Lumber Eases from Recent Highs

Lumber prices slipped below $620 per thousand board feet after reaching a two-week high of $627 on July 8th, as sawmill capacity remained subdued amid changing trade flows. US sawmill output declined for a second consecutive quarter, while production capacity fell 6% from a year earlier. American logs are pouring into China after lifting its pest-control ban, while US lawmakers push for policies favoring hardwood lumber exports over raw logs, arguing that raw material shipments reduce domestic feedstock and displace workers, which contributed to a 48.3% drop in lumber output since 2018. High borrowing and labor costs are also weighing on the housing market, dampening construction lumber demand. Canada is simultaneously urging the US to lift softwood lumber tariffs, with Premier David Eby calling on Ottawa to treat the dispute as a national priority, arguing that cumulative duties have forced mills, particularly in British Columbia, to scale back or shut down.

Lumber prices rebounded to above $620 per thousand board feet, as supply tightened faster than demand. US sawmill output declined for a second consecutive quarter, while production capacity fell 6% from a year earlier. Although lumber prices rose 6.1% from the previous quarter as producers attempted to capitalize, they remained 3.8% below year-earlier levels amid subdued buyer activity. At the same time, British Columbia, Canada's largest exporting province, seeks to expand shipments to China as higher US import costs for Canadian softwood lumber reshaped trade flows. Meanwhile, the US maintained antidumping and countervailing duty orders on certain wood products and renewed trade measures on Chinese wood-related imports effective June 24, citing the need to “quarantine forest pests”. On the demand side, Canadian lumber exports to Japan fell 27%, while elevated borrowing costs, higher labor costs, and a weaker housing market continued to curb demand for construction lumber.

Lumber prices eased to near $615 per thousand board feet, after reaching near an eight-month high on June 22 amid concerns over higher import costs for Canadian softwood lumber and tighter supply conditions. Although preliminary antidumping and countervailing duty rates were recently lowered, the overall tariff burden remains elevated, including the existing Section 232 tariff set to take effect in August. The prospect of higher import costs has tightened supply expectations and prompted buyers to accelerate purchases, supporting prices in recent weeks. At the same time, U.S. domestic lumber production remains constrained, while demand for wood products continues to be underpinned by residential construction. However, declining housing affordability amid higher labor costs and elevated construction loans interest rates could curb new homebuilding activity and temper lumber demand in the months ahead.