- 2018 was a great year for most Spruce/Fir sawmills in the Northeast. While Spruce/Fir lumber prices have significantly declined from their historic highs in early summer, pricing remains solid, providing ample margins for most mills. The other positive aspect in this market is that the demand/capacity ratio will likely continue to stay in the 90 percent range as capacity gains are being offset by improving demand.
- Of continuing concern is that housing starts aren’t moving beyond the 1.3 million annual rate. Without much improvement in housing starts, pricing in the Spruce/Fir sector will be constrained, and the forecast for lumber margins is becoming more guarded.
- Transportation issues that helped to fuel the substantial climb in lumber prices earlier in the year have subsided to some extent, especially the rail issues in Canada. That said, transportation remains an issue that the industry is having difficulty dealing with, both nationally and internationally as well as locally.
- Eastern White Pine did not see the substantial run up in prices that was experienced in Spruce/Fir, nor has it seen the significant drop. Like Spruce/Fir mills, the Eastern White Pine mills in the Northeast will likely post record to near-record profits in 2018.
- Hardwood lumber prices have been much more problematic. Recent trade issues and the imposition of tariffs are beginning to reverberate within markets. Current tariff levels in China on U.S. hardwood are at 10 percent, and thus have not had much impact on overall prices. The scheduled jump to 25 percent on January 1, 2019, has been paused while the two countries negotiate, although little progress has been made to date. With China being the largest export market for U.S. hardwood, many are concerned about the impact on markets in 2019.
Pulp and Paper
- Improving paper markets, especially containerboard and tissue, along with strong pulp markets have supported capital projects being undertaken at various Northeast pulp and paper mills.
- Pulp markets are strengthening and harvest levels increasing in all species in the Northeast.
- Stumpage prices in most species and products have been moving upward, with further improvement expected.
- Sector-wide capacity improvements in North America may overshoot demand and so some observers remain cautious about the outlook for most paper products.
- Loggers in Northern Maine have faced substantial challenges in recent years, but ongoing improvement in pulp and paper markets has helped the industry. Those contractors that remain are seeing more opportunities to increase harvest levels, which will positively impact their profitability.
- While the Northeast has been spared some of the transportation challenges faced in other regions, it has not been immune from trucker shortages and the impact of electronic driver logs. Some producers report that transportation bottlenecks have cut into production capacity. This is true throughout the Northeast region, as loggers in Southern New England report difficulty sending loads north.