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19, Feb 2018 -

2018 Lumber Outlook

2018 Lumber Outlook

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After the currency-driven global lumber price slump in 2015, market demand and prices both started to improve in 2016. While overall global demand improved modestly in 2017 - at only half the rate of 2016 - it has been supply disruptions and changing dynamics that created a wild and unpredictable market that surpassed everyone's expectations.

All markets appeared to be at least good to strong in 2017; this included the U.S., Canada, most of Europe, Japan, China and much of Asia. Only one market region remained unsettled again: the Middle East/North Africa (MENA) ­- Egypt and Algeria, specifically, along with some areas of the Middle East. The U.S. was a solid growth market again in 2017 (the case since 2010), but supply dislocations (forest fires, hurricanes, etc.) and other developments resulted in surging prices throughout the year. 

As usual, there are always various change factors at work that can directly or indirectly lead to unpredictable swings in lumber supply, demand and prices, and this was especially the case in 2017. One of the largest market variables in 2017 was the initiation of import duties on Canadian lumber shipments to the U.S. (announced in late April and including retroactive duties back to late January 2017). These duties were expected to cause huge disruptions and volatility, and certainly did so as Canadian exporters successfully pushed up U.S. market prices to cover all of the import duties. The following excerpts from WOOD MARKETS 2018: The Five-Year Solid Wood Products Outlook 2018-2022 address some of the important North America lumber market changes anticipated over the next two years. 

North American demand

Both the U.S. economy and housing starts continue to improve, although at a stubbornly slow pace. The official unemployment rate is now down to almost four per cent (but the effective level is considered much higher), while home foreclosures are much closer to historical rates than ever - all good news. New residential housing (the key driver of North American lumber consumption) remains on a slow but steady upward trajectory and should reach between 1.20-1.22 million units in 2017. Stocks of both new and existing homes have retreated to historical levels, but prices for new homes continue to move up in many markets (and in some cases are higher than those seen before the 2006 crash). With a shortage of building lots and workers, as well as strong credit ratings required for new-home purchases, a number of factors have contributed to a tight housing inventory, fostering price increases. The five-year WOOD MARKETS 2018 housing forecast is still very conservative, and we do not foresee U.S. housing starts reaching 1.5 million units until 2022 at the earliest. Even with a slow rate of growth in U.S. housing starts in 2017 and given what is expected from 2018 to 2022, supply-side impacts have already led to some major imbalances; overall demand and market activity is anticipated to remain active and volatile again in 2018 and beyond.

Source: Wood Business

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