July 11, Lumber News
SYP All widths in SYP have officially hit their bottom prices as 2x12x20 was the only dimension that took a decrease thi...
Welcome to another look at the world of lumber & the current lumber market conditions!
The Giant Sequoia and Redwood trees of the Pacific Northwest (where I grew up) fascinate me. We had an old-growth Redwood tree stump outside our house in Humboldt county which we used to play on and in. “In?” you say. “Surely that was a typo”. But it is no typo. I’m not talking about a stump 36 inches wide and 6 inches high – I’m talking about a stump that was 10 feet high and 10 feet in diameter. It was rotted out inside and we had an entrance on the outside to go in and out. We had a platform on top and a rope anchored there so we could shimmy down the rope into the damp darkness of the stump’s interior. What an amazing playground I had growing up that I just took for granted!
General Sherman, the biggest tree in the world by volume, can be found in California at Sequoia National Park. At 274-feet tall and with a 60-foot girth, one feels like a dwarf standing beside it. Imagine all 1500 tons hitting the ground if the tree were cut down or fell by natural causes! It is also one of the oldest living things on the earth, having stood for about 3,500 years. It has been estimated that General Sherman would yield over 600,000 board feet of lumber! Redwood Trees grow the tallest while the Giant Sequoias hold the record for the most volume. The tallest Redwood tree in the world is about 368 feet tall!
With forests covering over 30% of the worlds land area, we humans have found a way to harness these trees into a multi-billion-dollar industry; making lumber one of the top commodities in the global economy. Leading the pack in the lumber market is the United States, as they are the largest timber producer and consumer in the world (producing 19% of the worlds lumber). The top five countries in the worlds lumber production are: the U.S., China, Brazil, Canada, Russia. Two of these countries, the U.S. and Canada, have controlled the spotlight this year in the lumber world. Tariffs and threats of tariffs have dominated the market talk in quarter one of 2025.
With Donald Trump now being President, there are many new initiatives being presented for the United States to become more ”self-sustaining” as a country; and lumber in particular is a hot topic around these new ideas. As we have briefly mentioned in our articles before, even if the United States could produce enough softwood lumber to meet its’ own consumption, there are many other factors such as consumer preferences that come into play, especially concerning Canadian lumber. After all, Canada does seem like a convenient place for the US to do business with as there are no oceans dividing the two countries AND an intricate railroad infrastructure is already in place.
Another fact from Canada’s standpoint is that the country produces much more lumber than it can consume (for reference: the state of California has more residents than all of Canada.) The United States alone accounts for approximately 84% of Canada’s softwood lumber exports. So, needless to say, a new directive from the Donald Trump administration to rely much less on Canadian lumber will (and already has/ is) having major implications on the lumber market at large.
The effects seen from March’s temporary week-long tariffs on Canadian products showed precisely how dependent the Canadian lumber prices are on The United States consumption. Although the argument of the US not needing Canadian lumber is up for debate, Canada needing the US to need it’s lumber is not. Whatever may come in international lumber trading this year, changing the dynamic between the US and Canada will not only shift prices in Canadian softwood, but ripples are likely to be seen in all lumber products around the globe.
The SYP market spent the first quarter of 2025 slowly increasing in value almost every week. The second week of May we finally saw our first week of decreases across all sizes and grades. With over 12 weeks of constant price increases, all lumber buyers were buying cautiously, and rightfully so, not knowing when SYP would hit it’s peak prices. This cautiousness is likely what finally led to the softening in the SYP market as mill’s inventories began to overflow with buyers remaining on the sidelines.
For most lumber yards and related consumers, while prices are clearly on a slow upward trajectory, maintaining inventories can become a delicate balancing act. You can’t run yourself out of a particular size, yet you don’t want to buy too much while the market is up. With so many SYP buyers buying conservatively for most of the year so far, we expect the prices will fall quicker than they were rising and for deals to be bought up rather quickly for the Summer building season.
After getting through the first round of tariff talks from the Trump administration in February and March, SPF prices did not see an increase all of Spring. Through April and May, prices were falling almost $20 mbf a week. With prices seemingly bottoming out at a perfect time for buyers to stock up for Summer demand. How much and how fast prices will jump back up is a hard thing to predict as background chatter of the anti-dumping duties on Canadian lumber are still looming. This volatility is likely to continue through fall of this year.
