Potlatch at UBS Conference Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“if you follow the industry, you are maybe you familiar with this issue. British Columbia is an important producer of lumber to the industry not just for North American demand but also for Asian demand, particularly China. The mountain pine beetle has decimated the forest in British Columbia and the trees are basically dead…oughly 20 to 25 large saw mills that will be closing in British Columbia. These are big mills, these are not typical small mom and pop mills that you might find in the U.S. These are large mills, and so when they comes down, there will be less supply coming out of British Columbia, which ought to help the outlook for the industry.”

“A lot of the lumber and logs that the [Chinese] are buying from North America are used for construction. It’s not for the construction of the single family home, but it’s used for the construction of concrete warming for large urban building or condominium building and in any given year, the management try to maybe a little bit higher or a little bit lower but nonetheless, very significant. And the simplest way to think of it that the takeaway from North America today is roughly the equivalent of 600,000 to 800,000 U.S. housing starts. So you think about housing starts in the U.S. collapse so less demand for wood. Well, China has really stepped in the plates here to absorb a lot of that capacity.”

“back in the early 2010, you can see both lumber and power prices went to the roof that was due to extraordinarily wet weather down in the south, or it’s going to receive shortage of logs because we stop to harvest when the ground is too wet.”

“A lot of dealers in the U.S. build up inventories in anticipation of a strong home building season while we did see a pretty strong home building season so maybe not quite as strong as they had hoped. So prices rolled over”

“it’s not easy to get that late capacity to come back on line again, there is somebody that recently bought a mill in our operating area down in our Arkansas and they said we are going to get this mill back up and running again. And the question was asked when do you expect to start this mill back up again and they said December of 2014. So it’s going to take them almost a year and half to get this mill up and running again, and if you think about it and we are just mills and sitting, they are not running for four years is probably, the machinery is probably gotten rust, you have probably lot of motors that need to be replaced certainly the blades and the saws have to be sharpened, you got to find the employees, skilled labors scattered in the recession oil fields. So I think it’s a lot harder to get these mills back up and running than we might think.”

“certainly there is a lot of chatter about new mill construction. [Postner] has said they are going to build some 700 million square foot two mills in the South. There is talk of that sort of thing, but when does that capital actually get invested, when does the plant gets build, and when it starts production. It’s a long time into the future. So I think people are scratching their heads right now trying to figure out how to get capacity up in south and sorting through the various alternatives.”