North American log and lumber experts: FEA Softwood Conference

By Kelly McCloskey, Tree Frog Editor
Tree Frog Forestry News
June 15, 2020
Category: Special Feature
Region: Canada, United States

The following is a brief recap of three speakers at FEA’s Global Softwood Lumber Conference—the virtual version, speaking on the North American market.

First up was FEA VP Rocky Goodnow with an update on softwood timber trends. With respect to key factors driving log availability and costs, Goodnow said the main driver for timber demand is lumber production, which has been significantly reduced across all North American producer regions in 2020. The resulting log price declines varied by region with West Coast prices falling 12%-14%, Inland down 5-9% and the US South down 7%. The associated log volume declines were 6.5%, 4% and 6.5%, respectively. Looking forward, Goodnow says current markets have reached their bottom, prices will be steady in the fall and then start increasing late in the year and through 2021. Although the drivers for recovery vary by region, the most significant factor for all markets will be the gradual recovery of domestic sawlog demand by lumber producers. Prices, however, will be kept in check through potential increases in supply in the US South and to a lesser degree Ontario/Quebec, where harvests lag current AACs.

Rob Schuetz, President of Industrial Forest Service provided an overview on BC’s struggle in the face of declining log supplies. The key driver being the mountain pine beetle infestation more than a decade ago, that resulted in elevated AACs. Exacerbating the AAC challenge today is the potential impact of caribou habitat protection (impacting up to 2% of the Interior harvest); the current Spruce beetle epidemic (a key mid-term timber supply source); the recent catastrophic fire seasons (AAC’s could fall by 6%-10% in heavily impacted areas); and the doubling of First Nations tenures to 12% of the AAC (adding some cost and uncertainty to supply). Finally, there is the challenge of log cost competitiveness due to longer cycle times and higher stumpage rates.

Although some stumpage relief is forecast, Schuetz noted his May 2019 forecast (in conjunction with FEA) of 13 mill closures is mostly realized one year later, as eight mills have shuttered and many more are curtailed. Further, fewer sawmills results in fewer residual chips, which puts BC’s 17 pulp mills at risk; and less sawdust, shavings and hog puts pellet and bio-energy mills at risk as well. Bottom line, Schuetz says six more sawmills will likely close or continue to curtail shifts through 2025, and his long term sustainable lumber production estimate of 9.8 BBF, just over half of what BC produced back in 2005.  

Finally, Jeff Webber, retired COO of EACOM Timber Corporation, provided his views on the state of the forest products industry in Quebec and Ontario. Using comparisons with other producer regions, Webber noted the key differences that challenge the Ontario/Quebec industry. This include smaller logs, longer haul distances and appurtancy (i.e., timber licences that require local fibre to be milled at specific mills), which collectively has resulted in Eastern Canada’s smaller sawmills and higher conversion costs. Working to offset these disadvantage are lower fright costs, less open bidding and thus more volatile stumpage rates (at least in Ontario), and a strong network of pulp and paper mills to sell residuals to. Webber closed with some comments on his company’s COVID-19 challenges and response, which is a positive story of strong mitigation practices and continue operations.

Click here for Russ Taylor’s global overview on supply trends and competitive dynamics, Brendan Lowney’s forecast for the US economy, and Paul Jannke on North American lumber markets.

Read More