It is predicted that softwood lumber demand in the United States (U.S.) will rise at an annual rate of 2.3 per cent through to 2030, according to Future Suppliers of Softwood Lumber to the U.S. Market – Supply and Demand Outlook 2017-2030, a study conducted by ForestEdge and Wood Resources International at a rate that is higher than reports forecast for real GDP.
The Base Case demand scenario of the research study implies that lumber consumption in the U.S. would reach a record-breaking, all-time high by 2030, with the detailed analysis of the future rate of consumption pointing to the category of non-residential construction out of five – material handling, non-residential construction, repair and remodelling, residential housing and other – as the one that will expand the fastest, and is slated to increase its share of the total softwood lumber usage from around 11 per cent in 2016 to an estimated 14 per cent by 2030. However, lumber taken up by the residential housing as well as repair and remodelling sectors will continue to account for about 70 per cent of the end-use market.
But with an a estimated cost of less than US$200/m³ for softwood lumber production in 2016, the US South is one of the lowest cost suppliers of softwood lumber to the market in the U.S. And when combined with the “overhang” supply of softwood sawtimber which arose as a result of the Global Financial Crisis that took place between 2008 and 2009 along with a mature plantation resource, these factors are expected to continue to facilitate a major expansion of sawmill capacity in the region, according to the study by ForestEdge and Wood Resources International.
Moreover, the market share presently occupied by Canadian lumber producers is expected to shrink in the coming years, with the biggest reduction occurring between 2017 and 2025. Outlook for available log supply to the two major sawmilling and lumber producing arenas in Canada is also different, with harvest levels predicted to decline sharply in British Columbia (B.C.) over the coming ten years.
Overseas supply of lumber to the U.S. is expected to rise in both volume and market share by 2025, which will then lead to a decline until 2030. Based on the lumber supply curve analysis provided by the study, major supplying regions will likely include Brazil, Chile, Germany, as well as the Nordic countries.
However, the study’s High Demand Scenario, which forecasts a very strong rebound in housing starts, non-residential construction, and repair and remodelling, the supply from overseas will be vital and hit a market share of more than ten per cent by 2030.
Now, after almost twenty years of real price declines of sawlogs in North America and elsewhere, the combination of a rebounding U.S. softwood lumber demand, finite log supply and export production in Western Canada, and consistent strong demand for softwood lumber from markets in Asia, Europe, and the Middle East and North Africa (MENA), is all expected to drive prices of softwood logs in real US dollar terms in many timberland investment regions by 2030.