Lumber prices in the US have started to increase since they reached a 5-year in a row decreasing in September last year. Still, they remain approximately 20% lower compared o 2015, when the winter conditions pushed down the prices, affecting the demand and distribution of wood. The market has also been unsure because the Softwood Lumber Agreement (SLA) between the US and Canada expired in October 2015. Its renewal is still under debate.
The housing and construction markets have begun to rise from February to April 2015, with around 30% and the prices increases were also due to the rise in demand for exported lumber. Though, this demand wasn’t big enough to sustain the prices, so starting June 2015 they began to fall. Reaching 5-year in a row decrease was caused also by a weaker demand from China, high production in both the US and Canada and the trade agreement coming to an end.
The SLA began in 2006 and it served to regulate imports from Canada as to reach a minimum price range. Most forests in Canada are owned by the state, compared to the US, where the majority of the forestry is owned by private investors. This led to various complaints on the fact that the Canadian government supported the market, bringing the US to a disadvantage. The SLA was especially designed to prevent such cases by regulating the market.
Now, with the uncertainty upon its renewal, the US shows little interest in resining it until the conditions are renegotiated. This also brings the risk of trade disputes between the US and Canada.
Further on, the US might put restrictions on the trade with Canada, because the Canadian government might sell their lumber at lower prices, a thing that could cause prices increases on the US domestic market because of a lesser competition.
Still, for the moment, the housing in the US started to increase since November 2015 with 10% every month and it expected to grow the most since 2007, when the financial crisis started.
Now, there is time until October this year to renew the contract, as the previous one prevented litigation in the 12 months after the agreement finished.
[gravityform id="1" title="true" description="true"]
