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Higher Lumber Demand In The US Increased Both US Lumber Production And Importation In The 3Q/12, But Sawlog Prices Have Remained Unchanged
The improved housing market in the US the past four months has resulted in both higher lumber production in the US and in increased importation of lumber. As a consequence lumber prices have gone up by over 30% from last year. However, sawlog price have remained unchanged so far this year, reports the Wood Resource Quarterly.
Housing starts in the US jumped to 894,000 units in October. This was 19 percent higher than in August, and as much as 42 percent more than in October of last year. So far this year, housing starts have been at their highest levels since 2008, and market analysts expect the next 12 months to be bumpy but still upward-trending.
The improved housing market has been good news for many sawmills in North America, reports the Wood Resource Quarterly. Lumber production has been higher throughout the continent, with an increase of 7.3 % in August year-over-year in the US, and of 6.3 % in Canada over the same time period.
The US Northwest and the province of Quebec have been the regions with the biggest increases in production the past year. The sawmills in Quebec have really ramped up production, with output in August being 30 percent higher than in August last year. It is also interesting to note that for the first time in two years, sawmills in the Western US produced as much lumber as the mills in the US South in August. Typically production levels are higher in the US South than in the West.
The improved US housing market has resulted not only in higher domestic lumber production, but also in an increase in the importation of lumber. Softwood lumber imports in the 3Q/12 were up nine percent from the previous quarter, which was the highest quarterly import volume since the 2Q/10.
The higher lumber demand has pushed lumber prices substantially upward this fall. In November, Southern pine prices were 48 percent higher year-over-year, while Western hemlock prices were up 32 percent over the same period, according to Random Lengths.
As reported in the Wood Resource Quarterly, sawlog prices have not yet gone up as a result of the improved lumber market. Pine log
prices across the US South have been practically unchanged for almost two years, and sawlog prices in the US Northwest have been surprisingly flat for more than a year. However, in early November, there was increased upward pressure on sawlogs prices in the West from Chinese log buyers that were more active in the market than earlier in the year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Log And Lumber Imports To China Were Down 19% During First Eight Months Of 2012; The Biggest Declines From Russia And The US
Importation of both logs and lumber to China fell substantially in 2012, reports the Wood Resource Quarterly. Total imports, by value, during the first eight months was 4.3 billion dollars, or 19% less than in 2011, with the biggest declines in logs imported from Russia and the US, and in lumber from North America.
The reduction in construction activities in China during 2012 has resulted in reduced demand for lumber, and as a consequence, a sharp decline in the importation of softwood logs and lumber to the country. During the first eight months this year, China imported logs and lumber worth 4.3 billion dollars, or 19 percent less than the same period last year, as reported in the Wood Resource Quarterly (woodprices.com). By volume, log imports were down 17 percent and lumber imports down five percent.
The importation of softwood lumber in August was down for the third consecutive quarter to 1.1 million m3, which was a decline of 21 percent from May and 23 percent lower than in August 2011. Canada and Russia are the two dominant suppliers of softwood lumber to China, together accounting for 84 percent of the total imports, with the US, Chile and New Zealand making up most of the remaining import volume.
During the first eight months of this year, Russia, Chile and New Zealand have increased their shipments to China, while volumes from North America have declined. Exports from the US are down as much as 41 percent as compared to the same period in 2011.
In August, the average import value for all softwood lumber imported to China was down nine dollars to $203/m3 from a year ago, according to Customs data. The cost for Russian lumber fell as much as $19/m3, while Canadian average costs were down only five dollars to $200/m3 over the past year. Costs for Canadian lumber have steadily increased from earlier this year and here at a 12 month-high in August.
Chinese softwood log imports have fallen dramatically this year. From January through August, imports from Russia were down 21 percent, and from the US, 31 percent as compared to the same period in 2011. The two other major log-supplying countries, New Zealand and Canada, have shipped practically the same volume this year as last year.
With the reduced demand for logs by the lumber industry in China, log prices have fallen through most of 2012. According to the latest issue of the WRQ, average import softwood log values in the 3Q/12 were down 13 percent from a year ago, and domestic Chinese-fir log prices have fallen about six percent in 12 months.
Global timber, pulpwood and biomass market reporting is included in the 52-page quarterly publication Wood Resource Quarterly (WRQ). The report, established in 1988 and with subscribers in over 25 countries, tracks sawlog, pulpwood, lumber and pellet prices and market developments in most key regions around the world. To subscribe to the WRQ, please go to woodprices.com
Contact Information
Wood Resources International LLC
Hakan Ekstrom
info@wri-ltd.com
www.woodprices.com
WRQ Reports That Domestic Sawlog Prices In Russia Have Gone Up 25% In Three Years, Despite Higher Log Export Tariffs; Will They Climb Even Higher Now That Russia Is A Member Of WTO?
Log costs for Russian sawmills did not fall as the Russian government intended when it implemented a 25 percent log export tariff in 2008. Instead, sawlog prices have increased by 24 percent the past three years and the supply of logs has been tight in 2012, as reported by the Wood Resource Quarterly.
Domestic log prices in Western Russia did not decline long-term as the Russian government had hoped when Russia increased log export tariffs to 25% in April of 2008. Initially, domestic log prices fell when the tariffs were implemented, but from the 1Q/09 to the 3Q/12 the average softwood sawlog price in Ruble terms went up by 24 percent, according to the Wood Resource Quarterly (woodprices.com).
When Russia joined the World Trade Organisation (WTO) in August 2012 the government was forced to reduce these export taxes to 13% and 15%, respectively, for spruce and pine logs. Despite these tariff reductions, there is not likely to be a major increase in the flow of logs from Western Russia to Finland, the major destination for Russian logs. Finnish sawmills close to the Russian border will continue to buy mostly from the domestic market in Finland, using only marginal volumes from Russia when the costs are competitive.
Overtime, as lumber markets improve in Europe, exporting sawmills in Finland will need additional sawlogs, and it is therefore likely that Finland will increase its reliance on Russian sawlogs again. However, log trade between the two countries will never return to the same levels as before the implementation of the export tariffs because Finnish sawmills have now established other log sources. The decline in trade has been dramatic the past eight years, from a record high of 6.4 million m3 down to an estimated 600,000 m3 this year.
Sawmills in Western Russia have kept up production relatively well during the summer months this year despite the weak lumber demand in Europe because markets in Western Europe account for a fairly small share of the Russian export volumes. Instead, Egypt and former CIS countries are the major destinations for softwood lumber produced in the Western provinces of Russia, and these markets have stayed fairly healthy and even improved during 2012.
The steady demand for sawlogs by the sawmills in Northwest Russia coupled with the fairly tight log supply resulted in close to record-high price levels (in Ruble terms) throughout the year, a development in contrast to many log markets in Europe where log prices have fallen the past six months, as tracked by the WRQ.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.