Prepared for Liam | Delivered August 8, 2019
North American Lumber Market
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To understand the supply and demand dynamics of the North American lumber market for 2019 for the purposes of projecting where lumber prices will be over the next 6 to 18 months.
Preliminary research indicates that information regarding supply and demand dynamics for lumber in North America is readily available. Early findings are as follows.
According to the Wood Markets Monthly International Report, despite the
drop in prices at the end of 2018, the "supply and demand fundamentals of the lumber market
The U.S. is expected to increase lumber production by
in 2019 and, due to strong gains in the remodeling and repair markets, the U.S. lumber market will reach about
52 billion board feet
(BBF) by the end of 2019.
The Wood Markets Monthly International Report also indicated the demand on North American lumber mills to "
grow steadily in 2019
This aggressive supply approach is expected to keep prices "
strong by historical standards
Despite the optimistic projections, the overall North American lumber market is expected to
remain volatile through 2020
due to "
on Canadian lumber shipped to the U.S., the reluctance of dealers and mills to oversupply the market, logging and transportation infrastructure attrition and transportation disruptions, capacity that exceeds consumption, and offshore trade."
On the supply side, for 2020, industry experts forecast a similar growth trend to 2019 with growth in the U.S.
mills there ramp up
However, Canada's lumber production is expected to contract by approximately
in 2020, and the losses could be even higher if "there are
in the B.C. Interior."
Canada is expected to lose
three to five
sawmills (or equivalent volume) by 2025.
While production continues to rebound in Eastern Canada, Ontario and Quebec are expected to "face longer-term
timber supply issues
as a result of legislated reductions in annual allowable cuts on government lands."
and newsprint mills have
closed in the area
, resulting in lower chip prices in these regions.
Eastern Canada is expected to see a lumber output of
in 2018 and those levels should rise slightly in 2019 and 2020 due to
"favorable U.S. market prices and
strong Canadian demand.
On the demand side, the U.S. residential housing construction market is
and still remains at near recession levels.
Multi-family housing in the U.S. is performing better than single-family housing, but it is still "slightly below its
That being said, given the
of existing housing and a limited supply of new housing in the U.S., there is still room for demand to grow.
Demand for U.S. domestic softwood lumber is expected to increase well into 2020 "as the U.S. economic recovery (and particularly housing)
By 2020, lumber production in the U.S. West is expected to reach
, while the South is expected to top
The South continues to enjoy "some of the
lowest delivered log prices
, the highest lumber prices, and the best sawmill margins in North America."
Canadian Forest Industries expects U.S. softwood consumption to reach
in 2019 and
Canadian demand for lumber has
increased every quarter
since 2015 and is expected to continue through 2020, although at a slower pace.
Forest Industries predicts a demand growth of
in 2019 and
Canadian Forest Industries projects the demand/capacity ratio for North America to hit
by 2020, which is positive news for lumber prices.
Prices in 2019 are expected to be
than 2018, but on par with 2017 levels and by 2020, prices will resume their upward trend.