January 16, 2023
Forest Products
Lumber Stats: Production lagging 2021 levels
Event: The Western Wood Products Association (“WWPA”) released October 2022 softwood lumber stats.
North American softwood lumber production in October was up 0.6% m/m but down 4.8% y/y — According to the WWPA, North American lumber production year-to-date through October 2022 was up 1.8% in the US, and down 8.8% in Canada, while lumber production in October was down 1.7% y/y in the US and down 9.8% y/y in Canada. In October, US production increased 2.8% m/m, driven by a 2.9% m/m increase in the US West (-12.3% y/y), a 2.8% m/m increase in US South (+5.4% y/y), and a 2.9% m/m increase in US Other (-1.7% y/y). In Canada, production was down 3.1% m/m, due to a 2.3% m/m decrease East of the Rockies (-2.9% y/y) and a 4.5% m/m decrease in British Columbia (-20.7% y/y).
Operating rates: US up, Canada down m/m — The US operating rate increased m/m to 82% in October (up from 80% in September) but was down 5 percentage points y/y. The operating rate in the US South was up 3 percentage points m/m to 89% (down 1 percentage point y/y), and up 2 percentage points m/m in the US West to 73% (down 10 percentage points y/y). The Canadian operating rate decreased m/m to 70% in October (down 9 percentage points y/y), with the BC operating rate down 2 percentage points m/m to 57% (down 16 percentage points y/y), and the East of the Rockies also down 2 percentage points m/m to 79% (down 5 percentage points y/y).
North American softwood lumber consumption was down 0.8% y/y in October — October saw a 1.5% y/y decrease in US softwood lumber consumption (~65 mmfbm), while Canadian softwood lumber consumption increased 4.8% y/y (or ~25 mmfbm), leaving overall North American consumption down by ~40 mmfbm y/y. US consumption was up 1.6% m/m, despite housing starts decreasing by 4.2% m/ m from September to October (before seasonal adjustments; please click here for our latest housing starts update). New housing typically comprises ~35% of US lumber market demand.
US softwood lumber imports increased 3.9% m/m — US imports of Canadian lumber in October were up 1.4% m/m but down 6.9% y/y. Imports from British Columbia were down 7.1% m/m (-9.3% y/y), while imports from East of the Rockies were up 7.9% m/m (-5.3% y/y). Non-Canadian imports were up 17.6% m/m, primarily driven by a 28.6% m/m (38 mmfbm) increase from Europe.
US log exports increased m/m but remained much lower y/y — US softwood log exports were up 6.1% m/m in October. A 104.3% m/m increase in exports to China, a 1.5% m/m increase in exports to Canada, and a 62.3% m/m increase in exports to other countries (i.e., excluding Japan, China and Canada) were partially offset by a 52.0% m/m decrease in exports to Japan. US log exports were down 51.3% y/y, driven by decreased y/y exports to China, Japan and Canada, which were only slightly offset by increased y/y exports to other countries (-65.6%, -60.8%, -32.6%, and +5.2%, respectively).
Lumber pricing update: bouncing off the bottom? — According to Random Lengths, the Framing Lumber Composite increased to $377 as of January 12, posting its first weekly gain since late October and ending a 10-week slump (during which the composite fell $124), as markets gained momentum following the holidays.
We think 2023 could be a challenging year for wood products — Our outlook for 2023 (please click here) includes adjustments to our commodity deck that reflect a more bearish stance on wood products for the year ahead. We are hoping that a difficult 2023 will lead to a number of permanent capacity closures, similar to what we experienced in 2019, with most of the curtailments occurring in BC to balance demand with the declining timber supply.