Timber!!! – The ups and downs of the volatile forest products market – American Journal of Transportation

Credit: Original article can be found here

In the past twelve months, prices for lumber and forest products hit a historic high and then pricing crashed. What’s next?

It was Bunyansque, for over a year lumber prices rose like…well, like a redwood tree and then crashed, as if Bangor, Maine’s own Paul Bunyan had yelled timber. What happened?

The short answer is a lot. And it takes a bit of a look back to understand the unusual market dynamics that caused both the growth spurt in lumber prices and the subsequent crash…and the potential rebound.

It’s not surprising that the U.S. is the world’s largest lumber market. However, even with a vast inventory of domestic forest to supply lumber and related products, the U.S. is also the world’s largest importer of lumber. Imported lumber generally accounts for 30% of the U.S. consumption in any given year. And with the vast resources of lumber-producing Canada next door as a near-shore supplier, the U.S. has relied on its northern neighbor to fill in a large portion of the gap – particularly in softwoods – between domestic production and consumption. Descartes-Datamyne (a company that tracks U.S. imports and exports) data on U.S. lumber imports and exports (see charts) observed that the “U.S, dwarfs other top countries as primary destination country for Canadian exports.” But also noted that the “Top countries of destination for U.S. lumber are China (1) and Canada (2),” illustrating the complexity of the lumber industry in North America.

And when it comes to lumber, the relations between the U.S. and Canada aren’t good. Lumber sales from Canada to the U.S. have been trending downward for the past five years.

Of course, forest product trade between the U.S. and Canada doesn’t exist in a vacuum. There are many other economic forces influencing trade trends. Taken together, the trade in forest products is a complex weave of suppliers and producers that can change on a moment’s notice.

Naturally, China – as the Descartes-Datamyne data points out – figures prominently into the mix as a largely raw material importer and forest product exporter. And there are other exporters like Russia, and the Scandinavian countries, Southeast Asian producers like Malaysia, Vietnam and Indonesia, along with countries like New Zealand, Australia and the European, African and South American nations – the latter two often supplying exotic woods.

Oh Canada, Redux

The U.S. and Canada have for nearly four decades been embroiled in a lumber dispute (see AJOT issue 712, published 9/29/20, “Misery Whip” for a more detailed account). And a succession of administrations on both sides of the border have failed to find common ground for an agreement. After the last Canadian-American lumber agreement expired in 2015, a “new” round of talks began in 2017. In the meantime, the U.S. Department of Commerce (DOC) levied countervailing duties on Canadian softwood lumber imports, arguing Canada’s lumber industry is unfairly subsidized by the Canadian government, as most of Canada’s lumber comes from publicly-owned forests, as opposed…

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