- Hannah Hammond
Where are we going to get the wood?
Authored by John K. Kelley, Steve Courtney, and Roy Anderson
The US and Canada are two among a small handful of countries worldwide where wood is the primary material used for building homes. So, the question “where are we going to get the wood?” is an important one. In the past, the answer was simple: from our own forests. This is because, as shown in the figure below, North American lumber production (the blue line) has been almost always greater than annual consumption (the orange line). This was especially true in the years following the Great Recession, but was also largely true during the mid-2000s when lumber production and demand were at all-time highs.
Importantly, note that since about 2019 production has been relatively flat while consumption was generally rising. What’s more, lumber production was flat during 2021 and 2022 when lumber prices were at all-time highs. COVID and limited ability to find the labor to produce lumber explains some of the production flatline. But as the remainder of this article describes, future lumber production is unlikely to increase in several key North American lumber producing regions. Thus, the current downturn in lumber demand, caused by a 2023 slowdown in housing, masks a period in the future when North America will likely find itself in the novel position of becoming a net softwood lumber importer.
Regarding North American lumber production, a key headwind is that log supply is constrained in Western North America on both sides of the border. In the US West, much of the timberland is managed by state and Federal agencies who manage for multiple objectives, which limits timber production. Additionally, most industrially owned private timberland in the US West is already being harvested at or near maximum sustainable levels. Also, recent large wildfires have depleted a portion of the growing stock. This means that current and future harvests must be reduced to allow for standing inventory levels to rebuild.
In Western Canada the story is a little different, but the result is the same – logs are in short supply. North of the border, the shortage results partly from reduced timber harvests to allow forests to recover from salvage timber harvests that took place in the early-to-mid 2000s in response to a widespread mountain pine beetle epidemic. Newly implemented policies in British Columbia are also deferring old growth timber harvests. The end result is that Western North America, once the dynamo of timber and lumber supply, can only produce at reduced levels for the foreseeable future.
In contrast, log supply in the US South is plentiful. The region is covered with vast Southern Yellow Pine forests (normally abbreviated SYP; a mix of loblolly, longleaf, shortleaf, and slash pine). Additionally, roughly 90% of the forestland in the US South is privately owned. This means that nearly all forestland contributes to timber production. Also, despite massive investments in sawmilling capacity and associated increases in timber harvests in the US South, overall annual harvests relative to annual growth levels are still well within sustainable rates.
What’s the problem? Can’t lumber production in the US South keep growing to meet expected demand increases as housing recovers in the coming years? The short answer is yes, that is true: The US South lumber industry will continue on a great run – but with some complicating factors. First, softwood lumber is marketed as species groups such as Douglas fir/Larch and Hem-fir in the US West and SYP in the US South. Most softwood lumber produced in Canada is sold as SPF (spruce, pine, fir) with a designation as either Eastern SPF (from Ontario, Quebec, etc.) or Western SPF (mostly from British Columbia).
All species groups have their niche uses. For example, Douglas fir/Larch is prized for its strength-to-weight ratio and is well liked by building contractors because nails can be driven into it with relative ease. SPF, regardless of originating region, is liked for the same reasons. Additionally, its lighter color and generally smaller knots make it preferred for applications where both strength and appearance are important. SYP is known for its strength and the ease with which it can be treated with preservative chemicals, but it is less preferred as wall framing (a very large market segment). Also, its heavier weight makes it more costly to transport long distances. This all means that SYP can’t always be the answer.
We expect that European softwood lumber imports will increase in the coming years, given that the process is already well underway. Imports of European SPF have been building into the billions of board feet over recent years. It has been well received for quality and price.
Another possible, but less likely, outcome is increased timber production on publicly owned Western US forests. A significant timber harvest increase, especially on US Forest Service lands, is well within sustainable levels. Also, active management of forests can dramatically reduce wildfire risk, which is a perennial problem on public lands. Increased public land timber harvests would not only stimulate rural economies and maintain North America as a net lumber exporter, but it would also reduce the risk of wildfire and lower all the associated firefighting costs, losses of life, and property damage while also decreasing the effect of wildfire smoke on public health. Better still, reducing the incidence of wildfire also reduces the massive wildfire-related carbon emissions that have become annual disasters. The time is now for a new, more utilization focused, path in Federal forest land management!
The Beck Group is a forest products planning and consulting firm based in Portland, Oregon. We take a results-oriented, practical approach to helping clients make better decisions and improving their financial and operational performance. We offer a variety of services and we operate throughout North America and overseas. Our blog posts highlight recent experiences of The Beck Group staff and feature topics relevant to anyone interested in forest products. We welcome your feedback and comments.