Tree Frog Forestry News

Global Softwood Log and Lumber Conference Points to Better Days Ahead

By Kelly McCloskey
Tree Frog Forestry News
May 9, 2019
Category: Business & Politics
Region: Canada, United States

Vancouver, BC – Despite challenging economic times, the 9th  annual Global Softwood Log and Lumber conference—held by FEA / Wood Markets—was a jam-packed affair, as two dozen world experts from a dozen countries updated the delegates on market trends and expectations.

Hosted by FEA-Canada Managing Director Russ Taylor and moderated by FEA Partner Francois Robichaud, the North American market review was kicked off by Dr. Clark Binkley, Managing Director, International Forestry Investment Advisors. Speaking on what we’ve learned from 40 years of forecasting, Binkley noted that, “demand factors such as population and GDP are key, but the outcomes vary significantly across products and regions, and market disruptions such as the Internet can effect supply and demand significantly and for a long time”. Looking to the future, Binkley believes that timber will “remain abundant globally, plantation forests will be increasingly important due to lower costs, and real timber prices are likely to continue their downward trend globally”.

Next up was FEA VP Rocky Goodnow with an update on North American timber trends. With respect to key factors driving softwood log availability and costs, Goodnow surmised that, “despite lower harvest volumes, the supply of US West Coast logs will remain tight and limit price declines and constraints on log availability in BC will maintain upward pressure on wood costs”. He further noted, “in eastern Canada, wood costs will be challenged by low pricing for residual chips, while expanding capacity in the US south will help close the log supply and demand gap, but any meaningful recovery in prices remains years away”.

FEA Principal Brenden Lowney followed with an overview of housing and lumber demand trends. Noting the existence of many economic signals that have predicated a US recession in the past, Lowney said “this time we think it’s different”. The reasons cited include the tight job market, rising real household income and low inflation that are all leading to low interest rates. With respect to US housing starts, Lowney forecasts a slow, upward climb for reasons that include changing population demographics, pent-up demand compared to past levels, and the ever-aging housing stock. “Good news”, Lowney suggests, “but the recovery will take until 2023 to fully materialize.

Christian Provost, VP Sales and Marketing at Boscus Canada and Paul Jannke, FEA Principal, rounded off the morning with comments on lumber trends in Canada and the US, respectively. Provost opined on Canada’s falling lumber production, drop in exports to the US, the lack of any movement in the softwood lumber dispute and pricing forecasts that are not improving fast enough for his liking. Jannke noted that US wood products markets have been weak for an extended period but this should reverse in the coming months due to: improving weather, low inventory levels, curtailments by money-losing mills, seasonal demand and the likelihood of another bad fire season. Other positive signals include low interest rates, rising housing starts and outside of the US south, the lack of room to increase supply.

With market supply and demand well in hand, the conference took a deeper dive into BC’s Coast and Interior outlooks. An update on BC’s Coast Revitalization Initiative was provided by John Allan, BC’s Deputy Minister of Forests; a BC Coast operator and trader perspective followed by A&A’s Dave Martin; and Jim Girvan of MDT Management provided a BC Interior update post-Mountain Pine Beetle.