2022 Global softwood lumber market update
Friday 25 Nov 2022
Lumber Markets – Global Trade
Global trade of softwood lumber fell about 10% in the first half of 2022
compared to the same period in 2021. Most of the decline was driven by lower
lumber demand in China, the US, and Germany. The slowdown in lumber consumption
worldwide came at an opportune time since European countries, North America, and
Asia boycotted Russian forest products after the country invaded Ukraine. As a
result, Russia's lumber exports fell by over 30% y-o-y during the first six
months of 2022 and are expected to fall further in the year's second half.
Lumber Markets – North America
A weakening in wood demand and sharply falling lumber prices reduced operating
rates throughout North America during the spring and summer months. The most
significant declines in production were seen in British Columbia and Western US.
Average prices for southern yellow pine and spruce/pine/fir in western and
eastern Canada fell by about 50% from March to July 2022. Despite the recent
price plunge, it is essential to note that the current price levels are close to
their five-year averages and 15-30% higher than the average prices over the past
ten years.
Lumber Markets – Europe
Russia's invasion of Ukraine and the boycott of Russian forest products created
much uncertainty in the European lumber market. Many expected that lumber flows
from the east into Europe would halt reasonably quickly. As a response, buyers
started to build inventories with the expectation that supply would get tighter
in the year's second half, according to Wood Resource Quarterly. However, this
short-term demand upswing promptly faded, and lumber prices softened in early
summer.
Lumber exports from the Nordic countries fell about five percent y-o-y during
the first five months (the latest available statistics). In addition, shipments
to China took a big hit, with about 30% less imported in the 2Q/22 than in the
1Q/22. As a result, volumes in the 2Q/22 were close to being the lowest in seven
years.
Lumber Markets – China
In 2019, China was the world's largest importer of softwood lumber, importing
just over 27 million m3. However, in the following two years, import volumes
fell 44%, and imports in 2022 are on pace to reach their lowest levels in ten
years as demand has fallen in the construction sector. The lumber volume from
Russia declined the most from 2021 to 2022, but Ukraine, Canada, and Chile are
the countries that lost the most significant amounts in market shares.
Average import values have remained relatively stable in 2022, with 2Q/22 lumber
prices averaging $260/m3, up from $255/m3 in the previous quarter. It is
important to note that, in the past, Russian lumber prices in China were
typically lower than those of Canada and the Nordic Countries - in 2022, they
have been practically the same.
Lumber Markets – Japan
Japan decreased the importation of lumber from 6.1 million m3 in 2017 to an
estimated 4.7 million m3 in 2021. The importation of sawlogs for domestic
sawmills has also declined over the same period, with local logs being used
increasingly instead. The Japan Lumber Journal reports that the domestic share
of total log consumption is now almost 80%.
However, during the first half of 2022, the declining lumber import trend turned
around, with volumes increasing 18% y-o-y. Most of the increase was in shipments
from Finland, Sweden, Chile, and Russia, while Canada reduced supply the most
because of solid demand and higher prices for lumber in the US.
Sawmill Gross Margins
Sawmills worldwide can look back on a few years with historically high profits
due to record high lumber prices and limited increases in wood raw-material
costs. Gross margins, revenues from lumber sales and byproducts minus sawlog
costs, have for sawmills on most continents been higher the past two years than
during most of the period since 1995 when WRQ started tracking this indicator of
profit levels.
The US lumber market saw the most dramatic fluctuations in gross margins in 2021
and 2022, when lumber prices saw unprecedented volatility. The Nordic countries'
lumber prices stayed elevated in the first two quarters of 2022, resulting in
high profits into the 2Q/22. After that, however, wood markets started to weaken
domestically and internationally, and sawmills announced downtime during the
fall.
Source: Wood Resources International
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