About a month ago, we received an email from a supplier commenting on the strengthening US dollar and it’s affects on the increasing cost of lumber. This is an upward trend that is a double-edged sword for Canada; a country reliant on exports and a robust trading partner with the US.
“The Hardwood Review Weekly has had two recent articles that offer an explanation as to why lumber has been in tight supply and prices have been on an increase. Here is a condensed version covering their basic content:
“Overproduction No Longer Inevitable – Several Reasons Why Supply Won’t Overtake Demand Anytime Soon” by Andy Johnson, Editor
Source: Hardwood Review Weekly, November 29, 2013 (Vol. 30, Issue 11)
Source: Hardwood Review Weekly, December 6, 2013 (Vol. 30, Issue 12)
Supply Side Constraints to Increasing Production:
- Fewer sawmills (many grade and tie mills have closed and were dismantled)
- Limited capital availability (credit requirements have tightened considerably for hardwood companies)
- Labour shortage (pool of qualified loggers, sawyers, graders and machine operators is quite low)
- Highly competitive timber/log markets (rapidly rising lumber prices have mills eager to buy as much raw material as they can afford)
I recently read an article form our brokerage company advising that logging practices in the Solomon Islands was not sustainable. So I immediately asked our contact for this wood to comment. Here is what was said:
“The Solomon Islands are a developing country and, as such, suffer from the misfortune of corruption and not having systems in place for conservation to the extent that we have here. It is true that there is illegal logging that occurs on some islands in the country. In particular, there is a great deal of bribery that occurs from the Asian logging companies that use naive landowner’s rights and privileges to log large areas. However, the government is making strides in enforcing conservation. For example, commercial logging can only occur on lands that are below 400 meters above sea level where the forest is accessible to logging. Some islands are low lying, and that is where this illegal activity is centered. There is also a maximum cut rate, and exports are monitored closely and include permitting, right of logging documentation and for species like the Tubi, extraordinary permission to log.