Bumping up and down for the past few months, US total housing starts for September 2021 dropped by -1.6% to a seasonally adjusted annual rate of 1.555 million. Continuing to make year-over-year gains, for September 2021 total residential starts in the US rose by +7.4% from the same month one year ago, when it was 1.448 million.
Also waffling up and down in recent months, permits for future homebuilding in September were down by -7.7% compared to August 2021, when it was 1.721 million, to a rate of 1.589 million units. September 2021 permits are flat compared to September 2020 when it was 1.589 million.
September starts of single-family housing, the largest share of the market and construction method which uses the most wood, was 1.080 million annualized, which is also flat compared to August 2021. Single-family permits were again almost flat, at 1.041 million units compared to August when it was 1.050 million units.
Benchmark Softwood Lumber Commodity Western Spruce-Pine-Fir Price: October 2021
An important metric is backlogs, the latest data shows that the number of single-family homes authorized for construction but not yet started edged lower to 144,000 in September, but remains near a 15-year high.
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.
In a noticeable change in the data for starts, units under construction compared to completions are much higher now that historically. Currently there are 712,000 single family units under construction, the highest level since 2007, and a record wide gap between completed homes and houses under construction. As well, most of these single-family homes are already sold, probably due to construction delays.
US Housing 1-Unit Starts and Permits September & Benchmark Softwood Lumber Prices October: 2021
Something else interesting, a new development in the data, is housing inventory. As of October 15th, housing inventory was at 424,000, compared to 554,000 for the same week a year ago. That is a decline of -23.6%. Compared to the same week in 2019, inventory is down -55%, from 936,000. A week ago, inventory was at 426 thousand, and was down 23.3% YoY.
Meanwhile, 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
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 wood panel manufacturers have expressed concern about potential production disruption coming from President Joe Biden’s proclamation stipulating mandatory Covid-19 vaccinations for all US companies with more than for 100 employees.
Preident Biden announced recently that the Occupational Safety and Health Administration (OSHA) would soon begin the development of an emergency temporary standard mandating vaccinations, with those not willing to be vaccinated needing to produce a negative COVID-19 test on a weekly basis.
In September, the Composite Panel Association circulated a survey to members to assess the potential impact of such a mandate on member operations.
More than 75% of responding CPA member companies do not presently have a vaccine mandate for employees, though several indicated that they have strongly encouraged employees to get vaccinated.
“More than 75% of responders reported that a mandate could result in employees deciding to discontinue employment, further exacerbating ongoing labour shortages,” the CPA said. “This would also impact mill production, with several responders noting that the mandate may lead to temporary production disruptions, depending on the ultimate impact on mill employment.”
The alternative of weekly COVID testing may not pose a significant problem, as almost 60% of responders indicated no local shortage of testing resources.
OSHA continues work on the emergency standard and a number of key details remain unclear, including when the standard may be issued, how much time employers will have to implement the mandate, and whom will be responsible for weekly employee testing, if an employee elects this option in lieu of a vaccine.
The CPA says it will continue to monitor and report on this matter as the mandate’s details are released from the administration.
Ikea has become the latest retailer to warn on supply chain problems, saying on Thursday that stock shortages were likely to last another year.
“We actually foresee that the availability and raw materials challenge will continue for the better part, if not the whole, of [the financial year to the end of August]. This is here for a longer period than we thought of at the beginning of the crisis,” Jon Abrahamsson Ring, chief executive of Inter Ikea said.
Reporting its annual results, the world’s largest furniture retailer also said the pandemic had helped its business and sped up its transformation. Sales in the year to the end of August increased 6 per cent on the previous year to a record €41.9bn, boosted by an almost doubling in online sales.
Jesper Brodin (in the left photo), chief executive of the biggest Ikea franchisee Ingka, said in a separate interview that Ikea had accelerated its shift away from selling from big out-of-town stores to more city-centre shops and ecommerce sales, which have risen from 7 per cent of the total in 2019 and 18 per cent last year to more than 30 per cent now. “This situation has given us a boost like never before to speed up our transformation,” he said.
Ikea has used trains to transport goods from Asia to Europe and bought and hired its own containers as it still faces supply chain problems, along with nearly all retailers, because shipping prices have soared and ports have become congested worldwide.
Ring said Ikea was unlikely to make big changes to its global supply chain as a result of the crisis, which occurred as retailers have tried both to restock and to deal with a huge wave of demand after the initial Covid lockdowns in Europe and the US last year.
“I don’t see a substantial change or shift in how we do our supply chain or sourcing. We will continue to work very closely with a focused number of suppliers,” he said.
Ikea, which reports full financial results later in the year, was in the middle of the biggest transformation in its 78-year history — aiming to end its reliance on customers collecting and building their own furniture — when the pandemic hit.
It has recently bought companies that build furniture for customers as well as augmented reality start-ups to help customers with home planning.
Brodin said Ingka, which accounts for about 90 per cent of Ikea sales, had invested €2.2bn in recent years in new store formats including stores focusing only on kitchens or bedrooms, as well as smaller general shops in city centres, such as one to be opened soon in Stockholm.
