Lengths Social Media Survey

Part 1 of 2: Industry lukewarm to incorporating social media

(The following article was published in the June 14, 2013 issue of Random Lengths.)

Members of the wood products industry have been hesitant to step into the world of social media. Those who do use platforms such as Facebook, Twitter, or LinkedIn have wide-ranging opinions of their benefits.

That’s according to results from a Random Lengths online survey asking mills and others in the industry their thoughts on social media.

Out of nearly 600 replies, 360 respondents said they did not use social media. A strong majority of that group (300) said they had no plans to do so within the next year. Usage was greatest among those who market directly to consumers. Of the 235 respondents who said they used social media, participation leaned heaviest toward retailers (29%), followed by wholesalers and distributors (25%), and mills (12%).

Sources said they felt the wood products industry generally lags other segments of the economy in its embrace of social media. “I think we’re coming around,” said a social media manager at a large wood products producing company. “I’d say we are behind the times. A lot of us are less consumer focused. We’re very industry focused.”

One survey participant commented: “I’m one of the older group ... from what I can see people seem to waste quite a bit of time on tweets and postings.” But, said another: “It’s the way of the future.”

Many cited the size of the potential audience that social media avenues open up as a lure for making it part of their marketing strategy. Facebook reportedly has more than a billion users. LinkedIn and Twitter are said to each have about 200 million users.

The marketing vice president for one producer said his company saw the rise of social media during the economic downturn as an opportunity to rework its marketing approach. When the company attended a trade show in 2009, few attendees had Twitter accounts. Now most do in their segment of the industry.

Among skeptics, some respondents said they didn’t get the return on investment they expected. One respondent was concerned that interactions on social media would expose their contacts to competitors. Others said it was difficult to measure success, or saw social media as a vehicle for gossip rather than to spark sales.

“At this point, social media appears to be better suited for those selling direct to the consumer and doesn’t lend itself well to the lumber business,” one said. “On the other hand, we had a Web page early on and dropped it after a year due to the lack of traffic. Now our Web page is one of our most useful sales tools. It is likely that something similar will occur with social media.”

A veteran trader for one producer who is helping lead his company’s exploration of social media believes the industry has lagged most segments of the economy in its usage of social media, but that’s starting to change. His company has taken a wait-and-see approach so far, but decided to consider delving into Twitter and Facebook, while it also updates its website. “You don’t want to be the last, but you don’t want to be the first, either,” he said.

Even though his company sells its products through wholesalers and distributors and doesn’t deal directly with consumers, company officials saw little risk in strengthening their Web presence with social media. “It’s becoming so big we thought maybe we’ll dabble in it a little bit, and see if we can benefit from this at all,” he said. “Marketing isn’t like it used to be.”

Part 2 of 2: Social media managers say results require persistence

(The following article was published in the June 21, 2013 issue of Random Lengths.)

Experienced social media managers say wood products companies need to commit and be patient to realize any benefits from investments in social media. Skeptics, meanwhile, believe social media tools are not well-suited to boost lumber sales, and are best left for socializing.

Those are the opinions of social media managers and respondents to a Random Lengths survey on platforms such as Facebook, LinkedIn, Twitter, and others. Survey respondents and others who use social media say updates, postings, and tweets are among the tools in their marketing toolbox that they use in conjunction with traditional channels.

The social media manager at one large producer said his employer saw its use of Facebook and other accounts as a way to extend the company’s brand, rather than as a means to directly generate revenue. His company mostly targets builders, architects, and others within the industry instead of consumers.

A marketing executive at a manufacturer said the best person to post updates or tweet is someone who knows your company and industry, and who also is deft at social media. One source recommended against putting an intern in charge of a company’s Twitter and Facebook accounts. “Be prepared to commit to social media, or don’t do it at all,” said a marketing executive at a large producer. “It takes dedication, planning, a strategy, and great content.”

One source said he varies the content between product promotion and a more conversational tone, uses Facebook more frequently than Twitter, and rarely posts the same content on both platforms. Another added that his company uses posts and tweets to draw more visitors to its Web site or blog, where they can then try to get users to register to receive email alerts or newsletters.

Said one social media manager: “The trick is not to generate content just for the sake of generating it.”

Of those who said they do use social media, roughly the same number of respondents described their experiences as “positive” as those who said they were “uneventful.”

