Williams Lake should anticipate an erratic recovery in the lumber industry said Larry Broadfoot, Tolko general manager of lumber and plywood sales.
Speaking to the Williams Lake and District Chamber of Commerce Thursday Broadfoot, who is from Vernon, said in the past the forest industry would pick up as the U.S. housing starts increased, but that’s not necessarily how it will work this time around.
“You should still feel good about the forest industry, but what we’re not going to have is a strong robust return happening because the U.S. economy is not going to have a strong robust return,” Broadfoot said.
Using statistics from U.S. housing starts, he suggested that single family home statistics are the main driver for the forest industry.
“Single family home construction is on the right trend up. The underlying demand should be somewhere around 1.1 million starts. We are well under that today, but we expect to be somewhere around 800,000 by the end of the year.”
It’s expected the need for wood products will continue and that the worst is behind, he added.
“I think we are going to see better days ahead.”
Housing permits also went through a downturn, but that statistic is also starting to turn.
“New home numbers are around 125,000. That’s an incredibly low number that hasn’t been seen since statistics were kept. But people want new homes, and while some old homes are being fixed up, we do expect that number of housing starts to be up to around 250,000.”
Referring to the number of foreclosures in the U.S., Broadfoot said there was a worry there’d be a second round of foreclosures, but that doesn’t appear to be happening, and the latest stats indicate the number of foreclosures is decreasing.
“We would expect as that goes down, and people who are staying in their homes, or those who were doubling up and living in basements of family members, are going to return to the market.”
A downside to the recovery has seen people fixing homes rather than building new ones, he added.
“Not necessarily bad news for people who are in the remodelling business.”
Broadfoot recently visited areas in the U.S. and saw many unfinished buildings.
“If you go through places like Phoenix, California, and even into Florida, you’re seeing a lot of infrastructure half built. That has to be finished before you’ll see any new construction,” he explained.
Pine beetle lumber continues to be purchased by China, whereas it’s a tougher sell in the U.S.
“The Chinese market is using that lumber and I believe will continue to do so,” Broadfoot. “Most folks here can take comfort in the Chinese economy, even though it’s showing signs of going down a bit, it still has a GDP of somewhere around 7.5 per cent.”
There continues to be “huge growth” of exports to China, he added.
“That is going to retrace a little bit, but overall marginally. By 2016 I think we’ll see ourselves in a much better position.”
Lumber prices have dropped $100 per 1,000 board feet, and Broadfoot expects it will recover up and down, although not by $100.
“I tell the folks who sell our product, ‘don’t go too high with the high or too low with the low.’ It will be a tough recovery.”
Tolko Soda Creek Division manager Ryan Oliver said he is questioned often about the timber supply and the impact of the mountain pine beetle epidemic.
“We are often asked if we have enough fibre to keep our mill. Definitely the difficult decision to shut down Creekside helps us out there,” Oliver said.
The fibre is out there, but the question is how far do companies go out to economically retrieve it, bring it back to the mill, and harvest it into market that makes sense and makes money, he added.
“If the markets hold true, the fibre is there, and Tolko will be able to afford to go out and get it.”
Oliver also introduced Mike Dextrase the new stud mill superintendent at Soda Creek.
He is relocating from High Level, Ab., and his family will join him in July.
