
Kevin Mason
After an encouraging finish to 2023, the U.S. housing market took a step backward to start the year, with weak starts in January and middling sales data offering no indication that the beginning of the next U.S. housing upcycle is imminent. U.S. home sales data for January were a little more encouraging than starts data, with seasonally adjusted new-home sales ticking up 1.5% month-over-month (MoM) and 1.8% year-over-year (YoY) to 661,000 units after the December data were revised lower to 651,000. It took longer than expected, but, after a sluggish start to the new year for North American lumber markets, we have seen a wave of sawmill capacity curtailment announcements this quarter. ……The capacity announcements will help tension lumber markets over time (perhaps Q2), while a seasonal uptick in demand around the spring building season should see prices migrate higher in the next couple of months.
In a significant deviation from more recent trends, the announced shuts in past few quarters have been spread across several major lumber producing regions, including the U.S. South and the Pacific Northwest, and have not been focused exclusively in high-cost British Columbia this time around. While it can take several months for a capacity closure announcement to actually impact market supply, these shuts will help to better balance North American lumber supply and demand over time (particularly if they coincide with green shoots appearing in the housing market). …Against a backdrop of declining U.S. residential construction activity, North American OSB markets enjoyed a surprisingly strong year in 2023… [and] several North American pulp producers have announced new softwood price increases for March.