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November 30, 2021 — The lumber market has changed forever. At time of writing the south of the province of British Columbia is under a state-of-emergency due to relentless stormwater accumulating over the past month. That after record rainfall of 200% more than normal for the months of September and October.

Transportation is completely stopped. Two weeks ago after the first atmospheric river (deluge) all four highways and both rail lines were wiped out. Since then 2 of those highways — technically roads — have been cleared, however these do not connect Vancouver to the rest of mainland Canada. Both rail lines have only just been repaired.
In the interim, the Port of Vancouver (the third largest by volume in North America) was closed. Currently the Port is re-opened, however the backlog of ships waiting to unload has grown from seven last week to 50 this week. As the torrential rain continues to come down, it is unknown how this will play out over the next week and month.
What we do know right now is that West Fraser announced downtime at it’s western operations. According to a company release, lumber shipments are down almost 30% and pulp shipments are down more than 80%. The company also stated that 4Q demand has been “more than expected”. Madison’s indicates that this means lumber sales will not slow down for the usual seasonal break, and will come back strong in January. As they started off this year.

Inching up slightly over the previous week, and closely matching the same week one year ago, for the week of November 19, 2021 the price of WSPF 2×4 #2&Btr KD (RL) was US$630 mfbm, said weekly industry lumber price guide Madison’s Lumber Reporter. This is up by +$10, or +2%, from the previous week when it was $620.

Eastern Canadian mills started the week with differing strategies in response to robust demand.

Catastrophic flooding in British Columbia created immense uncertainty in the solid wood commodities market.

— Madison’s Lumber Reporter

Western S-P-F demand was variable according to traders in the United States. Once-in-a-century flooding in the Pacific Northwest caused uncertainty to pervade the market as the week wore on. Some buyers busily scrambled to find wood amid the ensuing logistical chaos, while others cautiously sat on their inventories, hoping to eke out a quieter path to the new year. 

Demand for solid wood commodities jumped noticeably around midweek after severe flooding struck the Southwestern region of British Columbia, cutting off the port city of Vancouver from the rest of mainland Canada. Following the declaration of a state of emergency for the province, evacuation orders were issued for several towns. Many buyers turned on a dime, eschewing their watch-and-wait strategies for a more aggressive approach as they considered the logistical implications of this catastrophe. Producers in BC reeled, extending order files into early- or mid-December and informing their customers that indeterminate shipping delays were likely given the scenario.

Some Eastern Canadian sawmills took a defensive posture and boosted their asking prices in view of upcoming tariff increases, while others jumped into the fray with lower pricing to keep inventories in their yards lean. Secondary suppliers were busy again too, especially those who could offer quick shipment. Producers got more inquiry as the week wore on.”

— Madison’s Lumber Reporter

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

For the week of November 19, 2021 the price of WSPF 2×4 #2&Btr KD (RL) was up by +$21, or +3%, from one month ago when it was US$609 mfbm.
When compared to the same week last year, when it was $596, that week’s price is up by +$34, or +6%.

Compared to two years’ ago when it was $396, that week’s price is up by +$234, or +59%.

Softwood Lumber Duty increase filed today on the US Federal Register, dated tomorrow: Dec 2, 2021

The next Administrative Review of the Softwood Lumber Duty is expected to be released during the first few months of next year and would take effect at the end of next year / the beginning of 2023.

A drought over summer followed by massive amounts more rain than usual, and 3 atmospheric rivers — which in one or two days brought volumes of rain equal to an entire wet month — when the ground was already saturated have caused extensive damage to transportation infrastructure all through British Columbia.

More heavy rain started last night and is supposed to last until tomorrow night.
Impact on lumber is more on supply chain than the production; West Fraser announced downtime at it’s western operations. Lumber transport has been down almost -30% while pulp transport has been down more than -80%.

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The US Department of Commerce indicates that these Final Rates for the Softwood Lumber Duty were announced to “interested parties” Wednesday, November 24, 2021. 

UPDATE FROM OUR GOOD FRIENDS AT JONES & JONES CUSTOMS BROKERS:

None of the AR1 or AR2 entries will be liquidated until this case is resolved one way or the other.  These AR1 and AR2 rates are effective retroactively with respect to each Period of Review, with the AR2 rates going into effect upon publication in the Federal Register some time this week.  Those will be the rates going forward until AR3 in finalized.  AR3 will determine the retroactive rates with respect to 2020, and those rates going forward until AR4.

– Jones & Jones Customs Brokers and Trade Consultants

None of these retroactive duties will have to be paid until after liquidation, which could take another few years.

For historical purposes, the below are the duty rates as they were for the past year:

North America softwood lumber production volumes and sawmill capacity utilization rates released by Western Wood Products Association (www.wwpa.org) show:

For January to August 2021 softwood lumber production in the US improved by +3.3% from the first eight months of 2020. US lumber production volumes were 22,341 mmfbm.
Looking at the month of August against July 2021, and against August 2020, US softwood lumber production was almost flat.

