West Coast Business Trends
Trying To Find Stability In Upside-Down Market
By Zach Miller
At the time of this writing lumber prices across the U.S. could be described best as flat. Weak demand plus a host of issues, including rising fuel costs, tariff uncertainty, and overall cost of harvesting and manufacturing the fiber, the economics are upside down. The following is what a few West Coast producers had to say:
Dean Garofano of Delta Forestry Group, Pitt Meadows, BC said, “It has been a challenging start to the year for many forestry companies in British Columbia. Loggers and sawmills continue to deal with the results of numerous structural policy changes the last several years, which has severely impacted the number of logs available for harvesting and cutting. At the same time North American consumers are dealing with a fragile economy and inflationary pressures that are pushing projects – like building a new deck or fence – low on their priority list. Many consumers must instead prioritize paying their mortgage, putting gas in their cars and food on their tables. The result of this lower demand and the fragile economy have also pushed distributors to manage their inventories reluctant to bring in too much, too soon. Having said that, recently this spring, more distributors are finally reporting an uptick in demand, which is great news despite it having started later than usual.”
Garofano continued, “Along with the previous challenges mentioned, the punitive 45 percent duties and tariffs have now been in place for more than half a year, and the result has been eroding margins in most products. Sawmills are looking for log prices to come down, lumber prices to go up or a combination of both. However, increased fuel prices from the Iran war and the subsequent impacts on logging costs and consumer inflation make it unlikely that either will happen in the short term. All these factors set up for what could be an extremely challenging fall and winter. Manufacturers and distributors are starving for some positive changes for the industry and the expected reduced duty rates later this year will be welcome news for all.”
The era of steady, predictable pricing has been replaced by calculated volatility.
An anonymous West Coast producer had the following to say: “Interestingly mid-to-low grades have been seeing small but incremental price increases. Higher end knotty and clear products have been flat and steady on takeaway. I haven’t seen any runaways other than 4-inch knotty, which is unusual as smaller log profiles are usually more readily available. Customers in general have been requiring prompt shipments but recently late May early June I’ve found several getting caught with too low of inventory and in a panic. The large challenge is the ever-challenging MFPR tax the BC government is imposing on the primaries if raw material is shipped into the USA. Compound that with tariff and duty – it’s certainly a perfect storm. Canada is in a technical recession due to global politics and challenges specifically not ironed out with the U.S. We need a deal that in the end brings savings to the end user within the U.S. market. Labor is always a challenge in Canada these past few years. Young workers are reluctant to work entry jobs at the mill. You suspect that’s an industry-wide challenge.”
Another West Coast manufacturer who asked not to be named had the following to share: “The wood products market is undergoing an aggressive ‘capacity rationalization.’ The era of steady, predictable pricing has been replaced by calculated volatility. Canadian producers and U.S. importers are navigating a chaotic regulatory landscape. Total combined U.S. duties and tariffs on Canadian softwood lumber approach 35 percent, forcing buyers to continually adjust their margins. Retail chain yards and structural buyers are keeping their inventories incredibly lean. The core threat to the industry right now isn’t just market demand—it is an unstable access to affordable wood fiber. This is particularly critical in British Columbia. Near-term spikes in diesel and fuel immediately impact the bottom line via increased freight surcharges. This adds friction to the log-hauling segment (getting timber to the mill) and increases the landed cost of finished lumber delivered to retail chain yards.”
