Pacific Northwest Log Prices to Rise in Q1 2013

Posted: 01/10/2013 1:45PM

 

Charlotte, N.C. – After muted gains in the second half in 2012, log prices in the Pacific Northwest are climbing back to pre-recession levels. Forest2Market projects that they will gain additional ground in 1Q2013, the result of the ongoing recovery taking place in both domestic and export markets.

The U.S. housing market turned the corner in the last half of 2012, and demand for forest products quickly followed. In November, lumber prices were $100 per thousand board feet (MBF) above their November 2011 level. Forest2Market projects the housing recovery will continue to pick up steam in 2013, with annualized housing starts hitting the 1 million mark by the end of the year.

“Asian appetite for Northwest forest products strengthened in the second half of 2012 and looks strong moving into the New Year,” says Gordon Culbertson, Manager of Forest2Market’s Pacific Northwest business. “Inventories of imported logs and lumber products in China have declined by nearly 50 percent from a year ago, while the Chinese Government has renewed efforts to stimulate affordable housing construction. Russia’s market share, traditionally the largest supplier of Chinese logs and lumber, has continued to erode, leaving Chinese buyers to fill the shortage with deliveries from North America and New Zealand.”

According to Forest2Market’s Delivered Price Database, prices for logs delivered to Northwest seaports for export loading to Asia revived as 2012 progressed, with Douglas fir prices gaining back $72 per MBF of the $78 per MBF they lost in the first half of the year and Hem-fir hitting a 2012 peak in November at $558 per MBF. Strong demand from China, especially for hem-fir logs, and Japan’s renewed interest in higher quality second growth Douglas fir logs will bolster prices going forward.

Supply disruptions will add to the upward pressure on prices in early months of 2013, as mills attempting to increase production face tight log inventories, difficulty stimulating new log deliveries and—in some cases—lost production.

Weather is, in part, responsible for the supply disruptions, according to Culbertson. “The long, hot, dry summer of 2012 across the Northwest led to many days of curtailed logging due to fire risk. This was followed by heavy rains in the fall and heavy rains and snowfall at low elevations in December, both of which hindered logging and hauling operations and limited the ability of mills to replenish their log supplies.”

A combination of supply constraints and stronger demand from both U.S. and export markets will lead log prices higher in 2013. Douglas fir prices, for instance, will reach into the mid-$600s by the end of the first quarter, with the largest increases occurring in western Oregon, where the supply shortage is more acute.

Forest2Market’s Delivered Price Benchmarks

Forest2Market offers delivered price benchmarks for logs in the Pacific Northwest, the U.S. South and in the Midwest, and will soon offer the same service in the Northeast. Customers use our benchmarks to compare their performance to the market and make data-driven decisions to improve their performance.

Source: Forest2Market

 

 

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