Hardwood Oversupplies Recovering Markets

Favorable weather has allowed many sawmills to replenish log decks. While most indicate some reluctance to increase production “too much,” lumber price improvements have encouraged many to start up idled mills or increase hours. In general, we expect prices to firm a bit more through mid-May and then gradually fall until demand catches up with the added production. Hardwood Publishing offers Hardwood Review, Hardwood Leader, WoodLogics and other services  for lumber buyers and sellers in the wood manufacturing industries

The good news is that the economic recovery in the U.S. and the expansion of export markets for hardwood lumber should continue, even if demand increases are slower to come than production increases. Optimism about future business has been growing with each successive weekly survey, and foreign buyers, concentration yards, distributors, and end-users in the domestic flooring, furniture, cabinet and industrial sectors will all need more lumber.

While our two-month price forecasts have turned mostly down for the moment, we do not anticipate a wholesale collapse in hardwood markets. Mills will be discouraged from going “all out” with production increases by tight credit markets, limited working capital and/or low profitability. Most will not hesitate to cut back production if inventories rise, and transportation costs will remain a major drag on profitability.

The hardwood industry has historically oversupplied recovering markets, and will likely do so again. However, our smaller, cash-constrained industry has less capacity to do so than in recoveries past.

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