The manufacture and sale of North America softwood lumber and panel raced headlong into the US Thanksgiving long weekend after two years of a very tumultuous market. Madison’s own expectations were for the recent annual North American Wholesale Lumbermen’s Association (NAWLA) meeting in Chicago, IL, to be “off-the-hook” as the kids say.
While extremely well attended and busy, actual trading activity at this important forest industry event was muted to say the least. Producers have solidified relationships and customers have their baskets of suppliers to make regular orders from. The lumber industry has matured compared to the unfettered days of the mid-2000s.
Word from those attending was that, at NAWLA, the Canadians were focussed on selling offshore to emerging markets, specifically to China but elsewhere as well. And not just in the west, eastern sawmills were also having their eye on new markets in Asia.
Prices on benchmark Western Spruce-Pine-Fir KD 2×4 #2&Btr softwood lumber commodity rebounded another +$32, or +9%, after reversing recent sharp drops last week, landing at US$354 mfbm (from last week’s $322). The current lumber futures contract for November 15 expired last week, sending trading levels wildly fluctuating. In what is a traditional slow time for Canadian and US lumber production, Southern Yellow Pine KD 2×4 #2&Btr East Side print dropped another -$14 to US$426 mfbm, from US$440 the previous week. This is a -3.3% drop.
Looking at one-year-ago, Western SPF 2×4 prices are down -$174, or -49%, from US$528 in mid November 2017. Southern Yellow Pine 2x4s East Side started dropping at this time last year, so have fallen -$4, or -1%, from the same time last year’s level of US$430 mfbm.
— Madison’s Lumber Reporter, Nov 20 ’18
Even as Canadian producers and exporters focussed their targets on gaining new customers in emerging Asian markets, uncertainty continued to loom large in British Columbia.
Workers’ and employers’ groups in British Columbia, after having made great progress last week and signalled resolution soon, dashed hopes Monday with an announcement of potential job action again this week. November began with some rotating work stoppages at quite a few BC sawmills in the north and south Interior labour bargaining region. Noticeable capacity was impacted.
At the same time, individual producers announced curtailments and seasonal downtime, often citing depleted timber supplies or prohibitively high log costs. A significant amount of production is offline, with a good portion slated to never return. This leaves a lot of questions for the usual run-up to seasonal North American lumber trading in January and February: will the suppliers be ready with wood-on-hand after being down for almost two months? Will US demand be sufficient to warrant a ramp-up in production?
Only time will tell and Madison’s will be here with a finger on the pulse to explain what is happening with Canadian and US softwood lumber sales every week.