Irrespective of the location you’re based, the cost of wood acts as the single largest variable of price when it comes to wood-consuming manufacturing projects. In this regard, you need to have a fair understanding of the timber wood price or stumpage in a supply region. The stumpage price is the amount paid to the landowner to gain the right to harvest the trees from the timberland of the owner that can drastically vary across local wood basins. Now, upon careful research and development, it has been seen that 5 major factors affect the stumpage prices, regardless of their location:
Canada’s anti-dumping and countervailing legislation as part of SIMA (Special Import Measures Act), protects the Canadian producers and manufacturers from any unfair competition. The goods imported into Canada come at a lower price than the normal value. The SIMA process starts by submitting a complaint to the CBSA’s Anti-Dumping and Countervailing Directorate. At places that have evidence disclosing a reasonable indication that the goods have been subsidized or dumped and has been causing injury to the Canadian industry, the anti-dumping or countervailing duties will have to be paid on the importations. When these measures are in effect, the imports of the subsidized or dumped products start decreasing, and as a result, the Canadian shipments, employment, and related investments start increasing.
Production curtailments don't necessarily happen due to the sawmills being threatened by the wildfires encroaching on them, but because the disruption in supply chains results from the reduced freight rail traffic. These wildfires burning in the Western part of Canada have impacted the supply chain significantly and thus affected the ability to transport the items to market. Now, due to this situation, the short-term production curtailments at the Canadian Sawmills (starting July 26) have been implemented. Such curtailments will take up around 115m board feet out of the Western Canadian production, to say the least.
The prices of lumber have been receding quickly, especially in July 2021 as it faced a sixth week to reach the lowest point in more than 7 months. The weighted average SYP (Southern Yellow Pine) lumber price for the 26th Week (July 2nd) was at $566/MBF that ultimately represents almost a 31% decrease from the previous two-week period. Now, several people have put forward their thoughts on the disconnect between the lumber and log prices over the past year (all thanks to the pandemic). The reason behind this is perplexing for sure, but the truth is that the market for trees is distinctly different from that of lumber. The inventory of standing timber has risen since the 2007’s Great Recession which ultimately resulted in an oversupplied market. This surplus has kept log prices suppressed, even with the demand for lumber and sawmill production increasing.
As part of the after-effects of Hurricane Ida, the US lumber futures jumped for around 8% of the exchange-imposed limit and this hindered delivery in the US South as soon as the North American mills pulled back on their production. As per the Chicago Mercantile Exchange, the November lumber contract shot up 7.9% to $576.20 per thousand board-feet. This surge has extended towards a tumultuous year for lumber which was once upon a time one of the best performing commodities after the pandemic has fuelled a construction boom. After touching the all-time high price in the month of May, the combination of Hurricane Ida and the announcements of production slowdowns from the western mills has given the industry time to recoup some of those losses in recent weeks.
The above-mentioned points are ever-changing variables that can directly contribute to the complexity of the supply chain and marketplace of wood. Timber Exchange is a one-of-a-kind B2B platform that allows you to buy and sell timber directly with vetted and leading companies around the world. The platform allows smooth automation of the entire supply chain process where you can get the complete market data on the logistics, inventory, prices, consumptions, and productions with instant integration and team training. To get more information on the subject, feel free to check out https://www.timber.exchange.