Pacific Northwest Market—Northwest Douglas Fir Log Prices Tracking Downward

From the October 2010 Forest2Mill newsletter.

Prices for logs delivered to Northwest sawmills are undergoing a pronounced price correction. Following a spring run-up of lumber prices, May’s western Oregon and Washington Douglas fir domestic saw logs peaked at an average $531/MBF, the highest levels since 2007. The strong demand for Asian logs drove export prices correspondingly higher. For a short time at the peak, domestic logs eclipsed export prices in some locations.

Export demand has been particularly strong over the past twelve months; volumes to Japan have been flat, but logs to China and Korea year-to-date are up by over 30 percent. This new market share depends heavily upon common grade, second growth, which is traditionally destined for dimension lumber production.

During August, delivered Doug fir log prices tumbled 15 percent, averaging in the $460/MBF range. Southwest Oregon and Willamette Valley prices are currently the most conservative, as the export market has limited influence in these areas. 2S logs have held up the best, as sawmills cutting wide dimension and larger dimensions have fared a little better. Inland Empire Doug fir prices are down as well, currently averaging in the low $330’s on short-log scale. Because Inland prices didn’t accelerate as rapidly when lumber markets peaked, they are significantly lower than Westside prices.

Presently, Asian appetite for Northwest logs remains solid, although prices are now eroding. After three months of flat prices, Doug fir export prices are down $25 or more per MBF as buyers negotiate lower prices to match domestic logs.

Over the coming months, exports will lead the log market as timber sellers work to maximize return on their logs. Exporters are searching for new territory to fill strong demand. Buyers at Coos Bay, Oregon and Inland Empire locations are actively seeking log business, though at only a slight premium to domestic log prices.

Forest product demand remains somewhat stronger than a year ago. Remember, between December of 2008 and July 2009, Douglas fir log prices dropped more than $100/MBF, as forest products plummeted to prices not seen since the 1980’s. During that period, export prices experienced a significant downturn due to over-supply and over-heated prices. Because markets are somewhat stronger, however, prices are unlikely to decline to the basement levels we saw in the spring of 2009.