One factor holding back participation is the fear over handling derogatory comments that could be seen by thousands of people. When negative feedback comes in, one social media manager said he handles it similar to a customer complaint, and directs the customer to the department that can address the problem. Negative comments are likely going to have less impact than most people anticipate, said one source. “Facebook is so fleeting. (The negative comment) is up there, but then it’s pushed down by your cousin’s vacation photos.”

Social media managers at some companies that are active on Facebook and Twitter said they continue to encounter reluctance among top executives.

But one said his efforts have directly led to sales, and he has the data to prove it. He had experience in new media within the industry before being hired for his current position at a large producer. He said: “If someone is reading this and they are wondering if social media is something they should do, they need to get with it.”

To see comments submitted to our survey, click here (pdf file).


Correction: Lumber Weekly Price Changes table Dec. 28 issue

Incorrect numbers were printed in the Lumber Weekly Price Changes table for Random Lengths, page 3, for the December 28 issue.

We apologize for any inconvenience this may have caused. You can download the completely revised and corrected Random Lengths Lumber Price Guide page 3 pdf file, which includes the corrected Lumber Weekly Price Changes table, here:

RL_Lumber_Weekly_Price_Changes.pdf


Comment: Rosy housing forecasts do market a disservice

(The following is an article that appeared in the September 17, 2011 issue of Random Lengths.)

More and more wood products traders are taking housing forecasts with a grain of salt — for good reason.

After several downward revisions, forecasts for the current year look to be on target — and they should since we’re now three-quarters of the way through it. But many outlooks for next year and beyond once again look far too rosy, as if the forecasters are oblivious to the many problems still confronting the U.S. housing market.

How is it, given all the headwinds blowing against the market, that we go from sub-600,000 starts this year to 750,000 next year, and to 900,000-plus in 2013?

In fairness, many of these more forward-looking forecasts are based on best-case scenarios, and the economists presenting them, if pinned down, would readily admit that there are downside risks.

Downside risks? Let us count as space allows:

There are an estimated 1-2 million empty distressed homes on the market. Then, there’s the so-called “shadow inventory,” which adds another 4-7 million units, depending on what one counts as part of it. Until these inventories are drawn down and home prices stabilize, hyper-cautious mortgage lending will continue and builders will keep new single-family construction reined in at historically low levels.

As the banks try to clear their backlog of foreclosures, they remain hampered by the robo-signing legal mess. While this was of their own doing, the intent was expediency, not fraud. Now, federal regulators are suing lenders over the huge losses stemming from the subprime meltdown, generating additional uncertainty and potentially billions more in bank liabilities.

Let’s assume there are 1 million Americans with good-paying jobs, good credit, and a burning desire to buy a new home. They have record-low mortgage rates on their side, but lenders aren’t bent on underwriting right now for the above reasons and many more.

Some of these potential buyers would have to sell their current home first. Assuming they’re not among the one-quarter of homeowners who are “stuck” because they owe more than their home is worth, they still need a qualified buyer.

This buyer, assuming he or she is among the 1 million in good financial standing, and doesn’t need to sell a home, might very well need 20% of the purchase price for a down payment. This eliminates most first-time buyers.

For those who are left, there are still plenty of other uncertainties to contend with. Will home prices continue to fall? Is their job really that secure? Will the mortgage interest deduction be reduced or scrapped?

For all the above reasons, rosy forecasts for housing gains in 2012 and beyond do a disservice, as they tend to let lawmakers and regulators off the hook. Best-case forecasts suggesting that recovery is just around the corner provide cover that allows bad policies to continue, damaging proposals to move forward, or politicians to do nothing on the false premise that the market is healing itself.


Quarterly Price Patterns graph correction

(Random Lengths, issue of April 15, 2011, Page 3)

(The following is a correction to the Quarterly Price Patterns graph, which was published in the April 15, 2011, issue of Random Lengths.)

The Quarterly Price Patterns graph was not properly updated in the April 15, 2011, issue. The revised graph with the correct data is available in pdf format, to view or download on this page:

RandomLengths.QPP.Revision.pdf


 Correction: Lumber Weekly Price Changes table Sept. 5 issue

Incorrect numbers were printed in the Lumber Weekly Price Changes table for Random Lengths, page 5, for the September 5 issue. The "This Week" and "Chg 3 Weeks" change columns were incorrect. The 8/22 column for two weeks prior, and 8/29 column for previous week, were correct.

