Market Report: Plywood Imports and Market Pressure in a Volatile Economy

Wood products markets continue to be extremely difficult, especially for plywood and veneer. Plywood prices have retreated slightly over the last couple weeks as domestic producers have a difficult time selling weekly production. There is a general sense that price reductions won’t buy a whole lot of business, especially while panel producers are not at profitable pricing with veneer prices and veneer producers are not profitable with current log costs.

One brighter area has been our Mass Ply products where our sales volume has increased 53% year to date. While this is still a very small portion of our production compared to our commodity products, it is a hopeful sign for future growth, even during a very tough market.

There have been quiet production reductions across the West Coast as plywood and LVL producers try to match production with available sales. The housing market is still suffering, and recent indications show that national builders are taking steep discounts to sell homes while also buying down mortgage rates. The Fed’s stubborn insistence on keeping interest rates high has led to a severe 15-month downturn in the housing market.

Housing starts have been extremely volatile, but the latest numbers indicate only 1.256 million housing starts across the US. Without the Fed lowering rates, it is difficult to see when the housing market will improve.

The biggest problem right now is, of course, discussions around tariffs. Mainly the fact that tariffs are continually being discussed, but never levied. While I understand the concept that President Trump is using the threat of tariffs to negotiate better trade deals with our trade partners, the extensions have allowed foreign producers to fill US warehouses ahead of potential tariff threats. What little market is available to us during this housing downturn has likely gone to foreign producers. In fact, plywood imports and market pressure are both increasing, with US panel imports up year-to-date even during a declining housing market.

As it currently stands, President Trump has announced a 35% tariff on Canadian goods and a 50% tariff on Brazilian goods. Both tariffs could significantly affect US wood products pricing and production. It is unclear whether the tariff on Canada would apply to goods covered under the US Mexico Canada Agreement (USMCA). 80% of all of Canada’s exports are covered under the USMCA, including veneer, plywood and LVL, which means that they are tariff exempt. Brazil, however, has no such agreement and it is anticipated that if the tariffs are levied against them in August, panel products will be included.

The markets are just messy. The difference from other messy markets is that there is a lot that will be impacted by very near-term policy decisions, such as Fed rate cuts and the implementation of tariffs. Trump’s directives to increase timber harvests could also be a significant but less immediate benefit to US wood products manufacturing, as it takes much longer for these policies to be implemented. Hold onto your hats, the next couple of weeks will be very interesting.