Conversations regarding the North American Timber Market and speculations around it have been going on for quite some time now, and Mr Amir Rashad, the CEO & Founder of Timber Exchange, took it upon himself to call in two true veterans of the industry – Mr Russ Taylor (CEO, Russ Taylor Global) and Mr Christian Provost (VP, Boscus), to speak on the subject as part of a panel discussion webinar.
Taking place on the 30th of September 2021 over a video conference attended by over 100 people from the industry, this webinar touched upon subjects such as US wood procurement and consumption, industry expectations on international timber prices, the role played by Euro SPF on the US market and the potential forecasts of the future.
The webinar started with Amir Rashad introducing the esteemed guests and then opened the floor with the most basic question that set the tone for the rest of the 1 hour 30 minutes long session – How does the US timber market work? While real-time statistics were mentioned by Russ Taylor (who joined the webinar amid a power outage) and Christian Provost, the conversation then moved towards the macro and on-ground situation of the demand and consumption going around global wood markets.
Upon being asked if the weather can historically affect the market, Christian Provost says, “Future contracts are being treated as a weather channel. Future, let’s say, is derivative, and you should look at it for sure, but it shouldn’t be treated as fortune-telling. You should, however, look at the original weather channel.” He goes on to mention, “If a Hurricane disrupts the place, you’re going to lose out on construction days, which is going to automatically affect your demand.”
On the same point, Russ Taylor adds, “The weather has a massive impact on both the demand and supply. Especially the supply since it is the harder one to figure out, because although the capacity is one thing, we don’t know what is happening regionally or with the weather or labour.”
He also goes on to mention that the industry is currently paying a record-high stumpage price even when the prices have corrected. This has further resulted in curtailments occurring in the BC Interiors. In fact, from the 1st of October, the stumpage prices have again risen to almost Canadian $10 cubic meters. The cost structure, thus, is going close to $600, whereas the current prices are $522. The stumpage timber price index, however, is expected to plunge in January, thereby putting them back in their normal range. The supply changes going on at the moment is enough to keep the prices very volatile.
The conversation then shifted to if Europe will become a long-time supplier for the US Timber industry since they’re increasing their exports to North America, specifically. To this, Christian Provost said, “From the microeconomic aspect of things, the European imports will need to keep coming right now as it is as European imports are controlling on an average 300 miles of the Eastern Seaport.” Russ Taylor, on the subject of wood market prices, shares, “The log costs have gone up dramatically in Central Europe and irrespective of the fact that there are still beetles there, Europeans will be in the market as they need high prices.”
Christian Provost further adds, “One of the most interesting areas where some of the European producers could increase their business and maybe get a better return will be the engineered wood products. Because if there is a shortage in one line of business at the moment then it has to be engineered products, either Ijoys or LVL.” Russ Taylor also quips about knowing how to convert cubic meters to board feet, which is a nightmare, and how to get a grade stamp for those who want to ship structural lumber; as two of the most important things, anyone new to the US timber market industry should be aware of.
He further adds, “The combination of the new family starts and repairing and remodelling – that’s about 70% of US consumption, and so those two are driving the industry.”
The main question of the evening, how would the prices develop in the future, was raised by the host at almost the tail end of the webinar. To which, Russ Taylor went on to share the fact that 5 polls have been done by trader Gregg Riley on the prices and mentioned that in every poll, the consensus has been wrong every time, and the contrarians have been right.
He goes on to add, “One thing to mention is that prices will probably be very volatile over the next 12 months which is not fun if you’re on the wrong end of that!”
Russ Taylor further states, “As the demand grows, US South is going to gain market share by 2 billion board feet, but where is it going to come from? Southern Yellow Pine and imports are part of the solution going forward. It is not a matter of substituting; it is more like do we have enough lumber in North America over the next few years to meet demand as we saw in the pandemic.”
As the session moved towards the Q/A part, where the audience could directly ask their questions to the panellists, it became even more interesting! At one point to answer a question, Russ Taylor says, “I don’t see any inroads with steel studs, for example. I think Australia might be the only market that might be worried about that. The other thing about wood is it has got all its environmental properties, so I think wood has got a great future for use in building, and no other product could top it. So, even though we talk about substitutes for lower prices, no one’s got the value equation that wood has for the environment. So, longer-term, wood is in a very good position.”
The webinar ended on a good note as Amir Rashad went on to explain how the Timber Exchange platform works and how it can help the suppliers, importers, and freight forwarders to automate the supply chain and to get global wood markets info under one umbrella.