The past two years have been fraught with change, both for society at large and for the manufactured forest products industry.
Sawmills and lumber producers across North America have had to make a series of significant adjustments to their business, both due to changes to society and due to market conditions.
Each of these circumstances continue to be in flux, so expectations are that unknowns, volatility, and more changes are yet to come. The hope is these are not as drastic and sudden as has been the case for the past two years.
Please see other recent updates on the Madison’s website for details, particularly the full-year 2021 Canada and US lumber production and sawmill capacity utilization rates: https://madisonsreport.com/2022/03/10/north-america-softwood-lumber-production-sawmill-capacity-utilization-wwpa-december-and-full-year-2021/
For North America lumber suppliers; the main customer is US housing construction, and the largest (most powerful) group is the large US home building companies. These are followed by smaller home building companies and the retailers. Individual contractors and others are left to negotiate their purchase prices based on levels set by the largest customers.
For North America lumber manufacturers, the biggest need is for feedstock; meaning logs. In Canada these are largely sourced off public lands through purchase access set by provincial forest ministries. In the US, most of the timber received by sawmills comes from private timberlands, with the requisite individual price points and purchase agreements between buyer and seller.
The interplay between timber harvest, log availability, log costs, and lumber production is as murky — and fascinating — as the interplay between lumber manufacturing and sales / prices, and construction activity.
For this data Madison’s uses HS Codes, which are standardized globally. So the comparison definition of “logs” and “lumber” in Canada and in the US are exactly matched.
Full-year 2021 data is out for the supply side of the lumber industry:
LOG EXPORTS CANADA: 2017 – 2021
Canada log exports to the world were on a steady decline from 2017 to 2020, hit bottom last year then increased by +74% in 2021 compared to the previous year, with that to China up +41% and to Japan up +217% This made Canada log export volumes to Japan last year rise close to levels sent to China and to match those to Japan in 2018 and 2019.
LOG EXPORTS USA: 2017 -2021
In the US, log exports dipped after 2018 and remained relatively steady for 2019 – 2020, then improved last year but not quite to 2017 and 2018 levels. Year-over-year, US log exports increased by +32% last year compared to 2020, with that to China increasing the most; by +54%.
LUMBER EXPORTS CANADA: 2016-2021
This is where it gets interesting: Canada lumber exports dropped in 2019 then recovered in 2020. During last year they rose beyond levels seen in the past five years. Canada lumber exports to the world in 2021 were C$16,392 million compared to C$10,035 million the previous year, an improvement of +63%. That to China dropped by -22% while to Japan rose by +106%.
Canada lumber exports to the US — by far the largest volume, of course — grew by +66% last year compared to 2020.
LUMBER EXPORTS USA: 2016 – 2021
Now the US, and it’s amazing that anyone domestically within the country would have trouble sourcing wood, because US lumber exports last year were higher than any of the previous five years. US lumber exports to the world in 2021 were US$1,223 million compared to US$788 million the previous year, an improvement of +55%.
That to China dropped by -10% and to Japan dropped by -20%, while that to Canada rose by +69%. Interesting! This makes Canada by far the largest importer of US lumber in 2021.
These data sets, and the attendant market insight, is provide in regular publications by Madison’s: the monthly “Madison’s BC Coast Logs prices report” (details and sample https://madisonsreport.com/bc-coastal-log-prices/ ) and the quarterly “Madison’s Forest Pulse” (details and sample https://madisonsreport.com/products/forest-pulse/ ). To subscribe to any of this fabulous information, simply fill out an order form here: https://madisonsreport.com/subscribe/ .
CANADA SOFTWOOD LUMBER PRODUCTION AND SALES: 2016 – 2021
This graph clearly demonstrates why lumber prices have been higher the past two years: basic supply-and-demand. The table above shows how lumber production dropped from 2017 – 2020 then recovered slightly last year, while lumber sales improved from 2019 to 2020 then shot way up in 2021. In our weekly lumber market commentary, available to subscribers of the weekly Madison’s Lumber Reporter (https://madisonsreport.com/products/madisons-reporter/ ), we provide details of sawmill order files. For a lot of last year, many sawmills across North America were booked for production as far as two months out. This means that wood ordered in December 2021 would not be manufactured until this year was along the way.
As long as this strong demand situation continues, there is no reason for manufacturers to lower prices.
USA LUMBER AND CONSTRUCTION MATERIALS TRADE: 2016 -2021
To pull this all together, there is no data for just lumber sales in the US domestically. The best that can be found is total building materials. However that is good, because — as Madison’s explains often — lumber is a leading indicator. So when lumber prices are and have been high, some people start talking about switching to other building materials.
This is not so simple, as it requires re-tooling and other equipment changes on the part of builders. As well, and ALWAYS, other building materials prices rise as well. And often by more than lumber prices rose.
Wholesale trade of all building materials in the US increased by +30% last year compared to 2020, from US$169,719 million to US$221,424 million in 2021.