Meanwhile, on the big end of town

[longtime lurker]

So a buyout of Plum Creek by Weyerhaeuser. Combined value of 23 billion... 13 million acres of land, synergies and economies of scale yada yada yada.

http://www.reuters.com/article/2015/11/08/us-weyerhaeuser-plum-creek-timb-idUSKCN0SX0WW20151108#cQO0fpMCJ3I4UaEA.97

Forecast return of a housing recovery in the next two years... Well that's good for all of us.

But them big guys... My bet is a strengthening greenback against the yuan has got them scared enough to want this merger. Hard to compete against the Chinese at the best of times, add a weakening yuan to make the Chinese stuff cheaper and a dash of free trade agreement and... They should be nervous. As with here ithe bigger you are and the more generic your product, the more you need to fear cheap imports.

Little specialty guys like us don't got them headaches huh?

[pineywoods]

Don't know what the impact will be here. Plum creek owns most of the timberland in north Louisiana and south Arkansas. I'm completely surrounded by plum creek land. Hunting leases are a big part of their income..

[logboy]

Little specialty guys like us don't got them headaches huh?

I dunno about that. When it comes to finding big walnut crotch logs for slabbing I'm competing with the Chinese. You can go on Craigslist right now and see ads that say, "Do not sell your walnut logs to local mills for pennies on the dollar. I'm a direct link to China and will get you top dollar." Theyre paying more for walnut in log form than I can sell my kiln dried walnut slabs for.  It's crazy and frustrating.  I can't even find the logs anymore but I still have a market for the slabs.

[longtime lurker]

Little specialty guys like us don't got them headaches huh?

I dunno about that. When it comes to finding big walnut crotch logs for slabbing I'm competing with the Chinese. You can go on Craigslist right now and see ads that say, "Do not sell your walnut logs to local mills for pennies on the dollar. I'm a direct link to China and will get you top dollar." Theyre paying more for walnut in log form than I can sell my kiln dried walnut slabs for.  It's crazy and frustrating.  I can't even find the logs anymore but I still have a market for the slabs.

We have the same thing here: there are three species that I can get  $1800 a cubic meter for veneer  billets and $2500 a cube for sawn KD.... No brainer really, I sell anything that will make grade as a peeler log and saw the scraps that won't.
If you can't beat them join them.

[Ron Wenrich]

A number of years ago, I was talking to a wood trade representative from the state government.  He had been to China.  China was looking for 1,000 carloads of walnut lumber on a monthly basis here in PA.  I don't think we even produce that much statewide in a month.  At that time, there had been a change in how the Chinese can own homes.  They were able to build housing to their specs somewhat, and they would lease from the government for 99 years, so there was the fact that they could acquire the wealth associated with owning real estate.  China has a bunch of white wood that they use.  The walnut was to be used as trim to offset that white color, and it created a large demand.  I imagine a lot of that has gone into furniture. 

From what I'm reading, I think their housing bubble is slowing down.  They're not seeing housing prices zoom as quickly as it has in the past.  The lower of the yuan value would mean that their importation of our wood would slowdown.  Combining the more expensive wood, and their lower expectations of home value increases would put a damper on demand.  The economy of scale puts them more in competition with Canadian exporters.

[Sixacresand]

Plum Creek owns a lot of land in Middle Georgia.

[longtime lurker]

A number of years ago, I was talking to a wood trade representative from the state government.  He had been to China.  China was looking for 1,000 carloads of walnut lumber on a monthly basis here in PA.  I don't think we even produce that much statewide in a month.  At that time, there had been a change in how the Chinese can own homes.  They were able to build housing to their specs somewhat, and they would lease from the government for 99 years, so there was the fact that they could acquire the wealth associated with owning real estate.  China has a bunch of white wood that they use.  The walnut was to be used as trim to offset that white color, and it created a large demand.  I imagine a lot of that has gone into furniture. 

From what I'm reading, I think their housing bubble is slowing down.  They're not seeing housing prices zoom as quickly as it has in the past.  The lower of the yuan value would mean that their importation of our wood would slowdown.  Combining the more expensive wood, and their lower expectations of home value increases would put a damper on demand.  The economy of scale puts them more in competition with Canadian exporters.

The Chinese housing bubble is slowing... but its kinda like a heavy goods train, it might take a mile or four to come to rest.

The yuan issue though is (I think) a bigger potential issue then you give credit for. A devalued yuan against the greenback means they can probably afford to take less logs from the USA. But they get a whole whack of logs from other places, and not all the terms of trade are done in USD - a lot of the time in the less developed parts of the world the exchange will be in local currency plus development related stuff... roads, airstrips, port facilities, Kalashnikov copies, that kinda thing.

The last few years with a high AUD have been hard on us. Domestically the market swung to white oak and to some degree walnut... those logs that went to China wound up here and with the high AUD they landed at a price that the domestic industry struggles to produce for. The middlemen don't care - they got their whack either way, but white oak became the flavour of the month and the low import cost and being exotic meant big margins for them. Now the AUD is back around its normal level against the USD theres two things happening... we're getting domestic demand again because the middlemans margin has swung back to favouring us, and for the first time since the GFC we are looking at an export order to the USA going on our books.

A devalued yuan means the Chinese can produce the usual cheap stuff even cheaper, and that puts pressure on domestic producers anywhere they send to. Even with regards logs from the USA, while it might be costing them  more in yuan to buy the log, they'll also be theoretically able to sell more back to you because the value added products made from said logs are also cheaper which increases consumption. So they spend more USD to buy logs but generate more USD from sales.