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Scotiabank predicts growth in 2014

Jan. 28, 2014 - Scotiabank's Commodity Price Index ended 2013 on a weak note, falling -1.2% m/m and -6.8% below a year ago — the second consecutive annual decline. All sub-components lost ground in December.

However, signs point to a bottoming in the All Items Index in early 2014. Prospects for stronger U.S. economic growth (+3%), with China's GDP still likely to advance by more than 7% this year, should provide a modestly positive backdrop for commodity markets.

The Forest Products Index also lost ground in December (-2.1% m/m), but remained slightly above a year earlier (+0.1%). Western Spruce-Pine-Fir 2x4 lumber and OSB prices lost ground seasonally, with lumber falling from US$382 per mfbm in November to a still profitable US$364, as snow cover inhibited building activity. However, prices have edged up again to US$376 in mid-January.

We remain optimistic that prices will strengthen further to average US$390 in 2014 alongside a multiple-year recovery in U.S. housing starts. NBSK pulp prices in the U.S. market — important to the B.C. and Eastern Canadian economies — were flat in December at US$990 per tonne, but increased another US$20 in January to a lucrative US$1,010 — a 21⁄2-year high (annual discounts off list will increase 2- 3% in 2014). Low world inventories of 'softwood kraft' (only 25-days of supply) contributed to the price increase.

This is an excerpt of the Commodity Price Index from Scotiabank. To read the full report, go to http://www.gbm.scotiabank.com/English/bns_econ/bnscomod.pdf


January 29, 2014
By Scotiabank