If Canada has been declining their exports of lumber because of a domestic negative supply shock, what has happened to Canadian timber prices? Has that also fallen? If so, why aren't U.S. timber increased their exports to Canada? In other words, how can there be a shortage of timber in Canada, but a glut of timber in America?
so i guess i’ll have to hold off on that backyard DIY deck and substitute with a concrete/flagstone patio...unless quarries and stone producers are in simiilar situation?
(1) Imports of timber and lumber. Why haven't we seen a rise in lumber imports from places like China and Brazil?
(2) You seem to imply that sawmills order timber from all over (e.g. Alberta) but local lumber shops only order from local sawmills. Why? Is there some economy of scale in transportation that I am not thinking about?
A lot of it has to do with the size of the growers/sawmills. The majority of sawmills operating single shops, so they probably shop locally from family farms. There are big, international sawmills like Georgia Pacific that can operate their sawmills and their own tree farms. IBISWorld has some good information on the characteristics of the market. It reminded me a lot of pizza stores where there are a few big chains making 40% of the revenue and then just a BUNCH of small local shops.
What are the barriers to entry in the Sawmill industry? Is it cost and expertise? Or are there regulations? You'd hope to see more Sawmills open up seeing this type of misallocation.
I'm guessing it's a combination of extremely high startup costs and safety regulations. I can't even imagine the insurance premiums a sawmill needs to carry.
While researching this article, did you find anything on sawdust sales? I always like using that as an example of complements in production but haven't looked into data on if these companies do actually sell the sawdust and how big of a part of their sales it is.
I'm just trying not to write every article about the pandemic, but I can't seem to write any article without a section devoted to "here's how the pandemic has messed this market up."
If Canada has been declining their exports of lumber because of a domestic negative supply shock, what has happened to Canadian timber prices? Has that also fallen? If so, why aren't U.S. timber increased their exports to Canada? In other words, how can there be a shortage of timber in Canada, but a glut of timber in America?
This turned out to be a more interesting explanation than I was expecting. Canadian lumber prices are much lower than the US and it was such an issue that the US took Canada to WTO mediation over the low prices. Here's an article I found in AJOT on the ruling from the Fall: https://ajot.com/premium/ajot-the-misery-whip-the-ongoing-us-canada-lumber-dispute-just-doesnt-cut-it
so i guess i’ll have to hold off on that backyard DIY deck and substitute with a concrete/flagstone patio...unless quarries and stone producers are in simiilar situation?
I wouldn't be surprised if you told me the pandemic has disrupted quarry productions.
Super interesting. I am curious about two things.
(1) Imports of timber and lumber. Why haven't we seen a rise in lumber imports from places like China and Brazil?
(2) You seem to imply that sawmills order timber from all over (e.g. Alberta) but local lumber shops only order from local sawmills. Why? Is there some economy of scale in transportation that I am not thinking about?
We import more from Canada in a given year than the next 5 combined, so that's why I mentioned their drop. The US prohibits a lot of log/lumber imports from China: https://www.aphis.usda.gov/aphis/ourfocus/planthealth/import-information/permits/plants-and-plant-products-permits/sa_logs_and_lumber/wood-faqs
A lot of it has to do with the size of the growers/sawmills. The majority of sawmills operating single shops, so they probably shop locally from family farms. There are big, international sawmills like Georgia Pacific that can operate their sawmills and their own tree farms. IBISWorld has some good information on the characteristics of the market. It reminded me a lot of pizza stores where there are a few big chains making 40% of the revenue and then just a BUNCH of small local shops.
What are the barriers to entry in the Sawmill industry? Is it cost and expertise? Or are there regulations? You'd hope to see more Sawmills open up seeing this type of misallocation.
I'm guessing it's a combination of extremely high startup costs and safety regulations. I can't even imagine the insurance premiums a sawmill needs to carry.
While researching this article, did you find anything on sawdust sales? I always like using that as an example of complements in production but haven't looked into data on if these companies do actually sell the sawdust and how big of a part of their sales it is.
I'm just trying not to write every article about the pandemic, but I can't seem to write any article without a section devoted to "here's how the pandemic has messed this market up."