Chicago Mercantile Exchange lumber futures closed lower on Friday as quiet cash markets prompted speculators to retreat from their long positions. As of Friday mid-day, the quoted price was $255. A U.S. jobs report was issued this week and unemployment held steady at 9.7 percent. The Labor Department reported payrolls dropped by 36,000 last month after a revised 26,000 decrease in January. On the bright side, manufacturers added workers for a second straight month, which was the first back-to-back gain since 2006. On the down side, construction employment declined showing continued weakness in the building sector. The moral of this story is that with a high unemployment rate, there are not a lot of families out there that feel safe committing to a 30 year mortgage. Even the employed sector is going to have the crisis of confidence about how am I going to pay this new mortgage if I get laid off.
Also, another recent event was that the mill in Libby, Montana shut down due to a fire. The owners unfortunately did not have fire insurance due to the onerous cost and thus the mill was a total loss. Recently, the mill recently was producing survey stakes and burned down in late February. In 1985, Champion International purchased the plant from St. Regis. Then in 1993, Stimson Lumber Co., took over the mill and ran it until October 2002. Stimson announced the plywood plant’s closure and laid 300 employees that added up to a payroll of more than $13 million would be laid off. Timber supply, log cost increases and finished product declined all contributed to a difficult environment. Another factor was a flood of imports from China and Russia.
Finally, record warm temperatures in B.C. Canda this winter are forcing unseasonal closures to many harvest areas. This, combined with an ongoing legal dispute with the Okanagan Indian Band, has resulted in the need to curtail Tolko Industries Ltd.’s Armstrong sawmill operations for two weeks, commencing March 8, 2010. The scheduled restart will be dependent on fibre supply, company said in a press release received by Lesprom Network. Due to the prolonged warm weather, the Ministry of Transportation has implemented load weight restrictions that effectively prevent log hauling on a number of roads in the Okanagan area. These restrictions make many forest areas normally open for harvesting inaccessible for timber harvesting. The company’s Tree Farm License in the Brown’s Creek is not covered by these measures. However, this timber source continues to be blocked by the actions of the OKIB.