Hardwood lumber prices and log prices including oak, cherry, walnut, and maple are tied to the global markets. Sawmills and other suppliers of wholesale lumber of hardwood and softwood have been wondering where are lumber & log prices going? Timber traders and sawmills now find China as a major market. During the first half of 2011, the value of U.S. log exports to China is up 140 percent, while the total quantity is up 180 percent. These figures are both up but the fact that quantity is up significantly more than value shows that there is downward pressure on prices. The problem with government statistics is that there is a time lag. The latest export statistics are through July 2011 and we are now in September 2011. Therefore, when asking what is happening currently, one must keep their eyes and ears open for forest product insider opinions. Traders appear to be voicing the same sentiment that the statistics are showing, log prices in the future may drop, in part, due to a possible future slowdown in China. U.S. sawmills would benefit from a drop in prices, while log traders would suffer. In looking at U.S. lumber including hardwood lumber and softwood lumber through July, the total quantity shipped to China was up 117 percent from the previous year. The value of lumber shipments was up 78 percent. As with logs, the quantity increase was greater than the value increase showing downward pressure on prices.
One forest products company that is taking advantage of global markets is Canfor in B.C. Canfor reopened their Vavenby sawmill in B.C. to meet the demand of the Asian markets. The sawmill shut down in 2009 as a result of the housing market collapse. However, it is now expected to produce about 240 million board feet annually and employ close to 100 people. This will also stimulate timber demand as the mill secures logs.
As a final note, there has been some major announcements on the political front. First, President Obama proposed a jobs bill called the American Jobs Act. While this bill will not turn
the industry around, construction is one of the industries targeted for job creation. Additionally, Fed Chairman Ben Bernanke stated that the Fed would be looking at options to improve the economy. His options could include another stimulus package but he fells short of mentioning this in his speech.In summary, business strategy should focus on doing the best with the current business climate. The U.S. economy as a whole shows little sign of a recovery in the short term.
