2018- A Promising Year in the Log Market
Luke Machtolf, Northwest Management, Inc.
National Market Condition
2018 should be an excellent year for forest landowners to market and sell logs throughout the country, including the inland west. National lumber demand is increasing due to a robust housing market. The U.S. Census Bureau reports January 2018 seasonally adjusted housing starts at 1,326,000 – nearly 10 percent above the December estimate. The national lumber demand for 2018 is an estimated 51.6 BBF (billion board feet) and with an anticipated reduction in Canadian exports, U.S. producers will need to cover the difference. Most of this demand is expected to be filled by the US South (forest2market).
Record Lumber Composite Price
The Random Lengths Framing Lumber Composite Price (FLCP) recently hit an all-time high of $512 on March 2, 2018. The FLCP serves an indicator for price behavior in the U.S. framing lumber market (Random Lengths Publications, Inc., 2016). The graph below displays recent activity in the FCLP since the beginning of 2018.
The finished product markets continue to be very strong and should remain so through 2018. While the finished product markets are a good indicator of the overall demand for raw logs, they are not always a direct correlation to log prices.
Canadian Lumber Trade Dispute
On November 2, 2017, the US Commerce Department made final determinations on the antidumping duty (AD) and countervailing duty (CVD) investigations. The Commerce Department determined that exporters from Canada “sold softwood lumber into the US at 3.2 to 8.89 percent less than fair market value. The Department also determined that Canada is providing unfair subsidies to its softwood lumber producers at rates of 3.34 to 18.19 percent” (US Dept of Commerce). The Department set the final combined countervailing and anti-dumping duties for most companies at 20.83 percent, with West Fraser, Canfor and Tolko receiving higher duties (US Dept of Commerce).
The expectation of this ruling caused a great deal of uncertainty in the market last year. However, a very strong lumber market has minimized the impacts of duties placed on Canadian lumber exports. Uncertainty in the market has disappeared, now that Canadian producers know what the duties are and have reportedly been able to pass most of this expense onto the consumer, given the strong lumber market. (CBC)
In 2017, coastal Douglas-fir log prices surged above $800/MBF while coastal hemlock increased nearly $100 to about $600/MBF (Campbell Global). This is a result of an overall log supply shortage and recently increased milling capacity. Prices for Douglas-fir logs have not been this high since 1993, when the Northern Spotted Owl was listed (Random Lengths).
The competitive log market west of the cascades is having some influence locally, drawing some of the Inland wood basket to coastal and export markets, particularly in eastern Washington. While this is creating marketing opportunities for inland landowners, there doesn’t appear to be a log supply constraint. The perception of several local purchasers is that current pricing structures are procuring the needed volumes of logs for their facilities. Furthermore, most area mills have been running on healthy winter inventories and have not needed to increase prices in Q1 due to shortages.
Moving into 2018, demand for logs in the inland will remain strong through the year. Mills however; will purchase largely based on their inventories and not directly by the lumber market. Landowners interested in harvesting should be prepared to capture seasonal spikes in delivered log prices, having their foresters and contractors under contract in advance. Selling logs in the early spring often creates an advantage for some private landowners, whom own land in lower elevations, allowing their logs to hit the mill prior to most agency and industry sales.
Random Lengths, 3/2/2018
Random Lengths, 3/9/2018
Campbell Global – Timber Trends, February 2018.
CBC News: http://www.cbc.ca/news/business/softwood-lumber-demand-housing-starts-demand-1.4541742. February 2018.
US Department of Commerce: https://www.commerce.gov/news/press-releases/2017/11/us-department-commerce-finds-dumping-and-subsidization-imports-softwood. November 2017.
Forest2Market. “PNW Log Markets Causing Challenges for Regional Mills.” Swanton, Joel. https://blog.forest2market.com/pnw-log-markets
causing-challenges. March 2018.