While there is little in the domestic economy to be excited about, we can still find rays of hope in the latest job market and housing sales reports. Slow, steady improvements in the U.S. economy will drive like improvements in building products demand through year-end, while demand for industrial materials will remain very strong.

That said, hardwood lumber markets are in the middle of—or the front end of, depending on who you ask—a market correction driven by slower exports and higher lumber production. After 18 months of underproduction and rising prices, the supply shortfall has now narrowed for most species, and inverted for 4/4 red oak and hard maple. Still-strong demand and limited production increases will keep white oak and walnut prices especially firm. Some avoidance of stain-prone species will keep hickory supplies tight and soft maple supplies from getting too far ahead of demand.

Slower June-July exports were expected due to European vacations and larger-than-normal inventories in China. On the positive side, the slowing has allowed producers to rebuild depleted inventories and sawmills to do some much-needed maintenance. Most Canadian sawmills will be down for three weeks in Jul/Aug. How soon and how aggressively Chinese buyers return will determine, to a large extent, the depth and duration of this market correction.