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Lumber sector hampered by transportation challenges, abysmal sawmill service

Keta Kosman
0 Comments|March 21, 2014

The business of trading solid wood products in North America continued its sluggish pace this week, even as warmer temperatures and better weather in several key purchasing markets provided hope that the spring sales season is just around the corner, writes Keta Kosman in Madison's Lumber Reporter
This spring week break at schools across Canada and the US brought a spurt of buying Monday and Tuesday then a great lull for the rest of the week. Sentiment was positive however, as construction sites in Texas were going full-tilt and more parts of northern California also saw increased construction activity.
Never ending complications with transportation do not bode well for a tenderly recovering lumber market. Canadian sawmills report ongoing abysmal service from both national rail providers, Canadian Pacific Railway Ltd.  (TSX: T.CPStock Forum)and Canadian National Railway (TSX: T.CNR, Stock Forum).
Record-breaking winter conditions in large parts of the country are certainly to blame, but the railways are also at fault for not planning properly. This bumper wheat harvest out of the prairies was already known in 4Q 2013, and increased delivery volumes for lumber manufacturers happens every year in the second half of 1Q.
The CN especially has a history of adjusting rail car allotments only in hindsight. This is the third time since the run-up then crash of US home building starting in 2005 that CN has not reacted to customer requests for a change in car arrivals in response to market conditions. During the winter of 2009 Canadian sawmill operators watched in amazements as rail cars by the dozens arrived at inactive lumber yards. Demurrage charges on unwanted rail cars stored at mills and slow response by the CN to collect idle cars plagued lumber manufacturers during a time of extremely depressed revenue.
A similar situation is now occurring but in reverse; with the agriculture sector — seasonal by nature, no pun intended — being overlooked for much-needed cars at a time when the volume of oil transported by rail is skyrocketing.
Still with the CN, leaders of the union representing 3,000 conductors, yard workers, and traffic coordinators at the railway will meet on Friday to decide whether to strike or take other action after union members narrowly rejected a second tentative contract deal with Canada's biggest railway. The Teamsters Canada Rail Conference said in a statement that it still has a valid strike mandate and added that its leaders will meet with counsel to decide on its next move.
The company said, in a statement after the vote, said it would propose binding arbitration to reach a settlement and requested a union response by the end of Friday.
For its part, Teamsters Canada Rail Conference has no immediate plans for job action.”
We do still have a valid strike mandate but that's somewhat limited given the government's ability to take away our right to strike," said Chair Roland Hackle to Canadian Press Friday.
Already in a bad enough situation when it comes to logistics, lumber producers in western Canada also now have to content with an all-out work stoppage at Port Metro Vancouver, Canada’s largest port and one of North America’s most important hubs with emerging markets in Asia, particularly China.
Into its third week and not looking to be solved any time soon, the crisis at the Vancouver port is affecting manufacturers and retailers from Prince George, BC, to Winnipeg, MB, and beyond.
So far the Port is reacting with great insensitivity, to be blunt; charging its customers outrageous storage fees for goods caught in containers piled up. This is a situation exacerbated, if not outright caused, by the Port itself. Not by the customers. Those with perishable or time-sensitive goods trapped at the facility have already lost everything on those deliveries.
Prices of most lumber and panel products moved little this week as consistent but constrained volumes continued to sell into regions where they could do so. Eastern stocking wholesalers in New Jersey had to lower their prices on delivered Douglas fir as none of their customers wanted to risk buying wood to hold for any significant period of time. At the same time, however, Douglas fir producers on the west coast said their customers at the big-box retailers reported tangible increases in orders from contracting outfits.
In company news this week, Universal Forest Products Inc. (NASDAQ: UFPI, Stock Forum), out of Grand Rapids, MI, Monday announced that one of its subsidiaries has purchased certain assets of Container Systems Inc (CSI), a manufacturer of crates and containers for industrial applications and the moving-and-storage industry, located in Franklinton, NC. The transaction closed on March 14, 2014.
CSI produces a full line of moving and storage crates, specialized crates for niche markets, and integrated packaging solutions, and is a wholesale cut-to-size panel and lumber supplier to the area’s industrial customers. Sales in 2013 were approximately US$3 million.
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Keta Kosman
Madison's Lumber Reporter
604 984-6838

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