Softwood lumber production in Canada rose further, as most of this year, for January to August 2021 it was up +8.2%, to 16,176 mmfbm, compared to the first eight months of last year.

US sawmill capacity utilization rates were again stable at 86%.
Canada sawmill capacity utilization in the first eight months of this year dropped slightly, and was still low compared to historical, at 81%.

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US total housing starts were flat in Oct compared to Sept. Total permits were up +4%, and were up +3.4% compared to Oct 2020.
Single-family starts were down a bit compared to Sept, but single-family permits were up +2.7%.

Year-to-date data shows both total and single-family starts up significantly in Jan to Oct 2021, at +20% and +17.3% respectively, compared to the first ten months of last year. This indicates yet more strong home construction activity to come.

Lumber prices have flatted out somewhat after falling from highs at the end of the summer. Currently softwood lumber prices match quite closely to where they were at this time last year.

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On the weekend of Nov 12 southern British Columbia, including Vancouver, was hit of epic torrential rains that can only bring to mind imaginative disaster movies.
There was 200% more rain in Sept & Oct than usual.
In those 2 days as much rain fell (200 mm) as does in a normal wet month.

This combination of the second atmospheric river in one month and an already soaked ground created a disaster situation. The water literally had nowhere to go, and low-lying areas flooded within 15 minutes. As well, all 4 highways were washed out, blocked by multiple mudslides, or downright destroyed. At time of posting 2 of those highways have been cleared but they are small and one just connects a few towns (it doesn’t lead east across Canada).

Both rail lines were also impacted, one of the rail companies says it can get trains running a week from now.

Vancouver is cut off from the rest of mainland Canada.

The Port of Vancouver, which is the 3rd largest by volume port in North America, is closed because the rail lines are closed. More rain in coming in a few days, another atmospheric river is expected. There may or may not be a big impact on the movement of lumber products into the US and across Canada, watch this video to find out more.

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Go to the website https://madisonsreport.com/subscribe/ to get a sample of the full 450 individual lumber and panel commodity prices for that week, as well as the market commentary explaining why the prices are changing.

As this unusual year slowly wound toward a close, there were some developments which will only add more confusion and uncertainty to the construction framing solid wood marketplace.
One, which is well-known, is the looming increase — to almost double what it has been since November 2020 — of the Softwood Lumber Duty on Canadian forest products entering the USA.

The other, still developing at time of writing, is the massive damage to southern British Columbia transportation routes from the tremendous downpour of the previous weekend. Currently the City of Vancouver is cut off from the rest of mainland Canada as both major highways are either blocked by washouts or completely destroyed. Both rail lines coming into Vancouver are also seriously damaged, however the CP Rail says it will be able to resume service today (Nov 23). While it is assured that the supply chain to Vancouver will take many months to repair, it is unknown what effect there will be on lumber deliveries.
Currently there is nothing stopping wood being transferred from Prince George through Kelowna then south to the US border and east to the rest of Canada. However, the situation is not as simple as that. At time of writing the Port of Vancouver announced it is closed to incoming goods due to the railways being blocked; this means — at a minimum — there will be no lumber or log exports coming out of Vancouver by cargo. The port at Prince Rupert is still open (however the volumes it can handle are quite a bit smaller than Vancouver).
More torrential rain is expected for southern British Columbia in the coming days.

Cresting just above levels for the same week last year, for the week ending November 12, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) remained flat compared to the previous week, at US$620 mfbm. That week’s price is up by +$11, or +2%, from one month ago when it was $609.

There were plenty of buyers looking to fill holes in their inventories – especially early in the week.

Demand experienced a palpable pullback as Remembrance Day, Veteran’s Day, and the NAWLA Trader’s Market all took precedence.”

— Madison’s Lumber Reporter

Traders reported tepid demand for Western S-P-F lumber and studs in the US. Buyers were extra-quiet late in the week as they attended the NAWLA Trader’s Market and observed Veteran’s Day. As for customers, even if they could find prompt wood it was delayed by at least a week due to significant shortages of truck drivers.

Canadian purveyors of Western S-P-F lumber related a decent start to the week before demand quieted down, as folks observed the late-week Remembrance Day national holiday. Large sawmills leaned on two- to three-week order files and kept firm pricing on everything but 2×12 dimension. Shipping challenges abounded no matter the supplier. Potential increases to duties on US-bound shipments of Canadian softwood lumber continued to be a frequent topic of discussion.

WSPF stud demand was OK for the time of year according to traders, but definitely decreasing by the week as winter approached. Sawmills were still busy enough that supply remained a jot behind demand, and resultant order files were in the range of two- to three-weeks out. Asking prices took a big step back on some trims.”

— 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 US$590 mfbm, for the week ending November 12, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) was up by +$30, or +5%.
Compared to two years’ ago when it was $396, that week’s price was up by +$224, or +57%.

