Spruce/Fir lumber prices have experienced significant volatility since the fall of 2018 when they peaked at record levels. With a significant price correction taking place in the market at YE 2018 and early 2019 (prices falling by 50%), below breakeven for many mills, capacity reductions, especially in Western Canada, have buoyed prices back up to $440/mbf. With improving residual prices (sawdust, bark and clean chips), overall margins for mills in the Northeast remain positive but tight.
Eastern White Pine markets have remained solid with less volatility than Spruce/Fir. Prices have fallen by about 10% over the course of 2019, but are still providing sawmills with good margins.
Hardwood markets continue to struggle, partly impacted by the trade wars with China (the largest export market for US hardwood lumber), and partly due to softening demand, especially for Red Oak and to a lesser extent, Maple. Current tariff levels in China on US lumber continue to impact prices as well as the tepid demand both in North America and worldwide for US hardwood lumber. We continue to view this segment of the lumber markets as the most challenged from a profit standpoint, and expect that many hardwood mills will struggle with profitability in 2019 and 2020.
Housing starts seem stuck at the 1.2 million level with little potential for increase. This will cap demand for framing lumber unless things pick up beyond current levels.
Pulp and Paper
- Pulp prices have softened from their two-year rally, but are still solid based on historic levels.
- There is little change in the overall paper markets, with free sheet, super calendar and newsprint remaining under pressure and declining, while tissue, container board and packaging have been returning positive margins.
- Continued expansion in pulp and paper capacity in Maine has buoyed pulp prices and elevated demand for harvested wood.
- The overall outlook remains positive for the Northeast which continues to convert capacity to tissue and packaging.
- Improving markets for containerboard and tissue, along with solid pulp markets have supported capital projects at various Northeast pulp and paper mills. Verso, Sappi, and Nine Dragons have all invested, or announced investments, in projects to retool and expand capacity. Nine Dragons opening of the Old Town, ME pulp mill (July 2019) has had a positive impact on pulpwood prices and demand with harvest levels increasing significantly.
- The longer term outlook for pulp, especially Northern Kraft virgin pulp which is the mainstay product in the Northeast, remains positive. Consequently, stumpage prices for most species and products have been moving upward, with further improvement expected.
- Once the cold and wet spring weather subsided, harvest conditions improved in the Northeast.
- Many landowners are approaching the usually wet fall period at or below harvest expectations, as logging capacity is now short in much of the Northeast.
- Many logging operations are reluctant to invest in additional capacity until they feel more certain that current harvest conditions will be sustained.
- The availability of skilled labor is restraining expansion as well.