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The adoption of the European Union Timber Regulation (EUTR) in December 2010 changed the landscape of timber imports for the European Union, Australia, and the United States.
No longer did these regions import illegally harvested exotic timber from countries on the African continent, and Indonesia, Myanmar, Sarawak, etc.

As the EUTR regulations came into use, those importing nations were required to receive chain-of-custody documentation which proved timber had been harvested legally. Otherwise entry was not permitted. Other nations, however, paid no mind to the EUTR regulations, which did not deter countries like China and India from continuing to import unregulated timber.

The import rules succeeded regardless, because — over time — the illegal supply of exotic timber dropped significantly.

Unlike China, India is a democracy with an open market capitalist system. It is also a culture accustomed to using wood for building, again unlike China. Traditionally in India homes were not built out of wood, but rather were finished with wood. Siding, wainscotting, doors and doorframes, windows, and more have historically been made out of exotic hardwood species. India banned all domestic timber harvesting around 2000, so since then has relied exclusively on imports.

The dropping export volumes from countries with a previously-active illegal timber trade has provided an opportunity for other nations, which engage in sustainable harvesting, to sell manufactured wood products into India.

For a historical perspective on this huge market, please go here: https://madisonsreport.com/2017/02/02/india-softwood-lumber-use-2016/

As for the current reality and projection for the future, a recent International Monetary Fund (IMF) report details good growth prospects for India’s economy. The IMF projected a +12.5% growth rate for India in 2021, the only major economy to have a positive growth rate in 2019. The annual World Economic Outlook, prepared for the spring meeting with the World Bank, says the Indian economy is expected to grow by +6.9% in 2022.
In 2020, India’s economy contracted by -8% according to the IMF. Meanwhile, India’s exports and imports surged more than +50% from a year earlier in March 2021, but this was from a very low base. Data from the Ministry of Commerce shows that exports grew +58% to a record US$34 billion and imports rose +53% to US$48 billion in a month when global trade was disrupted by the week-long closure of the Suez Canal.
(See: https://indianexpress.com/article/business/economy/imf- projects-indias-growth-rate-to-jump-to-impressive-12-5-per-cent- in-2021/)

Elsewhere, the US Department of Agriculture (USDA) Global Agriculture Information Network (GAIN) report of 2019 found that India’s annual import of logs, lumber, and wood products increased from US$1.3 billion to US$2 billion in the past decade. India remains a long-term prospective market for US forest products, specifically lumber and logs. The poor/inadequate level of processing by domestic sawmills has prompted the Indian trade to import higher volumes of lumber versus logs in recent years.
The share of US lumber in total exports to India has risen from 3% in 2007 to 42% in 2018. Imports of forest products from the United States has been witnessing an annualized growth rate of approximately 14% since 2007. Imports of lumber were dominated by shipments of softwoods, the 2019 GAIN report found.

Why has Canadian export share not increased during this time as well?

Value of wood and wood product imported into India from financial year 2011 to 2019, with an estimate for 2020

Meanwhile, India’s lumber imports from Canada have been dropping abysmally from 2012 through September 2020! What is the reason for this? It certainly is not from lack of demand, nor due to slowing growth in India.

The July 2021 issue of Exports released by BC Stats on September 2 found that notable declines of total B.C. origin exports were reported for South Korea (-17%), India (-41%) and Mexico (-15%).
(see: https://www2.gov.bc.ca/assets/gov/data/statistics/business-industry-trade/trade/exp_monthly_exports_highlights.pdf)

According to a recent study conducted by the World Bank, the organized furniture market across India is expected to grow at a rate of about +20% annually over the next few years. The value of imports by that industry was more than 396 billion Indian rupees (US$5.38 billion) at the end of fiscal year 2020.

Indeed, due to a surge in building projects, India’s plywood consumption is also projected to grow significantly. The Food and Agricultural Organization (FAO) of the United Nations ranked India third in the world for global imports of veneer sheets in 2019, accounting for a full 8% of the world total.

According to a report ‘Indian Plywood Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2021-2026‘ from the IMARC Group a market research company, the Indian plywood market was worth 222.5 billion rupees (US$3.03 billion) in 2020 and could expand over +4% annually up to 2026. The Indian plywood market is primarily driven by construction activity and the home furnishing sector. Growth in consumer disposable income levels along with the rising expenditure on home décor will support demand for wood based panels.
(See: https://www.imarcgroup.com/indian-plywood- market/requestsample)

While there are well-known challenges to exporting Canadian wood products into India, this is also true of the United States. Yet that country has significantly improved sales volumes from 2018 to present while that from Canada has plunged to almost zero.

