RBC Notes November 15, 2022
Forest Products
Lumber Stats: North American production ramps up
Event: The Western Wood Products Association (“WWPA”) released August 2022 softwood lumber stats.
North American softwood lumber production in August was up 10.7% m/m and 5.4% y/y — Production in August was up 11.3% y/y in the US and down 4.5% y/y in Canada. US production increased 9.1% m/m, driven by a 6.2% m/m increase in the US South (+13.7% y/y), a 14.0% m/m increase in US West (+7.6% y/y), and an 9.2% m/m increase in US Other (+11.6% y/y). In Canada, production was up 14.1% m/m, due to a 24.3% m/m increase East of the Rockies (-0.9% y/y), which was slightly offset by a 0.6 % decrease m/m in British Columbia (-10.3% y/y).
US operating rates fall m/m; Canadian operating rates flat m/m — According to the WWPA, the US operating rate decreased m/m to 84% in August (down from 88% in July) but increased 3 percentage points y/y. The operating rate in the US South was down 7 percentage points m/m to 87% (up 2 percentage points y/y), while the US West was also down 1 percentage point m/m in August at 78% (up 2 percentage points y/y). The Canadian operating rate was unchanged m/m at 65% in August (down 7 percentage points y/y), with the BC operating rate down 9 percentage point m/m to 55% (down 10 percentage points y/y), while East of the Rockies was up 6 percentage points m/m to 72% (down 5 percentage points y/y).
North American softwood lumber consumption was up 10.2% y/y in August — According to the WWPA, August saw a 12.0% y/y increase in US softwood lumber consumption (~509 mmfbm), while Canadian softwood lumber consumption decreased 1.8% y/y (or ~11 mmfbm), leaving overall North American consumption up by ~498 mmfbm y/y. US consumption was up 8.1% m/m, which aligns with the stronger m/m trend in housing starts, which increased 13.7% m/m from 1,377k (SAAR) in July to 1,566k (SAAR) in August (please click here for our latest housing starts update). New housing typically comprises ~35% of US lumber market demand.
US softwood lumber imports increased 6.2% m/m on higher Canadian volumes — US imports of Canadian lumber were up 10.0% m/m and 9.4% y/y in August. Imports from British Columbia were up 17.1% m/m (+16.6% y/y), while imports from East of the Rockies were up 4.4% m/m (+3.8% y/y). Non- Canadian imports were down 9.5% m/m, primarily driven by a 15.5% m/m (-31 mmfbm) decrease from Europe, which was partially offset by a 12.8% m/m (+7 mmfbm) increase from Latin America.
US log exports decreased 4.5% m/m — According to the WWPA, US softwood log exports were down 4.5% m/m. An 11.3% m/m decrease in exports to China, a 1.7% m/m decrease in exports to Japan, and a 5.1% m/m decrease in exports to Canada were slightly offset by a 1.7% m/m increase in exports to other countries. US log exports were down 42.7% y/y, driven by decreased y/y exports to China, Canada, and other countries (-70.4%, -22.9%, and -28.0%, respectively), partially offset by increased y/y exports to Japan (+17.2%).
Lumber pricing update — According to Random Lengths, the Framing Lumber Composite was $479 as of November 11, down $18 from the start of November. Lumber pricing trends for this week were down; uncertainty about coming trends in the economy are continuing to keep buyers in a conservative mode.