“We are still working hard on cracking the code around the product range and logistics. But the traffic has been phenomenal and has boosted our market share in cities,” he added.
Ikea has placed a heavy emphasis on sustainability at the same time as trying to cut prices as it enters countries such as India, leading to concern from some critics about disposable consumption.
Brodin called it “this classic myth about low prices” and argued that Ikea was showing “the new economy is built on being resource smart and thus being climate smart”.
It has invested in initiatives such as taking back used mattresses in the Netherlands and converting them into new products, as well as spending on renewable energy and promoting products such as plant-based meatballs and LED lamps.
As summer came on the sawmills across North America continued to recover manufacturing volumes from the dramatic drops of one year ago. For January to July production increased, however comparing just June to July 2021 there was a drop. Sawmill capacity utilization rates in the United States and in Canada also fell somewhat.
For January to July 2021 softwood lumber production in the US improved by +3% from the first seven months of 2020, says the latest issue of the Western Wood Products Association’s monthly Lumber Track. US lumber production volumes were 22,060 mmfbm compared to January to July of 2020 when it was 21,424 mmfbm. Looking at the month of July against June 2021, US softwood lumber production was 3,020 mmfbm in July 2021 compared to 3,213 mmfbm in June, which is a decrease of -6%. There was a drop of -9% from July 2020, when it was 3,349 mmfbm. Last month’s update here: https://madisonsreport.com/2021/09/23/north-america-softwood-lumber-production-sawmill-capacity-utilization-wwpa-june-2021/ Canadian softwood lumber production continued the trend of improvement seen so far this year. For January to July 2021, Canada sawmill manufacturing was up +10%, to 14,322 mmfbm, compared to the first seven months of last year when it was 13,010 mmfbm. Specifically in British Columbia — which accounts for 50% of Canadian lumber manufacturing and sales — sawmill production volumes for January to July 2021 grew by +16%, to 5,741 mmfbm, compared to the same time last year when it was 4,931 mmfbm.
North America Softwood Lumber Production, Sawmill Capacity Utilization, WWPA: July 2021
US sawmill production as a per cent of practical capacity for the first seven months of this year grew by +1%, to 86%, compared to the same time in 2020 when it was 85%, 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 July 2021, to 82% compared to one year ago when it was a disastrous 75%.
It has been another extraordinary year in the softwood market since the International Softwood Conference (ISC) was held completely online for the first time in 2020.
On October 14th 2021 the 69th edition went hybrid – welcoming 200 participants in Helsinki and further 100 online. In the past months the demand has been unprecedentedly high for most of the year amid a volatile economic context and high uncertainty for the future.
The development of softwood production and consumption suggests that in 2021 there would be a record-high increase in Europe (at the end of the year it will probably be +6 to 7% compared to 2020).
The dynamics which took shape in 2020 also continued well into 2021 – with demand driven by a lively DIY sector as well as a strong renovation sector and a resilient construction sector. The outlook for 2022 is for a more moderate growth on top of the high level of 2021 of both production and consumption, but uncertainty is high amid rapidly changing market conditions.
Morten Bergsten, Vice-President and Softwood Chairman of ETTF, Herbert Jöbstl, President of EOS, and Kai Merivuori, managing Director of the Finnish Sawmills Association, delivered similar messages in their presentations from their respective vantage points of user and producers. Overall, they emphasized, the year was characterized by an imbalance between demand and supply which seems to be easing going into Q4 2021. This has driven sawnwood prices up and caused stocks to be at record-low level during the first half of the year. In order to serve local demand European players this year focused on home European markets. The only overseas market where deliveries of European sawn softwood increased is the United States, which has also seen very high demand and extraordinary volatility of prices.
A main driver of the future demand will be the increasing recognition of the potential of wood to mitigate climate change when used as building material, as Jöbstl showed in his presentation. The client base of the European sawmill industry became bigger since the start of the pandemic: it will be key for the future success of the industry to retain a few of these new customers. Sawnwood prices, which for many years were low compared to other building materials, might stabilize at a higher level than in the past: this view was shared from presenters from both sides of the Atlantic.
Bergsten stressed that consumption is expected to grow more than production next year, which points to a strong underlying demand. The overall picture for the softwood sector is good. But there are abundant challenges to the rosy picture depicted above, especially when it comes to the supply of raw materials. The prices of raw materials, having been subdued for most of 2020, rallied over the last few months and in a few European countries reached record high levels. Also the recently proposed EU forest policies seem to be an obstacle to the mobilization of raw materials in the coming years. There is a huge need for communication.
Also a main topic of the ISC 2021 was the looming log export ban of Russia (which enters into force in January 2022) which is expected to upend the global softwood logs market and put further pressure on European supply. Meanwhile China longs for more and more logs instead of lumber due to the large price differences and will have to figure out how to close the gap that even turning to South America for supply might not be able to fill. In the first seven months of 2021 China’s softwood lumber imports have decreased by 27% while the log imports gained 31%.
The ISC was hosted by Finnish Sawmills Association, which co-organized the event with the two usual partners: the European Organization of the Sawmill Industry (EOS) and the European Timber Trade Federation (ETTF). The next edition of the International Softwood conference will take place in Denmark in October 2022.