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Prices for logs on the US West Coast have increased due to the natural disasters, housing construction, Asian competition and labor constraints.
According to the Daily Astorian, a confluence of factors is lifting Northwest log prices at a time when the US demand for lumber is only expected to grow. Natural disasters, from wildfires in the West to hurricanes in the South, have restrained the supply of logs from US forests.
Also, housing construction and remodeling have increased the domestic lumber consumption as Asian buyers continue to compete with sawmills for US logs and environmental laws that restrict logging on federal lands are unlikely to be relaxed while finding enough workers to harvest and process logs will only get tougher.
The Canadian timber industry, traditionally a major supplier, is unlikely to provide much relief: Timber harvests in British Columbia are declining due to damage from mountain pine beetles while a trade dispute is expected to further limit lumber shipments from that nation.
“The big question for 2018 is if harvest levels should be accelerated, and if so, by how much?” said Mike Mackelwich, vice president of timberland operations for Pope Resources.
As the Daily Astorian reported, strong prices would indicate that forestland owners are in prime harvest time, but the number of standing trees in the Northwest isn’t infinite. In the region’s private coastal and inland forests, the harvest level is already reaching the sustainable yield and may exceed timber growth by 2020, said Rocky Goodnow, vice president of North American timber service at Forest Economic Advisors.
Prices for Douglas fir on the West Coast went up 23% from about $650 to more than $800 per 1,000 board feet, while the price of coastal hemlocks surged 20 percent from roughly $500 to $600 per 1,000 board feet in 2017.
“It’s pointing to the tight supply conditions in the West,” Goodnow said.
Landowners are winning under current circumstances while the profit margins of sawmills are shrinking, said Tim Atkinson, vice president of sales for the Stimson Lumber Co. At a certain point, mills just have to throw their hands up and stop buying, he said. “You’re already seeing people balk at these situations.”
The demand for lumber from North American mills is projected to increase by about 2 billion board feet a year, reaching nearly 70 billion board feet in 2022, up from roughly 60 billion board feet in 2017, Goodnow said. Any attempt to escalate logging on public lands will likely be thwarted with lawsuits, he added.
With constricted supplies in the West, this demand is expected to have a big effect in the U.S. South, which is also likely to export more to Asian markets. “China is going to find the timber where it can,” Goodnow said. Moreover, trade is expected to affect incoming lumber supplies.
Late last year, the US decided that Canada was subsidizing its timber industry in violation of the Softwood Lumber Agreement, resulting in standard duties on lumber of more than 20 percent. Canada is expected to challenge this finding through the World Trade Organization, which may take three to five years to resolve, according to the Daily Astorian
The US is expected to “dig in” on its position at a time when the broader trade relationship with Canada is precarious due to negotiations over the North American Free Trade Agreement, or NAFTA, Atkinson said. Apart from the question of sheer timber supply, U.S. log and lumber production also challenged by labor availability.
“We expect real constraints on the labor side,” said Goodnow.
One factor is the opioid abuse epidemic, which is influencing the decline in labor force participation, he said. “This is hitting the rural communities where the industry is located.”