Knowledge Exchange

Ag Economy

Timber

Lumber

  • 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 break even for many mills, capacity reductions, especially in Western Canada, have buoyed prices back up to $450/mbf. With improving residual prices (sawdust, bark and clean chips), overall margins for mills in the Northeast have returned to comfortable levels.  
    Eastern White Pine markets have remained solid and relatively stable for 2+ years.  
    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 in Red Oak and less so for Maple. 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 anticipated tariff increase. With China being the largest export market for US hardwood many are concerned as to the impact on markets in 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

  • 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.

Logging

  • The winter harvest for many contractors improved from that of the 2018 winter harvest, but margin challenges remain for many contractors.
  • The extended “mud season” this spring has had a negative financial impact on some, as many have moved through the traditional skipped payments of April and May, and are still not back to work.
  • Improving log and pulp markets are beginning to have a positive impact, but many contractors will need significant improvement to recover from the last few down years.