September 28, 2026 Lumber News
Another week of decreases comes as demand seems to refuse to pick up the pace in nearly all sectors of lumber. The only ...
Lumber Notes March, 2026
Welcome to another look at the lumber world!
In last month’s article we mentioned the proposed merger between Southern Pacific and Norfolk Southern railroads, and how this may affect the railroad tie industry. We’d like to investigate this more deeply here.
The proposed merger would span 50,000 route miles across 43 states and tie together about 100 ports in North America. The concept of railroad companies merging is not new. About 40 years ago there was over 30 major freight railroads operating in the US. By the time of the proposed merger (July 29, 2025), there were only six with four of them accounting for almost 90% of all rail freight: Union Pacific, Norfolk Southern, CSX and BNSF. So while others have merged in the past, this is definitely a historic merger because it would create America’s first transcontinental railroad, linking the Pacific coast with the Atlantic. Union Pacific operates in the west while Norfolk Southern operates in the east, the dividing line being roughly north and south extending from Chicago to New Orleans.
If approved, the merged company would operate with the Union Pacific name. The proposed merger was under review by the Surface Transportation Board (STB) which is a U.S. government agency that is in charge of regulating railroads. Just considering the magnitude of the application would give a person a hint of the complexity of the deal: the application was nearly 7,000 pages, which is several boxes of printer paper by my estimate. There is pressure for the agreement to go through in the form of a “termination payment” or breakup fee that would require Union Pacific to pay Norfolk Southern $2.5 billion if the STB rejects the deal or creates certain conditions that make it impossible to complete.
Executives from these two railroad companies maintain that the merger would cut shipping times by 20 hours to two days for about one million loads a year, and that it would shift an estimated 2 million truckloads of freight from our roads to our rails every year. The benefits of less trucks on the road are manifold, from less traffic and congestion to less wear and tear on the roads. Trains are also better for the environment because they emit approximately 75% less carbon than trucks, so more train traffic and less trucks still equal less emissions.
The STB rejected the application on January 16, 2026 as “incomplete” because some information that the STB required wasn’t present. How could the merge effect the tie industry? The unfolding story in January was a downturn in the industry. For the last six years the railroad tie industry has been the only sector in the hardwood industry that has grown, as all the others have been taking a downturn. But in January railways were holding back on maintenance buying which made the prices drop and left sawmills stuck with an overstock of lower grade Oak with less markets for it.
And as we mentioned last month, long term effects could mean that tie purchasing moves toward larger contracts with preferred suppliers and sawmills that can produce consistent specifications, and could also mean fewer contracts overall. Some areas may see reduced tie demand due to changing freight patterns while other areas may see increased demand along future transcontinental routes. [1][2]
There is a trend to be aware of that is quietly becoming apparent in Southern Yellow Pine. SYP production is gradually shifting to grades and products that are readily consumed by the construction industry. An example of this is the increased production of machine stress rated (MSR) 1650 which can substitute well for SPF.Machine stress rated SYP more closely matches the properties inherent in SPF No2&Btr lumber, which is a common grade and species used by builders all over the country.
There are a number of reasons for the concept of replacing SPF with SYP. Less availability of SPF, especially from Western Canada, and often significantly higher cost (especially with the 45% duties and tariffs on Canadian exports currently) have greatly increased the pressure to substitute SYP. Exports of Canadian softwood lumber to the US in 2025 came in at just over 10 billion board feet, which was 12% less than total exports in 2024 and the lowest annual total since 2012.
There are reasons why SPF has traditionally been the framing species of choice, and some SYP producers are coming up with ways to imitate the strengths of SPF. Twisting and waning are some of the common complaints from builders using SYP for framing, and some producers are offering SYP lumber that is more resistant to twisting and warping to help with this problem. SYP tends to mold more than SPF, and some have come up with a coating to apply to keep mold from forming.[3]
A new wave of thermally modified SYP products—like Arbor Wood Co.’s Thermowood® SYP—chemically alters the wood’s cellular structure using only heat and steam. This process:
Kiln drying itself is not new, but tighter controls and better equipment can reduce moisture movement in the finished lumber.
Because of the difficulties of sourcing SPF from Canada, due to some of the factors already discussed above in the Southern Pine section, many would-be SPF buyers are looking elsewhere to fill their Spruce needs, particularly southern pine (which is produced here in the US) and European spruce. The 45% duties and tariffs caused extensive production cutbacks in Canada and significantly contributed to the dip in sales to the US.
