Improving on stability begun last year for North America’s forest products manufacturers, 2014 ended on a positive note. Volumes and values of dimension and framing lumber shipped from Canada to the US for the first ten months of this year equalled that for full-year 2013. Data out of Statistics Canada December 29 shows lumber exported from Canada to the US, by value, for Jan – Oct 2014 is up 23.5 per cent compared to the same time period last year.
Volumes increased 10.5 per cent.
Field inventories of solid wood continue extremely weak, while stocks at sawmills are somewhat increased over this time last year as product already sold waits to be delivered before the end of the year. As always, both producers and secondary suppliers intend to close the year with as little wood in their yards as possible. Given the buying momentum carried through into early December it is possible the first week of the New Year will see hot lumber sales.
In any case, a strong sales season into February is expected by all. For how long the spring sales run will last next year is unknown; in 2014 it was about six weeks in duration.
While uncertainty at the producer level is lessening, there remain several unknown variables.
There is much discussion about where total US housing starts will be when 2015 closes — most analysts agree somewhere around 1.2 million annualized — however it will be important to watch the more volatile multi-family units. For the past year and a half these have been driving the increase in total starts (although single-family units have also been improving, albeit more slowly).
The most often-used item in the construction of an average single-family North American house is the 2×4, while for multi-family building it is the 2×6 size.
As the graph on this page demonstrates, the price of Southern Yellow Pine 2×6 has not traditionally tracked with SYP 2×4 as closely as Western Spruce-Pine-Fir 2×6 has tracked with both WSPF and SYP 2×4. It is possible that, for the next couple of years at least, the commodity price of Southern Yellow Pine 2×6 will be an excellent forward indicator of new US home building. At a minimum it is clear, at least for the immediate future, that SYP 2×6 prices are coming much more into play with US housing than has been the case in the past.
Sawmills and panel mills across the US and Canada finished 2014 with excellent log decks. All consider themselves well-stocked for whatever level of demand will come in the near future.
Transportation on the rails continues difficult, especially for Canadian producers. Trucks are becoming more difficult to source, and expensive, particularly in the east for both American and Canadian mills. Challenges sourcing rail cars is not new for Canadian lumber manufacturers, however the lack of trucks is a more recent development. The loss of approximately one-third of independent truckers and trucking companies across North America since 2008, coupled with the looming retirement of a significant proportion of existing truckers, is causing panic for solid wood shippers.
As well, the 2006 Softwood Lumber Agreement expires in less than a year, with so far no word out of Canada except a professed desire to ‘renew as is’. For it’s part, the powerful US Lumber Coalition has already expressed it’s deep concern about several important aspects of this bi-lateral trade deal and is on the record as stating it does not support a simple renewal. Upon expiry the 2006 SLA remains in effect for one additional year. The possibility of a renewed trade dispute between Canada and the US in 2016 over softwood lumber is not much welcomed by industry at this difficult time of recovery.
A selection of key lumber and panel prices, published in the
December 12 issue of Madison’s Lumber Reporter:
WSPF KD R/L 2×4 #2&Btr . . . $340 . . +$4
WSPF KD R/L 2×6 #2&Btr . . . $348. . . +$3
WSPF KD R/L 2×8 #2&Btr . . . $336 . . . -$6
WSPF KD R/L 2×10 #2&Btr . . . $354. . . -$6
WSPF KD PET 2×4 STUDS . . . $350 . . . -$5
Douglas Fir green #2&Btr 2×4 . . . $320 . . . +$2
Douglas Fir green #2&Btr 2×10 . . . $410 . . . +$5
ESPF KD 2×4 8ft STUDS . . . . . . . $405 . . . $0
OSB ON 7/16″ (C$/1000 sq ft) . . . $220 . . . +$20
all prices FOB mill, US$ per thousand board feet
*except OSB which is C$ per thousand square feet