- Price volatility continues in the Spruce/Fir industry. After a significant improvement in lumber prices through early March 2020, Spruce/Fir lumber pricing peaked at over $460/mbf. During the early stages of the COVID-19 outbreak in the United States prices declined by about $60/mbf in the first two weeks. During April, as a result of mill capacity reductions and shutdowns for maintenance both in the United States and Canada, supply and demand has found a new equilibrium and prices for East Coast random length Spruce/Fir 2x4’s have recently stabilized.
- Eastern White Pine markets have remained solid with less volatility than Spruce/Fir. During the early stages of the COVID-19 outbreak in the US, many Northeastern Pine mills experienced a temporary spike in demand, however, prices have since fallen 10% and demand is down when compared to the previous period.
- Hardwood markets continue to struggle, partly impacted by the trade wars with China (the largest export market for U.S. hardwood lumber), and partly due to softening domestic demand. 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.
- Housing starts rallied late in 2019, reaching a rate of 1.6 million (annualized) for December. However, with the impact of the coronavirus, they are expected to decline significantly for at least the first half of 2020. If quarantines and restrictions on construction continue past June, forecasts will need to be revised downward again.
Pulp and Paper
- Pulp prices have softened from their 2-year rally but are still solid compared with historical 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. 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. Due to the coronavirus, some facilities have had trouble maintaining adequate staff, resulting in reduced shifts and hours of operation in some locations.
- Although there was some hoarding of paper and tissue products during the early stages of the COVID-19 outbreak in the U.S., the primary explanation for empty tissue and paper product shelves in grocery stores is because the industry is divided into two segments: “away from home” and “at home.” The pandemic created a situation in which “at home” paper product demand surged as 75% of the US population was under stay at home orders. This created packaging and logistics challenges for suppliers.
- The onset of the spring thaw has paused some harvesting operations. Many anticipate a slow start to the spring/summer season due to the coronavirus. Additionally, the availability of skilled labor and increased absences is restraining production as well.