Back in 2008 it seemed like the bottom had fallen out of the lumber market. US housing prices and construction declined, most of the world went into recession, and lumber prices were down. 2009 wasn't much better, and in the years since there have been some signs of recovery, but no giant leaps forward.
The effect of this decline was that forest companies were less profitable, jobs were less plentiful, some mills shut down or reduced capacity, small communities were affected, and forest workers moved on to other better paying jobs and industries. If there hadn't been lumber demand from Asia it likely would have been much worse.
Like with all commodities, when prices decline production starts to pull back and the workforce starts to shrink. This continues until demand starts to pick up again, and an industry has to ramp up to meet increasing demand.
It appears we are finally at that point.
Lately, there are reports and articles coming out almost daily on positive lumber price forecasts and demand. Buy recommendations have been coming out on forestry stocks. US housing is showing signs of life again, with new starts once again increasing to address shortfalls. Asian demand hasn't gone away. Could it really be that lumber is turning into a hot commodity?
The article below explains a lot of what is happening. In short, demand for lumber is picking up again at a time when mill capacity has been reduced, forest workers are scarce, allowable cut levels in some provinces have dropped, and mountain pine beetle damaged timber harvests are decreasing.
If you have stuck out the last few years in your forestry job, it looks like there may be brighter days ahead. If the forecasts are correct, improving lumber markets will benefit communities, families, forest workers, forest companies, and government revenues. It will also allow more money to go back into the forest, for things such as wildlife, stream and research projects.
Here are some excerpts from a recent article, with a link to the full article below:
“The economy went into a recession in 2008, but the lumber business went into a depression,” said Mr. McIver, West Fraser’s vice-president of sales. “For the last five years we’ve been waiting for some sort of recovery, but we are really beginning to feel like things are getting better.”
Lumber prices have surged to their highest level in nearly eight years, busting out of a slump and lifting the outlook for producers. The commodity’s comeback has been a roller-coaster ride, but in this latest phase, industry experts say the highs will persist for longer while the lows won’t be as harrowing as in the past.
Lumber’s winning streak has been fuelled by a rebound in U.S. housing starts, robust exports to China, restricted timber supplies in Canada and a series of North American sawmill closures.
After a pullback to $210 in the spring of 2011, lumber prices have shot up to their recent level of $390, tripling over the past four years and bolstering producers along the way.
The combination of a revived U.S. housing market and tightened timber supplies will help spark an unprecedented supercycle for lumber – a long period of rising prices for the commodity, Mr. Swetlishoff said. While there will some bumps ahead, lumber is in the early stages of an extended bull run, he said.
Article: A lumber boom that’s built to last
http://www.theglobeandmail.com/globe-investor/a-lumber-boom-thats-built-to-last/article7608016/------------
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