ERA comes clean on April Fool’s prank. Almost every company seems to have struggled with supply-chain congestion, bottlenecks, and an inability to adequately restock, or ship, certain items. The latest update to the Global Supply Chain Pressure Index hints at mild relief on a global basis, but more struggles in Europe. Both the global and European situations have surely worsened, as the war in Ukraine has intensified this month amid sanctions that are beginning to bite; also, Western companies have begun withdrawing from the area. We expect the next quarter or two to show little relief, but things will be significantly better by year-end.

As much as we are reading about recessionary threats and the general macroeconomic malaise caused by Russia’s invasion of Ukraine, for now (at least) the U.S. housing market remains in rude health. Housing starts took a somewhat unexpected jump in February, increasing by ~7% m/m and 22% y/y to a seasonally adjusted total of 1.77MM units. Single-family starts accounted for an adjusted ~1.22MM units (up 6% m/m and 14% y/y), with multifamily making up the balance of 554,000 (up 9% m/m and a whopping 47% y/y). Adjusted permits slipped by ~2% m/m to a still-strong 1.86MM (up ~8% y/y). Here is our industry overview.

• Russia–Ukraine war: The biggest disruptions for the forest products industry are centred in Europe, where there is an overarching risk of substantial demand destruction via high prices and/or a recession. 
• Housing starts improved last month and the near-term outlook remains robust despite rising rates. Little risk of material weakness until 2023. 
• Log markets are good. North Americans are not pursuing opportunities in China at the moment, but higher prices might change that in time. 
• Lumber prices have rolled over for the major grades and species. A sizable drop is coming, but it won’t be a straight shot lower. 
• Panel markets are seeing incredible prices. Overall, panels look better than lumber for 2022, due particularly to favourable shifts in trade flows. 
• Pulp prices are heading up in all markets on supply challenges. Worsening logistics are expected to keep prices stronger for longer. 
• Newsprint prices rose in March and will be rising by another $50 over April/May. With U.S. pricing below int’l levels, more hikes are possible. 
• Paper prices are up everywhere, with more gains coming. We suspect that prices for most grades will peak in H1/22, but supply-chain issues could extend the cycle. ND Paper’s decision to convert a coated mechanical machine to packaging will tighten markets even more. 
• Containerboard producers achieved the bulk of their proposed $70 hike. This should be the peak, but never say never in this environment. 
• Boxboard producers have succeeded in pushing through their last $50 price hikes and haven’t wasted time in announcing even more. 
• Recovered-paper prices are mixed, with SOP soaring to a 10-year high and OCC stabilizing. The new ND mill will be recycled-based. 
• European newsprint prices are reaching impossibly high levels once surcharges are factored in (pushing US$1,000 in some cases!). 
• European paper-price increases continue, pressured by high energy costs and the ongoing strike at UPM in Finland (extended to mid-April). 
• European packaging: Bold price hikes are coming (€100–150/tonne).