Market Report: Wood Products Market Conditions

The Fed has continued to reduce interest rates amid signs of labor market weakness, as wood products market conditions remain mixed and inflation remains slightly elevated. Mortgage rates have responded accordingly, dropping 30 to 40 basis points since the beginning of the year to a current average of 6.22% according to Freddie Mac.

We hope that the Fed continues to gradually ease rates and mortgage rates respond accordingly so it will have an impact on housing affordability. The government shutdown kept many market statistics from being published on their normal time frame, so the Fed was flying blind. The latest report on inflation is anticipated on December 18th, so we will soon get a better idea of the Fed’s direction.

Wood products markets are still choppy. Lumber futures continue to trade at the lower side of the range for the year. Veneer markets are slow, but there hasn’t been any current pressure on prices. Pricing will depend on market takeaway and log markets.

There is always talk of seasonal winter log price increases, but that may not materialize due to weakness in product markets. Panel markets have been sluggish, but at least consistent volumes have been moving weekly. Panel prices are still below breakeven for most producers.

Mass Ply projects look solid through the second quarter of 2026 right now. These projects always begin later than scheduled, but it is nice to see a good volume of confirmed projects to begin the year. Mass Ply projects give us a much closer touch with the General Contractors and developers who are moving forward on projects in the near term.

Anecdotally, we are hearing that large framers and general contractors are anticipating a dramatic increase in the number of industrial projects for 2026. One large contractor mentioned that they believe they will double their workforce in 2026 due to the strength of their pipeline. We hear some are booking projects into 2027 already. I hope that means strength as we come out of the chutes in 2026, and won’t be delayed until mid-2026.

There are very large market disruptions occurring early this next year. The Supreme Court is set to rule on President Trump’s tariff authority under the International Emergency Economic Powers Act (IEEPA). In the case of an adverse ruling against the administration, even the process of refunding tariffs already paid could be very disruptive.

For wood products, the administration has already completed a Section 232 investigation, so the tariffs have the potential to be much more durable if they lose the case at the Supreme Court. The administration is also looking to renegotiate the USMCA near the beginning of 2026 to address trade issues with Canada and Mexico.

While the tariffs on softwood lumber have been all over the news, the administration is looking at the other 85% to 95% of goods that cross the border tariff free. The USMCA is scheduled for a mandatory joint review process by July 1st, 2026. As almost all engineered wood products are currently exempt from tariffs, the review has the potential to shake up engineered wood products markets specifically.

Most of us in the wood products industry are looking forward to 2025 coming to an end and 2026 providing some relief in the way of increased housing and construction, a reduction in the massive volume of imports that have been hitting our shores, and a more favorable policy towards forest management and timber volumes available from our local Federal lands. We would look forward to being a part of the renaissance in American manufacturing again.