MADISON’S KEY SOFTWOOD LUMBER MARKET WEEKLY COMMENT:
“ Low field inventories ensured strong demand and repeat business. ”
Prices updated June 27, 2017
(CLICK TABLE TO ENLARGE)
All prices are net FOB mill in U.S. dollars per 1000 board feet unless otherwise noted. Green = not dried KD = kiln dried PET = precision end trim R/L = random lengths SPF = Spruce-Pine-Fir Std&Btr = standard & better (a grade)
SOFTWOOD LUMBER INDUSTRY MARKET PRICES, NEWS AND INFORMATION
Offshore imports of softwood lumber to the US continued to climb in early 2017 after increasing 43 per cent in 2016, according to the Campbell Group’s monthly Timber Trends Thurday. As Canadian producers have shifted their focus to markets outside of the US, attention has turned to the supply side of the US softwood lumber market and more specifically to offshore imports.
An increase in ffshore imports is one of the expected supply-side responses to constrained shipments from Canada resulting from the countervailing duties levied against Canadian producers. While offshore imports to the US are projected to rise steadily, they will do so from a relatively low volume basis and the limited availability of structural grade lumber shipments from Canada will require increased shipments from countries such as Germany and Sweden that produce structural grade lumber.
US Softwood Lumber Imports: 1Q 2017
However, attracting increased supply from these European suppliers may prove somewhat challenging in light of the strengthening euro, a slowly improving European economy and the well-developed markets and supply chains outside of the US that were created as a result of the collapse in US demand during the Great Recession
Offshore imports accounted for an estimated two per cent or 0.94 billion board feet (bbf) of US domestic consumption in 2016. At this level, offshore imports were up 43 percent over 2015, but were still 69 per cent off their 2005 peak of 3.0 bbf. The lumber from Germany and Sweden is a suitable replacement for Canadian lumber as it can be used in structural applications.
Anti-Dumping Duty Rates announced -- Softwood Lumber
Canfor 7.72 percent
Resolute 4.59 percent
Tolko 7.53 percent
West Fraser 6.76 percent
All others (including Irving) 6.87 percent
Lumber produced in NS, PEI, and NL, from timber harvested in those provinces, and so certified by the Atlantic Lumber Bureau, will be excluded from both AD and CVD.
Madison’s Lumber Reporter, est. 1952
Vancouver, BC, Canada
Builder confidence in the market for newly-built single-family homes in the US weakened slightly in June, down two points to a level of 67 from a downwardly revised May reading of 69 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI), released Thursday.
Elsewhere, according to the Federal Reserve Board’s 1Q 2017 release Tuesday of its Financial Accounts of the United States report, household holdings of real estate totalled US$23.526 trillion in 1Q 2017, which is US$1.597 trillion higher than its level in 1Q 2016.
Home mortgage debt outstanding, US$9.813 trillion in 1Q 2017, rose by US$252 billion over the same four-quarter period. As the change in the total value of household-held real estate exceeded growth in mortgage debt outstanding, total home equity held by households grew.
US Builder Confidence, Home Equity: June & 1Q 2017
Builder confidence levels have remained consistently sound this year, reflecting the ongoing gradual recovery of the housing market, said the National Association of Home Builders/Wells Fargo Housing Market Index Thursday. As the housing market strengthens and more buyers enter the market, builders continue to express their frustration over an ongoing shortage of skilled labour and buildable lots that is impeding stronger growth in the single-family market.
All three HMI components posted losses in June but remain at healthy levels. The components gauging current sales conditions fell two points to 73 while the index charting sales expectations in the next six months dropped two points to 76. Meanwhile, the component measuring buyer traffic also moved down two points to 49.
US HOME EQUITY
Home mortgage debt outstanding, US$9.813 trillion in 1Q 2017, rose by US$252 billion over the same four-quarter period, said the Federal Reserve Board Tuesday. As the change in the total value of household-held real estate exceeded growth in mortgage debt outstanding, total home equity held by households grew. Over the year, total home equity held by households rose by US$1.346 trillion, 10.9 per cent, to US$13.714 trillion. Households’ home equity is now 58.3 percent of household real estate.
The share of refinancings resulting in a 5 per cent or higher loan amount has risen in recent years, and the median ratio of the new mortgage rate to the old mortgage rate has also increased from its 2013 low. However, a ratio of .81 indicates that, at the median, refinancings resulted in a 19 per cent decrease in the borrower’s mortgage rate.
In contrast, over 2006 and 2007, the last period that the majority of refinancings resulted in a new loan amount that was 5 per cent or higher than the old loan amount, the median ratio peaked at 1.10 indicating that, at the median, a refinancing resulted in a 10 per cent increase in the mortgage rate.
Total housing starts in the US declined in May after a few, strong early months to begin 2017. Total starts were down 5.5 per cent, falling to a 1.092 million seasonally adjusted annual rate, according to the joint data release from the Census Bureau and HUD Friday. Declines were recorded for both single-family and multifamily development.
Single-family starts fell back, declining to a 794,000 annual rate. The February annualized rate, 877,000, was the fastest monthly pace since the Great Recession. Nonetheless, single-family starts are up 7 per cent year-to-date compared to 2016 as limited existing inventory and solid builder confidence make for positive demand conditions.
US Housing Starts
Single-family permits were down 4.9 per cent in May, said the US Census Bureau Friday. There has also been a noticeable increase in the number of single-family homes permitted but not started, consistent with survey data indicating supply-side bottlenecks. For example, in May there were 78,000 single-family homes permitted (on a seasonally adjusted basis) but not started construction. This is almost 15 per cent higher than a year ago.
Multifamily starts dropped again in May for a fifth consecutive month of decline. Five-plus unit multifamily starts fell 10 per cent to a 284,000 seasonally adjusted annual rate. Multi-family five-plus unit permits were also down, falling 10 per cent.
With respect to housing’s economic impact, 57 per cent of homes under construction in May were multifamily (612,000). This multifamily count is almost 6 per cent higher than a year ago, although in recent months this total has flattened, consistent with our forecast. There were 455,000 single-family units under construction, a gain of 6 per cent from this time in 2016. This is slightly lower than the April total (457,000), which was a post-recession high.