Hardwood Publishing says its latest Leading Hardwood Demand Indicator (LHDI), while rising in the March through May 2015 period, is falling behind the levels of 2014. A big unknown: how much lumber China will be buying.
The LHDI, a forecast of future demand for U.S. hardwood lumber based on residential and commercial construction, import/export trends, inflation levels, and job markets, was 106.3 in March, rising to 116.4 in April to 129.4 in May 2015, based on growth in non-residential construction; the normal seasonal bump in residential remodeling; and seasonally higher exports (January 2013=100). However, readings for all three months are below year-ago levels, and with lumber inventories elevated at secondary manufacturing plants in North America and abroad, actual sales growth will likely lag index growth.
Hardwood lumber inventories have increased in virtually every species, but none more than Red Oak. Sawmills gave mixed reports on sales, but even those reporting decent sales volumes were troubled by falling prices. “Last year we were told housing starts would increase 15-20%, and we all ramped up production accordingly,” one sawmill sales manager noted. “It would be best if we planned for no increase and then are pleasantly surprised.”
Many hardwood lumber sellers—exporters and non-exporters alike—are waiting for a flurry of Chinese business to bolster sales and stabilize prices. However, China remains a question mark. Several exporters say underlying Chinese demand is still strong but this year’s post-holiday sales bump has been unusually small because so much lumber is already in the market.