When world economies rise and fall, so do our valued resource industries. This has certainly been the case with the North American forest industry in recent years. Fortunately, the market value of lumber is looking a little brighter these days, thanks to an increased demand for lumber in China, and a recovery (albeit slow) of the U.S. housing market.
The WOOD MARKETS 2011 – The North America Solid Wood Products Outlook: 2011-2015, released annually by International WOOD MARKETS Group, predicts lumber prices are indeed predicted to at least double within the next four years. The report states specifically that prices are expected to touch the US$500/Mbf level in the next two to three years – this compares to the average annual price of US$180/Mbf (for Western spruce-pine-fir 2×4 dimension) in 2009 at the bottom of the market cycle.
Prices are already starting to increase. After enduring some of the worst market conditions in 75 years between 2008 and 2009, the lumber industry has already seen improvements in the U.S. housing market from the low point of 554,000 units in 2009 to almost 600,000 units in 2010 (+8%).
“Total North American lumber demand bottomed in 2009 at 40.6 billion bf and is forecast to rebound steadily to 61.0 billion bf in 2015 — a 50% increase from 2009,” says Russell Taylor, President of WOOD MARKETS. “However, this is still well below the peak of 76 billion bf in 2005, so there is a lot more upside after 2015 before the market finally stabilizes. It appears that the next five years will be quite a ride for lumber.”
Gerry Van Leeuwen, Vice-President of the International WOOD MARKETS Group, agrees. “The prospects look very interesting for domestic producers as price levels have already moved higher in late 2010 and this should boil over starting in 2013 when prices are forecast to break out, creating price spikes later in 2013 and especially in 2014,” he says. “W-SPF lumber prices should spike to as high as US$500/Mbf in 2014 – and earlier if housing starts increase faster than forecast – creating huge gains for lumber producers and distributors.”
In the larger picture, the U.S. the Bureau of Economic Analysis are showing numbers that overall correspond with the rising value of U.S. exports are increasing as well. For example, the analysis shows the real Gross Domestic Product (GDP) — the output of goods and services produced by U.S. labour and property — increased 2.9 percent in 2010 (that is, from the 2009 annual level to the 2010 annual level), in contrast to a decrease of 2.6 percent in 2009. This is an indication that overall, the economy is improving.
And forestry and sawmill equipment dealers are ready for a piece of the action. Over the course of their 26 years in business, AMS Equipment Inc., one of Canada’s largest distributors of used and rebuilt sawmill equipment, has experienced highs and lows as dictated by the economy, but owner Vince Brenner is feeling positive about sales of sawmills and equipment going into 2011 and beyond. He says 2010 was certainly a better year than 2009 was for forestry equipment dealers, but there is always room for improvement.
“I’m optimistic, there are some signs that are making it look like 2011 might be a better year,” says Brenner. Sales of sawmills — both new and used — corresponds directly with the lumber market, which is warming up due to increased demand in China for Canadian lumber, he says.
“Typically what happens when we have a bad economy, there is someone else who is doing something, but in 2009, all of the markets were bad. There wasn’t anything that was opening up. Prior to the crash, there were some opportunities opening up in China, but that had changed a little bit in 2009 [China was milling their own lumber at the time] and there was a world wide crash where no one was spending a ton.”
But, AMS made it through the slowdown and are eager to be busy once again. As for AMS Equipment’s methods of staying in the black when times were at their worst, Brenner says that there aren’t any specific tricks out there when it comes to surviving a recession. “All you can do is tighten your belt, and aim to bring in more than what you are spending and try and hold on as long as possible. There is a diversification process that happens for some, and you try and make money doing more than one thing,” says Brenner.
“You need to adapt to what your customers want, especially when it comes to dealing used equipment, where customers either need the item or they don’t. Your business really depends on what their needs are and they are always changing with market conditions. You’re always trying to find the niche, that is so important,” he adds.
Of course it is important to be a reputable dealership, like AMS Equipment, that ensures its inventory comes with all of the available information on the machinery, such as the working hours and the year of production. The dealership will be able to answer all questions regarding maintenance schedules and whether or not the equipment was used excessively, before their business acquired it.
During a slower economy, it is essential to minimize expenses, which is a good reason for lumbermen, sawmills owners, and people who earn their living working in the forestry industry, to consider buying used forestry equipment because doing so allows them to save money and enjoy good quality at the same time. Adding to the projected increase in sawmill sales is that more contractors and DIYers are becoming interested in milling their own lumber, something that continues to keep sales of used sawmill equipment moving.
Currently, AMS Equipment is selling a lot of debarkers, chippers, and small log lines, but what is popular often varies. But AMS Equipment is always prepared and keeps a full supply of everything from single pieces to complete used sawmill lines. The company’s online database contains hundreds of used and re-built sawmill equipment components from bandmills to trimsaws, and everything in between.
AMS Equipment is located in Williams Lake, BC, and sells machinery worldwide. With 26 years of being established as used equipment dealers, AMS Equipment has a strong reputation in Canada’s West Coast. The dealership is looking forward to serving an influx of customers as millwork begins to get going again to meed the demands of the lumber market in China and the U.S.
