Madison’s North America Lumber and Sawmill Update: May 2020 Sawmill Capacity Utilization Rates
The vast majority of logs sold, in British Columbia and elsewhere in Canada, go to the sawmilling industry for lumber production. It’s very interesting to watch the trend of log prices as a result of this latest lumber price volatility:
US sawmill production as per cent of practical capacity for January to May 2020 dropped slightly, down by -1%, to 83%, compared to 84% in the first five months of 2019, said the latest issue of the Western Wood Products Association’s monthly Lumber Track. Canadian sawmill production as per cent of practical capacity yet again dropped significantly in Jan – May 2020, at 73% compared to the first five months of 2019 when it was 82%.
For softwood lumber production, meanwhile, compared to one-year-ago, in the first five months of 2020 softwood lumber production in the US was almost flat, said the WWPA. For January to May 2020 US lumber production volume increased by just +0.7% to 14,825 mfbm compared to the first five months of 2019 when it was 14,720 mfbm. Comparing the month of May to April 2020, US softwood lumber production fell by -4.4%, at 2,777 mfbm for May 2020.
In Canada softwood lumber production continued drastic drops, falling by another -15.9% in the first five months of 2020, to 9,111 mfbm, compared to one-year-ago when it was 10,829 mfbm. Comparing the month of May to April 2020, Canada softwood lumber production recovered nicely, up by +25%, at 1,816 mfbm for May 2020 compared to 1,452 the previous month.
A large proportion of lumber produced in Canada goes into US home building. Like lumber prices, housing construction in the US underwent a significant stall in spring. And, like lumber prices, it is recovering steadily from severe lows:
Since Madison’s Lumber Price data comes out weekly, but US housing starts data is released monthly, there is always a lag between actual building activity and the US Census Bureau data release.
However, during this unprecedented time of upheaval on multiple fronts, lumber prices are proving to be an excellent forward indicator of US home building.