“The demand for sawn timber exceeded supply from early 2020 to the first half of 2021. This trend allowed prices to reach all-time highs and they went off the chart and peaked in late May 2021,” says Russ Taylor of the market situation in North America in the summer of 2021. Taylor runs his own forestry sector consulting company.
However, what goes up must come down, and US prices have plummeted by 75 per cent to reach more modest levels in August 2021.
“Producers initially thought that the markets would decline due to the coronavirus pandemic, but because people were stuck at home, they started renovating and carrying out DIY projects. At the same time, sawmills decreased their production flows.”
Both home builders and renovators could not obtain enough structural sawn timber.
He initially estimated that local sawmills will not be able to make up their production losses until later in 2021, but this occurred earlier. Up to the end of 2021-Q2, North America was therefore a fruitful market for imports from the rest of the world. These imports have covered the tight mill capacities in domestic production.
Strong role of wood in housebuilding
Taylor believes the increase in demand will continue at a moderate pace.
“We knew that a price correction will occur, as was evident in early June 2021, but the demand will still remain strong. It is estimated that the demand will grow by an annual rate of about six per cent in 2021 and perhaps at four per cent in 2022. Sawmills currently have full order books and limited capacity.”
Insect damage has also been a problem in British Columbia, Canada, where a pest called the mountain pine beetle has taken its toll, causing 40 sawmills in the Interior region to close since 2005.
When less and less raw material is available, the number of sawmills also decreases. Additional capacity is appearing only in the southern parts of the United States, where the forests are plentiful.
Residential construction, repair and renovation each represent a little more than a third of sawn timber consumption in North America. The remaining third comprises the woodworking industry and non-residential construction.
A specific local feature is the strong role of wood in housebuilding. The environmentally conscious trend is also increasing the use of wood in building tower blocks, and new factories producing composite panels from cross-laminated timber (CLT) are being established in North America.
“According to statistics, residential construction is on the rise. People want to move from city centre apartments to more spacious single-family homes because of remote work and remote schooling,” explains Taylor.
In North America, the environmentally conscious approach also covers the origin of the wood. Many large retailers require wood products with various environmental certificates (FSC®, PEFC™, SFI®).
Russ Taylor is an experienced forest industry consultant and market analyst, working for his own company, Russ Taylor Global.