PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 19:29 UK, 8th Jul 2014, by Agrimoney.com
Asia slowdown halts three-year US sawlog rally

A run of rising US sawlog prices stretching back more than three years has come to an end, undermined by a slowdown in China's construction sector, besides by a softer domestic market.

Prices of US sawlogs the highest-value parts of a trunk, sent to sawmills rather than for pulping tumbled in May, taking their declines for 2014 to up to 15%, depending on the species of tree and the logging region, Wood Resources International said.

The declines in prices, "after having trended upward for over three years", was reflected in both of the major US lumber regions, in the north west and south of the country.

And it reflected weakening demand "from both domestic sawmills and the export market in Asia", the US-based analysis group said.

China factor

Lumber markets in both of Asia's top two economies shown weakness in 2014, with Japan's, falling 4% year on year in the January-to-March period, and making their weakest start to a year since 2010.

In China, a "slowdown in the economy has impacted the construction sector, resulting in a decline in lumber imports during the first four months of 2014", Wood Resources International said.

Chinese property sales fell by 16%, month on month, in the first half of June, latest data from China Confidential show.

In fact, Chinese imports of US, and Russian, lumber overall have held up relatively well, as have Russian shipments, but poor purchases from other countries have sagged, producing knock-on effects on other markets.

With Canadian lumber exports to China down by 22% in the January-to-March period, and to Japan 32% lower, merchants have sought to place extra volumes nearer home, with shipments to the important US market rising by 6%.

Recovery ahead?

For the overall US lumber market prices were 5-17% lower in May than at the start of the year, which had started strong, with Douglas fir log prices hitting their highest since 2006 in the north west, and those of hemlock, also used in construction, reaching an 18-year high.

"The recent price trend for lumber in North America has been downward after sharp increases last summer and fall," the Washington state-based group said.

However, there is hope for producers, with Chicago lumber futures staging some recovery from an early June low of $293.10 per 1,000 board feet, for the September contract, which stood at $333.00 on Tuesday.

London-based Capital Economics has forecast a rise in US lumber prices to $400 per 1,000 board feet by the end of the year, boosted demand from the country's own housebuilders.

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