This is the third in a series related to Forisk’s 2014 mid-year forecast of U.S. timber prices.

Question

In the U.S., where does the softwood lumber come from that builders use to construct and remodel homes?

Short Answer

Three sources account for approximately 95% of the softwood lumber used in the United States: the U.S. South, the Pacific Northwest, and Canadian imports.

Discussion for Diehards

Understanding which regions drive lumber volumes helps us account for structural changes in the market when forecasting. For example, the U.S. increased its market share of domestic lumber at the expense of Canadian imports. The U.S. share has risen from ~61% in 2004 to ~71% in 2014. In addition, the U.S. South has grown market share of domestic softwood lumber production from ~34% in the mid-1980s to ~50% for the past five-years. This growth has come primarily at the expense of the Pacific Northwest.

Projecting softwood lumber supplies requires a hard look at each of the core lumber sources.

• To what extent can Canada increase imports? (Short answer: in the short term, room exists to grow; in the long-term; the Mountain Pine Beetle has reshaped the sector).
• To what extent can the Pacific Northwest recapture U.S. market share? (Short answer: the Pacific Northwest has permanently ceded the yellow jersey to the South, but retains upside to fill the hole of a diminished Canadian sector.)
• How much could the U.S. South lumber sector grow relative to its historic peaks? (Short answer: once new and announced capital investments are in place, the South can exceed its historic peaks from 8-9 years ago.)
• Could the U.S. North become a dominant softwood lumber producing sector relative to the South and Northwest? (Short answer: no. Long answer: no.)

 

U.S. softwood lumber exports provide an interesting story. They comprise a small share of U.S. production and have not exceeded 2 BBFT since 1994. Yet, softwood lumber exports grew three-fold since 2008 and may approach 1.9 BBFT in 2014. The noteworthy change has been the shift in volume by region as the South, in 2014 YTD, has grown its share of U.S. lumber exports from 35% in 2013 to 42%, largely at the expense of the West. At the end of the day, however, the U.S. housing market will dictate the export market. If Uncle Sam energizes home construction, those export volumes will stay home.

To learn more about the 2014 Mid-Year Forisk Forecast or Forisk’s market-specific forecasts of stumpage (timber) and delivered wood prices for individual wood-using facilities or timberland ownerships in the US, contact Brooks Mendell at bmendell@forisk.com, 770.725.8447.