Sawn softwood trends out of North America

Following on positive growth in North American consumption in 2010, the sawn softwood market showed only modest signs of continued recovery: consumption in 2011 rose by just 1% to 73.0 million m3 according to this month’s WOOD Markets Monthly International Report.

Despite relatively flat consumption, however, North American producers were able to increase their output by 4.4% to 83.4 million m3 (53 billion bf nominal) as producers ramped up exports by 10.2% (to 26.8 million m3).

Although exports to Japan, Europe and the Middle East/North Africa changed very little, North American exports to China continued to experience tremendous growth. In 2011, Canada’s exports to China grew by 2.9 million m3 to 7.5 million m3 (+62%), while the U.S. increased its exports by 640,000 m3 to 981,000 m3 (+189%). The mid-term outlook for China calls for rising dependence on imported sawn softwood lumber from North America, Europe and Russia as, despite the temporary dip in imports in late 2011 and into 2012, China’s long-term growth rate in consumption is expected to far exceed its own domestic capacity.

In terms of price trends, since hitting a low in the first quarter of 2009, North American sawnwood prices have trended higher; however, they remain much lower than prices seen during the housing boom (figure 5). In Europe, following the market collapse in 2007 through 2009, reduced supply helped lift prices dramatically in 2010. However, economic weakness caused prices to trend lower in 2011. In the aftermath of the tsunami in Japan, prices there experienced a brief uptick but have gradually trended lower due to reconstruction efforts taking longer than first anticipated.

In the case of China, prices from 2010 to the middle of 2011 trended higher. However, in the latter months of 2011, prices in China began to slip as the Chinese government tried to respond to potential overbuilding in the residential construction sector through a tightening of financial policies. In recent months, an easing of these credit policies may have helped exporters, who are reporting improved volumes and prices that are inching higher.

For 2012, the key trends to watch for are how the euro sovereign debt crisis will resolve itself, how strong a recovery there will be in the U.S. housing market, and what incremental demand gains will come from Japan and the Middle East/North Africa. The answers to these questions will likely influence the collective supply response of producers within the UNECE region.

Source: International Wood Markets Group, www.woodmarkets.com

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