One local British Columbia operator who has made significant improvements to sales into India is Sundher Group.
Having worked hard at this for a couple of decades, Surrey, BC’s, Tom Sundher told Madison’s, “We recognize that markets in North America for lumber products are very strong, and we are benefitting from that. But at the same time we know that our long term success must also include a range of international customers. While it would be easy to sell all our products to the US today, we know that the reality tomorrow might be very different, so we need a healthy balance.”

After a slower start, the business of exporting lumber to India has really started to develop over the last 5 years.

Since the BC Government’s forest sector market development agency Forestry Innovation Investment (BCFii) and the Canada Wood Group (CWC) industry association started working together in India, we have seen continued interest and demand for our products there. We are one of a number of BC companies collaborating together with these agencies to grow the Indian market for BC forest products.

Dave Sundher, VP of Sales and Marketing, sundher group

With on-the-ground support from BCFii, Sundher Group supplied the Western Hemlock used as interior panelling for the new auditorium built at Mahatma Gandhi Memorial Medical College.

“To grow our business in markets like India, it is important to show potential customers what we have to offer and how it can be used”, explained Dave Sundher. “And projects that showcase BC wood species like the Gandhi Auditorium, the Taj Rishikesh (a resort in northern India), or the Peninsula in Mumbai (a high end residential project), are invaluable to companies like ours”.

Given India’s substantial, and growing, demand for high quality wood products, it seems worth the effort for other Canadian operators to demonstrate uses and applications. After all, diversification of customer base can only be good for any business.

September 3, 2021 — Customers who had been waiting on the sidelines since spring, to see how far down lumber prices would go, returned to the scene and booked significant purchases in the week before the Labour Day long weekend.
Sawmills gleefully extended order files as secondary suppliers — who had been running on lean inventories themselves — did not necessarily have specific items on hand to sell on the spot. Construction projects which had been put on hold roared back to life as builders rushed to complete them before winter starts.

Continuing gains from the previous week, for the week of September 3, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) was US$430 mfbm. This is up by +$10, or +2%, from the previous week when it was $420. That week’s price was down by -$17, or -4%, from one month ago when it was $447.

The unspoken consensus that a price bottom had been reached was apparent from sawmills all the way to purchasers.

Most players agreed prices had generally hit bottom, though the real proof will come post-Labour Day.

— Madison’s Lumber Reporter

There was more energy to Western S-P-F sales according to veteran traders in the US. One large sawmill apparently had turned to offshore markets, selling virtually their entire September WSPF inventory. Sawmill order files ranging between one and three weeks were reported; however were producer- and item-dependent. 
Canadian Western S-P-F sales were marked by a tone of cautious expectation, with all eyes on the imminent Labour Day long weekend and the pace-setting effect it usually has on solid wood commodities. Buyers continued to focus on short-term volumes to keep their inventories from total depletion as they tried to predict where price levels will end.

Monday started off with a bang again for Canadian Eastern S-P-F sales as volumes improved, prices continued to firm up, and most counter-offers were rejected by sawmills. With each passing day more buyers decided to jump into the fray as they sensed the market changing direction, thus attempted to get in at or near the price bottom.

— Madison’s Lumber Reporter

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages

When compared to the same week last year, of $966, the price of Western S-P-F 2×4 for the week of September 3 was down by -$536, or -55%.
Compared to two years’ ago when it was $370, that week’s price was up by +$60, or +16%.

August 27, 2021 — Many customers had been waiting on the sidelines over this summer before making their lumber purchases, to see when prices would hit bottom. As it became apparent over the past two weeks that prices were on their way back up, the bulk of the market stepped in to commit to purchases.

Sales volumes were good as sawmills were able to tick prices up slightly, but — more importantly — stretched out their order files as had been their goal since spring. Some buyers tried to negotiate counter-offers, however sellers rejected these as their phones were consistently ringing with new orders. Those who waited either had to pay higher prices or found that suppliers had sold out of inventory-on-hand.
Having clearly hit bottom and rising back up from the most recent levels, for the week of August 27, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) was US$420 mfbm, which is up by +$30, or +8%, from the previous week when it was $390.

Collectively so many customers were making purchases that prices started ticking back up. The price for the week of August 27 is down by -$204, or -33%, from one month ago when it was $624.

