Great Canadian Rail Fiasco 2017 – July ’18

Monumentally-frustrated North American forest operators were astonished last week to receive word from a major Canadian railroad that the egregious logistics and supply chain problems of last winter will not be unwound until July. Those Canadian sawmill facilities which are at the mercy of one or the other of the two Canadian rail operators have no recourse but to suffer for the next several months, even as US demand for softwood lumber is showing itself to be on an absolute rampage so far in 2018.

Otherwise this week, ravenous customer demand for wood — especially out of the US — increased only further.

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

SOURCE: Madison’s Lumber Reporter

Current Softwood Lumber Prices Compared to Recent and Historical Highs

Astonished buyers and sellers alike just booked orders for more wood, at higher and higher prices, while producers extended already robust order files close to the end of May.

SOURCE: Madison’s Lumber Reporter

Reluctant customers who had held off purchasing in recent weeks as prices seemed impossibly high were filled with regret this week. It is legitimate continued strong growth of US home building, renovating, remodelling, etc activity that is driving these unexpected high prices.
While the ongoing transportation issues especially on the railways was part of the sustained high prices at the beginning of April, the actual lack of wood available is what is really keeping prices up.
For softwood lumber manufacturers in the north and west, the cold, soppy, wet winter has turned instantly to summer. Forest operators are recognizing there will be a small window between the spring snow-melt road ban and the summer wildfire logging ban, and are contorting their plans now in order to be able to get as many logs into their yards as they can. Madison’s is following this story closely and will soon have an update for upcoming 2018 US home building season.