Knowledge Exchange

Ag Economy

Timber

Lumber

  • 2018 will bring record profits to most spruce/fir sawmills within 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. Prices for Free on Board (FOB) Boston are now in the mid $450’s per thousand board feet (mbf). The other positive aspect in this market is that the demand/capacity ratio will continue to stay in the 90%+ range as capacity gains are being offset by improving demand. The forecast is for positive lumber margins well into 2020.
  • 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. However, transportation remains an issue that the industry is having difficulty dealing with locally, nationally and internationally.
  • 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. However, they are scheduled to climb to 25 percent on January 1, 2019. The reaction is that buyers in China have been building inventories ahead of the tariff increase. With China being the largest export market for U.S. hardwood, many are concerned about the 2019 market impacts.

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. Verso, Sappi and Nine Dragons have all invested in projects to retool and expand capacity. Nine Dragons, in addition to its recent purchase of the Rumford, Maine pulp and paper mill, just announced it will acquire the currently idled former Georgia-Pacific mill in Old Town, Maine.

Consequently, all Northeast species are finding strengthening pulp markets and increasing harvest levels. Once the Old Town mill is back on line (projected mid-2019), demand for pulpwood will be back to levels not seen for almost 10 years. The longer term outlook for pulp, especially Northern Kraft virgin pulp, a mainstay product in the Northeast, remains strong. Thus, stumpage prices have been moving upward in most species and products, with further improvement expected.

Logging

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. For more on this topic, click here for our September Knowledge Exchange Partner article, Trucking Compliance: Electronic Logging Devices Mandate and Agricultural Exceptions.


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