Market Report: Wood Products Market Trends

It shouldn’t come as a surprise to anyone that wood products markets are really tough at the moment. The long process of the Fed tightening, which began in 2023 but has continued throughout 2024, continues to have a negative effect on the housing market; which ultimately hurts all wood products markets tied to housing.

Lumber producers felt the pinch earlier than panels, as indicated by several Pacific Northwest lumber companies shuttering their doors in 2024, the latest being Malheur Lumber which announced permanent closure on July 23. Persistently high log costs through much of the year have moderated, although there isn’t a large volume of open market logs available at discounted prices.

Veneer markets have become particularly difficult this month. The LVL market has not materialized as expected this year, which is by far the largest user of green and dry 54’s nowadays. Anticipated LVL production increases have largely stalled as producers try to balance production with current demand. Veneer for plywood production is also slower now than it has been through most of the year.

On the upside, plywood has been our best performer so far in 2024. Prices have been flat, with ½” 4-ply starting the year around $585 but declining gradually to current lows in the low $500s, according to Random Lengths. We are moving our weekly production consistently and have little-to-no plywood inventory, but there is also little incentive to run any harder. We have heard reports of unannounced panel production curtailments in the Northwest. Yet there are also  reports that the plywood bottom has been established and a strengthening market is approaching, but that is always questionable until it arrives and higher volumes are sold by producers.

The bright light is that the recent Fed report indicates they will begin easing interest rates in September. It is a sad state of affairs when the Fed decides when we will experience good or bad markets. Wells Fargo’s latest economic report is predicting a 50-basis point drop in September, and an additional 50 basis point drop in December. This is a considerable change from previous reports and likely reflects the weakening of labor markets, as well as the weakness we are seeing in our markets. On the back of aggressive Fed easing, markets could be dramatically different in 2025. Some developers we have spoken to believe that very moderate Fed easing would lead to immediate resumption of projects currently put on hold.

The Fed has maintained high rates while other countries are easing rates, which continues to exacerbate trade issues. The strong US dollar is encouraging imports from a multitude of countries to the detriment of US producers. The Canadian Central Bank lowered their rate by 25 basis points in July, which has led the Canadian dollar to the weakest levels we have seen over the last three years, and very near the weakest we have seen in the last five years. Veneer pricing from across the border has been ruthless.

We are hopeful that better markets are ahead, but the remainder of 2024 will likely be rocky, especially with a contentious presidential election approaching. We expect these dark clouds will dispel, however, and we can look forward to more stability going forward. We intend to run through our order file until the market shows signs of life.