We apologize for any inconvenience this may have caused. You can download the completely revised and corrected Random Lengths Lumber Price Guide page 5 pdf file, which includes the corrected Lumber Weekly Price Changes table, here:

LumberWeeklyPriceChanges.pdf


2006 Yearbook Correction

(The following article is supplementary to an article published in the February 16, 2007, issue of Random Lengths.)

In the 2006 Yearbook, the 5-year graph on page 301, International Section, Hemlock Clears, 2-1/2x6&wdr, is incorrect.  It is a duplicate of the graph that appears on the following page 302 for Western Red Cedar, 4x6&wdr #2, #2 Clear&Btr. The prices that appear in the table are correct; only the graphic under the heading "Five-Year Trends" is incorrect.

We apologize for any inconvenience this may have caused. You can download the completely revised and corrected 2006 Yearbook page 301 pdf file here:

YB_Correction.pdf

Print the corrected PDF on your printer, and cut or fold on the line to insert the corrected page into your copy of the Yearbook.


Wood Products Industry Financial Results

Hot markets, consolidation boosted sales and earnings in 2004

Quarter ending December 31, 2004

(The following article is supplementary to an article published in the February 25, 2005, issue of Random Lengths.)

One of the most robust lumber markets in history, as well as a record year in structural panel prices, helped many publicly held U.S. and Canadian companies post record earnings in 2004. But the good times for many are a stark contrast to a few Canadian companies, which posted heavy losses.

With the final fourth-quarter results from most of the companies now available, it’s clear that companies with a strong solid-wood focus continued to fare best. “2004 was a record by virtually every measurement,” noted Barrie Shineton, president and CEO of OSB-producing giant Norbord, headquartered in Toronto. Louisiana-Pacific, North America’s largest OSB producer, also reported record earnings.

Yet for Eastern Canadian giants Domtar, Abitibi-Consolidated, and Tembec, stagnating pulp and paper markets, duties on lumber shipments to the U.S., strength in the Canadian dollar, and increases in costs of raw material and freight took a heavy toll. “These are trying times for companies with a large manufacturing base in Canada whose products are sold in U.S. dollars,” noted Domtar CEO Raymond Royer.

Consolidation was a big story in 2004. Canfor’s integration of the former Slocan mills into its operations helped the company post record net income. West Fraser, which acquired Weldwood from International Paper, reported sharply higher sales and earnings in 2004. Acquisitions during the year also placed major publicly held companies in private hands. Among these were Riverside, acquired by Tolko Industries, and Boise Cascade, which is destined to re-emerge as a publicly traded company.

View and print the Wood Products Industry Financial Results table in PDF format

Answers to frequently asked questions in the duty case

(The following article is supplementary to an article published in the December 17, 2004, issue of Random Lengths.)

Here is the latest information available to Random Lengths regarding questions that have surfaced since the new 21.2% duty rate was announced December 14 by the Department of Commerce.

When will the U.S. refund money owed to those who shipped wood from Canada to the U.S. from May 2002 through March 2003?

No specific date is set because the money collected from the duties will remain in the U.S. Treasury until the NAFTA appeals process is exhausted.

Is the Byrd Amendment still in place?

Yes. The World Trade Organization ruled that the Byrd Amendment did not conform to international trade law, but the U.S. has not repealed it. Under the amendment, money collected from the lumber duties can be distributed to U.S. companies who supported the filing of the duty petition by the Coalition for Fair Lumber Imports. A very small portion of the duty funds have been distributed to U.S. companies, according to the Southeastern Lumber Manufacturers Association. A distribution of $5.4 million came from money collected from Canadian companies who did not appeal the original Commerce ruling. The amount of money collected from the duties, which were implemented in May 2002, totals more than $3.5 billion.

Can Commerce's final administrative review be appealed?

Yes. Any party involved in the duty case can appeal the results of the review, but the new 21.2% duty rate will remain in effect, pending the outcome of any appeal. Canada has not officially appealed the review to NAFTA, but is widely expected to do so.

How does the NAFTA injury case affect this whole duty process?

