- With strong demand for softwood lumber continuing through the summer building season, East Coast random length Spruce/Fir 2x4 prices peaked at over $1,100/MBF, a significant increase from $350/MBF in March 2020. These record price levels were driven by better-than-expected lumber demand, as homeowners increased repair and remodeling expenditures and were also aggressive in building new homes. U.S. softwood lumber supply continued to be tight as many mills were quick to idle production in March and April based on experience with the housing start collapse in 2008/2009. As mill production continues to come back online it is expected that Spruce/Fir lumber prices will revert to average levels.
- Eastern White Pine markets have remained solid with less volatility than Spruce/Fir. During the summer building season demand for Eastern White Pine has continued to be good with mills able to move sufficient inventory.
- Hardwood markets continue to struggle, impacted by declines in both domestic and international demand, as well as the emergence of new, high-quality substitute engineered wood products. We continue to view this segment of the lumber market as the most challenged from a profit standpoint and expect that many hardwood mills will struggle with profitability in 2020.
- After an initial slump in housing starts due to COVID-19 seen in April (930,000 seasonally adjusted units), starts have grown steadily and hit their peak in July at 1.49 million seasonally adjusted units.
Pulp and Paper
- Pulp prices have softened from their 2-year rally but remain historically solid. There is little change in 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. An explosion and fire at a mill in Jay, Maine has put that facility out of operation, and shifted traffic to other mills in Maine, resulting in capacity constraints.
- Despite good demand for SPF logs, it was a difficult first half of 2020 for many logging contractors as a result of the loss of a low-grade mill in Jay and reduced capacity of a few other low-grade markets. The availability of skilled labor and increased work absences is constraining production as well.