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Key takeaways:
A potential hike in tariffs imposed on Canadian exports to the US as early as January will highlight developments that could define first-quarter trends in the softwood lumber market.
President-elect Donald Trump has threatened to impose a 25% tariff on commodities imported into the US shortly after he is inaugurated on January 20. Traders are hopeful that the tariff threat represents a Trump administration strategy to begin negotiations surrounding US foreign trade.
Many traders have expressed a perception that market conditions and the broader economy will prosper in 2025 with a more business friendly administration in the White House.
However, if the tariffs are imposed, they could significantly alter the flow of softwood lumber and panels from Canada to the US. Some Canadian producers have already noted that they will withdraw from the US market rather than deal with the rising costs.
If returns on shipments to the US plunge, many Canadian mills could funnel a larger percentage of production offshore, especially to Pacific Rim destinations. But weak economic conditions and competition from other suppliers worldwide in key markets such as China and Japan will present headwinds to any efforts among Canadian exporters to increase shipments to that region.
Read our report on the relationship between the US and Canadian wood products supply, with detailed analysis on how tariffs will impact exports.
Other policies installed by the new Trump administration also will command close attention. Interest rates are of particular concern among some traders who have expressed apprehension that rates could hover at current levels or even rise, which might undermine demand for housing.
Housing starts declined in November but permits jumped more than 6% on strength in multifamily units. Meanwhile, while homebuilders were neutral in their sentiment of the single-family housing market, there was optimism for 2025. Traders will look at myriad data when attempting to gauge housing market trends in 2025.
Lumber supplies in various North American markets will draw unusually close attention. January will be the first time some of the largest curtailments and closures announced in 2024 will permanently take production offline. The potentially resulting tighter supplies could generate more urgency among buyers to cover near-term and spring needs in the first quarter.
Southern Pine traders hope the first quarter sets the stage for a rebound after a difficult year in 2024. Production outpaced demand for most of the year, sustaining steady downward pressure on prices.
A traditional spring buy among treaters was conspicuously absent from the Southern Pine market last year. Any signs that treaters will seek to bolster inventories for the spring building season would be encouraging for SYP traders.
Further, contentious labor negotiations involving the International Longshoreman’s Association could lead to work disruptions at East Coast and Gulf Coast ports in the first quarter. A labor strike among dockworkers could disrupt softwood lumber imports and exports, and impact the broader economy.
The US Department of Commerce has delayed its sixth annual review of duties on Canadian lumber shipped to the US originally scheduled for February. The deadline to announce a preliminary decision was pushed back as much as 90 days.
Winter weather is a constant first-quarter wildcard. A severe, extended winter could impede consumption and cause a late start to the traditional spring building season, while mild conditions could have the opposite effect.
Trends in European shipments to the US will set the tone for offshore trade as 2025 begins. US imports from Europe declined last year, but remained strong by historical standards.
Looking deeper into the coming year, any change in the wars in Ukraine and the Gaza Strip could alter worldwide trade and global economies in general.