RUSS TAYLOR
As seen in Truck LoggerBC Winter 2025
BRITISH COLUMBIA – Another year and another market outlook. After a dismal 2023 and
2024 in lumber markets in both demand and prices, it can only get better in 2025, right? Well, that depends. There are a wide range of factors that are emerging to make 2025 great, or poor, which is why 2025 could have varying outcomes.
Before diving into the outlook, it is important to review the lumber market conditions over the second half of 2024 until mid-December (at time of writing). In July, US lumber prices bottomed out where BC mills were in a terrible loss position, given sawmill costs were at around US$400-$425/Mbf. From July 12, W-SPF 2×4 #2&Better lumber prices moved from US$325/Mbf (FOB BC mill) and peaked at US$470/Mbf in early December before easing by 5 per cent. In late April/early May, Southern Yellow Pine West (SYP) bottomed out at US$285/Mbf (FOB mill) and increased to US$432/Mbf by early November before slumping to US$333/Mbf in mid-December.
The drop in SYP is concerning as there is a near-record premium of W-SPF over SYP (West) of US$114/Mbf. Historically, there has been a discount of US$50/Mbf for W-SPF to SYP although this has eroded due to the surplus of SYP and the increasing tightness in SPF supplies. This implies something must give to find an equilibrium; will it be W-SPF moving lower (back towards a loss position) or will SYP bottom out and start to move higher? A paradox that market forces will determine.
The outlook for 2025 needs to incorporate several variables:
The good news
- Global, Canadian and US interest rates are finally retreating. As high interest rates constrain demand and consumer spending, it is expected that lower rates will stimulate wood products’ spending and house buying.
- North American demand in repair and remodelling and in new residential construction is coming off 2 years of declines against a background of severe housing shortages. Government programs could help stimulate affordable house construction.
- There was too much sawmill capacity operating in 2024 resulting in huge losses at mills. At least 21 sawmills in North America closed in 2024, removing some 3 billion bf of capacity. Saw mill curtailments in the year reduced production by another 1-2 billion bf. The good news is that over 5 per cent of excess North American sawmill output was permanently removed in 2024, clearing the way for potential supply shortages and yielding higher lumber prices as demand picks up in 2025.
The bad news
- In 2025, US lumber duties and tariffs could be market killerssince75 to 80per cent of BC lumber exports go to the US:
- The current Canadian lumber duties on US shipments is 14.4 per cent.
- In August 2025, it is likely that lumber duties will be around 30 per cent as part of the next US Administrative Review.
- As early as January, Trump tariffs of 25 per cent on all Canadian ex ports to the US are being proposed.
- If the 25 percent tariff was implemented on top of the duties, this would imply a combined duty/tariff of 40 per cent on Canadian lumber exports to the US in January, increasing to 55 per cent in August of 2025. That would raise the break even cost level of BC SPF mills selling to the US to arow1d US$600/Mbf and would require significant lumber price increases just for them to break even.
- There are also implications if China is hit with 60 per cent US import tariffs. This could result in reduced demand for exported logs and lumber to China and a major shift in Chinese exports away from the US to other markets. With the Russians already searching for new markets in “friendly”countries, this could create further export market chaos and severe price competition in some markets.
- And finally, at the end of 2025, the implementation of the European Union Deforestation Regulations (EUDR) could create further trade disruptions, especially in less developed countries or with smaller companies. There will be winners and losers.
The unknown
- Geo-politics continue to evolve, and some hot-button regions could develop positively or negatively. This includes the Russia-Ukraine war, the lsrael-Hamas war, US-China and China-Taiwan tensions, the Red Sea blockage, and others.
- Supply chain issues can develop quickly,whether it be logistics issues, changes in ocean freight rates, or one-time events (like a ship blocking the Suez Canal or the Panama Canal drought).
The ugly
In BC, government forest policy along with a lack of solutions to accelerating the issuance of key operating requirements such as cutting permits, making more timber available and creating a more sustainable forest industry continues to work against forest operators. The fact that Eby‘s NDP government eked out a one seat majority government against an almost unknown Conservative party speaks reams about the lack of confidence the NDP party now has in BC.
I do not expect that the government can do much for the industry now, as they have steadily worked against it, allowing it to dwindle without offering any new initiatives unless it has to do with First Nations, parks, caribou and other policies that appease their urban-based electorate. So sad.
The outlook
Ignoring the Trump tariffs for now, I expect the market to surprise to the up side, given the improving demand dynamics and the heavy sawmill closures in 2024. I predict that the average W-SPF 2×4 #2&Better lumber price will be in the high US$400s/Mbf about $60-$75 higher than 2024. Any US tariffs would require much higher prices for BC and Canadian mills.
Russ Taylor, President of Russ Taylor Global