The OSB market also spent most of Spring decreasing in price. Some traders were finding deals better than they had seen in the past 5 years. When May came, most were speculating that surely prices were at the bottom, but with each week passing, deals were still easy to be found. Although prices did seem to hit the floor late May, how long they linger there will be up to pre-Summer builds.
The early optimism we were seeing in the pallet industry seems to be diminishing somewhat as sales remain mediocre. One of the largest pallet companies, PHET, had been projecting more growth in sales but have since announced that they are lowering their earlier forecast. When the Trump Administration announced tariffs earlier this year there was a big flurry of activity as folks rushed to buy pallets and pallet lumber ahead of the tariffs. Since the tariffs have been postponed we were seeing slower periods late April through May as the market tapered off slightly. The possibility remains that a surge will occur as retailers and other businesses try to stock up again before the tariffs come into effect later this year. Several large pallet shops are only running four days a week instead of five, indicating a slow period. Others, while not experiencing any major increases in sales, are remaining steady. This year may very well shake out like last year and we are predicting medium sales volume for the pallet industry for the remainder of 2025.
Pallet hardwood surged upward in price during March and April but it has since leveled off and is holding steady at $500-$550/mbf or per thousand board foot. Southern Yellow Pine was climbing in all grades until May when it started coming down, with #3 and #4 pallet grade following. Two considerations to keep in mind for the future of the pallet raw material industry: 1) Hardwood prices are likely to remain high as a lot of hardwood mills have shut down, raising prices as supply tightens, and 2) SYP prices are not likely to stay down for long because more and more mills are producing higher quality lumber which means they are producing less pallet grades like #3 and #4, once again raising prices by tightening supply.
According to the Railroad Tie Association, inventory across the US is at its highest point in seven years. Near the end of May there was between 20 and 21 million ties across the US at the treating plants, causing demand to remain flat and prices steady with no major changes. That being said we did see an increase in the first quarter of 2025 of cross tie purchases over the previous six quarters going back to the first quarter of 2023. So while the treating yards remain full demand remains steady as the rail road maintenance program continues to use millions of ties every year to replace worn out ties.
Several recent facts stand out in this industry that we’d like to make you aware of. First, in the first four months of the year hardwood lumber prices have increased slightly, including all categories across all regions of the eastern half of the US (where the hardwood is sourced), by about $25/mbf or per thousand board feet. Secondly, production in the first quarter of the year lags nearly 20% behind production in the first quarter of 2024. So we are seeing higher prices while at the same time production is down about 20% (as compared to the first quarter of 2024 as previously mentioned). Millwork factories producing trim (e.g. for the housing market) have reported pulling out of a slow period, not necessarily by leaps and bounds but becoming steady where before it was lethargic. A large percentage of America’s hardwood gets exported to China, which came to a screeching halt when the high tariffs came along. The good news is that on May 12 the Trump Administration, together with China, announced they would drop the tariffs significantly, at least for a 90-day period while they work out a longer-term agreement. This lowers the tariff (as of late May) on hardwoods from 125% down to 10%, representing a 92% decrease in tariffs. This is great news for hardwood sawmills.
The housing market is tied in with current economic conditions overall so there are many factors that affect this market. Car sales is one indicator of people’s willingness to spend on bigger-ticket items and might give us a clue into the housing market. While car sales are up we are seeing that pickup truck sales are down, indicating less willingness to spend on items that usually require financing. Another deterrent in this market currently is the fact that 30-year mortgage rates have been gradually creeping up in March, April, and May of this year. The average mortgage rate for a 30-year mortgage is now at 6.95%. It is interesting to note that there is a serious housing deficit in the US, meaning that there is not enough new homes being built to meet the current demand. This would seem to drive the demand upward as limited supply usually does. However, high material costs, high interest rates, and economic uncertainty together seem to be discouraging people from buying and building new homes.
There are a couple positive indications in this market, however, which we will briefly consider. The first is the repair/remodeling sector. Expenditures in this area by owner occupied, single family homes have continued to set new record highs since COVID. For example, in March of this year a new record of 385.4 billion dollars spent was reached, which represents a dramatic increase. This sector remains strong as it seems people favor repairing and remodeling their homes rather than buying new or building. The second positive factor is new housing sales itself. New house sales were expected to drop 4% in the month of May, but instead of dropping there was a 10% increase in new house sales one week the end of May. This could be an indication of increasing buyer confidence.
