Wood panel and lumber
outlook: June 2019

7 questions you need to consider when analyzing wood panel and lumber markets for the rest of 2019.

1 A malaise is how many traders have described lumber and panel markets in the first half of 2019. Weather was a key factor holding back trading and allowing the distribution pipeline to fill up, generating weakening price trends. With better seasonal weather, can the markets break out of their funk in the second half of the year, allowing builders and traders to finish 2019 on stronger footing?

2While battling harsh winter and spring weather, home builders have been beset by supply-side issues, such as tight availability of labor and lots. Affordability issues are also affecting would-be home buyers. What’s in store for housing construction in the second half of 2019? Can builders catch up after a slow start and get housing starts back on the forecast pace of 1.3 million units?

3Wood products production has so far well outpaced demand in the first half, and weak prices have generated curtailments and mill shutdowns. Are more in store this summer and fall, as the industry tries to restore a supply-demand balance? Will the forest fire season play a role in curbing production? How will the Western Canadian industry respond to declining annual allowable cuts?

4The U.S.-Canada lumber trade dispute has been in the backdrop of the lumber market, as legal challenges wind their way through the international bodies and courts. It is expected to take months for these challenges to play out. As Canada struggles amid 20%-plus duties on shipments to the U.S., while tightening timber supplies pressure log prices, will a greater impetus emerge to strike a lumber trade deal?

5It’s clear that the Southern Pine region is the low-cost producing region, as Canadian producers acquire sawmills in the region, and U.S. and Canadian companies alike have expansion plans on the table. How much new production capacity in this key region is coming in the months ahead? How will markets this summer and fall respond to this additional supply? Will soft early 2019 markets put some of these projects on hold?

6The larger trade war between the U.S. and China has generated plenty of concern and economic uncertainty around the globe. Wood products are among the hundreds of products subject to tariffs on either side, with U.S. logs and lumber subject to 20-25% retaliatory tariffs. Will loggerheads between the two key trading partners continue or will a pact get trading back on track?

7European lumber producers ramped up shipments to the U.S. in 2018, and only recently have shown a modest pullback amid the stark price correction that followed the record price run a year ago. Will imports from Europe continue to fade over the coming months, or does the U.S. still provide one of the better markets for these producers to sell into?

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