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While many industries and commodities took a severe downturn due
to COVID-19, there were some that outperformed their historical
norms. Lumber and wood related commodities certainly fall into the
latter category. Within the United States, wholesale and retail
lumber prices have soared since COVID-19 emerged in 2020 increasing
concerns of inflation for the U.S. economy as supply has become a
major concern both in terms of raw supply as well as ancillary
areas like labor shortages, transportation congestion, equipment
shortages and so on. (1)(2) While these prices have dropped
recently from their highs, they remain elevated over historical
norms with expectations to remain so for the near term. (3) Below,
we will explore the macro trends and micro trends within this group
as well as where IHS Markit's economists see the market for the
remainder of 2021 as well as future years.
The five largest exporting countries of wood commodities under
harmonized chapter 44 account for over 40% of the global
international trade market when comparing January 2021 through
April 2021 against the same time frame for prior years. When
looking at year-to-date comparisons, most notable is that Canada
has doubled from $3.6 billion through April 2020 to $7.5 billion
through April 2021.
A comparison against the same time frame for prior years also
shows how significant the growth has been in 2021 during which
Canada shows exponential growth.
Switching to import countries of interest, mainland China has
been the largest importing market in years past. However, for
January 2021 to April 2021, the United States has so far overtaken
mainland China as the largest importer with 20% of total imports
globally.
The growth rate for the United States for 2021 over 2020 exceeds
85%. Even comparing against older years of 2017, 2018, and 2019
within the same months, the growth rate is tremendous.
Who is the U.S. sourcing from? Not surprisingly, Canada is the
primary source as previously noted, followed by mainland China,
Brazil, Germany, Chile, and Indonesia. The latter group's combined
market of 21% pales in comparison to Canada's market share of 63%.
Within this latter group, we see extremely strong growth in January
2021 - April 2021 against the same period in 2020 as well as prior
periods. Notably, imports from Germany increased 83% while Brazil
and Indonesia both increased over 50% for the same comparison
period. The Canadian growth rate was significantly higher still,
increasing to 160% during that same time.
The preferred mode of transport from Canada to the United States
is rail at 62% followed by road at 38%. Maritime as a mode of
transports makes up less than 1% of the total. Geographical
proximity, logistics flexibility, and lower costs make road and
rail the primary options.
Further U.S. Canada trade analysis reveals most of the wood
imports by value, moving from the provinces of British Columbia and
Quebec. On the U.S. receipt side, 10 states, by value, account for
50% of the imports with the west coast states of Washington,
California, and Oregon comprising 18%.
It is not just total volumes and values exhibiting high rates of
volatility, but unit prices are fluctuating as well. Dating back to
January 2019, two of the largest HS4 commodity categories shows
relatively consistent unit values until August 2020 when the turn
markedly upward with continued steady increases as 2021 progress.
This trend benefits producers who are earning more for their
exports per unit shipped but alienates importers and end consumers
as they struggle to find supply at reasonable cost levels.
Where does the market go from here? IHS Markit GTAS Forecasting
economists currently project a nearly 6% global growth in wood
commodities by metric tons for full year 2021 with steady, low
single-digit growth in the years thereafter through the forecast
frontier of 2035. Similar annual forecasts are available for 270
commodities, 16 key indicators, and 248 countries, updated
quarterly.
In summary, the trends seen within the data point discussed
above indicate producers will continue to benefit from increased
demand and higher price points for the foreseeable future, while
stakeholders on the import side like home builders, furniture
producers, hardware stores, and others may struggle to compete for
available supplies at elevated prices.
