Kéta Kosman

This week marks the normal seasonal end to softwood lumber manufacturing across most of North America annually.

Sawmills in Eastern Canada, specifically Quebec, are already on their yearly seasonal break, and those in the West are not far behind with curtailments and closures, according to Madison’s Lumber Reporter. Usually at this time of year construction activity is down to almost nothing, and lumber producers are spending their time doing year-end accounts and taking inventory.
In order to be in a good position for tax reporting, sawmills want to empty their yards of manufactured wood products before year-end. Also they want to have their log yards stacked as full as possible. Because demand has been so consistently strong, which is very unusual for December, lumber suppliers have been quoting wood sales into January 2021. This with the accompanying increase in prices, of course. Customers, while reluctant, can do nothing but accept the higher price lists because none have been stocking inventory and there continues to be rush of real building projects to serve.
Industry expectations, therefore, are that current price increases will remain through the Holidays and into the beginning of January.

“Prices continued to rocket upwards last week amid acute supply shortages.” — Madison’s Lumber Reporter

Western S-P-F purveyors in the US reported another gangbusters week as scores of buyers jumped into the fray, capitulating to the strong, upward trajectory of demand. With Canadian producers selling out at home every day, primary and secondary suppliers in the US were under siege from desperate customers whose hand-to-mouth strategies have ensured perpetually-light inventories. Sawmills pushed their prices up on every conceivable commodity, thus most order files stretched into the first week of January.

Canadian Western S-P-F producers continued selling out like crazy every day, leaving not a speck of fibre for the US market. Sawmill order files were to the first week of January and fully expected to move further this week. Producers in BC reported log supply was becoming a real problem in that province’s Interior. Any heretofore freezing weather events were short-lived and on balance the climate has been so mild thus far that harvesting and hauling crews simply can’t access and convey enough raw logs.

Relentless unseasonably strong demand pushed prices even higher, for the week ending December 11, 2020 the price of benchmark softwood lumber commodity item Western S-P-F KD 2×4 #2&Btr rose another +$92, or +14%, over the previous week to US$744 mfbm, said Madison’s Lumber Reporter. Last week’s price is +$154, or +26%, more than it was one month ago. Compared to one year ago, this price is up +$350, or +89%.

“The frenzy of panic-buying of Eastern S-P-F lumber and studs was alive and well last week as prices skyrocketed ever further. Buyers continued to deal only in small volumes, partly due to their reticence to cover anything more than immediate needs and partly due to a persistent lack of overall supply. For their part, sawmills couldn’t keep production even close to apace with demand, as winter weather affected operations and surging coronavirus cases caused staff shortages or even temporary shutdowns. Sawmill order files were almost ubiquitously into the New Year 2021 as buyers desperately scrambled to plug holes in their empty inventories.” — Madison’s Lumber Reporter

Compared to the 1-year rolling average price of US$554 mfbm, last week benchmark softwood lumber item Western S-P-F KD 2×4 #2&Btr was selling for +$190, or +34% more, and was up +$282, or +61%, compared to the 2-year rolling average price of US$462 mfbm.

The above table is a comparison of recent highs, in June 2018, and current December 2020 benchmark dimension Softwood Lumber 2×4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept 2015:

New Funding for Alberta Biomass Fuel Projects, Global Biomass Capacity to Grow by 16%

Alberta Announces $150 Million in Funding for Emission-Cutting Projects

The Government of Alberta announced in early November it will provide $100 million in funding for Emissions Reduction Alberta’s (ERA) Shovel-Ready Challenge through the Technology Innovation and Emissions Reduction fund.
An additional $50 million will also be available from the federal Low Carbon Economy Leadership Fund. Successful applicants are eligible for up to $15 million, and projects receiving funding must begin within 60 days of being approved and must include commercial demonstration or deployment of technologies in operational environments. Eligible projects include mobility and transportation solutions, low-emission electricity generation, high-efficiency equipment, optimization of agriculture and forestry operations, methane emissions management, waste heat utilization, low carbon industrial heat, fuel switching, alternative feedstocks, carbon capture, utilization, and sequestration, and more.
The application deadline is Tuesday, December 22nd, 2020.

