|GUIDELINES for||. . .|
|Developing Stand Density Management Regimes|
While most of the lumber produced in the interior region of the province is exported to the U.S., lumber sales from the coast region are diversified to a much greater degree throughout the Pacific Rim countries, notably Japan. One of the major coastal timber products now sold there is hemlock squares (cants usually of 3-9/16" x 3-9/16" dimension). Figure A1-7 shows the real price of hemlock squares over the period January 1990 to April 1996.
Figure A1-7. The real price of hemlock squares over the period January 1990 through April 1996 (delivered price/MBF).
Note the prices are delivered (c.i.f.) whereas the lumber prices reported in previous illustrations were f.o.b. sawmill prices. The graph indicates a substantial price increase starting around April of 1992. One of the reasons for this increase was a substantial rise in the value of the Japanese yen relative to the Canadian dollar. Figure A1-8 shows the Japanese/Canadian exchange rate over the same period. Note the value of the yen started to climb rapidly relative to the Canadian dollar starting about April 1992. The pattern over time for the price of hemlock squares shown in Figure A1-7 closely follows that of the exchange rate shown in Figure A1-8.
If one considers the price rise of April 1992 to be the result of changes in the exchange rate, it is reasonable to assume that future price may also be linked to future increases in the value of the yen relative to the Canadian dollar. However, it is extremely unlikely that the exchange rate will remain as high as the peak shown in Figure A1-8.
Figure A1-8. Japanese/Canadian exchange rate over the period January 1990 through April 1996 (based on the Japan noon spot rate; in Canadian dollars).
While many economic observers believed the yen was undervalued during the 1980s, few believe it is so today. The peak in the exchange rate shown in Figure A1-8 has been attributed by some to the sudden liquidation of foreign reserves by the Japanese government and industry in order to rebuild after the devastation of the 1995 earthquake.
A final note concerns the cost of manufacturing hemlock squares, relative to that of dimension lumber. The lumber recovery factor (LRF) for logs sawn into squares is significantly lower than for the production of dimension lumber from the same logs. Thus, more raw material/MBF is required, resulting in a higher milling cost for producing squares.
Copyright 1999 Province of British Columbia