March 14, 2023
Forest Products
North American production was cold in December
Event: The Western Wood Products Association (“WWPA”) released December 2022 softwood lumber stats.
North American softwood lumber production was down 15.8% m/m and 12.9% y/y in December, reflecting curtailments — According to the WWPA, U.S. production decreased 9.7% m/m in December, driven by a 9.1% m/m decrease in the U.S. South (-7.4% y/y), a 10.8% m/m decrease in the U.S. West (-15.0% y/y), and a 9.7% m/m decrease in other regions (-10.5% y/y). In Canada, production was down 25.6% m/m, due to a 22.0% m/m decrease East of the Rockies (-11.3% y/y) and a 32.8% m/m decrease in British Columbia (-28.6% y/y). In 2022, North American lumber production was down 3.1% y/y, or ~1.9 bbf, with production up 1.0% in the U.S. (+5.9% in the South, -6.0% in the West, +1.0% in other regions) and down 9.5% in Canada (-14.6% in BC, -6.2% East of the Rockies).
Operating rates dropped in both the U.S. and Canada — The U.S. operating rate was 74% in December, down 8 percentage points from November and down 7 percentage points y/y. The operating rate in the U.S. South was down 8 percentage points m/m to 77% (down 8 percentage points y/y), while the U.S. West operating rate was also down 8 percentage points m/m to 69% (down 8 percentage points y/y). The Canadian operating rate decreased 16 percentage points m/m to 56% in December (down 10 percentage points y/y), with the BC operating rate down 17 percentage points m/m to 41% (down 14 percentage points y/y), and the East of the Rockies operating rate down 15 percentage points m/m to 67% (down 7 percentage points y/y).
North American softwood lumber consumption fell by less than production — December saw a 9.4% y/ y decrease in U.S. softwood lumber consumption (381 mmfbm), while Canadian consumption decreased 2.8% y/y (15 mmfbm), leaving overall North American consumption down by 8.6% y/y (396 mmfbm). U.S. consumption was down 7.9% m/m, which directionally aligns with the softer trend in housing starts on both a seasonal basis and a seasonally-adjusted basis (please click here for our latest housing starts update). New housing typically comprises ~35% of U.S. lumber market demand.
U.S. softwood lumber imports decreased 8.2% m/m — U.S. imports of Canadian lumber in December were down 12.8% m/m and 15.1% y/y. Imports from British Columbia were down 12.8% m/m (-17.5% y/y) and imports from East of the Rockies were down 12.9% m/m (-13.5% y/y). Non-Canadian imports were up 9.7% m/m, primarily driven by a 9.4% m/m (~20 mmfbm) increase from Europe. U.S. lumber imports decreased 2.7% y/y in 2022, but imports from Europe of ~2.1 bbf were up 25.6% y/y and were equivalent to 4.0% of U.S. consumption (up from 3.2% in 2021).
U.S. log exports increased m/m but remained much lower y/y — U.S. softwood log exports were up 3.5% m/m in December. A 13.0% m/m decrease in exports to Japan and a 9.9% m/m decrease in exports to Canada were offset by an 8.4% m/m increase in exports to China and an 84.6% m/m increase in exports to other countries (i.e., excluding China, Japan, and Canada). U.S. log exports were down 24.0% y/y, driven by decreased y/y exports to China, Japan, Canada, and other countries (-26.2%, -29.0%, -27.9%, and -2.8%, respectively).
Lumber pricing update — According to Random Lengths, the Framing Lumber Composite was $407 as of March 9, up $34 (+9.1%) from the start of Q123, but down 69.5% from $1,334 at the same time last year. Our current commodity deck calls for an average Framing Lumber Composite price of $455 in 2023, versus an average of $412 year-to-date.