Bioenergy Usage Expected to Grow: IEA

In a report released in early November the International Energy Agency (IEA) detailed the growing role of bioenergy in energy production worldwide. The IEA Renewables 2020 report showed that global biomass electricity production grew by 8.5 GW in 2019, making 2019 the second-highest increase on record. China accounted for the largest proportion – 60 per cent – of new biomass capacity in 2019, mostly in the form of energy-from-waste projects. Japan was second in new biomass capacity at one-tenth the size of the Chinese market.
The report forecasts a decline of 16 per cent in bioenergy capacity additions in 2020 due to ongoing effects from the COVID-19 pandemic. Ten nations accounted for 90 per cent of major deployments of biomass power projects in 2019, and the largest markets – China, Brazil, Japan, and the United Kingdom – have been severely affected by the pandemic. Delays in biomass project delivery have already occurred in those countries and are expected to continue. At the feedstock level, widespread supply disruptions of biomass fuels for existing projects have not been observed according to the report.

A large proportion of lumber produced in Canada goes into US home building. Like lumber prices, housing construction in the US underwent a significant stall in spring 2020.
And, like lumber prices, it is recovering steadily from severe lows. It’s very interesting to watch the trend of log prices as a result of this latest lumber price volatility:

Since Madison’s Lumber Price data comes out weekly, but US housing starts data is released monthly, there is always a lag between actual building activity and the US Census Bureau data release:

However, during this unprecedented time of upheaval on multiple fronts, lumber prices are proving to be an excellent forward indicator of US home building. Don’t miss out on the latest information providing advance insight into US home building activity!
Check out Madison’s products today, and simply fill out an order form to subscribe.

At a time of year when housing construction across North America is usually slowing down to very limited activity, thus softwood lumber prices are usually quite soft, in the past couple of weeks there has been a resurgence of strong demand for solid wood products. Prices of dimension lumber commodities have responded upward accordingly.

Underpinning the hot lumber sales and rising prices is continued extremely rosy US home sales and house price data. Lumber manufacturers in Canada and the US are experiencing such strong demand that sawmill order files are pushing out into the start of 2021.

Forest industry veterans and home builders with 40 years experience alike have never seen this situation toward year-end. All agree, however, that home sales, house prices, and home building will not reverse direction any time soon.
Madison’s expects a hot US housing market to last at least to the end of 2021.

“Prices of virtually every commodity continued to climb last week; especially in studs where levels were bonkers.” — Madison’s Lumber Reporter

Western S-P-F purveyors in the United States were chuffed with a strong week to start December. Buyers were frequently in the mix to shore up their empty inventories thus sawmills pushed their order files into late-December or early-January 2021. Prices continued to climb and buyers had no choice but to participate, as downstream consumption was uncharacteristically robust considering the time of year. Players use American Thanksgiving as an important litmus test for the market. The result this year appeared to be more vigourous demand than many had expected.

Canadian producers of Western S-P-F lumber reported another good week as prices on every dimension item climbed yet again. Relentless demand persisted as Canuck sawmills sold out so quickly each morning that the US cash market didn’t see a stick of bread and butter lumber items on offer. Resultant order files on all items were into the first week of January 2021.

Rising again at a time of year when prices are usually soft, for the week ending December 4, 2020 the price of benchmark softwood lumber commodity item Western S-P-F KD 2×4 #2&Btr was up another +$32, or +5%, over the previous week to US$652 mfbm, said Madison’s Lumber Reporter. Last week’s price is +$72, or +12%, more than it was one month ago. Compared to one year ago, this price is up +$258, or +65%.

“Eastern stocking wholesalers along the US Eastern Seaboard described the eruption of a buying frenzy following the American Thanksgiving holiday weekend. One veteran vendor likened the surge to the follow-the-leader behaviour of lemmings, as a few customers jumped off the cliff and incited a rash of panic-buying. The perpetually-depleted state of field inventories helped push prices up, of course.” — Madison’s Lumber Reporter

Compared to the 1-year rolling average price of US$547 mfbm, last week Western S-P-F KD 2×4 #2&Btr was selling for +$105, or +19% more, and was up +$193, or +42%, compared to the 2-year rolling average price of US$459 mfbm.

The above table is a comparison of recent highs, in June 2018, and current December 2020 benchmark dimension Softwood Lumber 2×4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept 2015:

US construction employment gained +27,000 jobs in November to a total of 7.4 million, but employment is -279,000 below its February level, the Bureau of Labor Statistics reported Friday. Residential construction employment, specifically, rose by +15,400 in November to 2.9 million. In November, employment rose in residential specialty trade contractors by +14,100.

