Things are looking up – way up – for softwood lumber consumption in the coming years. A new study by ForestEdge and Wood Resources International forecasts a 2.3 percent annual increase in demand through 2030, with overall lumber consumption reaching an all-time high the same year. While the residential housing sector will still account for almost 70 percent of the end-use market, the fastest growth will be seen in non-residential construction.
In fact, domestic softwood demand might increase so much, lumber producers in the United States won’t be able to keep up with it all. While Canada’s market share in the U.S. is expected to decline as harvest levels fall substantially in British Columbia over the next decade, suppliers in countries like Brazil, Chile and Germany may step in to fill the gap. Softwood production is also expected to increase in America’s South and Northwest regions.
The report notes that some of this growth is the result of the market finally exiting the shadow of oversupply resulting from the 2008-2009 Global Financial Crisis. New residential housing is on an upward trajectory.
“After nearly two decades of real price declines of sawlogs in North America and elsewhere, the combination of a rebounding US softwood lumber demand, constraints on log supply and export production in Western Canada, and continued strong demand for softwood lumber from markets in Europe, Asia and the Middle East/North Africa (MENA) region, is expected to push conifer log prices higher in real US dollar terms in many timberland investment regions by 2030.”
“The five-year WOOD MARKETS 2018 housing forecast is still very conservative, and we do not foresee U.S. housing starts reaching 1.5 million units until 2022 at the earliest. Even with a slow rate of growth in U.S. housing starts in 2017 and given what is expected from 2018 to 2022, supply-side impacts have already led to some major imbalances; overall demand and market activity is anticipated to remain active and volatile again in 2018 and beyond. “
Previously, the Wood Markets 2018 five-year forecast noted that suppliers in the United States will need to boost production. A supply gap is projected in 2019 wherein domestic lumber supplies won’t be readily available to meet projected U.S. demand. The U.S. was a solid growth market in 2017, but supplies were occasionally disrupted by events like fires and storms, resulting in volatile prices. Meanwhile, Canadian import performance suffered in 2017 thanks to new import duties.
“Simply put,” indicated Russ Taylor, Managing Director, WOOD MARKETS/FEA Canada, “by restricting incremental Canadian lumber exports via import duties, there may not appear to be enough lumber supplies to adequately balance with projected U.S. demand. There will need to major increases in U.S. lumber capacity (which is starting to build), more offshore imports, and/or record-level prices to stimulate more supply. The question that we have seen coming for a number of years is: Where will the U.S. get all of the lumber it needs, and at what price?”