So the lumber industry is thenew year. Lumber supply is primarily driven by housing starts. According to NAHB, residential housing starts in 2011 will be 655,000 in 2011, which is 40 percent increase from 2009.
Residential starts are projected to rise to 970,000 in 2012 and this will increase demand from stand timber supply to sawmills.
Future lumber prices as of 12/9/10 are at US$265 for March 2011.
It is a little more speculative but we are expecting a firming up of hardwood lumber prices in 2011, which are coming off a 15 year low.
As we approach the year end, cherry lumber prices appear to be inching up. While hard maple hardwood lumber and soft maple prices are weak, walnut lumber prices appearto be firming up.
According to the WWPA, 2010 softwood lumber production in the West was up 7.9 percent through the end of October, over the previous year.
The crux of the data is that both hardwoods and softwoods are crawling back to recovery. We feel that 2011 will be a transition
year and that 2012 will be a strong growth year. The industry will emerge in 2012 with increased demand chasing a depleted supply chain.
When lumber demand ramps up, it will ramp up fast from stand timber, sawlogs, sawmills, treated lumber plants, and lumber wholesale outlets. An example of this is that Crain Lumber co. in Port Matilda, PA is shutting down this month. This lumber yard and thousnds others across the U.S. were the backbone of lumber distribution. When demand ramps up, timber and lumber distribution channels will need to be re-established.
Another issue for 2011 is biomass energy. Some sawmill and pulp mills searching for opportunities are turning to biomass energy. A good example is Collins Pine company which has started construction at its 26.8 MW Lakeview biomass cogeneration plant in Lakeview, Oregon. The fuel for the operation will be a combination of logging and sawmill residuals from its Fremont Sawmill.
A light in the recession has been the remodel market, which stimulates demand for building materials including hardwood flooring, hardwood cabinets, and dimension lumber.
According to the Harvard Joint Center for Housing Studies, strong growth is expected in the remodeling sector in 2011. Low interest rates, pent up demand, and improving consumer confidence should all come together in 2009 and spur softwood and hardwood building materials associated with remodeling. Another bright spot is Asian demand. Both hardwood lumber and softwood lumber exports are up in Asia, with the top 3 markets being Japan, South Korea, and China. It is interesting to note that China lumber orders for U.S. mills have more than doubled in 2010.