In the past seven months, +438,100 residential construction jobs were created, offsetting about 96% of the -456,800 residential construction jobs lost in March and April due to the pandemic. In February national not-seasonally-adjusted (NSA) construction employment was +214,000 higher than in February 2019 — signifying a robust job market.

“The only major sector to display immunity to the economic impacts of the coronavirus is the housing market, which has experienced a strong V-shaped recovery. Residential building jobs initially rebounded strongly from April’s low point and are continuing the slow increase to pre-pandemic levels. In the most recent report, jobs in residential building increased by nearly +0.2% compared with one month ago, and hovers just -0.7% below its high level in February. Since more hammers leads to more homes, the continued rise in residential construction employment was welcome news for a housing market in desperate need of more supply.”

Odeta Kushi, First American deputy chief economist.

Construction unemployment, meanwhile, was down by -179,000, or -2.4%, from the November 2019 total. Construction’s November jobless rate climbed to 7.3% from October’s 6.8% and also marked an increase from the year-earlier level of 4.4%.

In November, the unemployment rate for construction workers dropped to 8% on a seasonally adjusted basis, from 8.2% in October. After hitting 16% in April due to the impact of the COVID-19 pandemic, the unemployment rate for construction workers has been trending downward for the past seven months.

From February to September 2020, the national NSA construction unemployment rate went from 5.5% in February, to a peak of 16.6% in April, then to 7% in September, its lowest post-February rate, according to BLS numbers.

Residential construction employment now stands at 2.9 million in November, broken down as: 835,000 builders and 2.1 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was +35,133 a month. Over the last 12 months, home builders and remodellers added +26,000 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained +964,900 positions.

2020 Decline in Construction Employment, Compared to 2019

According to the Association of General Contractors, the pandemic initially triggered widespread project cancellations and interruptions that resulted in the loss of -1.1 million construction jobs in March and April.

The total value of US construction put in place in October rose +1.3% from September, and +3.7% from October 2019, to a seasonally adjusted annual rate of US$1.439 trillion, according to US Census Bureau data released Tuesday.

US residential construction spending in 3Q 2020 is the highest since the previous residential boom in 2005-2006. Spending is now already +2% higher than previous high in February. Housing completions in 2020 are up +10% and spending is expected to climb another +10% in 2021.

The increase of US residential construction spending was the fifth monthly gain in a row but still left spending -0.2% below the pre-pandemic peak of US$1.441 trillion reached in February.

US National Association of Home Builders analysis of Census Construction Spending data shows that total private residential construction spending stood at a seasonally adjusted annual rate (SAAR) of US$637 billion in August. Residential construction spending grew +3% in October and is up +9.6% year-to-date.
Spending on new single-family residential, specifically, continues to pull the US construction train, jumping +5.6% in October to a US$324 billion annual pace, supported by the increasing buyer traffic amid the record low mortgage rates, and is up +5% year-to-date.

Total private residential construction spending in the US was +14.5% higher than in October 2019.

Multifamily construction spending inched up +1.2% to a US$90.2 billion annual pace, reaching a record high in October.

Private residential improvements meanwhile, which include spending on remodelling, major replacements, and additions to owner-occupied housing units, stayed flat at a US$223.0 billion annual pace in November.

Here is a SNEAK PEAK at tomorrow’s print for North American construction framing softwood lumber and panel prices:

“Robust demand persisted, sending sawmill order files well toward the end of December.” — Madison’s Lumber Reporter

In September 2015, the “recent-low” of lumber prices, benchmark commodity Western Spruce-Pine-Fir KD 2x4s were selling for US$249 mfbm. The last “recent-high” was in June 2018, when this price was US$622 mfbm.

The wholesaler price of benchmark construction framing dimension softwood lumber item Western Spruce-Pine-Fir KD 2×4 #2&Btr, for the week ending Dec 4, 2020, increased at a time of year when usually prices are at annual lows, at US$652 mfbm (net FOB sawmill), an rise of +$32, or +5%, from last week, when it was US$620.

The full Madison’s Lumber Reporter North America softwood lumber price list is updated first thing Friday mornings Eastern time.

Stay up-to-date on these weekly lumber price updates, SUBSCRIBE NOW: https://madisonsreport.com/subscribe/

The Association of American Railroads (AAR) Wednesday reported US and Canadian rail traffic volumes for November 2020.
US railroads originated 900,194 carloads in November 2020, down -6%, or 55,198 carloads, from November 2019. US railroads also originated 1,136,695 containers and trailers in November 2020, up +11.5%, or 116,915 units, from the same month last year.

