US ‘bull market’ for lumber predicted to continue

ONE OF THE REASONS BEHIND THE high international prices for timber is the buoyant situation in the US and a leading forestry industry commentator says the ‘bull market’ run is set to continue.

Vancouver-based Russ Taylor says in his latest Wood Markets update that the US market has been red-hot in 2017, based on a combination of supply, demand, trade and climate factors that have come together to create a ‘one-of-a-kind’ year. And he believes it isn’t over yet.

He writes: “We have been predicting a timber supply crunch in Canada since 2007, when we first analysed the impact of a diminishing timber base in the BC Interior (mountain pine beetle-related) and Eastern Canada (mainly in Quebec, due to government timber policies).

“The effects of reduced timber supplies and, by default, lower lumber production, were expected to show up ‘in the middle of the next decade’, with the timing subject to US lumber demand, key export-market dynamics, and supply from major offshore exporters.

“This scenario began to show up in 2016 as rising global demand propelled prices higher in most markets, with many all-time US price records being achieved (last) year.”

Offshore imports have seen a substantial jump, says Mr Taylor, with rises up 130 million bf in the first seven months of last year (+32.8%) driven by high lumber prices and reduced Canadian supplies.

Throw in massive forest fires in BC and the US Pacific Northwest, along with hurricanes in the US South, and we have all the components of a ‘perfect storm’, he adds.

With uncertainty around Canadian import duties that started in early January 2018, we are already setting up for another volatile year in North America, Mr Taylor adds, which could see prices rise higher in the US.

Other outside trends will also add to ongoing supply and demand pressures in both log and lumber trading, according to Mr Russell.

The global log supply is increasingly constrained, changing competitive positions of some regions/countries, he says, adding that China is facing a growing timber-supply deficit. He also predicts more growth in India, which he likens to the Chinese market of five or six years ago.

European wood suppliers, along with Russia, will step into the gaps, but Mr Taylor says sawn wood inventories are currently low in Europe for the first time in many years.

NZL