Lumber Demand Expected to Remain Strong, Even in a Recessionary Period

At last Thursday’s (4-28-22) Council of Forest Industries (COFI) conference, analysts and economists speaking at the forum began using the dreaded “R” word. Some speakers said openly that by end of 2022 or early 2023, at least Europe, and potentially North America, could be in a recession due to run-away inflation, the war in Ukraine, and rising interest rates.

Typically, a recession is not good news for the Canadian forest industry. However, Paul Jannke, principal at Forest Economic Advisors (FEA), says that because demand for new housing is so robust in the U.S., he expects demand for lumber in the U.S. will remain strong, even with an economic contraction due to an “underbuild” of 4 million housing units and aging housing stock. “While we have a slowdown, these markets still remain very, very strong,” Jannke said.

Jannke believes that the loss of lumber imports from Russia will likely mean increased demand for Canadian lumber in “non-China” Asian countries. “We do see room for an increase in exports to non-China for North America,” Jannke said. “We’re calling for it to occur in (2023).”

Jannke added that he expects lumber prices to be in the high US$500 per thousand board feet range in 2023. That’s lower than what prices have been for the last couple of years, “but still very high prices relative to history.”

In 2021, U.S. housing starts were expected to be 2.2 million, but there were only 1.6 million new housing starts, leading to an underbuild. “We just simply couldn’t build it because of the supply side,” Jannke said.

In a typical recession, U.S. housing starts would fall to 1.2 million. But even if there is an economic contraction, Jannke said U.S. housing starts are expected to be 1.6 million this year and next. “We have fundamentally strong demand over the next decade, based on age class distribution of our population, based on pent-up demand, based on the age of the housing stock but also on the reshoring of our manufacturing,” Jannke said.

Other speakers at the conference noted that while market fundamentals bode well for B.C. forestry products, there remains a laundry list of challenges domestically for B.C. lumber and pulp and paper producers, from continued logistical pinch-points to provincial policies and regulations that deter investment.


FEA compiles the Wood Markets News from various 3rd party sources to provide readers with the latest news impacting forest product markets. Opinions or views expressed in these articles do not necessarily represent those of FEA.
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Even in recession, lumber demand expected to be high