Wednesday, May 23, 2007

Mill closures...

Canfor has indefinitely closed its Mackenzie mill-- CBC news.

The company's interim president and CEO, James Shepard, said Tuesday he had been directed by the company's board to cut costs "and position the company to weather this market downturn, which is the worst this industry has seen in decades."

21 comments:

exvancouverite said...
This comment has been removed by the author.
mohican said...

Interesting but not surprising. I expect we will see a lot more of these kind of stories about the lumber business in BC.

It is sad because when the lumber industry falls down, whole towns are decimated and the displacement of families is substantial.

I wonder when this will become front page news in BC. I think most BC residents are in collective denial about the weaknesses in our economy.

Warren said...

Well, there's no way mill closures are good news, but forestry is cyclical, and it was bound to happen with the housing slowdown in the US.

I don't want to hijack this thread, but I just came across an interesting link on the "myths" that circulate regarding the lack of office space, head offices, land use, etc. I thought it was interesting for its comments on land use and real estate.

Myth and Fact

Taken with a grain of salt since it is a City of Vancouver publication.

exvancouverite said...

"The company's interim president and CEO, James Shepard, said Tuesday he had been directed by the company's board to cut costs "and position the company to weather this market downturn, which is the worst this industry has seen in decades."


Fortunately, the housing slump in the U.S. will have absolutely no effect on BC, ie: Vancouver. It's just cyclical, apparently.

The upside - there will be plenty of buying opportunities for housing enthusiasts. Mackenzie will be a poster child for all those popular RE investment seminars "Buy Northern BC".

We moved from the Cariboo region a year ago. The corridors of Hwy 97 and Hwy 16 are bleeding people.

I wonder which town is next.

freako said...

"Well, there's no way mill closures are good news, but forestry is cyclical,"

And what part of our "hot" economy isn't?

solipsist said...

450 lay-offs in a town of 5,000 is going to hurt. It should be noted too, that that area is more spruce, so it's not about beetle kill in the pines.

Somewhat related - they are closing refineries in Ontario, and shipping them overseas. This ought to help with fuel prices, wot?

Gird yer loins - this is the tip of the iceberg.

M- said...

FWIW, Ontario refinery closures will have a minimal effect on the west coast region-- our fuel doesn't come from that side of the country.

What will be guaranteed, however, is a healthy profit margin for the remaining refineries serving that side of the continent.

exvancouverite said...

"Gird yer loins - this is the tip of the iceberg".


This is somewhat related. When we lived in the Cariboo, we were close to what used to be BCRail, before it was privatised by Gordy.

Every day there was train load after train load of raw logs heading south. Couple trains a day, carload after carload of raw logs. People wonder why BC sawmills are shutting down.

I've talked with people who work at vancouver stevedoring and they used to process a boomboat a month. Then it started picking up to a few a week. There's an exodus of raw BC timber.

mohican is right - most BC residents are in collective denial about the weaknesses in our economy.

Luckily, Vancouver will be unscathed...and we can quibble about buy vs. rent ratios in Yaletown.

The rest of the province simply doesn't matter.

patriotz said...

450 lay-offs in a town of 5,000 is going to hurt

That's small potatoes compared to the mine closure in Kimberley a few years back, yet they are building condos there and someone is apparently buying them. And please don't tell me recreational condos are detached from the local housing market, it's a small town.

Am I the only one who thinks that BC has become Canada's Florida?

beta said...

Those mill towns will be fine...the Olympic baby boomers are coming.

Warren said...

And what part of our "hot" economy isn't?

You can say everything is cyclical since the economy is, but excluding 9/11, tourism has grown every year for a long time. Its not without risks (travel restrictions, rising dollar). But mills have been big boom and big bust for a long time.

Here's a better question, will this make lumber a lot cheaper and help prolong the building boom in BC?

exvancouverite said...

"Am I the only one who thinks that BC has become Canada's Florida?"

