DNR Revenue Forecast: Timber Prices Fall on China Concerns

By David Chertudi, Lead Economist, and Kristoffer Larson, EconomistDNR Office of Budget and Economics

Lumber and log prices have fallen markedly since peaking in mid-2014. Random Lengths’ Coast Dry Random and Stud composite lumber price peaked at $393/mbf in January 2014 but fell throughout the rest of the year to average $373/mbf. The composite lumber price continued to fall precipitously to a low of $287/mbf in May 2015 before rebounding to $333/mbf in July. As of December the price had fallen to $295/mbf, to average $311/mbf for 2015.

This decline is mostly due to the dramatic slowdown in demand from China and an ample regional supply of both logs and lumber. Log prices are expected to increase throughout FY 16 to average as much as six percent more than FY 15.

In the November forecast, we noted that the expiration of the Softwood Lumber Agreement posed a major downside risk to the forecast because the expiration of tariffs might allow a flood of cheap logs and lumber to stream across the border from Canada. This has not occurred and probably will not because of constraints on Canadian log supply as they run out of excess wood from beetle-kill, the importance of China to the British Columbia lumber market, and the significant presence of Canadian companies that own U.S.-based sawmills.

Read the full February 2016 DNR Quarterly Economic and Revenue Forecast online.