Demand for softwood lumber has gone up in many markets around the world this year, resulting in a substantial increase in global lumber trade. With very few exceptions, the major importing countries have imported more lumber during the first six months this year than they did during the same period in 2015, according to estimates by the Wood Resource Quarterly (WRQ). The higher demand and a weaker U.S. dollar resulted in generally higher lumber prices (in U.S. dollar terms) worldwide in the first half of 2016 compared to the same period in 2015.
Lumber import prices to China from the two major supplying countries – Russia and Canada – have converged this year. In July last year, Canadian lumber was sold at a premium of almost $40/m³ over Russian lumber. But the Canada did not gain any market share despite lower prices in its lumber – rather the opposite. This year, Canadian supply has counted for 26% of the total import volumes, while Russia’s share has been approximately 59%. Back in 2013, Canada was the major supplier and accounted for about 40% of the imports.
Housing starts in Japan have trended upward during the first six months of 2016 with wooden housing starts being 3.8% higher this year as compared to the same period in 2015. The demand for lumber has also followed a similar trend. The higher demand wood was partly met by an increase in the importation of lumber with the biggest increases coming from Austria, Finland and Sweden. Prices for both imported and domestic lumber have not changed much in Yen terms over the past year, but with the strengthening Japanese currency, lumber prices in dollar terms have rapidly gone up since the beginning of the year.
This year, the demand for softwood lumber in the U.S. has expanded continually so far. During the first five months of 2016, lumber consumption was 14.2% higher than during the same period in 2015, according to WWPA. The increased demand was predominantly met with higher production by sawmills in the U.S. South, a substantial rise in import volumes from Canada (up 40%) and incrementally more shipments from Europe. Lumber prices in the U.S. have also trended upward for most of 2016 with prices in August this year reaching their highest levels since early 2015.
Export shipments from Russia have continued to go up in 2016, with volumes in the first half being 12% higher than the same period in 2015. The biggest increases in exports, by far, have been to the Asian markets. Very low production costs in eastern Russia have resulted in major inroads for Russian sawmills in the Chinese market at the expense of the Canadian sawmills, primarily. Lumber export prices in Russia have declined in the past few years, but not at the same rate as prices for sawlogs, and so as a result, sawmills in Siberia have become some of the most profitable sawmills in the world.
In 2015 and 2016, weaker currencies in the Nordic countries have resulted in more competitive prices for lumber. Prices this year are among the lowest they have been since 2005. And this year, Finland is on pace to increase export volumes for the seventh consecutive year. During the first five months, export shipments were up almost 15% as compared to the same period in 2015. The biggest increases have been to non-European countries including Egypt, Japan, China and Saudi Arabia, reports the WRQ.