I have been accurately predicting much lower US lumber prices since May 2022 – an outlook that, unfortunately, has been correct. In May 2022, W-SPF 2x4 prices were over US$1,000/Mbf (FOB BC mill) but had reached an unsustainable level of US$335/Mbf (US$216/m3; ~US$300/m3 delivered to US east coast port) on January 6, 2023.
Trying to forecast commodity lumber prices is a minefield, as many scenarios, factors and assumptions must be incorporated. However, the range in lumber price forecasts, (as well as US housing starts) by forecasters cover a wide range for 2023. My track record has been better than the analysts and economists simply because I have spent so much time in the field and at sawmills, where I have looked more at the supply-side dynamics rather than the demand-side, (which is where the others seemed to be focused).
In looking ahead to 2023, my RTG outlook is on the pessimistic - and more on contrarian - side. However, I expect lumber prices will potentially rally through to the middle of first quarter, 2023 before slowing down again. The reasons are many, but mainly due to building material dealers maintaining low inventories through the winter. When they start to order their lumber, it will likely be close to the same time and that will extend sawmill order files for several weeks (maybe a few months) and cause prices to move higher before they inevitably fall back later in first quarter. A slow rebuild in price levels is expected, but it may not come easy.
Over the year of 2023, I expect W-SPF prices will be volatile at times and could range from below US$400 to as high as $600/Mbf. However, I expect the average price for the year to be below US$475/Mbf (FOB BC mill; US$307/m3; ~US$390/m3 delivered US east coast ports) for 2023. This compares to the forecasts of other forest products analysts that ranged from US$475 to $595, with an average price of $523/Mbf for W-SPF 2x4 (FOB Mill – based on late October 2022 forecasts).
The RTG forecast is based on a rigorous analysis of sawmill costs as well as North America supply and demand, where US demand will be lower in 2023 than in 2022, but North American lumber production capacity will be even higher in 2023, mainly from new and expanded sawmills in the US South that are in start up mode. This extra volume will more than offset any curtailments or closures in BC Interior, creating surplus production. Offshore export markets are expected to disappoint in 2023, as there is no short-term appetite for increased volumes in all major importing countries.
In the end, all forecasters, including myself, will be wrong, as the assumptions and drivers considered will always be changing, and you can only be lucky if your forecast is even close to the actual. Essentially, lumber forecasters are placing an educated bet on their forecasts despite all the wild cards and unknowns ahead. I do hope that I lose my price forecast bet for 2023 so that the year is not a wipeout for mills, traders and exporters.
Russ Taylor,
Russ Taylor Global
