It has been a mixed month for North American lumber markets, with S-P-F prices posting modest declines and SYP prices grinding steadily higher. Western S-P-F 2×4 prices are at $535 today, down from a peak of $570 in early March (prices jumped after tariffs on Canadian lumber were put in place for 48 hours) but up from a low of $438 at the beginning of the year. SYP 2x4s remain at a significant discount to S-P-F; however, at $428 today, prices have risen by ~$60 since the beginning of the year. 

Lumber demand is showing signs of a slight seasonal uptick (data on February housing starts were solid), yet few, if any, expect demand to move into high gear this spring given lingering macroeconomic concerns and elevated mortgage rates. As has been the case for the past couple of months, tariffs/tariff threats continue to have an outsized impact on markets. With tariffs not forthcoming on Canadian wood products (a sigh of relief for Canadian producers), we anticipate that S-P-F prices will move lower in the coming months, until higher lumber duties kick in. 

When the recently announced softwood lumber duty rates take effect in late August (note that the combined “All Others” rate will increase to ~25%–30%, while mandatory respondent Canfor will see its combined rate surge to ~40%–45%), sawmilling economics will become exceedingly difficult for most Canadian mills, making additional capacity closures likely unavoidable (higher-cost British Columbia will once again be the most vulnerable region). 

North American lumber demand has been stuck in low gear for more than two years now, although lumber markets have been generally well balanced for the past two quarters; this is largely because of a decline in overall North American lumber supply. With painfully lagged December lumber production data now available, we can provide a high-level analysis of 2024 North American lumber supply dynamics. 

Looking first at the US South, total output was virtually unchanged for a second consecutive year in 2024, totalling just 22.1Bbf (southern production was 22.1Bbf in 2023 and 22.2Bbf in 2022). Stagnant southern output was a result of several permanent capacity closures and a raft of market-related downtime offsetting new greenfield capacity start-ups and a number of major sawmill rebuilds in the region. In the US West, production declined by ~0.5Bbf last year to just 13.1Bbf, marking a third consecutive annual decline as lumber supply from the region fell to its lowest level since 2012. 

In Canada, total lumber production actually crept up by ~100MMbf y/y to 20.6Bbf in 2024, driven largely by modestly higher output from virtually all provinces east of the Rockies, while BC production slipped by a further ~200MMbf y/y to just 6.7Bbf (BC production was off by fully 1Bbf y/y in 2023 following a ~1.4Bbf decline in 2022). Adding in a ~0.6Bbf decrease in offshore lumber imports, total North American lumber supply contracted by over 1.3Bbf in 2024. 

We anticipate that lumber demand will be flat to modestly up in 2025 (with R&R potentially a bigger driver than new residential construction), with inherent downside risk. Overall, markets should remain tensioned as expected growth in U.S. South output should be largely offset by further declines in BC output. 

Although the tariff threat has not materialized yet, the risk remains and a short look at the possible impact on lumber is instructive.  With housing end demand basically steady over the last six months, gains in lumber pricing have been driven by capacity shuts across all producing regions, higher duty costs and, we believe, fears of tariffs bleeding into pricing. Theoretically, tariffs would not apply to Canadian mill-gate purchases, but they would apply to US-delivered buying. Reality would be more complicated, with pricing in both Canada and the US reflecting the broad market and net returns to producers. Benchmark lumber prices would include duties and tariffs to the degree producers are able to pass them on; it would be impossible for outside observers to parse out duty and tariff costs a priori. Headline prices will tell observers less than previously about margins and producer bottom lines. 

If we take the average S-P-F 2×4 price for March 2025 ($552) as an example, then deduct various levels of current and forecast duties and potential tariffs, our estimate shows that median BC mills generated positive margins with just the 14.4% duties in place. However, holding this S-P-F 2×4 lumber price steady, and add a 25% “Trump tariff” would have resulted in slightly negative margins.