September 15, 2023
Forest Products
Lumber production was down 9.8% y/y in June
Event: The Western Wood Products Association (“WWPA”) released June 2023 softwood lumber stats.
North American softwood lumber production down 9.8% y/y in June — According to the WWPA, U.S. production was up 2.8% m/m in June (-6.0% y/y), driven by a 4.6% m/m increase in the U.S. South (-6.7% y/y), a 3.0% m/m increase in Other (-11.5% y/y), and a 0.2% m/m increase in the U.S. West (-4.2% y/y). In Canada, production was down 6.5% m/m (-16.9% y/y), due to a 9.8% m/m decrease in British Columbia (-26.3% y/y) and a 4.8% m/m decrease East of the Rockies (-11.1% y/y). Overall, North American production was down 9.8% y/y in June.
Imports of European lumber remain well below recent peak — European imports into the U.S. of 245 mmfbm were up 7.9% m/m (+23.7% y/y). With that, European imports comprised ~5% of U.S. softwood lumber consumption in June, down from the recent peak of ~10% (on 441 mmfbm of imports) in January 2023. U.S. imports of all non-Canadian lumber were up 15.8% y/y in June (+9.1% m/m), while imports of Canadian lumber were down 14.4% y/y (-8.5% m/m). Imports from British Columbia were down 24.4% y/y (-7.7% m/m) and imports from East of the Rockies were down 5.9% y/y (-9.0% m/m).
North American softwood lumber consumption down y/y — U.S. softwood lumber consumption down 4.3% y/y (-206 mmfbm), while Canadian consumption decreased 1.2% y/y (-8 mmfbm), leaving overall North American consumption down 3.9% y/y (-214 mmfbm). U.S. consumption was up 1.9% m/m, while Canadian consumption was up 22.2% m/m.
Operating rates were up m/m down and y/y — The U.S. operating rate was 80% in June, up 2 percentage points from 78% in May, and down 10 percentage points y/y. The operating rate in the U.S. South was up by 4 percentage points m/m to 82% (also down by 13 percentage points y/y), while the U.S. West operating rate was up m/m at 78% (down 4 percentage points y/y). The Canadian operating rate decreased 4 percentage points m/m in June, and was down 10 percentage points y/y at 61%. The BC operating rate was down 6 percentage points m/m to 51% (down 14 percentage points y/y), and the East of the Rockies operating rate was down 4 percentage points m/m to 67% (down 9 percentage points y/y).
U.S. log exports were down y/y — U.S. softwood log exports were down 23.8% m/m in June. A 76.5% m/ m decrease in exports to China, an 15.8% m/m decrease in exports to Japan, and a 12.0% m/m decrease in exports to Canada were partially offset by an 7.1% m/m increase in exports to other countries (i.e., excluding Japan, China and Canada).
August housing starts preview — The U.S. Census Bureau will release U.S. housing starts data for August before the market opens on September 19. Consensus estimates are calling for housing starts of 1,440k SAAR (-0.8% m/m, +3.9% y/y) and permits of 1,445k SAAR (+0.1% m/m, +0.1% y/y).
Highlights from the RBC Global Industrials Conference — We hosted Interfor in Las Vegas this week as part of the RBC Global Industrials Conference (please click here). From our discussions, management sees current lumber markets to be in equilibrium and is optimistic about the outlook for 2024. They noted that against a challenging 2023, interest rate cuts and normalized European imports could provide a runway for a meaningful recovery in 2024.
West Fraser acquires Spray Lake Sawmills — West Fraser announced on September 6 that it had agreed to acquire Spray Lake Sawmills in an all-cash transaction of CAD 140MM. Spray Lake Sawmills is located in Cochrane, Alberta, and has an annual lumber capacity of 155 million board feet. The transaction implies a valuation of CAD$903/mfbm (~USD$668/mfbm).