As we have stated multiple times over the past months, demand is not coming to the rescue for this industry, thus capacity rationalization and supply discipline are crucial. The traditional refrain in the commodity space is that “low prices are the cure for low prices.” Well, prices are depressingly low for many key commodities, notably pulp, lumber and OSB, with precious little rationalization to date.  Although some current commodity prices are slightly above trough levels, costs have risen substantially since then. Many softwood pulp mills in Canada and Scandinavia are losing money at these levels, yet there has been only a smattering of downtime concentrated in Finland (high log costs are the main culprit, but those are now starting to come down). The tolerance for pain has been surprising! 

For lumber, even with punitive 35% duties on Canadians, a lot of production continues to run despite losing $100‒150/mbf. SYP prices are also horribly low and stuck below cash-cost levels. US producers expect Canadians to take the brunt of the closures (which will probably be the case), but they will likely need to curtail production as well given that the substitution of SYP for S-P-F is not happening at the speed many had hoped. Canadian sawmill shuts should also spur pulp mill shuts.  On OSB, mills are in the money-losing zone (with a pretty flat cost curve) and there is more capacity on the horizon with Kronospan and Huber mills soon to start up. Supply needs to be removed, but aside from a couple of temporary shuts from Arbec, nothing has transpired.

Key takeaways include:

• Solid Wood: S-P-F lumber prices had been trending upward in anticipation of duties; now, with the duties in place, prices have plunged for both SYP and S-P-F (to the consternation of producers, to be sure). Demand is poor and the market awaits necessary downtime/closures on both sides of the border. Panel demand is weak as well, with OSB prices retesting lows that are below cash-cost levels (with new supply coming soon). The market needs capacity shuts to support prices and move them higher. We wait… 
• Timber/Log: Log prices are trending lower as end markets struggle. Timberland values remain robust despite reduced cash flows. 
• Pulp: Hardwood prices have nudged up, with more price hikes slated for October. Softwood prices languish at money-losing levels in China and are approaching the same in other markets. Significant Chinese production has swung from hardwood to softwood, helping the former and depressing the latter. Substantial downtime/closures are key to shifting softwood prices higher. And, again, we wait. 
• Paper prices are generally stable, with markets waiting to see the full impact of tariffs on imported volumes. For coated woodfrees, all producers (imports and domestic) are pushing for higher prices, while there is only one domestic producer attempting (and generally failing) at pushing up coated mechanical prices. Tariff impacts and capacity shuts could boost the fortunes of domestic uncoated woodfree producers, but not until 2026. 
• Containerboard: Box shipments are expected to be down again y/y in Q3, but, considering the massive capacity reductions (IP’s closures in Georgia being the latest), the market is positioned for significant tightening through Q4. We suspect domestic producers will look to push prices up in Q1/26 even if demand remains lacklustre. 
• Boxboard: Demand has been reasonably good for SBS and CUK yet surprisingly poor for CRB. CRB has lost some market share to bleached grades (SBS/FBB) as price spreads have compressed massively over the year. Tariffs should trim imports, but rising domestic supply (Sappi and GPK) will pressure prices, with some slippage possible without downtime.