Market Report: Optimism and Challenges in the Wood Products Industry

May was a sunny, beautiful month in Oregon! When the year started it seemed like the rain would never stop. Snowpacks were up across Oregon and California, bringing much needed replenishment of water storage. Some places in California accumulated snowpacks that were 300% of the historical average!

Industry chatter blamed the rain and the snowpack for lethargic panel markets in early 2023. The thought was that the California markets would improve as soon as there was some sunshine. Now, some are saying that widespread flooding due to melting snow is halting new construction. We are all looking for signs of marketplace improvement.

Log prices are still tenaciously high compared to wood products prices. There aren’t many primary producers who aren’t feeling the pinch, in veneer, lumber, or panels. Input costs, such as resin and flour, are also still elevated. And large hourly wage increases over the last two years still have not lured additional workers into the mills; so productivity is suffering.

There are reasons for optimism in wood products markets. April housing starts increased to 1.4 million starts, seasonally adjusted. While still down compared to last year, this is consistent with published reports that larger homebuilders are seeing renewed interest in new houses amidst a persistent lack of existing housing inventory. Builder confidence is also improving. There is still the cloud hanging over markets of interest rate hikes and tightening credit availability.

Rumors in the market indicate that laminated veneer lumber (LVL) inventories have largely been worked out and that producers are close to capacity on their current production schedules. Anticipation is that the LVL market will improve going into the third quarter of this year. 

Producers are still skittish, however, and reluctant to add production capacity with so much market uncertainty. Adding shifts is still a larger hurdle than in the past due to the previously mentioned labor availability.

Structural panel imports are down 33% this year, compared to the same period last year. Imports from China and Brazil are down 56% and 45%, respectively. The reduction in the volume imported so far this year is equivalent to the annual production of two medium-sized mills. We believe that imports will continue to decline, and domestic production will become a larger portion of US domestic consumption.

The Mass Ply facility has a significant order file, and we will be pressed in the short-term to make the production that is being requested. It looks like we will be “pedal to the metal” until September, but projects keep appearing that will continue to push our project schedule. We are actively exploring new ways to increase our production capacity.