This extended US government shutdown has begun to affect that country’s exports, while Bank of Canada economists warn that Canadian export volumes will likely drop in 4Q 2013.
According to the Wall Street Journal Wednesday, “The US government’s partial shutdown is beginning to gum up trade, with companies unable to gain approval to import or export computer gear, lumber, steel and other products [ . . . ] All pesticide imports to the US have been halted, according to the Environmental Protection Agency, which must approve them but has had more than 90 per cent of its staff furloughed. Some US technology companies can’t fill overseas orders.”
Other US government departments besides those in trade are affected by the shutdown. Logging operations became a victim of the federal government budget impasse after the US Forest Service (USFS) suspended timber contracts on federal lands throughout the nation. According to the USFS, 2.5 billion board feet of timber was harvested from 150 national forests in 2012, a 2.5 per cent increase over the 2.44 billion board feet cut in 2011. The USFS says loggers have taken 2.8 billion board feet out of federal forest in the first three quarters of 2013.
In an October 3 letter to regional foresters, Craig Bobzien, Acting Director of Forest Management at the USFS, directed timber sales contracting officers to send notices to 450 logging operations “to delay or suspend operations until notified otherwise.”
Logging has been shutdown on 150 national forests nationwide. The loggers were given seven days to finish cutting and hauling out logs on sites where they have already been working.
The logging suspension will eventually impact mills that make wood products. In Montana, the eight mills affected derive eight to 14 per cent of their logs from public lands.
Scott Kuehn, president of the Montana Wood Products Association, told Land and Timber TalksWednesday, “It’s a big deal for all of us. This is our final big push before the snow comes. We’re all scrambling. We all can’t just move to private or state lands in order to get by.”
Steve Brink with the California Forestry Association said about a dozen of his group’s members will be affected by the suspensions, although, so far, none have received shutdown notices from the contract officers who control the timber sales, according to ProSales Tuesday.
Brink says it’s difficult to determine the cost of the shutdown on logging companies. “Every woods contractor’s situation will be different as far as cost,” he says. “Many would do their erosion control this week, and then pull their equipment out, go to another job, and not come back this season when the suspension is lifted.”
Meanwhile, Bank of Canada Senior Deputy Tiff Macklem said Tuesday that Canadian growth forecasts need to be pulled back, “We are now expecting growth in the third and fourth quarters of this year to be in the 2 per cent-2.5 per cent range before strengthening next year as the rotation to exports and investment gains momentum.”
The Bank of Canada had previously forecast growth of 3.8 per cent for 3Q of this year and 2.5 per cent the following quarter, said the Financial Post October 1. However, the new adjustments followed a weak 1.7 per cent increase in 2Q 2013, which was still much better than the 1 per cent reading the bank had originally expected.
“[ . . . ] recovery in US housing, in particular, is creating new demand for Canadian exports of lumber and building supplies,” continued Macklem. “Japan and Europe are in tentative recovery mode, even as China has slowed to a ‘still-solid pace of 7.5 per cent, and confidence is growing.’ Of concern, though, is increased financial volatility and weaker growth.”
As for BC, that province’s economic growth rate will drop from 1.8 per cent last year to a four-year low of 1.5 per cent for 2013 — dragged down by sluggish job growth, slowing housing investment and a dip in consumer spending, according to RBC’s latest provincial outlook.
But the forecast suggests that increasing exports and more capital spending on major projects next year will help the provincial economy rebound to a more robust 2.7 per cent growth rate in 2014. BC merchandise exports rose nearly five per cent in the first seven months of 2013, with wood-product exports surging 29 per cent – driven by stronger sales in the US and China. Exports of metals, machinery and equipment, natural gas, electricity and various food products also showed improvement.
“Wood product exports surged impressively by 29 per cent—driven higher by stronger sales in the US (up 51 per cent) and China (up 31 per cent)—although part this increase reflected a substantial rise in softwood lumber prices,” says the RBC’s Provincial Outlook September 2013 report. By comparison, the latest Washington State Department of Natural Resources Economic and Revenue Forecast states:
Pacific Northwest log prices have also moved up sharply after being fairly flat for 2011 and most all of 2012. The price for a ‘typical’ DNR log delivered to the mill climbed dramatically to a nominal high of US$587/mbf in April, the highest price since 2000. The log price has fallen off a bit in August to US$564/mbf, mimicking the recent drop in lumber prices.
Projected timber sales volumes for fiscal years (FY) 2014-2017 are unchanged from the June Forecast. Timber sales volumes are now predicted to be 540 mmbf in FY 2014 and about 500 mmbf in each of the outlying years.
According to the Western Wood Products Association’s latest Lumber Track, out Thursday, US softwood lumber consumption and exports for the first seven months of 2013 are: