The outlook for global lumber markets hinge on demand forces in the key consuming regions of the world. More specifically, it will be the lumber demand trends in the U.S., China and Western Europe that will shape global markets in 2014 and beyond. The following analysis by International WOOD MARKETS Group is derived from its consultants’ extensive travels and market investigations that, in turn, are the basis of six of its strategic outlook reports and analyses that were produced in the second half of 2013.
While the supply dynamics are becoming more constrained in some areas, the ability for sawmill capacity to ramp up production is an all too familiar dynamic that continues to over-shadow the global lumber market. However, if global demand can achieve a 4% (or higher) gain in 2014, the outlook should be very good for lumber and sawnwood prices. In the November issue of the WOOD MARKETS Monthly International Report, a 3.4% gain is forecast for 2014 by WOOD MARKETS which will result in favourable – but not spectacular – lumber prices.
The U.S. market outlook for 2014 (and beyond) was assessed in great detail in WOOD MARKETS 2014 – The Solid Wood Products Outlook: 2014 to 2018. While there will be a definite tightening in supply side dynamics in Canada, U.S. output is expected to drive lumber production over the coming five-year period. However, it is the pace of U.S. housing starts that will set the tone for the lumber (and panel) markets in 2014. After a strong gain in new U.S. housing starts of 28.5% in 2012 (an increase of 175,000 over 2011), 2013 will end up with a more lackluster gain of only 18.5% (+145,000 units) or about 925,000 new housing starts.
In 2013, the North American lumber supply chain became more balanced – starting in the second quarter 2013 – as production started to swamp overall demand. By fourth quarter 2013, a much better balance between supply and demand had developed, setting the stage for a good start to 2014. However, without strong gains in new residential housing starts increases of 20% of more (or 175,000 or more units), it is more likely to just be a “good” year overall, but still could feature some supply chain shocks during the year that could create price spikes both up and down. WOOD MARKETS is predicting a steady growth in housing starts in 2014, but less than the 20% that is needed to support a very strong market.