After falling by -7% in July, US total housing starts for August 2021 increased by +4% to a seasonally adjusted annual rate of 1.615 million.
For August 2021, total residential starts in the US shot up by +12.3% from the same month one year ago, when it was 1.416 million. Improving further over gains throughout this year, permits for future homebuilding in August were up by +6% compared to the previous month, when it was 1.630 million, to a rate of 1.728 million units. Indeed, August 2021 permits are up +13.5% compared to August 2020 when it was 1.522 million. August starts of single-family housing, the largest share of the market and construction method which uses the most wood, was 1.076 million annualized, a -2.8% drop compared to July, when it was 1.107 million. Once again single-family permits were almost flat, at 1.054 million units, +0.6% above July when it was 1.048 million units.
Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales. Don’t miss out, get lumber price data updates directly to your desktop every Friday morning.
Looking at lumber prices, after rising incrementally since Labour Day, for the week of September 17, 2021 the price of Western S-P-F 2×4 #2&Btr KD (RL) remained flat at US$480 mfbm. That week’s price was up by +$33, or +7%, from one month ago when it was $447.
Benchmark Softwood Lumber Commodity Western Spruce-Pine-Fir Price: September 2021
STAY AHEAD of US housing price data by getting access to softwood lumber prices. Released every Friday for that week, since 1952 Madison’s Lumber Prices is used by the forest products industry as a price guide for North American construction framing dimension softwood lumber. These are, of course, the inputs into US and Canadian home building materials.
US Housing 1-Unit Starts & Permits August and Benchmark Softwood Lumber Prices September: 2021
When compared to the same week last year, of $960, the price of Western S-P-F 2×4 for the week of September 17, 2021 was down by -$480, or -50%. Compared to two years’ ago when it was $382, that week’s price was up by +$98, or +26%.
Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Historical Perspective
Still improving significantly after massive drops last year, for year-to-date 2021 softwood lumber production volumes in the United States and Canada jumped yet again. Sawmill capacity utilization rates in the United States and in Canada also increased, yet again.
For January to June 2021 softwood lumber production in the US was up by another +5.3% from the first six months of 2020, says the latest issue of the Western Wood Products Association’s monthly Lumber Track. US lumber production volumes were 19,033 mmfbm compared to January to June of 2020 when it was 18,075 mmfbm. Looking at the month of June against May 2021, US softwood lumber production rose to 3,208 mmfbm in June 2021 compared to 3,137 mmfbm in May 2021, which is a +2.3% improvement. Meanwhile there was an increase of +1.9% from June 2020 when it was 3,147 mmfbm.
Softwood lumber production in Canada stayed on its trend of recovering for January to June 2021, up +12.8%, to 12,564 mmfbm, compared to the first six months of last year when it was 11,139 mmfbm. Specifically in British Columbia — which accounts for 50% of Canadian lumber manufacturing and sales — sawmill production volumes for January to June 2021 grew by +20%, to 4,989 mmfbm, compared to the same time last year when it was 4,154 mmfbm.
North America Softwood Lumber Production, Sawmill Capacity Utilization, WWPA: June 2021
US sawmill production as a per cent of practical capacity for the first six months of this year grew by +2%, to 86%, compared to the same time in 2020 when it was 84%, said the Western Wood Products Association’s monthly Lumber Track. Still improving greatly from last year, Canadian sawmill production as a per cent of practical capacity again jumped in January to June 2021, to 84% compared to one year ago when it was a disastrous 75%.
The key topic when it comes to European imports from Asia remains freight rates. A 40ft container from Malaysia or Indonesia as late as last autumn cost US$1500 -$2000. By Q2 2021 importers were being quoted US$15,000- 20,000 and rates have stayed there.
This is attributed mainly to the general disruption to world trade caused by the pandemic, with a lack of return freight from western markets to South East Asia and empty containers stock piling in the wrong locations. In response, there has been a shift for some timber products, such as plywood and sawn timber, to break bulk.
But shippers have capitalised and put rates up here too. It’s also not proved a straightforward solution.
“It takes longer than shipping by container and is more complex to organise. You have to have the volume to make it viable, goods are more prone to damage and unloading is a time-consuming process,” said an importer.
They added that the breakbulk vessel Konya from Malaysia to Rotterdam and London Tilbury this summer spent weeks discharging at the latter, partly as the port was so busy, partly because personnel weren’t used to the work. It was reported to be the first timber breakbulk from Malaysia into London in 30 years.