Plywood sales continued to flounder while demand for OSB and most lumber categories seemed to be turning a corner.”

— Madison’s Lumber Reporter

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages

There was a note of cautious optimism in the US Western S-P-F market as players expected demand to increase with the return of vacationing buyers and the coming of autumn. Burgeoning demand from the retail sector was reported by multiple sources as many had worked through the majority of their high-priced inventory and were looking to restock with larger-volume deals heading into September. 
Western S-P-F producers in Canada were confident that the market was returning to some semblance of normalcy. Prices were still considerably variable between sawmills and at the secondary level, but more solidified levels seemed to be in the offing.

Suppliers of Western S-P-F studs described another lukewarm week as buyers remained cautious and circumspect when it came to purchasing more volume. Prices continued to vary from mill to mill but overall numbers were soft, with 2×4-9’s being the only item firm in price and tight in supply.”

— Madison’s Lumber Reporter

When compared to the same week last year, at $940, the price of Western S-P-F 2×4 for the week of August 27 was down by -$520, or -55%. Compared to two years’ ago when it was $370, that week’s price was up by +$50, or +14%.

Is the softwood lumber supply-demand balance reaching equilibrium? We will only know in the coming weeks … check back often:

For July 2021, total residential starts in the US improved by +2.5% from the same month one year ago, and dropped by -7% from June 2021. Indicating strong construction activity still to come for this year, permits for future homebuilding in July were up by +6% compared to July 2020 and were up by +2.6% from June 2021.

July starts of single-family housing, the largest share of the market and construction method which uses the most wood, increased by +12% compared to July 2020. Single-family permits had a +1.7% improvement compared to June 2021.

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The U.S. Census Bureau and the US Department of Housing and Urban Development released July 26 new home sales and house price data. New home sales comprise 10% of real estate activity and are considered a leading housing market indicator as they are recorded when contracts are signed.

Benchmark Softwood Lumber Prices August and US NEW Home Sales July: 2021

After dropping somewhat in June, sales of new US single-family homes improved in July as the median price of newly built houses rose compared to previous months and compared to one year ago. There were 708,000 new homes on the market in July, which is up +1% from 676,000 in June. At the sales pace in July, it would take a usual 6.2 months to clear the supply of houses on the market, similar to the 6.3 months seen in June.
The median sales price rose to US$390,00, from US$361,800 in June. House supply has lagged behind demand, as builders are constrained by high lumber prices as well as shortages of other building materials, household appliances, land, and labour. The ratio of homes sold in July either still under construction or yet to be built was 75%, up from an incredible 77% in June.

Looking at lumber prices, continuing to correct downward somewhat, in the week ending August 20, 2021, the price of benchmark softwood lumber commodity Western S-P-F 2×4 #2&Btr KD (RL) was US$390 mfbm. This is down by -$49, or -11%, from the previous week when it was $439. That week’s price is down by -$234, or -38%, from one month ago when it was $624.

When compared to the same week last year, when it was $850, price for the week of August 20 is down by -$460, or -54%. Compared to two years’ ago when it was $346, this week’s price is up by +$44, or +13%.

STAY AHEAD of US home sales data by getting access to softwood lumber prices. Released every Friday for that week, since 1952 Madison’s Lumber Prices are used by the forest products industry as a price guide for North American construction framing dimension softwood lumber. These are, of course, the inputs into US and Canadian home building materials.

US Median New House Prices July and Benchmark Softwood Lumber Prices August: 2021

Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales.
Don’t miss out, get lumber price data updates directly to your desktop every Friday morning: https://madisonsreport.com/subscribe.

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages

Builder backlogs of projects awaiting construction remain elevated and indicate residential building will stay firm in coming months and contribute to economic growth.

Certain Softwood Lumber Products From Canada: Notice of Court Decision Not in Harmony With the Final Results of Countervailing Duty Expedited Review; Notice of Rescission of Final Results of Expedited Review; Notice of Amended Cash Deposit Rates

As we know, the US Administrative Review of softwood lumber duties on imports from Canada this past spring reversed the reductions to the duty rate which were made at last year’s Administrative Review (and took effect in November).
This November the US softwood lumber duty on Canadian imports will go back up to approximately 20%.

