Lumber and Log Prices: Lumber and log prices increased markedly in 2013 and somewhat less so in 2014. Washington log prices moved up sharply from a two-year plateau in 2013 and continued to rise in 2014. The average price for a ‘typical’ DNR log delivered to the mill reached US$591/mbf in 2014, and has averaged US$560/mbf so far in 2015.
Timber Sales Volume: DNR has sold 248 mmbf thus far this fiscal year, which is about half of the revised 491 mmbf planned for FY15. Given current timber sales plans—and absent a new sustainable harvest calculation—sales volumes are still pegged at about 500 mmbf in each future year.
Timber Sales Prices: The FY14 sales price averaged $356/mbf. Weighted by volume, sales prices have averaged US$375/mbf through February. Sales prices in FY15 are predicted to average US$352/mbf, down three percent from November’s US$365/mbf forecast. This reduction is primarily due to the continued slowdown in export markets, particularly China; to lower demand in end-use markets; and to an ample regional supply of logs
— Washington State Department of Natural Resources, March 18, 2015
State of Lumber Manufacturing: North America 2003 vs 2014
The forest products manufacturing sectors in Canada and the US are slowly moving further into recovery, after the epic crash of US home building from September 2006 through 2011. But what does that recovery look like? How does it compare to business prior to the run-up of US housing starts from 2004 to mid-2006? As always, a deep look at the data and numbers reveals the most accurate story.
In 2003, Canada’s three main lumber producing provinces — British Columbia, Quebec, Alberta — together manufactured 62.3 million cubic metres of softwood lumber, an 18.6 per cent improvement over 2014 when it was 50.7 million cubic metres, according to Statistics Canada.
Put another way, in 2003 sawmills in those three provinces sold $11.5 billion worth of lumber, 20.9 per cent more than the $9.1 billion sold in 2014, also from StatsCan.
In the US, softwood lumber production in 2003 was 85.6 million cubic metres as reported in the March 5, 2004 issue of Lumber Track by the Western Wood Products Association, which is 10.8 per cent more than the 77.6 million cubic metres produced in 2014.
In the US, total sawmill product imports (C.I.F. value) in 2003 were US$6.9 billion, 10.1 per cent higher than US$6.2 billion for full-year 2014, according to US Census data. The vast majority of these imports came, of course, from Canada. As for exports, US total exports of sawmill products (F.A.S. value) to the world were US$1.95 billion in 2003, 48.7 per cent lower than US$3.8 billion in 2014. US sawmill product exports to Canada were largely unchanged from 2003 to 2014, while that to China increased by 966 per cent (from US$133.5 million to US$1,293.9 million in 2014).
In Canada, total exports by sawmills were $7.3 billion in 2003, which is 17 per cent lower than the $8.8 billion for 2014 sawmill total exports. Plummeting demand from the US is responsible for this decrease.
Perhaps the most interesting of all the North American lumber manufacturing data are the sawmill capacity utilization rates. Industry players are painfully aware of the massive change in operations that has taken place since 2003. Rampant sawmill closures and/or repurposing increasingly restricted sawlog timber supply in mountain pine beetle-affected regions, as well as a continued reduction of AAC in Quebec playing against some amount of new, ultra-modern sawmill building and the undeniable migration of the three largest lumber manufacturers from British Columbia to the US southern pine belt.
In 2003, total sawmill capacity utilization in the US was 88 per cent, a 2 per cent drop from 90 per cent the previous year, according to WWPA. In Canada, sawmill capacity utilization rates were 96 per cent, almost unchanged from 2002.
However WWPA data for 2014 tells a very different story: US total capacity utilization was 83 per cent in 2014, a 3 per cent increase over 2013 when it was 80. As for Canada, the rate was flat in 2014 at 79 per cent compared to the previous year.
These are some very interesting changes for anyone interested in the forest products industry in North America.
Occasional guest writer Rick Doman, formerly of Doman Industries and more recently CEO of EACOM Timber for several years, wrote in the October 9, 2009 issue of your Madison’s Lumber Reporter,
“Delivered log costs are one of the largest drivers under which sawmills operate, and which cause sawmills to curtail or shut. In particular when lumber demand and prices are lower than normal.” Rick Doman, formerly of Doman Industries and more recently CEO of EACOM Timber
This piece was a follow-up to his contribution in the February 20, 2009 issue.
Please refer to Page 8 for a very useful chart of log price comparison and a graph illustrating the change in mill cost structure in different regions of North America, 2004 vs 2013.