“Breakbulk also just doesn’t work for more vulnerable and valuable goods, like flooring,” said one importer. “We’ve just had to pay the container rate and hope customers will cover the cost. Asian timber price rises this year average 8-10%. Freight has pushed that to 30%.”
No-one sees container rates changing significantly in the near future and, despite the issues with the Konya, another breakbulk vessel is due to set sail for continental Europe and the UK in October.
“Christmas goods traffic from China will now further underpin container prices, so we see little sign of softening for the next six to eight months,” said an importer. “Talk is also now that rates have historically been too low and that, even when they come down, it won’t be to former levels.”
Importing from Brazil is also proving a greater challenge. “Prices are sky high, driven up by US and wider global demand and also the serious Covid situation, which has led to personnel shortages and restricted mills’ output,” said an importer.
“The combination of the pandemic and political turmoil has also hit administration and it’s become increasingly difficult to secure export licences.”
Log stocks in China have not increased but there is a lot of volume on boats queuing at Chinese ports. Some industry observers estimate log stocks could be over 7m m3 including all the volume on the water.
Congestion in China has reached the point where at the end of August approximately six percent (599) of the worlds handy size fleet capacity was queueing off the China coast. This has two effects, high demurrage, and reduced shipping capacity.
This congestion has been caused by China authorities reacting to Covid outbreaks by closing ports, delaying berthing, and imposing strict procedures that have reduced ship handling capacity. There has also been strong demand for grain, minerals, and iron ore imports.
There is a concern for the property sector in China as property developer Evergrande faces the risk of default. Evergrande currently has 778 projects underway in 223 cities. The property sector contributes 28% of China’s economy and has been one of the engine rooms for China’s economic development. The Chinese government therefore will most likely intervene in some form. Even if the central government opts to let Evergrande default rather than bail it out directly, authorities are likely to be involved in coordinating the continuation of these projects that employs 163,000 people. There will, however, be short term disruptions.
The Caixin China General Manufacturing PMI fell to 49.2 in August 2021 from 50.3 in July, missing market estimates of 50.2. This was the first contraction in factory activity since April 2020.
Wood in Austria has been in short supply in recent months and the prices are horrendous. According to the Austrian sawmill industry, things are now back to normal.
The enormous increase in the prices of lumber has been a major topic of discussion, especially in the past few months. Impacted by huge demand in the USA, wood in Austria has also been difficult to get and prices have climbed at unprecedented levels.
The Austrian sawmill industry exported large quantities, and local timber builders criticized the fact that too few goods were available at too high prices. Wood prices have also had an impact on Austrian consumers. The construction costs have risen sharply.
A situation that is slowly returning to normal. “After a dynamic first half of the year, normality is returning to the Austrian timber market, ” says Georg Jung, member of the federal timber trade committee of the Austrian Chamber of Commerce on the occasion of the International Timber Day, which takes place in Pörtschach am Wörthersee. The Austrian market has found its equilibrium again and delivery times are back to normal.
Further increases in production
“We expect our production output to increase again in 2021. As early as 2020, the Austrian sawmill industry was able to increase its production as in previous years, despite the COVID restrictions,” explains Markus Schmölzer, Chairman of the Austrian sawmill industry. In 2020, 10.6 million cubic meters of lumber were produced in Austria. Based on the first half of the year, the forecast for 2021 expects a production of more than 11 million cubic meters.
According to Jung, the Italian market is particularly important for the Austrian local wood and sawmill industry. The export of lumberr from Austria to Italy is the fourth largest timber trade in the world. Almost half of the lumber exports go to the southern neighbors. Germany follows in second place with a share of 20 percent. Schmölzer also points out that half of the lumber production remains in Austria.
“A successful sawmill industry needs a secure supply of sawlogs. And this can only be achieved with active and sustainable forest management. Extending forest areas in Austria and Europe from harvesting, i.e. shutting them down, is counterproductive for climate protection and bad for added value and jobs,” explains Schmölzer. He is addressing the discussion in the political arena, especially in the EU Commission, about withdrawing forest areas from timber harvest.
Enough sales markets for damaged wood
Before the pandemic, there was a lot of damaged wood on the market that you could hardly get rid of. That has changed, said Markus Schmölzer, the chairman of the sawmill industry in Austria and managing director of the Hasslacher company.
“We still have the hotspots in Upper Carinthia and East Tyrol, where there is still a lot of damaged wood. However, the market conditions have changed positively to the point that there are sufficient sales opportunities. ”However, there are currently problems with the capacities for processing and transport,” said Schmölzer.