Tag Archives: Lumber Prices

Lumber ‘Check-Off’ Launches Website

Lumber ‘Check-Off’ Launches Website:

Associated Oregon Loggers

The Binational Softwood Lumber Council announced its new website offering information about activities of the North American lumber public marketing campaign, funded by assessments on all lumber producers in the US and Canada. The “check off” program is designed to increase international and domestic demand for softwood lumber. For more information about the lumber check-off program online: www.softwoodlumber.org/check-off/lumber-check-off.html

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Canada surpasses Russia as China’s largest global lumber supplier

Canada surpasses Russia as China’s largest global lumber supplier.

Lumber futures that surged more than any other commodity in February may extend a rally to a 10-month high as China boosts imports and the U.S. housing recovers, researcher Wood Resources International LLC said.

Lumber futures that surged more than any other commodity in February may extend a rally to a 10-month high as China boosts imports and the U.S. housing recovers, researcher Wood Resources International LLC said.

Photograph by: Bruce Stotesbury, Times Colonist , Times Colonist

Led by British Columbia, Canada emerged as the largest exporter of lumber in the world to China in 2011, surpassing Russia as the Middle Kingdom’s No. 1 source for lumber.

“We are king of the hill,” Gerry Van Leeuwen, of the Vancouver consultants International Wood Markets Group, said Tuesday. “We are No. 1 in total lumber imports into China.”

The trend has continued in 2012, Van Leeuwen said. According to the latest statistics from China Customs, Canada supplied 1.45 million cubic metres (about 900 million board feet) of softwood lumber during the first quarter of 2012, corralling 47 per cent of the market share for softwood lumber in China. Russia is second at 35 per cent.

Softwood lumber — lumber made from coniferous species like spruce, pine and fir — is the dominant wood product manufactured by British Columbia sawmills. B.C. softwood lumber accounts for about 95 per cent of all Canadian softwood shipments to China, making this province China’s largest global supplier, surpassing Russia, which exports both hardwood and softwood lumber, for the first time.

International Wood Markets tracks Chinese statistics and on Tuesday released a report, China Bulletin, on the latest figures.

Canada’s emergence as the top supplier has been meteoric. In 2011, Canada shipped 6.8 million cubic metres of lumber to China, up twenty-fold from 2006, when Canada shipped only 331,000 cubic metres of lumber.

“A number of issues have driven our success but one of the biggest ones is price,” Van Leeuwen said. “As the North American lumber market collapsed in 2005/06 and lumber prices went south -from $400 US a thousand board feet to $188 US — suddenly our lumber became very attractive.”

When the U.S. housing market eventually improves, Van Leeuwen said he thinks B.C. sawmillers will not abandon their new markets in China.

“We are subject to this softwood lumber export tax. We have been burdened by this for the last four or five years and I think Canadian lumber producers are much more conscious of the dangers of being too dependent on the U. S. market. So we think they won’t move a s quickly. They will be a little more skeptical about suddenly moving their volume from China to the U.S.”

If prices in the U.S, increase significantly, however, he said it’s unknown how B.C. producers will react, he said.

China’s total demand for wood has been growing at a rate of 10 to 15 per cent a year. It has been buying logs from around the Pacific Rim to meet that demand, pushing up log prices globally, which made the depressed price of B.C. lumber even more attractive, Van Leeuwen said. He added that China now accounts for 26 per cent of Canadian lumber exports, not enough to influence the price significantly. The U.S. accounts for 63 per cent of Canadian lumber exports.

B.C. is also a major exporter of logs to China but it pales in comparison to countries like Russia and New Zealand. Russia exported three million cubic metres of logs to China in the first quarter of 2012 while B.C. exported 594,000 cubic metres during the same period.

However, statistics on housing construction show a dramatic slowdown is underway in China. Floor space in newly-started residential buildings dropped by 5.2 per cent in the first quarter of 2012.

International Wood Markets is holding a Global Softwood Log and Lumber conference Wednesday in Vancouver, part of the weeklong Global Forest Products Leadership Summit now underway in the city.

ghamilton@vancouversun.com

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Lumber Prices Moving Higher – SLA Could Become a Factor

Lumber Prices Moving Higher – SLA Could Become a Factor

by Robert Denk — Eye on Housing

A mill fire in British Columbia sent lumber prices higher, adding to a number of supply side developments that moved the Random Lengths Framing Lumber Composite Price (FLCP) to $316 on Friday. This price, if maintained, would trigger provisions in the US-Canadian Softwood Lumber Agreement (SLA) reducing tariffs on imports of Canadian lumber. An average price above the $315 limit for the period from April 20 to May 11 would result in reduced tariffs for the month of June.

