Russ Taylor, Präsident von Russ Taylor Global, Vancouver/CA; www.russtaylorglobal.com
North American lumber consumption was lower by 1.9% in 2023 vs. 2022. It was another tough year as housing starts moved lower due to higher interest rates, repair and remodelling remained soft, and furniture production slumped. This resulted in lower North America lumber production in 2023, as the USA was lower by 1.2% and Canada dropped by 6.0%, led by reductions in BC totalling 12.6% (from ongoing timber supply reductions and many new restrictive government forest policies).
Some of the key takeaways from speaker Dustin Jalbert of RISI focused on US market conditions for the rest of 2024. The slow reductions expected in interest rates will ease housing affordability challenges, there are positive demographics, and solid (but easing) fundamentals in the repair and remodelling sector.
For 2024, RISI estimates that demand will reaccelerate during the year and most wood products categories are primed for a strong recovery. US housing starts are forecast to increase 0.6% in 2024 to 1.43 million units, and a big gain of 7.5% in 2025 to 1.54 million units. Repair and remodeling is forecast to increase by 0.3% in 2024 (in total dollars) and 1.6% in 2025. North American softwood lumber consumption is forecast to grow by over 7% (4 billion bf; 2.5 million m3) from 2023 to 2025, reaching 57.9 billion BF. However, growth in 2024 will be marginal.
It is expected that the strong demand forecast for 2025 will increase North American sawmill operating rates to almost 83% from 78% in 2023. This should increase North American lumber production by 1.5 billion bf (950,000 m3) over the next two years. However, lumber demand is forecast to increase by 4 billion bf, so this is where European and other offshore lumber imports will fit in (aside from reduced North American exports). RISI expects total offshore imports to decrease from 4.65 billion bf in 2023 to 4.4 billion bf in 2024 (-5%) and increasing to 4.75 billion bf in 2025 (+8%).
RISI forecasts an average softwood lumber price increase of 15% from April 1, 2024, to December 31, 2025.
This RISI forecast is different from the feedback heard from delegates at the MWC. The industry delegates suggest a less bullish price increase for 2024, where the consensus thought that lumber prices will remain subdued for the next three to perhaps six months – and some thought even longer. The consensus was that this will reduce European imports to the US by 15% to 25% in 2024 as compared to 2023 levels, but this will mainly depend on what happens to lumber prices (Europeans volunteered that they need over US$600/Mbf US East Coast (€ 365/m3) to sell to the US market, depending on the country of origin).
Both consensus views on lumber prices and European imports are more pessimistic than RISI’s outlook. My experience is that those in trade have better short-term outlooks than economists, but also that the consensus view can often be wrong! So, this means that there will be plenty of uncertainty ahead for the rest of 2024 in the US market, but also some potential price volatility!
North American lumber prices in the first 16 weeks of 2024 are showing an extremely wide range that is quite unprecedented. The 16-week average price in 2024 for the benchmark W-SPF 2x4 #2&Better, random lengths (FOB BC mill) was USD 443/thousand board feet (MBF), or € 269/m3. (The peak price in 2023 for W-SPF was USD 450/Mbf). During this same period, SYP(West) 2x4 prices averaged only USD 374/MBF and in mid-April were at multi-year lows of only USD 290/MBF (€ 176/m3). Normally, SYP trades at a USD 50-60 premium to W-SPF on a FOB mill basis, but in mid-April it was trading at a massive ~USD 120/Mbf discount (W-SPF at USD 410 and SYP-W at USD 290).
On the high end, US Inland Fir-Larch 2x4 KD R/L has averaged a whopping USD 541/MBF (€ 328/m3), and US Inland Hemlock-Fir has averaged USD 535 (€ 324/m3) – both are huge FOB mill premiums to W-SPF and SYP. This imbalance and widespread in lumber prices mean that something will have to give. As SYP lumber prices are now below the cash costs of many SYP sawmills, these prices will need to rise. By how much and when are the major unknowns. SPF prices are moving lower, but they are also near break-even levels. How high SYP lumber prices will rise will be a key variable to watch – they need to at least get closer to SPF prices, but markets can work in unpredictable ways!
Russ Taylor, President
RUSS TAYLOR GLOBAL
Website: www.russtaylorglobal.com - see our two new activities for 2024: China Outlook to 2035
Report, and the Global Wood Summit in October.
Email: russtaylor@russtaylorglobal.com