In advance of that, an announcement was just made on the Federal Register:

https://www.federalregister.gov/documents/2021/08/30/2021-18596/certain-softwood-lumber-products-from-canada-notice-of-court-decision-not-in-harmony-with-the-final

For now the latest Canadian softwood lumber duty increases seem to be affecting sawmills in Québec. Check back often with Madison’s Lumber Reporter to know when the next round of increases will be announced.

August 20, 2021 — While there were some construction framing dimension softwood lumber prices that continued to drop for the week ending August 20, several prices were flat while others actually popped up.
Many in the industry suggest a combination of correction with the supply-demand balance, and eager customers returning to buy after holding off since spring when prices were so high, as reasons for this new development.

Normally at this time of year construction activity is slowing down, thus lumber sales — and prices — are weakening. However the latest data out of US new home building and new home sales and prices shows a powerful underpinning of strong appetite, which might bring high volumes of lumber sales to come before this year is out.
Dropping for barely two days before recovering back up — which will be seen in the following week’s data — for the week of August 20, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) was US$390 mfbm. This is down by -$49, or -11%, from the previous week when it was $439.

Field inventories were far from empty, and some buyers still had high-priced lumber headed their way which had been delayed during the market’s precipitous tumble.

The summer doldrums persisted in lumber and studs sales as demand for panels continued to slump.”

— Madison’s Lumber Reporter

Demand for Western S-P-F in the US was hit and miss. Sawmills consequently chased customers for deals, more than the other way around. Order files were no further out than one week, with plenty of prompt availability showing up in producers’ yards.

Trading ranges continued to fluctuate, but the tone of business was slightly less chaotic according to Canadian suppliers of Western S-P-F commodities. While sawmills searched for the magic price level that would bring consistent sales, obstinate buyers leaned on counter offers and were quite content to sit on their decent inventories if they didn’t like the numbers. 

Steady demand for Eastern S-P-F persisted, and demand improved as the week wore on. Sales volumes trailed off Friday as has become the trend in recent weeks. Buyers and sawmills continued to haggle, with the former taking an aggressive approach to quoting while the latter threw out counter offers until the two found a level amenable to both.”

— Madison’s Lumber Reporter

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages

When compared to the same week last year, at $850, the price of Western S-P-F 2×4 for the week of August 20 was down by -$460, or -54%.
Compared to two years’ ago when it was $346, that week’s price was up by +$44, or +13%.

August 13, 2021 — The big softwood lumber market correction of summer 2021 continued, however the drops in some benchmark lumber prices slowed while others corrected upward yet more.

Underpinning overall market conditions was ongoing quite strong US construction activity and very severe wildfires in the important timber supply baskets of British Columbia and the US Pacific Northwest. Meanwhile, powerful storms hammering the US south and east were ongoing. The aftermath of these will require solid wood building materials for the necessary rebuilding.
For their part, lumber suppliers were more interested in extending order files and booking sales for coming weeks than in getting the highest price possible for their goods.
Falling significantly after a minor plateau, in the week of August 13, 2021, the price of Western S-P-F 2×4 #2&Btr KD (RL) was US$439 mfbm. This is down by -$100, or -19%, from the previous week when it was $539.

Overall demand was decidedly down as many buyers were absent while they took time away from the frustrating lumber game to be with family and friends.

“Demand was anaemic and prices continued to correct, while many players were on vacation.”

— Madison’s Lumber Reporter

Suppliers of Western S-P-F lumber and studs in the United States continued to struggle with every deal as buyers were cagey in view of wobbly pricing. Most customers were too busy working through their own high-priced inventories to bother with much new volume. Prices remained variable between producers, but were decidedly down.
Prices of Western S-P-F kept coming off in bunches as Canadian sawmills adjusted and re-adjusted to meet vacillating customers’ terms. Demand was quieter even than the previous week since so many players decided to abscond to get their summer family vacations in before work and school get into full swing in September. 

“The Southern Yellow Pine market was again a mixed bag; one source reported robust inquiry while another lamented weak demand. Sawmills maintained one- to two-week order files and asking prices were a smattering of flat, slightly up, or slightly down.”

— Madison’s Lumber Reporter

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages

When compared to the same week last year, when it was $746, the price of Western S-P-F 2×4 for the week of August 13 was down by -$307, or -41%.
Compared to two years’ ago when it was $342, that week’s price was up by +$97, or +28%.

“What Goes Down Comes Back Up”

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

The full Madison’s Lumber Reporter North America softwood lumber price list of 450 individual lumber and panel commodity items is updated overnight Thursdays.

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