As supply-chain disruptions increased costs, new U.S. home construction slowed down in October, driven by a drop in single-family projects.
For October 2021, total residential starts in the US remained essentially flat from the previous month, at 1.520 million units.

Continuing to improve as throughout this year, permits for future homebuilding in October were up by +4% compared to the previous month, when it was 1.586 million, to a rate of 1.650 million units. This is a +3.4% increase over October 2020, when it was 1.041 million units.

There were about 333,000 job openings in the construction industry as of the end of September, and according to the NAHB, availability of land for building is at multi-decade lows. As well, construction costs jumped a record +12.3% year-on-year in October, according to the latest producer price data.

October starts of single-family housing, the largest share of the market and construction method which uses the most wood, was 1.039 million annualized, an almost -4% drop compared to September, when it was 1.081 million. Single-family permits, however, rose by +2.7% above September, to 1.069 million units from 1.041 million units.

Over the first 10 months of 2021 there were permits issued for 1.439 million residential units, an increase of +20% from 1.199 million at the same point in 2020. Single-family permits, meanwhile, improved +17.3 percent year-over-year to 949,400 units.
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.

Benchmark Softwood Lumber Commodity Western Spruce-Pine-Fir Price: October 2021

Looking at lumber prices, cresting just above levels for the same week last year, for the week ending November 12, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) remained flat compared to the previous week, at US$620 mfbm. That week’s price is up by +$11, or +2%, from one month ago when it was $609.

The Census housing report also showed the number of homes under construction but not yet completed rose to 1.45 million, the highest since 1974. The number of houses that remain under construction exceeded the number of those completed for the fifth straight month and by the most on record as delays persist.

Starts have declined from the 1.725 million unit-pace scaled in March, which was more than a 14-1/2-year high. Still, home building remains underpinned by a severe shortage of previously owned homes on the market, which has resulted in record house price increases.

STAY AHEAD of US housing price data by getting access to softwood lumber prices. Released every Friday for that week, since 1952 Madison’s Lumber Prices is 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.

* Madison’s Lumber Prices, weekly, are a good forecast indicator of US home builder’s current lumber buying activity ——> DETAILS

US Housing 1-Unit Starts & Permits October and Benchmark Softwood Lumber Prices November: 2021

When compared to the same week last year, when it was US$590 mfbm, for the week ending November 12, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) was up by +$30, or +5%.
Compared to two years’ ago when it was $396, that week’s price was up by +$224, or +57%.

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Historical Perspective

To subscribe to Madison’s Lumber Reporter, simply fill out an order form here: https://madisonsreport.com/subscribe/

After consistent — if moderate — climbs in September and October, most benchmark construction framing dimension softwood lumber prices have levelled off to match where they were one year ago, said weekly forest industry price guide Madison’s Lumber Reporter.

In many ways the market dynamics are the same: constrained supply against ongoing strong demand, serious ongoing problems with transportation, difficulty finding workers, and unseasonal strong construction activity. In other ways the lumber market this year differs from 2020.
One thing is the same though: the week of November 5 was the North American Wholesale Lumbermen’s Association annual meeting, where sawmills and wholesalers from across Canada and the US meet. Much clarity will be decided between players during this important event; Madison’s will update readers on the results of that.
Staying flat for the first time in many weeks, for the week ending November 5, 2021, the price of Western S-P-F 2×4 #2&Btr KD (RL) was US$620 mfbm. This is down by -$10, or -2%, from the previous week when it was $630.

Large sawmills in British Columbia mostly held firm on pricing thanks to strong three- to four-week order files.

As November kicked off, demand for lumber and studs ebbed noticeably while flat pricing persisted in panels.”

— Madison’s Lumber Reporter

Suppliers of Western S-P-F lumber and studs in the US reported muted demand to start the month of November. Asking prices remained firm from most sawmills, but cracks were starting to show among smaller producers who had weaker order file positions. Average lead times were apparently two- to three-weeks out.

Demand for Western S-P-F commodities in Canada sagged as November kicked off, with a much more cautious tone from buyers compared to October. Availability appeared to be improving, making customers tentative and more apt to draw from secondary suppliers who could offer quicker shipment. For their part, smaller producers with less solid bookings were open to lower numbers to keep fibre flowing from their yards.

The week began with unhurried demand for Eastern S-P-F as buyers restrained themselves and pricing appeared vulnerable. Sawmills were aggressive sellers and voiced their eagerness to ship more. A dearth of drivers and other personnel caused severe transportation bottlenecks. Around midweek sales activity did perk back up in response to lower prices.”

— Madison’s Lumber Reporter

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

For the week ending November 5, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) is up by +$11, or +2%, from one month ago when it was US$609 mfbm.

When compared to the same week last year, when it was $580, this week’s price is up by +$40, or +7%. Compared to two years’ ago when it was $396, this week’s price is up by +$224, or +57%.