24 WESTERN PALLET
Don’t blame Trump for disruptions felt last year in the West Coast lumber market. That was one of the messages from Chaille Brindley, publisher of WPA-member Pallet Profile Weekly and Pallet Enterprise Magazine (Industrial Reporting), speaking at the 2019 WPA Annual Meeting. Brindley interviewed several experts to gain insight on the current state of the lumber market.
“In terms of the softwood lumber dispute, we would have gotten here regardless of who was in the White House,” Steven Rustja, Vice President - Trading, Weston Forest Products told Brindley. “The wheels were set in motion back in 2015, actually probably prior to that. We knew in 2013 that we likely would not get a renewed Softwood Lumber Agreement. Both Hillary Clinton and Donald Trump were anti-trade, so we were going to get that slant from whoever won the presidential race in 2016.”
As for 2019 predictions, Forest2Market projects more softwood production in the U.S. South, with pine prices remaining flat. It is anticipated that the U.S. dollar will slightly depreciate against the CAD and EUR in 2019, making U.S. exports a bit more attractive.
Bryan Beck of the Beck Group sees big changes taking place in the South, including consolidation, capacity expansion and modernization. There are 16 new mills going online between 2017 and 2020. Most of those are new, greenfield operations.. The expected capacity of new operations is nearly 3.5 billion board feet. Over the next five years, southern pine capacity will increase 30% over the 2016 level.
Fores2Market told Brindley that B.C. will curtail production due to impact of tariffs, lower costs and restricted log supply, with an estimated reduction of 1BBF of lumber. At the same time, U.S. housing starts will retract and the overall housing market will flatten. “Single-family construction will struggle as multi-family will inch up and remodeling will remain strong,” according to Weston.
“We hit a bottom and have been stumbling along for six or eight weeks,” said Steven Rustja. “Now, I'm getting a little bit more confidence that we’ve actually seen the worst of it. I don't think we're going to implode… I don't think you're going to see dramatic uptick in prices in 2019. I don't think you'll see anything like you saw last year.
“So, if you ask me, the overall North American economy in '19 will probably consume less lumber than it did in 2018.
In terms of Trump policy and tariffs with China, the impact has been felt most in the South and by hardwood producers, where Chinese tariffs have been targeted.
So while domestic markets for Western lumber buyers seem likely to be less volatile in 2019, the President still generates some level of concern with respect to lumber markets. “The big thing with Trump is that he creates so much uncertainty,” one contact told Brindley off the record. “No one really knows what he's going to do next. If you’re a sawmill or a seller or buyer of forest products, you aren’t sure how agreements are going to change or policy that could affect exchange rates.”
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Trump Policy and Lumber Supply in the West