The global lumber industry is facing a period of significant change, with shifting tariffs, unpredictable market conditions and evolving consumer demands reshaping the landscape. These factors are creating both challenges and opportunities for businesses navigating this dynamic environment.
At a live recording of The Lumber Word Podcast from Montreal Wood Convention, Dustin Jalbert, senior economist for wood products at Fastmarkets, joined Ashley Boeckholt and Gregg Riley from the forest products team at Sitka USA, and Charles DeLaTorre, CEO of Industrial Forest Products.
The discussion at the Montreal Wood Convention covered various aspects of the lumber market. Key points included the impact of tariffs on spruce and pine markets. The conversation highlighted the uncertainty in the market, with cash prices below futures indicating market stabilization.
A key theme throughout the conference centred around the importance of having conversations with other people in the market. While data is a significant tool, it can only take you so far in the lumber market. It is crucial to combine that data with an understanding of what experiences other industry players are having.
Tariffs top of mind
Jalbert noted that there has not been much market curtailment in the Canadian market since the tariffs were announced. Cash prices for Canadian spruce supply have sat above break even levels for many Canadian mill operators.
“There’s this tension between building in tariff risks into the marketplace, but if the market is pretty thinly traded, how is it going to flesh out?” Jalbert said.
Despite the lack of market curtailments, the potential impact of tariffs remains top of mind for many in the industry. The high levels of uncertainty around how tariffs will be implemented has led to widespread confusion in the market.
“There’s so many different angles of tariffs that are out there. There’s the 25% tariff on Canada and Mexico, but USMCA compliant goods are exempt, so lumber is in the clear. But, then we had the reciprocal tariffs announcement on April 2.”
However, now the big question revolves around the Section 232 investigation into wood products imports and their potential threat to national security. The timing of when the findings will be announced remains uncertain, but it has raised red flags for the wood industry.
Other products that have been the subject of 232 investigations are strategic, industrial goods such as automobiles, steel and aluminium. That wood products are being given the same treatment has caught the attention of market participants.
“Everyone is figuring things out on the fly, we’re the market experts on this and we’re just trying to keep up.”
Recent demand developments
Demand across the wood products industry has remained stable, trending around 50 billion board feet of consumption on an annualized basis. Demand has been oscillating in the recent market volatility, but remains above 2019 levels. However, consumption is around 9% below the pandemic peak. This has left the industry feeling that demand is off, despite reasonable consumption levels.
The Fastmarkets Repair and Remodel Index (RRI) shows that the construction industry has been surprisingly resilient. This resilience has come the face of a high interest rate environment and slowing discretionary spending among consumers. But similar to the broader consumption trend for softwood lumber, overall the RRI is lower, correcting off the home improvement boom during the pandemic.
“At the start of the year, there was plenty of reason to believe that interest rates would be falling under various economic pressures and things were going to slow down.”
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Outlook for the market
Attempting to make predictions for the coming months in lumber market is difficult during such a volatile period.
“Coming into this conference, I was more in the bearish side given the trajectory that tariffs seemed to be taking and what that would mean for the wider economy. Everyone has been watching the financial markets closely, and when we saw gold selling off and bonds selling off everyone was starting to feel pretty bearish,” Jalbert said.
He also noted a general sentiment of resignation at the conference, with most people adopting a ‘wait-and-see’ approach amid the uncertainty.
“I’m feeling less bearish now than I did coming into this week, but everyone seems to be feeling like they’re just muddling through.”
Interested in learning more? At Fastmarkets we offer weekly and monthly monitors of lumber markets alongside price data, analysis and forecasting. Speak to one of our experts to find out more.
