Global softwood lumber prices continue to climb

Global softwood lumber prices continued undisrupted two-year climb in the 1Q/18 with faster growth seen in North America than in the Nordic countries, Russia and China, according to Wood Resource Quarterly.

Lumber markets – North America

After softwood lumber consumption in the US peaked at a ten-year high in 2017, demand dropped in early 2018. Despite a drop in first quarter consumption, lumber production on the US west coast enjoyed a surge of 9% y-o-y when compared to the 1Q/17 due to healthy demand from China. There was an increase of close to 50 per cent in shipments to China during the 1Q/2018, as compared to the 1Q/17.

Lumber production in Canada’s eastern provinces increased slightly in early 2018, while sawmills in British Columbia cut down production by an estimated three per cent in the 1Q/18 as compared to the 1Q/17. Production levels fell partly because of less demand from the US during winter, and also because of decrease in availability of logs due to poor weather conditions. Bad weather also impacted lumber shipments by rail, resulting in significant slowdown in exports from BC.

Lumber markets – Northern Europe

The sawmilling industry in the Nordic countries has seen an improvement in their markets both in demand and in pricing in the past year. Export volumes may have declined somewhat early this year as compared the same period in 2017, but prices increased, reaching the third highest level seen in the past decade (in local currencies). In Finland and Sweden, sawmills have strengthened their presence in different markets in 2018, with Swedish sawmills focusing on expanding sales in Europe, and Finnish increasing exports to the Middle East and Japan.

Sales to China slowed in January and February when the Chinese New Year is celebrated.

Lumber markets – China

Demand for wood in China slowed in the 1Q/18, following a record-2017. Import volumes of softwood lumber declined to their lowest since the 4Q/16. Imports from Canada fell the most, with quarterly shipments reaching an eight-year low in the 1Q/18.

The Nordic countries have taken over from where Canadian suppliers have pulled back. In the 1Q/18, lumber volumes from Finland and Sweden made up for 12% of total imports, doubling their market share as compared to 2015.

Lumber market – Japan

The record high softwood lumber prices in the US have affected the costs for North

American lumber imported to Japan in the past half a year. In May 2018, prices for US

Douglas-fir lumber (45×105) and Canadian hemlock lumber (45×105) imported to Japan

peaked for the month of May since 2013. Lumber import volumes to Japan have been falling for three quarters straight, reaching 1.46 million m3 in the 1Q/18 as compared to 1.6 million m3 in the 2Q/17. The biggest fall in lumber supply over the past year have been in wood coming from Canada and Finland while Sweden,Chile and Russia increased their market shares.

Lumber market – Russia

Russian lumber exports reached an all-time-high volume of 28 million m3 in 2017, a 10 per cent rise from 2016 and doubling in exports from 10 years ago. Exports to their primary destination, China, fell 19 per cent  y-o-y. Interestingly, 20 years ago, Europe took up eight out of the 10 major export countries for Russian lumber, while in the first quarter of 2018, only three European countries made the top-ten. Average export prices have increased in both US dollar terms and rouble terms in the last two years, with the biggest upward trends occurring in lumber sold to China, Uzbekistan and Egypt.

Source: Wood Resource Quarterly