More Record-Level Lumber Prices Expected in 2018 from U.S. Import Duties
New WOOD MARKETS/FEA Canada Five-Year Forecast calls for further price volatility in North America, while global lumber supply tightens and exports grow
In WOOD MARKETS’ new five-year softwood lumber forecast, the continuation of U.S. duties on Canadian lumber exports to the U.S. are expected to cause more short-term market and price volatility The preliminary duties launched earlier in 2017 rocked the U.S. market and more of the same is expected in 2018. As we predicted one year ago, the headline for last year’s WOOD MARKETS 2017 news release was bang on: “U.S. Import Duties on Canadian Lumber to Cause Market Chaos and Soaring Prices”. Indeed, they did. The WOOD MARKETS 2018 Outlook Report predicts more chaos and the chance of further record-breaking prices.
These details and further analysis of commodity lumber and structural panels was released earlier this week in the report, WOOD MARKETS 2018 – The Solid Wood Products Outlook: 2018 to 2022 by WOOD MARKETS/FEA Canada, Vancouver BC.
The recent announcement of final countervailing (CVD) and anti-dumping (ADD) duties on Canadian lumber exports to the U.S. will cause lumber prices to remain near record levels in 2018 and even higher at various points over the next five years. This is because Canadian lumber production Canadian exports to the U.S. are forecast to ease in 2018.
“Simply put,” indicated Russ Taylor, Managing Director, WOOD MARKETS/FEA Canada, “by restricting incremental Canadian lumber exports via import duties, there may not appear to be enough lumber supplies to adequately balance with projected U.S. demand. There will need to major increases in U.S. lumber capacity (which is starting to build), more offshore imports, and/or record-level prices to stimulate more supply. The question that we have seen coming for a number of years is: Where will the U.S. get all of the lumber it needs, and at what price?”
The impact of U.S. import duties on Canadian lumber production and exports has been developed from building a cost curve of Canadian producing regions from WOOD MARKETS’ Global Timber/Sawmill/Lumber Cost Benchmarking Report. From this, WOOD MARKETS has overlaid a cross-Canada timber supply availability map with delivered log and sawmill costs to determine which producing regions (and mills) are most impacted by 20.23% (“all-others”) import duties.
While the timing of supply and demand forces is always unpredictable, we forecast that the first real “supply gap” could occur as early as 2019, This is when there may not be enough incremental lumber supplies that are readily available to meet overall projected U.S. demand without seeing an increase (versus the forecast decrease) in Canadian lumber imports. “What this all could mean,” commented Russ Taylor, “is that ongoing price volatility can be expected again in 2018 and even more so in 2019 and/or 2020 when further record-level lumber prices are forecast in the U.S. market.”
Some of the regional trends are summarized here:
Given the positive outlook for the U.S. housing market over the next five years coupled with the imposition of final U.S. import duties starting imminently, even higher U.S. lumber prices than were achieved in 2017 are forecast – at least at various times.
Full details of the five-year outlook for the U.S. and Canada’s lumber and panels consumption, imports, exports, production and price trends are available in WOOD MARKETS 2018 – The Solid Wood Products Outlook – 2018 to 2022.