The mill fire, the second this year, coupled with already lean inventories helped push up the FLCP which has climbed steadily from a low of $252 in early November 2011. But the fire, the result of wood dust from the harvesting of beetle killed timber, also renewed focus on the longer term supply implications of the bug kill. One study estimates the British Columbia Interior timber supply could be reduced by one third over the next 20 years.

On the demand side, a slow but improving US housing recovery, combined with slower but still strong growth in China will keep upward pressure on lumber prices.

But some downward pressure on lumber prices, in addition to the possible tariff reductions, could come from Russia’s entry into the World Trade Organization. Membership is expected to increase competitiveness through reduced tariffs on Russian lumber exports, increasing exports to China and European markets. Theoretically, this would ease price pressures in the US market, but procedural issues of implementation could delay this effect.

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Producer Prices in March – Gypsum Continues to Rise

Producer Prices in March – Gypsum Continues to Rise

by Robert Denk — Eye on Housing

The Bureau of Labor Statistics (BLS) released the Producer Price Indexes (PPI) for March last week. The PPI for finished goods was unchanged from February on a seasonally adjusted basis, as a 1.0 percent decline in energy prices offset a 0.2 percent increase in food goods and a 0.3 percent increase in the core index (i.e., finished goods less food and energy).

With respect to building materials, gypsum prices continue to be the main driver for residential construction cost increases in 2012, rising 2.2 percent in March, after increases of 5.9 percent and 5.1 percent in January and February, raising gypsum prices 17.7 percent above the most recent low in February of 2011.

Lumber prices rose 0.9 percent in March while cement prices declined 0.4 percent, pushing the aggregate index for residential construction up 1.1 percent for the month. This brings residential construction costs to 13.0 percent above the mid-2009 lows.

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Near highs for housing starts & building permits

Near highs for housing starts & building permits

April 11, 2012

Timber Industry Report
By Rick Sohn
Umpqua Coquile  LLC

Spring is here! Studs are up. Unsold Inventory is down, and Housing starts/building permits are at or near their highs. Four-year trends of lumber, logs, housing, and mortgage statistics are shown below.

Information and interpretation.
Studs are up $20 since last month, and $40 since January, a welcome spring rally, but not unlike a rally we saw in 2010, when studs ran up from 220 in January, to $280 by March and reached $333 by April.. By June of 2010, Studs were back down to $235, and $205 by July. Nice prices, not sustainable in 2010.

Fortunately for mills, log prices are steady. Both now and 2010, mill operating levels are very low. Small changes in demand should be reflected in the price. Supposedly, fundamentals are better than 2010. Stay tuned a couple more months to see if the rally is sustained better than 2010. Foreclosures and unsold inventories were big factors in 2010. Let’s see how this spring develops.

Homebuilding surpassed 700 again, with building permits up to 717 and housing starts corrected to 706 in January. Perhaps February starts will also be corrected to above 700.

Mortgage rates are still very low, but recently the average rate on 30-year fixed rate mortgages rose above 4% for the first time in 5 months. Last week’s rate (just one week) jumped to 4.08% from 3.9%, according to Freddie Mac, as reported in the Oregonian.

The lower unsold inventory at 6.5 months is welcome data, and was accompanied by a rise in pending and closed sales, according to RMLS. While new listings are down this year, and others report a strong shadow inventory, the smaller inventory brings home buying and selling into better balance.

Data reports used with permission of:
1) Random Lengths. 2”x4”x8’ precision end trimmed hem-fir studs from southern Oregon mills. Price reported is Dollars per Thousand Board Feet for the most recent week. One “board foot” of product measures 12 inches by 12 inches by one inch thick.
2) RISI, Log Lines. Douglas-fir #2 Sawmill Log Average Region 5 price. Current report is for the prior month. Dollars per Thousand Board Feet of logs are reported using standardized log measurements from the “Scribner log table.”
3) Dept. of Commerce, US Census Bureau. New Residential Housing Starts and New Residential Construction Permits, seasonally adjusted, annual rate. Current report is for the prior month. Recent reports are often revised in bold. Also, major revision made each May, reaching 21/2 yrs back.
4) Regional Multiple Listing Service RMLSTM data, courtesy of Janet Johnston, Prudential Real Estate Professionals Broker, Roseburg, OR. Inventory of Unsold Homes (Ratio of Active Listings to Closed Sales) in Portland Oregon, for most recent month available.
5) Freddie Mac. Primary Mortgage Market Survey. 30-year Fixed Rate Mortgages Since 1971, national averages. Updated weekly, current report is for the prior full month.
Issue #5-3. © Copyright Rick Sohn, Umpqua Coquille LLC. For permission to reprint for nominal fee, Email rsohn@umpquacoquille.com

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Lumber Says This Is A Top For Housing Stocks

Lumber Says This Is A Top For Housing Stocks

Chart In Focus

March 30, 2012

Here is an update to an article I posted in September 2011, describing the leading indication that lumber prices give for the shares of housing related stocks.  Back then, it was saying that a rally was ahead for homebuilders, building materials providers, and others involved in the housing industry.  And that opinion ran contrary to what was being voiced back then by a lot of other analysts.