It has a huge impact on the case. The U.S. lost the injury case before a NAFTA panel, and has now asked for an Extraordinary Challenge Committee to overturn the NAFTA ruling. If the U.S. loses the injury case before the ECC, it cannot legally collect either the countervailing or anti-dumping duties. A decision from the ECC is scheduled for March 9, 2005, but the panel of three former judges has not yet been selected. Each country will have one panelist seated, and whether the third is from Canada or the U.S. will be determined by the luck of the draw. The decision from the ECC is final and cannot be appealed.

Because the anti-dumping duty of West Fraser and Canfor came out below 2%, are they excluded from that portion of the duties?

No. In the preliminary review, if a company's anti-dumping duty dropped below 2% they were declared "de minimis" and excused from paying that duty. However, in the final review, a company's rate has to drop below 0.5% before they are excused from the AD duty. Canfor's new AD duty is 1.8% and West Fraser's is 0.9%. The individual rates of other Canadian companies investigated are: Abitibi 3.1%, Buchanan 4.8%, Tembec 10.6%, Tolko 3.9%, and Weyerhaeuser 8.7%. The weighted average of those investigated was 4.0%, which is the new "all other" AD rate that will be charged to companies that were not investigated individually.

Are the Maritimes provinces included in the countervailing duty order?

No. Because most of the timber in the Maritimes is privately owned, producers in those provinces do not have to pay the 17.2% countervailing duty on shipments to the U.S. It should be noted that while each of the provinces included in the CVD were investigated in the case, the 17.2% duty is applied equally countrywide, excluding the Maritimes.


MOU signed in 1986 lasted five years

As officials from the U.S. and Canada work to settle their long-standing lumber trade dispute, a number of industry sources predict that something similar to the 1986 Memorandum of Understanding may result.

That agreement was signed only minutes before the Department of Commerce was scheduled to give its final ruling in a countervailing duty case. Canada agreed to impose a 15% export tax on softwood lum-ber shipments to the U.S., and the Coalition for Fair Lumber Imports agreed to withdraw its CVD peti-tion. Bonds and deposits collected by U.S. Customs under the preliminary CVD were returned to the im-porters of record.

Under that earlier agreement, Canada could choose to reduce or eliminate the export tax by increasing stumpage fees or other charges. The tax was later rescinded in British Columbia due to increased stumpage rates, and was reduced in Quebec.

The MOU lasted until 1991 when Canada terminated the agreement, which led to the filing of the third CVD case by U.S. interests.


Countervailing Duty Summary

(The following is supplemental to an article that appeared in the February 9, 2001, issue of Random Lengths.)

Prior to the signing of the Softwood Lumber Agreement in 1996, three countervailing duty cases were filed by U.S. interests relating to Canada's shipments of softwood lumber into the U.S. Here's how those cases were resolved:

CVD I

October 1982 -- The Coalition for Fair Canadian Lumber Imports, formed in July 1982 and now the Coalition for Fair Lumber Imports (CFLI), files a petition with the Department of Commerce seeking countervailing duties on lumber entering the U.S. from Canada.

March 1983 -- The International Trade Administration (ITA) issues a preliminary ruling that Canada does not significantly subsidize its industry.

May 1983 -- The ITA's final decision confirms its preliminary ruling that Canada's exports to the U.S. aren't unfairly subsidized, and that Canadian lumber can continue to enter the U.S. duty free.

CVD II

May 1986 -- The CFLI files a CVD case seeking a 27% duty on Canadian softwood lumber imports.

June 1986 -- The International Trade Commission (ITC) rules that the U.S. industry has been injured by Canadian imports.

October 1986 -- The ITA makes a preliminary ruling that Canada is subsidizing its industry and places a 15% interim duty on Canadian imports. A final decision is expected December 30.

December 1986 -- An agreement is reached just minutes before the ITA's final ruling is scheduled. A Memorandum of Understanding (MOU) is signed December 30 calling for Canada to impose a 15% tax on lumber exports to the U.S. The U.S. cancels its 15% duty and returns all bonds and deposits collected. The CFLI withdraws its CVD petition.

May 1987 -- Canada's Parliament approves the 15% tax, and legislation is signed into law. The tax is retroactive to January 8.

December 1987 -- The tax on exports from British Columbia is rescinded after the province proposes to raise stumpage fees.

April 1988 -- The U.S. and Quebec agree to lower to 8% the tax on lumber exports from that province. Ontario opts to maintain a 15% tax while keeping stumpage unchanged.

