- 2018 likely brought record profits to most Spruce/Fir sawmills within the LSA. While Spruce/Fir lumber prices have significantly declined from their historic highs last summer, pricing remains good, providing adequate margins for most mills. Lumber prices FOB Boston are now in the low $400’s per 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.
- Interest rate increases and affordability of real estate have softened growth in the housing market. Housing starts seem stuck at the 1.2 million level with little potential for increase.
- 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. Nonetheless, like Spruce/Fir mills, many Eastern White Pine mills in the LSA posted record to near-record profits in 2018.
- Hardwood lumber prices have been much more problematic. Recent trade issues and the imposition of tariffs have impacted hardwood markets. Current tariff levels in China on US hardwood are at 10%, and thus have not had much impact on overall prices. The scheduled jump to 25% on January 1st 2019, has been put on hold while the two countries negotiate. The reaction is that buyers in China have been building inventories ahead of the tariff increase. With China being the largest export market for US hardwood many are concerned as to 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.
- 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, acquired the former Georgia-Pacific mill in Old Town, Maine, and has invested heavily in the pulping side of the mill.
- Consequently, pulp markets are strengthening and harvest levels increasing in all species in the Northeast. 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 which is the mainstay product in the Northeast, remains positive.
- Consequently, stumpage prices in most species and products have been moving upward, with further improvement expected.
- Loggers in Northern Maine have faced substantial challenges in recent years, but ongoing improvement in pulp and paper markets has helped the industry.
- Contractors that remain after the downturn are seeing more opportunities to increase harvest levels which will positively impact their profitability.