Now the commentary I hear on the business TV channels seems largely bullish toward housing stocks.  They cite the growing economy, falling unemployment, rising rental prices, and other factors that should benefit the housing sector.

In response, I just cite the message from lumber prices, which peaked a year ago and fell throughout the rest of 2011.  Because lumber’s price movements tend to get echoed a year later in the HGX Index and other housing related sector indices, the implication is that we are at a top for housing stocks.  Perhaps lumber knows something that the economists don’t.

This relationship does not always work perfectly, and that fact should be understood by anyone contemplating listening to it.  A notable difference in behavior was the refusal of the HGX in early 2011 to follow the path of lumber prices up to a giant spike top.  But it should be understood that this spike in lumber prices back in April 2010 was due to the earthquake in Chile, which disrupted production of lumber in that country and sent lumber buyers scrambling to lock in supplies.

The reason why this relationship seems to work is that market forces that are going to affect the prices of housing related stocks tend to show up a year earlier as market forces affecting lumber prices. Because the Chile earthquake was an anomalous event, and not a reflection of the interplay of supply and demand forces in a liquid market, that effect did not flow through to housing stocks a year later.

We have not seen a similar anomalous event in the past year that would explain the decline in lumber prices.  So it seems reasonable to expect that the market forces which helped push lumber down a year ago should be echoed in 2012 in the share prices of housing related stocks.

Tom McClellan
Editor, The McClellan Market Report

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U.S. Lumber Prices Drifting Upward on Supply Shortages

U.S. Lumber Prices Drifting Upward on Supply Shortages

Posted by Chuck Ray at 1:02 PM
Reuters headline from today:”Credit crunch an unusual ally in U.S. lumber rally

U.S. lumber futures prices have soared about 30 percent in the past five months, with bets rising 18 percent since January with help from an odd ally – a credit crunch in the industry.

Lumber distributors — who channel supplies from mills to end users — finding it difficult to raise loans to buy lumber in the cash markets are resorting to buying futures as a hedge and to possibly take delivery when a contract expires.

Lumber supplies available to distributors in the cash market have also been shrinking due to a pick up in the housing market in the wake of a mild winter in the country.

“Distributors are having trouble buying lumber in the tight stocks environment and also they can’t get capital from banks so they’re buying futures,” said Brian Leonard, a futures broker and analyst for Leonard Commodities Inc in Chicago.

Open interest in lumber futures is up 18 percent and spot lumber prices are up 12 percent since January, indicating new buyers in the futures market.

The rest of the article goes on to explain the phenomenon we’ve been seeing since last year…lumber supplies are slowly tightening as mills shut down or cut back on production one by one, and yet lumber brokers and builders are finding credit hard to come by as the warmer than usual late winter has allowed the building industry to warm up a little earlier than usual. Result: a slight upward price pressure on lumber thus far this year, even as the slowdown in the Chinese economy reduces their lumber imports.

I forecast this slight buoyancy in the lumber markets in a January presentation to theWestern Pallet Association, and thus far my forecast is right on track.

In the presentation, I described this baseline scenario as a flat lumber market with a little buoyancy provided mainly by upward pressure on oil prices. My modeling logic is that lumber producers are selling lumber into the market near cost, and that oil price fluctuations have pretty much become the main driver of lumber prices in a market of minimal demand. So, under a “baseline scenario” that precludes any shock to the global economic system, lumber prices (as represented by the Random Lengths structural lumber composite) will remain pretty flat, bouncing up against $300/mbf a couple of times this year, but restrained by housing starts data that will continue to disappoint.

However, I’ve also forecast a “spike series scenario” that attempts to account for any of a number of potential global price shocks to oil and the global economic slowdown that would follow. This forecast is shown below. To use this forecast, you would need to follow the baseline series prices above until the price shock hits, and then use the series below from there on.

Here we see that the spike in oil, which could drive oil prices to over $200/barrel according to even the most conservative of estimates, should drive the structural lumber composite up to around $350 or higher for a very short burst, but then the price will collapse as business spending (and building) crashes to a halt. Under this scenario, lumber will fall to prices that will in real terms represent historical lows.

Let’s hope that doesn’t happen, for many reasons

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