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Forest product updates
Housing sector starts the season on a flat note.
Early signs suggest a flat start to housing demand in 2025 despite some softening in mortgage rates. While single family home starts increased in February, permits issued held flat and are near their 10-year average. Inventories for sale and the median days a home stays on the market have gradually increased from mid-2022 lows and are up 28% and 8% from February 2024, respectively. Lumber prices have increased moderately so far in 2025, but remain near break-even levels for West Coast producers. Prices are unlikely to rise significantly until affordability improves for prospective home buyers. Domestic lumber supply dropped by 1.9% year over year in 2024 due to lower production and imports (not including those from Canada). The World Cement Association estimates global cement use could fall 36% by 2050, with 4%-6% of that change the result of timber substitution.
Western log prices have benefited from lower supplies as relatively wet and/or snowy conditions limit harvesting capacity and slow deliveries. Log inventories are reportedly low throughout the region, suggesting prices should remain elevated over the next two to three months. Log demand from China, Japan and South Korea, the three largest export markets for Western log producers, is reportedly weak due to declining economic and/or home construction activity. On April 2, President Trump announced relatively higher tariffs on these countries, and how they will respond is not yet clear as of the writing of this report.
Profitability
March 12, 2025
Forest product mills: Slightly profitable - Neutral 12-month outlook
Timberlands: Slightly profitable - Neutral 12-month outlook
Lumber prices are unlikely to increase meaningfully given weakness in the housing sector. It remains unclear whether home construction will pick up in 2025.
Log prices are unlikely to improve until home construction picks up.
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