First Quarter 2024 Lumber Industry Update 

We are delighted to share with you our latest insights and developments in the lumber industry for the fourth quarter. Outlined below is a comprehensive industry update, provided with the help of our valued business partner, LMC. We believe it will be a valuable asset for your lumber purchasing decisions and business development discussions. As we reflect on the past quarters and gear up for new opportunities, we trust this update will provide you with key information to navigate the dynamic landscape of the lumber market. Feel free to reach out if you have any questions or would like to discuss how these insights can be tailored to your specific needs. Thank you for your continued partnership! 

OSB – The Show Stopper

While the rest of commodity wood products like lumber and plywood languish at relatively affordable prices through Q1 of 2024, OSB prices took a ride on Elon Musk’s Space-X.  From mid-February to the end of March, a six-week period, OSB prices rocketed up 50-60%. Currently, they remain there. While this doesn’t compare to the record high prices achieved in 2021, it does eclipse any pre-pandemic volatility.  

The reason OSB prices have moved so dramatically, while other wood products remain affordable is due to consolidation. 

It’s happened so gradually, that most paid little notice. Over the past 20 years the industry has lost more individual companies than the number that remain. Iconic names like Ainsworth, Norbord, McMillan, Champion, and Grant have all disappeared and have been swallowed by names like West Fraser, Georgia Pacific, Louisiana Pacific, and Weyerhaeuser. While OSB production capacity has grown over the past 20 years, the consolidation of pricing decision-making power among mega-manufacturers is what has changed market dynamics.

Currently, the four largest commodity OSB manufacturers own a whopping 76% of production capacity.  Notice the word “capacity”. Just because a producer can make more OSB doesn’t mean it’ll. Therein lies much of the reason for OSB price volatility. So, when you stop by your local lumberyard and are shocked at the price of OSB, don’t blame them, they have no control over market dynamics. 

Moving forward, producers will aim to match supply and demand to maximize profits, but it’s imprecise. Two large new mills may disrupt the market balance, potentially causing OSB prices to slide until they ramp up. However, this depends on housing market strength; recent growth in single-family home permits could offset the added OSB production.

Plywood 

The plywood market finished Q1 at a strong pace as many took advantage of market opportunities in preparation for spring needs.  Recent availability & price issues with OSB have incentivized some buyers to switch to plywood for the short term. This was a temporary fix, which seems to have played out.   

Currently plywood pricing seems top heavy pushing doubters to the sideline. Field inventories, however, remain thin, so a pause in the action shouldn’t last long. Just in time order fulfillment and inherent optimism should maintain steady demand throughout the year. 

Lumber

The main talking point of Q1 2024 was the extensive curtailment that we’ve seen in Oregon and British Columbia, with 9 mill closures (8 most likely permanent). The expectation is we will see more curtailment if lumber pricing remains soft.

Mills in Western Canada and the Pacific Northwest are struggling to produce profitably in the face of some challenging market factors, which include limited access to logs and extremely high fiber costs relative to current lumber pricing. 

Total North American Production

2020 – 60.521 billion board feet

2021 – 60.580 billion board feet

2022 – 58.909 billion board feet

2023 – 57.669 billion board feet

• Canfor announced a 6-month closure of their Polar mill, located north of Prince George, British Columbia, “due to a shortage of economically available fibre in the region.” This reduction in capacity will take approximately 140 million board feet of lumber out of the market as well as impacting the jobs of 190 employees. 

• Hampton Lumber announced that their sawmill in Banks, OR, that has been closed since October 2023 will now be shuttered indefinitely. 

• West Fraser announced the permanent closing of its Fraser Lake, BC mill. This will eliminate 160 million board feet of production. The decision was based on “West Fraser’s inability to access economically viable fibre in the region.”

• Dunkley Lumber announced the elimination of one shift at their BC mill. This indefinite reduction in their production at their BC mill is due to a lack of “affordable fibre.” This equates to a 25% reduction in capacity, or 100 million board feet of production.

• Tolko Industries will be “temporarily” laying off 60 workers at its Lakeview mill in Williams Lake, BC, beginning February 19, 2024 due to high costs of operations in BC. This elimination of one shift would account for 160 million board feet on an annualized basis.

• Rosboro Lumber, Springfield, OR, announced the indefinite curtailment of its stud mill, citing an “inability to buy logs at current price levels and continue to operate the business.”

• Interfor to “indefinitely curtail” their Philometh, OR mill, citing persistent high log costs in the region and ongoing weak lumber market conditions. The Philomath sawmill produces a mix of kiln-dried and green Hemlock and Douglas-fir dimensional lumber and timbers and has an annual capacity of 220 million board feet. This should be completed by the end of Q1 2024.

• Vaagen Bros. Lumber announced the curtailment of their Colville and Usk facilities, which should eliminate 25 million board feet over the coming months. These curtailments are temporary and the result of poor lumber markets and a shortage of fiber supply.

• C&D Lumber has announced the permanent curtailment of it’s Riddle, OR mill. Founded in 1890, this sixth-generation company is closing its door due to “market fluctuations, increasing operational costs, to timber supply issues – have made it impossible for us to envision a sustainable future for the company.”

Lumber Duties 

The U.S. Department of Commerce announced the preliminary findings of its fifth administrative review (AR5), which covers the period from January 1, 2022, to December 31, 2022, with Canadian Duties moving from 8.05% to roughly 13.86%.  This change is not effective immediately; it should take effect in either August or September 2024. Based on a $15,000 truckload invoice: Current duties equate to $1,275 per truckload Proposed duties to equate to $2,080 per truckload

Logistics 

Trucking Outlook:  The current truckload market is still in a state of over-supply when viewed from a national perspective. The first quarter was marred by extreme weather throughout most of the country which helped hamper any kind of sustained demand, though over the last month we saw some positive signs of activity returning.  As we move through QTR2, we expect a little more normalcy in relation to supply and demand effects on the market vs the over saturation of the last couple years.  Carrier attrition has been a hot topic over the past year with record revocations of authority, but it hasn’t hit a balance yet.  The missing piece in the equation is volume, and with less carriers, we have less leeway before some upward pressure hits the market unlike in the past where it was just absorbed.   

From a local perspective, we are already seeing some regions tighten up. The Southeast is as close to a balanced market as there is.  Capacity is still available, but as we move through the Spring / Summer months, I would expect to see extended lead times and an uptick in rates. The effects of the Port of Baltimore closure will also play a factor, as it was one of the larger ports for flatbed freight. That freight will be diverted to nearby ports where it will create some additional capacity constraints.  

• Expectation for a more normal supply and demand dynamic in QTR2 compared to previous years oversaturation

• Carrier attrition could potentially put upward pressure on rates due to reduced carrier availability (regionally)

Warehousing / Storage:

• Outside space is available

• Availability for inside storage is improving, but at a premium 

• Warehouses without inside availability have been suggesting wrapping OSB / Plywood for outside storage options

Load to Truck Ratio – The Load-to-Truck ratio represents a real-time indication of the balance between spot market demand and capacity.  It is important to note that while national averages are helpful in capturing the overall state of the market, regions may vary.

	After a pretty flat 2023 and beginning of 2024, we are starting to see some mild tension in the flatbed market.  March ended with a LTR of 18:1, with some upward momentum going into summer
	Dry vans represent the largest segment of the truck market and has experienced relatively no tension throughout the year.  March ended with a LTR of 3:1, but also showed some recent activity.  The dry van market tends to have less ebbs and flows than the flatbed market does.    We continue to be oversupplied on this side.

A Special Thank You to our partners at LMC for helping us provide this valuable information to our customers!