“Where will it end? No one knows,” one experienced eastern US trader exclaimed in astonishment Friday morning.

There can be no true answer to this until the horrifying (and seemingly NOT improving) railway backlog started well in 2Q 2017 is unravelled, not to be till July this year said one of the two major Canadian carriers to it’s forestry customers a couple of weeks ago. Once wood is again moving smoothly and sawmills can ship product out already made, then we will see properly what is the supply-demand balance. Madison’s is putting the question to sources right now if there are plans for additional investment in logging for this coming season.

Even if all the sawmills with available log supply did ramp up to maximum capacity, it seems there would still be a lag before that future wood made it to end-users.

Softwood lumber customers are scrambling even now, and those who put off purchases a few weeks ago are currently extremely regretful that they did not buy then.

The below table is a comparison of June 2017 and May 2018 prices for benchmark dimension softwood lumber 2×4 prices compared to previously historical highs of 2004/05:

 

Current Softwood Lumber Prices Compared to Recent and Historical Highs

This week in Vancouver, BC, was held Forestry Week. The Pulp and Paper Products Council annual meeting, which alternates between Vancouver and Montreal, QC, featured some very informative presentations and sparked some interesting conversations. This event is always well represented by participants from around the globe, and the single question on everyone’s mind this year was “where are the logs”. Downstream users like pulp and paper mills are already worried about a looming feedstock shortage and higher prices. Along with the pellet mills, as very informed consumers of sawmill residue, these players are right now concerned about near-term future wood chip and sawdust supply and prices.

Apart from log supply constraint issues in many parts of the world, the other worry on most peoples’ minds was labour. There is a terrible labour shortage right now both in the forest but also with transporters. Especially with trucking in USA; there have been steep losses in the number and scope of trucking companies and trucks on the road since the global economic downturn, with almost no recovery since. The nature of a trucking job, at the current rate of pay, is not attracting new entrants (women and youth) while the pool of willing traditional players has shrunk drastically.
More on the subject of North American logistics problems in a future issue.