Nearly three years ago, after the 2016 US presidential election, we posted “President Trump and the Price of Timber” in response to messages and calls querying the implications of the new administration on the US forest products industry. This week, with radiating global markets causing investors to count to ten and check their Geiger counters, the inbox swelled again with the concerns of investors and firms exposed to building products generally and timber investments specifically.

Let’s revisit the key points from 2016 to review what we know and confirm what remains worth watching as we move forward.

• Forest supplies: trees grow, regardless election outcomes and the state of the global economy. While forest clearing accelerated in Brazil recently, the physical facts affirm that the United States, and the South in particular, continues to grow trees and support a sustainable wood basket…
• Capital investment: the forest industry added billions of board feet of lumber capacity since 2012. Iron flows to the resource. Just recently, this slowed down with stagnant demand for housing and wood products, as reflected in growing downtime at mills across the US and Canada…
• Economic growth and housing markets: in 2016, we asked if the election would “somehow lead to uncertainty, slower economic growth, and fewer housing starts?” While the US economy continues to grow and housing starts inch upwards, uncertainty in markets exists. Grep Ip of the Wall Street Journal noted a reduced commitment to open or free markets in the US and elsewhere and, “in response, investors are rearranging portfolios, businesses are rethinking investments and policy makers are struggling to respond—all of which are pushing the global economy closer to recession.”
• Trade and legislation: three years ago, we noted how this “has the most direct potential impact on wood markets and timber prices…depending on trade policy with China and negotiations with Canada.” In our analysis of the forest industry, trade with China (via Canada or the US) and Canada are critical, measurable sources of US wood demand and softwood lumber production, and thus affect timber prices. As flows to China fall from North America, production in the United States follows suit along with timber price expectations.

In our models, stronger timber prices depend on growing demand, through increased housing starts and a growing population, and robust trade with a range of countries across a variety of forest products. Uncertainty reigns in my conversations with others, as investors and executives seek firm ground during a turbulent time.