The sharp decline in Chinese demand that began in June has continued into August, with significant impacts to Red Oak prices.

U.S. hardwood lumber exports to China totaled 35.6 million board feet (MMBF) in June, down 21% from May. From all indications, July data will probably show a similar decline.

Red Oak is a key species exported to China. Red Oak shipments to China fell from 10.3 MMBF in May to 6.1 MMBF in June, a 41% drop! Price levels for several Red Oak items were sharply lower last week, reflecting this dip in Chinese purchasing.

Many had speculated that the closure of Coastal Lumber would cause Chinese buyers to become more concerned about supply. However, Red Oak inventories at Chinese distribution yards are high, and they continue to use oversupply as a wedge to drive down prices. Reports of large numbers of containers not being picked up by buyers from ports in China appear to be mostly rumors. However, some exporters have decided to sharply reduce selling prices in order to keep lumber moving.

Many buyers and sellers anticipate that, with production still low, lumber supply will eventually become much more of concern once overseas markets pick up, perhaps as early as November.

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