Early signs in January of a US housing market improvement all but disappeared in February. Demand and prices for softwood lumber were lackluster in the first two months of 2024, and the market is in flux after new US tariffs were postponed for a second time.
The likely full extent of the proposed 25% tariffs on imports of Canadian lumber to the US is still largely theoretical, given the delay in the implementation of the tariffs until April 2.
ResourceWise CEO Pete Stewart highlighted in a February 4 blog (Lumber Market Shifts: How New Tariffs Will Reshape the Industry) that the proposed tariffs could put approximately 1.3 billion board feet of British Columbia’s lumber capacity at risk. Additionally, any attempt to offset the reduction in Canadian imports by increasing US Pacific Northwest (PNW) lumber production would strain the region’s log supply, driving up costs and ultimately impacting US sawmill profitability.
David Elstone, Managing Director of British Columbia-based Spar Tree Group Inc., has noted that, if new 25% import tariffs run concurrently with existing softwood lumber duties on Canadian lumber, the combined charges to sell into the US will be 40%, rising to 55% later in 2025 when softwood lumber duties are expected to double.
On March 1, the US president signed an executive order titled "Immediate Expansion of American Timber Production," with the aim of boosting domestic timber production, improving forest health, wildfire mitigation, and delivering economic benefits.
The Forest Service manages about 193 million acres of forestland, so clearly, the US has the natural resources to support an expansion in domestic lumber production. But, as Elstone noted in the January edition of View from the Stump, increasing the US annual National Forest annual harvest from around 3 bbf would face regulatory hurdles, environmental lawsuits, and a shortage of workers that PNW logging contractors already struggle with.
Meanwhile, investment in new sawmills anywhere in the US needs key fundamentals in place to inspire confidence in future lumber demand and stable prices. One of those is the recovery of the US housing market, which is in large part dependent on housing affordability, mortgage rates, and consumer confidence all improving.
The Conference Board Consumer Confidence Index in February declined by 7.0 points. The Expectations Index, based on consumers' short-term outlook for income, business, and labor market conditions, dropped 9.3 points, which The Conference Board said was “below the threshold of 80 that usually signals a recession ahead.”
To learn more about the evolving dynamics of the lumber market, the impact of delayed tariffs, and the challenges facing both US and Canadian producers, download ResourceWise’s latest Market Insights report, "US Builder and Consumer Confidence Slides in February, While Delayed Tariffs Keep North American Softwood Lumber Trade Guessing." Stay ahead of industry shifts with expert analysis and in-depth market data.