North American Lumber Trader Survey
2022 Edition: Demand remains strong, but lumber isn't moving fast
enough
Our view: For the third consecutive year, we surveyed lumber traders throughout North America to get a better understanding of what's going on in the market. Logistics and supply chain issues dominated our discussions, with traders holding limited inventories due to a combination of strong end-market demand and limited mill shipping capacity. While the pace of supply chain normalization will determine the trajectory of pricing in the near-term, most traders continue to expect strong demand based on customer feedback. Collectively, the survey participants trade ~11.3 billion board feet of softwood lumber, which we believe is representative of overall North American market expectations. We balanced our responses between Western Canada, the US South, the US West, Eastern Canada, the US Northeast, and the US Midwest for a more diverse picture of market dynamics.
Traders expect demand to be led by new residential construction
Based on our discussions with lumber traders, most expect that demand will be about the same as last year. Unlike last year when the consensus was that we would see a pullback in repair & remodel demand and an uptick in housing demand, none of those surveyed anticipated a significant decline in any segment in particular. Low-interest rates were cited as the primary driver of housing demand, and many traders noted that a few interest rate hikes would do little to slow down the demand in the US. Many expect that the first half of the year will be stronger than the second half.
Lumber inventories are heavy at the mill level but thin at the retail level
All of those surveyed said that inventory levels throughout the supply chain were either low or very low. Although inventory levels were characterized as low last year, the situation seems to have gotten worse as global supply chain challenges have only compounded issues. While demand and production has not been a problem, actually getting lumber to the customer has been difficult due to ongoing railcar and truck shortages.
Despite record pricing and volatility, pricing is still expected to remain elevated
Every single trader we spoke with this year expects pricing to remain well above historical levels. The range of results for both SYP 2x4’s and W.SPF #2&Btr 2x4’s was quite wide and many traders said their estimates were no better than a guess in this volatile environment. Results from respondents willing to make a forecast have the average 2022 price expectation for SYP 2x4’s at $825/mfbm and at $804/ mfbm for W.SPF 2x4’s.
Export and import markets are expected to remain stable, but Russia is an emerging factor
Despite the record pricing environment, most traders expect that export demand will be about the same (60%) and import demand will also be about the same (60%). Towards the end of our survey period, as the conflict in Ukraine escalated, some traders noted that decreased Russian exports into Europe should decrease the amount of imports coming into North America from Europe.
Interfor and Weyerhaeuser are leaders again in terms of quality and service
We found that most traders thought that Weyerhaeuser and Interfor were well-run companies that produced quality products with relatively strong service. Canfor, West Fraser, and Georgia-Pacific all saw declines in their score y/y. Interfor's service score has increased significantly over the last two years, particularly in the US South where several traders highlighted better service. Regardless of quality and service, traders acknowledged that all companies are struggling with filling orders as they navigate transportation issues (especially Canfor and West Fraser in Western Canada).