Total US carload traffic for the first 11 months of 2020 was 10,380,769 carloads, down -14%, or 1,663,263 carloads, from the same period last year; and 12,340,929 intermodal units, down -3%, or 400,753 containers and trailers, from last year.

Total combined US traffic for the first 48 weeks of 2020 was 22,721,698 carloads and intermodal units, a decrease of -8.3% compared to last year.

Regarding North American rail volume for the week ending November 28, 2020, Canadian railroads reported 81,713 carloads for the week, up +16%, and 74,960 intermodal units, up +9.4% compared with the same week in 2019.
For the first 48 weeks of 2020, Canadian railroads reported cumulative rail traffic volume of 6,899,077 carloads, containers and trailers, down -5%.

US housing starts were mostly flat in 2019. At this time last year softwood lumber sales improved markedly and prices started to rise from quite low levels. As the beginning of 2020 came on, the data on US home building was much improved over the previous year, sending demand for construction framing dimension softwood lumber higher. Sawmills and other lumber industry players were quite encouraged as to what the US home building market would do come spring.
Usually this time of year, in the weeks after US Thanksgiving, marks the annual slowdown in forestry and lumber manufacturing across Canada and the US.

This year we saw record-shattering lumber prices, then a serious correction after Labour Day, which is usual. Yet half-way through November 2020 prices started to rise again as US construction activity was literally non-stop.

This week, following US Thanksgiving 2020, is carrying on that recent trend as demand for wood has resurged. As with last week, once again prices are up due to ongoing hot lumber sales.
Other major news for this week is the publishing on the US Federal Register, finally, of reduced anti-dumping and countervailing duties on Canadian softwood lumber imports into the US. Details here: https://madisonsreport.com/2020/11/30/federal-register-publication-ar1-final-for-softwood-lumber-anti-dumping-portion/ . Both of these were announced in February, following the usual Administrative Review by the US Commerce Department.

“Robust sales activity persisted even as American Thanksgiving generated the typical late-week lull.” — Madison’s Lumber Reporter

Steady takeaway prevailed in the US Western S-P-F market last week. Buyers were frequently if sporadically at the table as they did their best to secure product from perpetually-undersupplied sawmills and distributors. Producers pushed their order files into early- or mid-December as availability became more limited by the day. While the general tone among buyers was one of barely-contained urgency, they continued to purchase small volumes fairly regularly in an effort to keep projects going where possible yet still remain lean to avoid carrying too much inventory through year-end.

Demand for Canadian Western S-P-F lumber continued to pour in from all over North America last week before being marginally dampened by US customers stepping away from the market on Thursday for American Thanksgiving. Momentum from the previous week’s strong sales carried into last week and precipitated four-week order files on nearly every item at sawmill. Producers in Canada were a little bit surprised by how busy they were during this normally-slow holiday week.

Continuing unexpected improvements of the previous week, for the week ending November 27, 2020 the price of benchmark softwood lumber commodity item Western S-P-F KD 2×4 #2&Btr increased more, up another +$24, or +4%, over the previous week to US$620 mfbm, said Madison’s Lumber Reporter. Last week’s price is -$40, or -6%, less than it was one month ago. Compared to one year ago, this price is up +$226, or +57%.

“It was another strange week for Eastern stocking wholesalers as demand came in fits and starts. Prices were all over the place, with vendors trying to guess how much inventory their competitors were carrying. Much of the tri-state area was in various states of lockdown, yet customers were apparently busy. At any rate; going into 2021 prices will be hundreds of dollars higher per thousand board feet than they were at the start of 2020.” — Madison’s Lumber Reporter

Compared to the 1-year rolling average price of US$542 mfbm, last week Western S-P-F KD 2×4 #2&Btr was selling for +$78, or +14% more, and was up +$164, or +36%, compared to the 2-year rolling average price of US$456 mfbm.

The above table is a comparison of recent highs, in June 2018, and current November 2020 benchmark dimension Softwood Lumber 2×4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept 2015:

The AR1 Results of Final Review have been published in today’s (11/30/2020) issue of the Federal Register confirming the effective date (today) the adjusted subsidy (AD) rates can be used going forward, until further notice, as the AD Cash Deposits.  However, as was the case with the DOC’s Preliminary instructions in 2017, the adjusted CVD rates are not yet effective.

Click to access 2020-26333-2.pdf