Odd winter means wood is piling up
ROSEBURG — With the deep freeze that has inundated the eastern half of the United States contributing to the drop, prices for logs and lumber processed on the West Coast have dipped over the last couple of months.
Sales are down and wood inventories are up.
The market today is not what was being hoped for and expected just a few months ago.
"There was a quick uptick in the market in late 2014, and that had a lot of people in the industry anticipating a good start to the new year," said Shawn Church, editor of Random Lengths, a Eugene-based publication that tracks the log and lumber businesses.
"There was also the forecast of housing starts increasing again. They had been up to 1 million in '14 and they were forecast to total 1.1 to 1.2 million in 2015. This all gave everybody high expectations for a good start to the year," he said.
The end of 2014, with positive factors such as home construction projects, improving home prices, mortgage interest rates at around 4 percent and steady stud prices, made the year comparable to the good year of 2005.
Steve Killgore, vice president of sales and marketing for Roseburg Forest Products, said the company finished 2014 in good shape and was moving wood products all across the U.S.
But then winter hit the eastern half of the U.S. hard with snow and bitter cold, bringing any construction to a halt. The U.S. is the largest market for soft wood lumber products.
In addition, China experienced an economic slowdown. And changes in monetary exchange rates have also resulted in that country looking more to Russia, where the exchange is better, than to the U.S. or Canada for logs and lumber. With China and other Asian countries buying fewer products, Canada has been looking south to sell to U.S. markets, adding to the competitiveness in the industry, which impacts pricing.
With fewer overall sales, log and lumber inventories at Douglas County mills have increased, resulting in a bigger supply than demand. The supply has also increased because a mild winter in the west has allowed for a steady stream of trees to be cut and hauled from the woods over logging roads that are usually closed at this time of year by bad weather.
All these factors have led to the wood market being in a downturn during the first two months of 2015.
Killgore gave some pricing examples. He said last year a 2 x 4 stud was selling for $2.70, and today it's at $2.28. On a larger scale, he said the price was $454 per thousand board feet a year ago, and today it is $380.
"The weather is shutting down so many markets," he said. "There's more supply than demand. We have plenty of supply here that needs to find a home."
Steve Swanson, president and CEO of Swanson Lumber in Glendale, explained that before the China slowdown, there had been enough exporting of products through the port of Coos Bay to Asia to keep the entire Swanson company busy. But he added that at this time, he knew of no ships scheduled to leave with a load of logs for anywhere.
Swanson expressed optimism, however, that the oversupply of wood products would decrease in just a month or two after the weather begins to warm across the country.
"Then I expect to see a modest increase in pricing," he said. "What I'm anticipating is a gradual increase for all of our products, plywood and lumber. With some note of caution, things should be good in our region."
Until the demand equals the supply again and prices do creep up, the low lumber prices will encourage construction projects when the eastern half of the U.S. does thaw out.
Toby Luther, the CEO of Lone Rock Timber, said he expects to see "a little bit of a lift, but not a huge swing upward," in prices this spring.
"We're still waiting on a full recovery," he said. "I expect no layoffs or anything like that this year. Considering we made it through 2009, the worst year, I would anticipate having no trouble keeping people working this year."
Paul Beck, the general manager of Mountain West Log Scaling and Grading Bureau, said the company's 84 log scalers have been "really busy" at 35 different locations between Terra Bella, California, at the southern end of that state's Central Valley and the Columbia River to the north.
"While there is a downturn now, my impression from most of the people we deal with is that they think it won't last," said Beck. "Companies have decent inventories now, but they're optimistic there will be real growth in their business this year."
Each of the last couple of years has been better than the previous one for the timber and lumber industries. Those in the profession are expecting that trend to continue in 2015 when compared to 2014.