Softwood Lumber Prices Back on the Rise: Report

Softwood lumber prices in the US and Canada are back on the rise as an improving housing market in the US has fed through to higher levels of demand and Canadian exports of softwood lumber to China are booming, the latest report has found.

In its January 2013 edition of Timber Trends released earlier this week by The Campbell Group, LLC, forest economist Bruce P. Glass says that after a lull following the GFC, prices of softwood lumber in North America shot back up last year as American housing starts recovered.

Glass says a 19 per cent rise in US housing starts in the year to October helped underpin price increases of southern pine and western hemlock of 48 per cent and 32 per cent, respectively, in the year leading to last November.

Saw log prices, however, have not been affected as pine log prices in the US South have hardly moved in two years and saw log prices in the northern US have been stable for the better part of 12 months.

Output levels are also on the rise with Quebec having recorded a whopping 30 per cent jump in production in the year ending last August.

Along with high levels of demand, prices and output levels are being influenced by demand from China, which drew in 16 per cent more imports from Canadian producers last November than it did in November 2011.

While higher prices and sales volumes are good for lumber producers, they add to cost pressures for residential builders at a time when expectations suggest housing construction activity in Canada will ease off.

Furthermore, not only have domestic producers benefited from rising demand in North America, importers have as well. In the third quarter of last year alone, softwood lumber imports jumped nine per cent.

In other significant findings of the report:

• China is now the second biggest softwood lumber producer in the world, trailing the US but ahead of Canada.
• A substantial portion of China’s plantation timber resource is designated for environmental protection rather than timber production.
• Changes in US housing market demand and supply fundamentals continue to indicate a strengthening housing recovery.
• Japan and South Korea are likely to increase imports of wood pellets and energy chips over the next 10 years.

By Andrew Heaton