Weak Lumber Markets Cause First Sawlog Price Fall Since 2009

Slowing lumber markets throughout the world have resulted in declining sawlog prices in many of the major lumber-producing regions in Europe and North America, according to the Wood Resource Quarterly (WRQ), Seattle, Wash., USA. The biggest price reductions occurred in Japan, Sweden, Poland, and Russia.
With weaker demand for lumber around the world, sawlog prices fell in a majority of the 21 markets tracked by the WRQ. The Global Conifer Sawlog Price Index (GSPI) declined in the third quarter of this year for the first time since the first quarter of 2009. With a few exceptions, prices fell in both local currencies and in U.S. dollar terms.

The only region that saw any substantial price increase in the third quarter was British Columbia, where prices were up 5% - 7% from the second quarter. This region has benefited from higher lumber exports and production has gone up during 2011. The price for Coastal Hemlock rose more than 3% in the third quarter, while the price for spruce-pine-fir (SPF) logs in interior British Columbia rose nearly 7%. Prices in both regions were the highest they have been since the global financial crisis in late 2008.

As noted above, the biggest price declines the past quarter occurred in Japan, Sweden, Poland, and Russia, where prices were down between 6% and 12% from the second quarter. The three latter countries are major exporters of lumber, and shipments to European markets and Northern Africa have fallen this summer and fall.
Wood costs have gone down for many sawmills throughout the European continent in the third quarter, mostly due to slowing lumber sales and an expectation of lower lumber production levels during the winter months.

In the Nordic countries, there were a number of announcements of curtailments for the fourth quarter and the first quarter of 2012. Although sawlog prices fell in a majority of the 10 countries in Europe covered by the WRQ, they were still higher than the third quarter last year. For most markets, log prices have come up between $15 - $25 per cubic meter during the past 12 months, with only Western Russia and Norway seeing minor price increases.

Many of the continent’s sawmills are currently paying close to the highest sawlog prices seen in at least 17 years, and this is occurring at a time when lumber prices are far from any record highs, and are even declining in some markets. Because of the weakening lumber demand, it can be expected that log prices will soften in the coming months.

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