November 1990 -- The export tax from Quebec is lowered to 6.2%.

CVD III

October 1991 -- Canada terminates the MOU, and the U.S. immediately imposes provisional duties. The duty on Quebec lumber is set at 6.2%, while 15% duties are placed on lumber from Ontario, Alberta, Manitoba, and Saskatchewan. Lumber from British Columbia is exempt since higher stumpage fees were imposed as a result of the MOU. The U.S. files a CVD case.

December 1991 -- The ITC finds there is evidence that the U.S. industry has been injured by Canadian imports.

March 1992 -- The ITA's preliminary ruling says Canada subsidizes its softwood lumber industry, and a provisional duty of 14.48% is placed on Canadian lumber entering the U.S. from all provinces except the Maritimes.

May 1992 -- ITA rules 14.48% provisional duty should be 6.51%.

June 1992 -- ITC votes 4-2 to make provisional 6.51% duty permanent. Canada appeals ruling to five-member bi-national panel.

May 1993 -- Bi-national panel rules ITA did not provide sufficient evidence to justify finding that Canada subsidized its softwood lumber industry.

July 1993 -- Second bi-national panel finds that ITC's finding that U.S. industry is injured by Canadian imports was unsupported by the evidence ... and otherwise not in accordance with law.

October 1993 -- ITC reaffirms earlier finding that U.S. industry is injured by Canadian imports.

January 1994 -- Commerce Department announces that, in accordance with bi-national panel's instructions, it has determined that Canada's stumpage and log export policies are not countervailable.

February 1994 -- U.S. Trade Representative's office appeals bi-national panel's ruling to Extraordinary Challenge Committee (ECC).

August 1994 -- ECC rejects appeal by U.S. in countervailing duty case. ECC's decision is binding and cannot be appealed.

December 1994 -- U.S. says it will return all deposits collected, plus interest, from provisional duty.


Housing report widely used, little understood

(The following is an updated version of an article that originally appeared in the August 21, 1992, issue of Random Lengths.)

Wood products traders have a love-hate relationship with the Census Bureau's monthly U.S. housing starts report. At times, the numbers are cited as confirmation of a market trend; at others, they're ignored.

Traders sometimes use them as a sales tool, but they don't hesitate to charge that the government is fudging the numbers if starts contradict their view of the market.

A Census Bureau source says there are stringent safeguards against outside influence or early release of the numbers. He says access to their offices is restricted, the data are kept under lock and key, and the FBI maintains a list of people who have access to the numbers. Census also turns away people who insist they need the numbers early.

This much-discussed and little-understood report is issued on the 12th working day of each month by the Manufacturing and Construction Division of the U.S. Census Bureau. It defines housing starts as occurring when excavation begins for the footing or foundation of a residential structure, or when rebuilding begins on an existing foundation, such as might occur after a natural disaster.

About 19,000 local jurisdictions issue building permits in the U.S. Nearly half fill out and return monthly reports to the Census Bureau, which are expanded into a national building permits total. Meanwhile, field employees of the Census Bureau are contacting a sample of owners and builders to find out how many permits are turning into starts. The resulting ratio of starts to permits is used to compute a monthly housing starts total.

The seasonally adjusted annual rate (SAAR) is one of the most quoted and least understood housing start statistics. Adjustment factors in the SAAR remove the impact of normal seasonal factors, such as weather, that cause predictable month-to-month fluctuations in the number of starts.

For example, if the number of housing starts normally rises by 20% between April and May, a starts gain of exactly 20% would result in no change in the SAAR. A gain in actual starts of more than 20% would raise the SAAR, and a gain of less than 20% would push it down.

The starts figures reported each month are revised in each of the following two months as the available information is expanded and refined. Census tries to keep the revisions of its preliminary reports to 1% or less, and to have a roughly equal number of upward and downward revisions.

Because the starts figures are based on a sample, some sampling error is unavoidable. The Census Bureau acknowledges this by computing a relative standard error (RSE) for each set of numbers it reports. For example, the RSE for the monthly seasonally adjusted annual rate of starts is 3%. RSEs range as high as 15-20% on some multifamily segments of the report.

Still, many users treat the preliminary SAAR as if it were a dead-accurate number. A source with Census said, I cringe when I see the media trying to analyze a 0.4% change in housing starts.


 

 

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