U.S. market conditions have been lackluster since the Trump tariffs on Canadian lumber were postponed for the second time in early April. From early March to early May, W-SPF 2\u00d74 #2&Better random lengths (FOB BC mill) prices declined almost 25% \u2013 from US$570\/Mbf ($368\/m3) to a low of US$437\/Mbf (US$\/282\/m3). In early June, price trends reversed and rose steadily to US$500\/Mbf in mid-July (+14%). Similarly, E-SPF 2\u00d74 (delivered Great Lakes) declined by 14%, or from US$640\/Mbf ($413\/m3) in March to US$545\/Mbf (US$\/353\/m3) in late May and then increased\u00a0 to US$610\/Mbf (+12%) in early July.<\/p>\n
The recent rise in Canadian lumber prices is most likely tied to the increase in duties that is looming in early August but also tied to lower production: Canada\u2019s lumber output was lower by 6.8% for the first four months of 2025.<\/p>\n
Recent Canadian lumber price trends have been the opposite of Southern Yellow Pine (SYP). SYP-West 2\u00d74 #2&Better random lengths (FOB mill) prices were in freefall starting in early May as they fell 27% from US$467\/Mbf (US302\/M3) to US$342\/Mbf (US$221\/m3) in early July. These prices finally saw their first increase in mid-July as the over-supply of SYP lumber finally started to balance out.<\/p>\n
Looking back to the beginning of 2025, SPF lumber prices in the U.S. rose through March, but this was strictly tied to the potential of 25% implementation of Trump tariffs being applied on Canada lumber and not from market demand. The lower prices in early May put B.C. Interior SPF mills back near break-even levels (on an EBITDA basis) \u00a0with 14.4% duties, with other Canadian regions looking to be marginally profitable. Curtailments have already occurred in Quebec, as Arbec Forest Products (~800 million Bf capacity) announced it is shutting down indefinitely due to weak market conditions and some B.C. mills are curtailing. With tariffs in suspension mode, the U.S. market fundamentals were exposed \u2013 the market has been weak and will most likely remain weak for the rest of 2025, as there is still too much supply relative to relative stubbornly lower lumber demand and high interest rates.<\/p>\n
Canadian lumber will be subject to elevated U.S. import duties in about August (rising from the current 14.4% to near 34.5%, although this could be staggered into September). This factor alone will require Canadian lumber prices in the U.S. market to stay high, and they may need at least another 10% to attract enough Canadian supply to the U.S. market. Any tariffs imposed on Canada and\/or other countries will only increase lumber prices further to attract enough imports into the US market. If prices do not rise enough from tariffs that are established, then expect mill curtailments in B.C. and some parts elsewhere in Canada.<\/p>\n
No one knows if or when \u201cTrump tariffs\u201d could be applied to \u201ctimber and wood products as well as derivative products \u201cfrom the Section 232 investigation and what the tariff levels might be by country. If tariffs are applied, that will cause some major dislocations to the Canadian lumber industry, as higher costs for imported lumber will ultimately cause U.S. lumber prices to rise. How much of the tariffs (or Canadian duties) are passed on to the consumer is the only wild card.<\/p>\n
The U.S. needs imported Canadian lumber \u2013 despite the \u201cU.S. noise\u201d to the contrary. However, the U.S. was by far the dominant market for Canadian lumber in 2024:<\/p>\n
The U.S. represented 67% of total B.C. lumber shipments and 59% for all of Canada.
\nThe U.S. represented 77% of total B.C. lumber exports and 90% for all of Canada.<\/p>\n
In 2024, 87% of all B.C. lumber production was exported, and the balance (13%) remained in Canada. Aside from the U.S., all other markets for B.C. lumber are now relatively insignificant. The next two largest markets are China representing 9.4% of shipments and Japan at 6.7%. Unfortunately, both markets face many headwinds with little growth prospects, including an aging population and slow housing demand, not to mention increased competition from other offshore suppliers. The rest of the world for B.C. represents less than 7% of exports, led by Taiwan (2.2%), Other Asia (1.6%), and the EU (1.1%).<\/p>\n
It appears that as production levels in B.C. plummeted after 2018, B.C. lumber companies narrowed their focus to the U.S. market and have dropped out or reduced shipments to most offshore markets \u2013 see chart.<\/p>\n
Between 2018 and 2024, total B.C. lumber production plunged by 48% with lumber shipments to the U.S. dropping by 2.1 billion board feet (-32%) as compared to total offshore exports declining by a more significant 2.35 billion bf (-66%). And Canadian lumber production has declined another 6.8% in the first four months of 2025. With excessively high log costs for most of that period, B.C. mills appear to have focused more on the U.S. market where they were more competitive and have slowly withdrawn from the more competitive offshore markets.<\/p>\n
Many pundits suggest that the solution to B.C.\u2019s (and Canada\u2019s) reliance on the US market is to simply diversify markets. If that were easy, it would have been done years or even decades ago. In fact, Canada Wood\u2019s overseas offices have been wound down dramatically due to the limited market potential for B.C. (and Canada) lumber in offshore markets. As a result, it has not been easy for B.C. mills to grow in offshore markets, especially Interior SPF mills.<\/p>\n
Only in North America do you find\u00a0imperial thicknesses, widths and lengths for lumber, and especially in planed 2\u00d74 to 2\u00d712. There are a few exceptions \u2013 Australia, New Zealand and the U.K. have imperial sizes, but not in North American sizes. Japan and China import imperial dimension sizes from BC and Canada, but these volumes have diminished in the last ten years.<\/p>\n
The rest of the world produces\u00a0metric-sized lumber with a heavy proportion of rough sawn lumber (unplaned sawnwood). The rest of the world trades in metric lumber (and in single species, not mixed species like SPF) and North American sizes and grades do not fit many, if not most, end-use applications. Sawmills in Europe, Australia, New Zealand and South America process logs differently than in Canada and the U.S. These countries have installed expensive log merchandizers that pre-sort logs into specific diameters, lengths and grades before milling. This extra capital investment allows mills to batch logs for a specific market, product or end use, creating value-added lumber with little to no fall-down grades. This means that European sawmills can target all of Canada\u2019s (and U.S.\u2019s) lumber markets, but B.C. Interior mills are heavily restricted to the offshore markets they can service with their imperial lumber sizes. In the end, B.C. and the rest of Canada\u2019s SPF sawmills are most effective in the U.S. market because of its lack of log merchandizing, limited species sorting options and imperial lumber sizes. While some Interior mills are better configured to produce some metric lumber (and do), the vast majority are not.<\/p>\n
The B.C. Coast has always been able to produce metric-sized lumber and have been present in many markets as a result. While struggling with competitiveness against other exporters, B.C. Coast mills have become more limited in both production volumes and in their offshore market fit.<\/p>\n
Unfortunately, B.C. Interior and Canadian sawmills are configured mostly for the U.S. market. This has always been a logical market, but President Trump\u2019s potential tariffs and trade policies may be huge obstacles to navigate for B.C. mills as they already have the poorest sawmilling margins in North America for most of the last ten years.<\/p>\n