Industry News Markets
Softwood lumber supply and demand corrects on further sawmill curtailments

The latest announcement of major sawmill curtailments Monday, this time with Canfor making production cuts at all its facilities, caused a complete reversal of lumber futures prices on the Chicago Merchantile Exchange. It will be very interesting to see what happens with cash prices this week. Madison’s Lumber Reporter print is Friday mornings; this week, prices are likely to at least stop falling if not to actually increase. The latest North America sawmill capacity utilization rates, for March, released by the Western Wood Products Association in their monthly Lumber Track on Monday, shows Canadian sawmills improving both utilization and production volumes for that month. This trend, when it comes out for May later this year, will return downward, however, to reflect production volumes taken offline by British Columbia sawmill curtailments in March and April.

Ongoing drops since the beginning of this year continued for the week ending June 7, 2019, with benchmark lumber commodity Western Spruce-Pine-Fir KD 2×4 #2&Btr (RL) FOB sawmill wholesaler price down another -$8, or -2.6%, to U.S. $298 mfbm, from the previous week when it was U.S. $306 mfbm. This week’s price is -$34, or -10%, less than it was one month ago. Compared to one year ago, this price is down -$360, or -55%.

Be ahead of these data releases … Don’t delay, this week’s softwood lumber market comment was published to the website Monday morning.

* Madison’s Lumber Prices, weekly, are a good forecast indicator of US home builder’s current lumber buying activity

Business appeared to improve noticeably this week in dimension and ESPF panels, while sales of studs lagged behind a bit. — Madison’s Lumber Reporter

While still down, it is encouraging that the ongoing price drops are slowing. This week’s WSPF 2×4 #2&Btr KD S4S (RL) price is down -$120, or -29%, relative to the one-year rolling average price of U.S. $418 mfbm it is down -$153, or 34%. The two-year rolling average price is U.S. $451 mfbm.

At this time last year those very high prices starting falling. However, this year both the U.S. home building and North America softwood lumber markets are completely different. An absolutely inscrutable trading board on the lumber futures board at Chicago Merchantile Exchange did nothing to help players understand what is happening with cash prices.

Traders of Western Spruce-Pine-Fir lumber in the U.S. described better market conditions this week, as many buyers sensed a change in the wind and dove in. Sales volumes were still comparatively small for the time of year but the total number of transactions day-to-day appeared to be increasing encouragingly. Producers in Canada, meanwhile, noted that sales activity kept improving as the downward trend in WSPF pricing continued to level off last week. A few important building markets in the U.S. had yet to rumble to life, but construction in many others was coming on strong just as demand from Canadian sources also improved. Canadian sawmill order files varied by WSPF item: June 17 for 2×4 and 2×6, June 24 for 2×8, and less than one week for 2×10 sizes.

Lumber producers in the U.S. weren’t too aggressive in extending sawmill order files at current prices, preferring to keep bookings only one or two weeks out. — Madison’s Lumber Reporter

For their part, kiln-dried Douglas-fir lumber traders continued to “grind” for sales this week. Weather appeared to be clearing in some key U.S. building regions but that development had yet to affect the lumber business in any meaningful way. Demand for 2×12 was “the only bright spot” according to one grizzled pro, only falling $5 to U.S. $470 mfbm. Sawmill order files at Douglas fir production facilities in the Pacific Northwest remained no more than two weeks out. Producers were fine with that at these levels.

The below table is a comparison of recent highs, in June 2018, and current June 2019 benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept. 2015: