PNW Log Costs Remain Near Record Highs

Delivered log prices in the Pacific Northwest (PNW) have maintained near record highs through winter, and the sustained high price run since 4Q2017 is unprecendented in the region. As we head into the warmer spring and summer months, as well as wildfire season, prices are not expected to retreat any time soon.

My observations from the field:

• West Side softwood log prices continue to push higher, averaging $832/MBF in March and continuing their journey into historically high price territory. Inland region prices are beginning to level off slightly.
• Sawmills are beginning to adjust their delivery mix to minimize high-cost logs.
• Some landowners—who accelerated winter harvests to benefit from the price run up—are starting to throttle back their production.
• Pulp mills continue to be affected by high prices, particularly those with a strong reliance on primary chips, as chip mills compete with sawmills for small diameter logs. Some BC pulp mills are actively seeking chip supplies on the US side due to low inventories as a result of harvest reductions in the province.

China’s ban on logging in its natural forests will result in a continued increase in its demand for foreign logs. The country is importing more logs from the US South, Brazil, Japan and New Zealand. While exports from the PNW have trended downward over the last 3 years, China’s appetite for logs is expected to remain strong.

As we enter peak building season in the US where housing supply is low, lumber demand is likely to remain high. Housing starts are steady from month-to-month, rising lumber prices have already increased the average price of a single-family home by nearly $6,400 since January of 2017, and prices continue to remain at sustained high levels. Forest2Market’s composite southern yellow pine lumber price for week 16 was at $480/mbf, which is up from the previous week’s price of $473/mbf.

Douglas fir log prices are at much higher sustained levels than they have been at any time in more than a decade. In March 2018, the weighted average price for delivered domestic logs was $885/MBF—up 2 percent from February.

In March 2018, the weighted average price of Douglas fir export logs was $891/MBF—up 0.5 percent from February.

Regional manufacturers need to pay close attention to price trends on both the raw material and the end product sides to ensure their input costs line up with the market in the near term.