I think you've nailed it. Of course, Florida doesn't have the beautiful weather we do.


"That's small potatoes compared to the mine closure in Kimberley a few years back, yet they are building condos there and someone is apparently buying them. And please don't tell me recreational condos are detached from the local housing market, it's a small town."


Kimberley is like the poor cousin that everyone talks about in hushed tones. It has a ski hill, but it pales next to Fernie. The only thing propping it up is equity locusts that are unfamiliar with its past.

The town is a negative vortex, planned using Malthusian theory.

exvancouverite said...

"Here's a better question, will this make lumber a lot cheaper and help prolong the building boom in BC?"


Warren.

What colour is the sky on your planet?

Warren said...

Warren.

What colour is the sky on your planet?


Right now its sunny and blue, a perfect Vancouver day.

My comment wasn't meant as bullish, merely speculating. As we know some development projects have already been canceled after people signed pre-sale contracts due to higher than expected building costs. Please try to contribute in the future.

patriotz said...

"As we know some development projects have already been canceled after people signed pre-sale contracts - allegedly due to higher than expected building costs."

Couldn't be due to the developer cooking the books so he or his proxy can sign up new buyers at higher than previously expected prices, could it?

jesse said...

"some development projects have already been canceled after people signed pre-sale contracts due to higher than expected building costs. "

How much of building costs is lumber? Framing (lab+mat) is only 20% of the building cost. A drop from $500/kbft to $300/kbft (a 40% drop) will only save $5-6K in materials. Methinks the cost overruns will not be saved by a depression in lumber prices.

Scary, but I am pretty sure most spec builders are only making money these days due to rising land prices.

talus said...

Off topic (sort of - it's still realty/cash based) - check out this post over at Safehaven regarding Spain...

"It appears the bank [of Spain] has been draining the [Gold] reserves to help finance the current account deficit, which has ballooned to 9.5% of GDP, reaching €8.6bn in January alone. It appears that the current account is completely out of control. Spain has the worst deficit in its history and worse than any other country in the western world. Should Spain face any form of banking crisis, Spain will find the situation nearly impossible to handle. For instance, should a housing slump occur, a banking crisis is likely to follow. The first signs of a housing slump are emerging as the E.C.B. raises interest rates already up seven times to 3.75% since December 2005. The shares of Valencia builder Astroc have fallen 77% since February, setting off a sharp slide across the sector, with knock-on effects on banks with mortgage exposure." .....

"Morgan Stanley said construction accounts for 17.7% of G.D.P., even higher than the 15% peak reached in Germany after reunification - a boom-bust story that left the German Banks emasculated for years."


Even better is the CIA table of debt shown with the above text.

Now, I really don't know what to make of the table but here it is in complete form...
CIA Account Balance

The US of A is a mere $862,300,000,000 to the negative side. Just when does this get paid off?

patriotz said...

Morgan Stanley said construction accounts for 17.7% of G.D.P

Spain is Europe's Florida - an RE driven economy funded by leverage on inflated RE prices in the UK, etc. When Spain goes down the tubes it will take the rest of Europe with it.

I'm a little puzzled about the story through - Spain is part of the Euro area, so its current account deficit should simply be financed through the capital markets, like the current account deficit for BC for example. I don't see why the government has to do anything at all - it has no currency to support.

Sam said...

Here's some background on the Spain deficit thing - I'm in the UK so a bit closer to it. The gist is that the ECB (European Central Bank) doesn't have to bail out member states. They are on their own. So, counterintuitively from a North American point of view, even though interest rates and inflation targets are set centrally, if a member state has a run on the banks, the ECB will hang them out to dry.

Sam said...

check out

http://www.financialsense.com/editorials/phillips/2007/0523.html and http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/16/cnspain16.xml

Sorry to be OT.

Warren said...

Thanks for the info sam. This is an interesting thing to watch from the outside. Should be a good test for the Euro and the ECB.