Five-Year Forecast Says Continued Volatility Ahead for N.A. Lumber Market

December 12th, 2013 by DWM Magazine

North American and global softwood lumber markets are forecast to continue expanding in 2014, but at a slower rate than was previously forecast, according to the report Wood Markets 2014—The Solid Wood Products Outlook: 2014 to 2018, released by International Wood Markets Group. The rapid expansion of North American lumber demand and an imbalanced supply chain that occurred in the second half of 2012 and first quarter of 2013 became more balanced (but still somewhat volatile) for the remainder of 2013, allowing supply to catch up and prices to moderate (but still at favorable levels), states the company in a release.

Wood Markets says that with the uncertainty surrounding the U.S. government shutdown in October, and the potential of a second shutdown in January 2014, the U.S. economic recovery continues to be more of a wildcard. A lumber market “super-cycle”, in which demand overwhelms supply and prices soar, is still expected; but is now projected for later in the forecast.

“Recent announcements of mountain pine beetle-related mill closures in the B.C. Interior and North American companies’ continued export expansions into Asia have shone a spotlight on the dynamics of the evolving business environment for wood producers,” says Russell Taylor, president. “Over the next few years, the timber supply base will continue to tighten across North America and will continue to do so until the end of the decade.”

While the demand for lumber and panels from the U.S. housing industry is steadily increasing, lumber and panel producers in 2013 increased output at a slightly higher rate than overall demand, causing prices to retreat for three months starting in the second quarter of 2013 and later at the end of the year. “Although the lumber and panel industries have room to expand output over the next two years,” says Taylor, “by about 2016, steadily rising demand (led by U.S. housing starts) is expected to absorb all of the available output, leading to supply chain shocks that should create substantial and sustained price increases, including record-level lumber prices.” There will continue to be price volatility as more limited and higher cost capacity is added and/or more expensive imports increase in 2016 and beyond.

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