And while US imports from Europe in the past have been predominantly spruce, imports of European pine is on the rise, even though it doesn’t replace Canadian western SPF in building applications very readily. Some other countries that ship softwood to the US are Sweden, Finland, and France, although volume from these countries is less than elsewhere in Europe. France and the Nordic countries somehow escaped the massive beetle-kill problems that were seen in other parts of Europe in recent years.[4]
As a result of the increased duties and tariffs on Canadian softwood lumber, Canadian producers began looking toward China to funnel larger volumes of softwood lumber. The fourth quarter of 2025 saw a nearly 30% jump of exports to China over the third quarter, as volumes reached over 70 million board feet in December. But there are two challenges with this which we will mention here. First, China has been experiencing a housing slump in recent years and so demand for lumber there has been weak overall, and second, China’s main source of (imported) lumber is Russia, which has easy access by rail to many destinations within China, unlike Canada, which means that Canada faces competition. [5]
West Fraser Timber Co. Ltd. reported a loss of just over $750 million in the fourth quarter of 2025, which was $689 million more than during fourth quarter of 2024. Higher duties and tariffs on softwood lumber, an oversupply of SYP and OSB, and less demand all contributed to this challenging season for the company.[6]
Tight supplies and lackadaisical demand were a theme in early 2026, keeping prices steady and low. Two new mill curtailments near the end of February contributed to more supply shortage. Late shipments in February were a source of frustration to many in the distribution pipeline. 7/16” and 5/8” OSB reached five-year lows and there was little price movement for months. Mills were operating at or near their cost floor, meaning there was no room for further price reductions. Prices were positioned to rise near the end of February, because of several factors, which goes to show how many factors affect prices:
This list represents some of the issues traders were having to navigate, and illustrates the complexity of the market and its fluctuations.
One of our contacts in Kentucky who owns a sawmill and cuts railroad ties, grade lumber and pallet lumber, commented that the hardwood flooring market really trickled down in the last while. Some of their large pallet lumber customers are very slow with the market being very competitive for the last six months. They focus on the standard 48×48 pallet size, and have been experiencing a challenging time. The tie market, which historically buoys the weak hardwood market in other sectors, has also been lax for them, which spells trouble for many mills that were propped up by a (formerly) strong tie market.
Mills producing specialty pallet sizes seem to be faring better.
This section wouldn’t be complete without mentioning the powerful winter storm named Fern, which impacted a huge swath of the US near the end of January, from Texas to New England, and put nearly 800,000 people out of power. The ice and snow and cold temperatures impact many aspects of the lumber industry. Machines don’t work as well, employees can’t get to work because of the icy roads, logging trucks cannot deliver, and mills cannot operate without electricity. Everything slows down, and it takes some time for production to catch up with lost time.[7][8]
We discussed the crosstie market in the introduction to this article. The proposed merger between Union Pacific Railroad and Norfolk Southern destabilized the market in early 2026 and gave rise to a slump in demand. See the introduction for further information.
Two major winter storms also impacted the hardwood industry, made logging difficult and snarled shipping, which are consistent themes in the winter season and particularly in storms.[9]
All major hardwood sectors were either fair, slow, or very slow in early 2026. Board road and upholstered furniture were doing the worst, according to the HMR Demand Index (HDI). [10]
The hardwood industry continues to struggle after it hit historic production and consumption lows at the end of 2025.
2024-2025 saw the lowest production in history, and here’s why:
Below is a quote from The Epoch Times Morning Brief Newsletter:
“The U.S. economy created 130,000 new jobs in January, suggesting employment conditions could be improving following months of a sluggish labor market. Economists had anticipated 70,000 new jobs. The unemployment rate also slipped to 4.3 percent from 4.4 percent in December 2025—lower than the consensus forecast—according to data from the Bureau of Labor Statistics (BLS) released on Feb. 11. The U.S. labor market could be turning a corner, as hiring momentum accelerated at the start of the year. In January, the economy added 130,000 jobs, up from the previous month’s downwardly adjusted 48,000.
Health care was the top industry for job creation, adding 82,000 roles last month. Social assistance payrolls also increased by 42,000. Both industries have accounted for a sizable share of payroll growth over the past year, and experts have attributed their growth to an aging population. Construction added 33,000 jobs, a strong start for a sector in which there was little employment growth last year. Federal government employment fell by 34,000, “as some federal employees who accepted a deferred resignation offer in 2025 came off federal payrolls,” the bureau said. Federal payrolls are down by 327,000 since reaching a peak in October 2024. As a result, the private sector created 172,000 new jobs, far higher than the 70,000 forecast.”[12]
References:
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