September 14, 2022
Forest Products
Lumber Stats: US production takes a step higher
Event: The Western Wood Products Association (“WWPA”) released June 2022 softwood lumber stats.
North American softwood lumber production in June was up 2.4% m/m but down 1.8% y/y — Production in June was up 2.7% y/y in the US and down 8.8% y/y in Canada. US production increased 6.1% m/m, driven by a 6.7% m/m increase in the US South (+6.4% y/y), a 5.3% m/m increase in US West (-2.4% y/y), and a 6.1% m/m increase in US Other (+2.7% y/y). In Canada, production was down 3.5% m/m, due to a 3.6% m/m decrease East of the Rockies (-6.1% y/y), and an 3.4% m/m decrease in British Columbia (-12.9% y/y).
US operating rates rises; Canadian operating rates fall more than production — According to the WWPA, the US operating rate increased slightly m/m to 85% in June (up from 84% in May) and was flat y/y. The operating rate in the US South was up 1 percentage point m/m to 87% (also up 1 percentage point y/y), while the US West was flat m/m in June at 82% (down 2 percentage points y/y). The Canadian operating rate was down 6 percentage points m/m to 71% in June (down 9 percentage points y/y), with the BC operating rate down 5 percentage points m/m to 65% (down 10 percentage points y/y), and the East of the Rockies down 7 percentage points m/m to 76% (also down 7 percentage points y/y).
North American softwood lumber consumption was up 0.7% y/y in June — According to the WWPA, June saw a 0.8% y/y increase in US softwood lumber consumption (~35 mmfbm), while Canadian softwood lumber consumption decreased 0.2% y/y (or ~1 mmfbm), leaving overall North American consumption up by ~34 mmfbm y/y. Although US consumption was up 4.5% m/m, housing starts decreased from 1,599k (SAAR) in June to 1,446k (SAAR) in July (please click here), a 9.6% decrease. With new housing typically comprising ~36% of US lumber market demand, we suggest that consumption is likely set to take a step lower m/m in July.
US softwood lumber imports increased 1.5% m/m on more non-Canadian volumes — US imports of Canadian lumber were down 1.9% m/m and down 3.7% y/y in June. Imports from British Columbia were down 6.6% m/m (-10.0% y/y), which were partially offset by imports from East of the Rockies, which were up 2.3% m/m (2.1% y/y). Non-Canadian imports increased 20.5% m/m, primarily driven by Europe (+45 mmfbm; +29.5% m/m). We expect lower US softwood lumber prices paired with tightening supplies within Europe to entice European suppliers to curtail shipments and shift focus back to domestic markets.
US log exports decreased 15.3% m/m — According to the WWPA, US softwood log exports were down 15.3% m/m to 104 mmfbm. A 32.8% m/m increase in exports to Canada and an 11.0% m/m increase in exports to Japan were offset by a 61.5% m/m decrease in exports to China and an 18.1% m/m decrease in exports to other countries. Exports were down 34.0% y/y, driven by an 83.8% y/y decrease in exports to China, primarily offset by a 60.2% y/y increase in exports to Japan.
Lumber pricing update — According to Random Lengths, the Framing Lumber Composite decreased to $541 as of September 8 (down $17 from September 1). Price trends were relatively flat; buyers continue to keep inventories lean as rising interest rates and declining mortgage applications continue to fuel ongoing headwinds in the housing sector.