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Asian demand drives up softwood prices

Softwood sawlog prices have trended upwards in all major regions of North America over the past two years, with the biggest increases occurring in the US Northwest, where the log export market has had a major impact on the supply-demand balance.


April 18, 2011
by HAKAN EKSTROM

SEATTLE, Wash.: Softwood sawlog prices have trended upwards in all major regions of North America over the past two years, with the biggest increases occurring in the US Northwest, where the log export market has had a major impact on the supply-demand balance.

Total log shipments to Asia from the US west coast last year were the highest they have been in 14 years, and much of this increase was the result of China’s seemingly never-ending need for wood raw-material.

Sawlog prices in Canada have followed the same pattern as in the US, with prices in the western provinces increasing more than in the eastern provinces. In the fourth quarter of 2010, US-dollar log prices in BC had moved up to their highest levels in more than two years.

Despite the increase, softwood lumber producers in the interior of the province still have some of the lowest wood raw-material costs on the continent.

Western Canada currently has the lowest sawlog prices in the world. In Canadian dollar terms, prices have fluctuated less in 2010 than they have over the past few years, and western and eastern Canada were actually two of the few regions in the world that had lower log costs in the fourth quarter of 2010 in the local currency than they did in the fourth quarter of 2008.

The US Southeast and US South Central are the sub-regions where log prices have increased the least since 2009; in fact, prices in these regions even fell slightly late last year.

In the fourth quarter of 2010, Douglas-fir log prices in the northwest were up 19% from the same quarter in 2009. Hemlock sawlog prices, which increasingly have been influenced by log exports to China and South Korea, have gone up over 25% the past 12 months.

With the recent price increases, sawmills in the west now have higher wood raw material costs than sawmills in the south, which is opposite to the situation in 2009. Price levels in the southern states are currently close to their nadir of 15 years.

Hakan Ekstrom is the president of Wood Resources International LLC, an internationally recognized forest industry consulting firm. The company also publishes two quarterly timber price reports tracking global forest products markets. Distributed by Troy Media.