Economic Outlook: Risks abound for 2026 and beyond but we see little chance of upside surprises for global GDP growth next year. Instead, we forecast modest declines in both US and Chinese GDP in 2026, with the Eurozone growth rate nudging up slightly from depressed levels. US-driven tariffs will stabilize but remain a drag and may become the norm for the next three years. As we’ve noted before, demand won’t be driving upside for the forest sector. Interest rate relief in the US continues to lag earlier expectations (with two further, 25bps cuts expected next year), and a US housing recovery will likely be pushed out to the second half of 2026 at the earliest (potentially 2027). A further weakening of the USD relative to other major currencies will create additional headwinds for US-based producers focused on exports but should also put downward pressure on US imports. 

Forest Products Outlook: For most markets, the first half of 2026 will look a lot like 2025, with oversupply resulting in weak prices and lacklustre earnings. Highlights include:

• Housing starts will slip next year to 1.33MM as mortgage rates are expected to move only moderately lower. Affordability issues persist.
• Log prices should trend sideways, with some markets up and others down. Demand from China could rise as its US log ban has ended.
• Lumber prices will move up in 2026 as supply reductions related to high costs (duties, tariffs, etc.) begin to bite harder.
• Panel prices are likely to remain rather low in 2026 due to OSB (particularly) facing oversupply issues as a couple of mills ramp up.
• Pulp prices hinge on supply dynamics; the situation has changed as China has boosted its internal supply. Although prices are moving off their lows, shuts are needed to maintain upward momentum.
• Newsprint demand will drop by double digits next year, but, with some mills currently offline, prices should hold until supply restarts.
• Paper prices will be mixed, with expectations for an increase in uncoated woodfrees; most other grades should hold at/near year-end levels. The removal of tariffs would push prices lower.
• Containerboard producers are expected to drive a price hike in Q1 given the massive capacity shuts this year. Demand will remain sluggish, but rising box shipments aren’t needed to support hikes.
• Boxboard is facing oversupply and capacity needs to be removed to support prices. We suspect a reduction in prices—particularly on CRB, then SBS—will be the requisite trigger for capacity shuts.
• Recovered-paper prices will move up from current levels but aren’t expected to climb aggressively given suppressed offshore demand.

Lumber – Our forecast of 1.325MM housing starts for 2026 implies a lumber demand decline of ~300MMbf in 2026, but we expect demand to recover by ~500MMbf in 2027 based on our projection of 1.375MM starts. Repair and remodel (R&R) demand has stagnated over the past two years; we are forecasting only a modest improvement (+1.5%, or 300MMbf) in 2026. As such, we expect that it will be actions on the supply side that will drive lumber prices. We forecast another material reduction in Canadian lumber output in 2026 (-1.2Bbf), but this will be mostly offset by a projected ~1Bbf increase in US production, driven predominantly by the South (as SYP prices recover to profitable levels; we also note that PNW output should also move higher as US lumber buyers seek alternatives to dwindling Canadian S-P-F supply). We are forecasting S-P-F 2x4s to average $510 in 2026; SYP 2x4s should rebound to $400. [Note that S-P-F prices include duties/tariffs, with actual mill nets lower]. For 2027, we suspect lumber demand growth will help drive operating rates higher, and this should push up lumber prices again (S-P-F 2x4s at $540; SYP 2x4s at $455). 

Structural OSB – While impressive supply discipline kept OSB markets tensioned through 2024 and into early 2025, new supply coming to market— coinciding with a pullback in demand—led prices to finally crack. Looking to 2026, many of these same themes are in play. WFG and Arbec have announced curtailments and this should support some modest price appreciation in early 2026; however, with the next wave of capacity expansions coming at some point in the first half of 2026 via greenfield mills by Kronospan and Huber, oversupply remains a risk. Higher pricing will be hard to sustain if OSB demand remains underwhelming through 2026. Ultimately, we forecast the average North Central 7/16ʺ price to be $250 in 2026, with a minor increase to $255 projected for 2027.

Structural Plywood – Overall North American plywood supply was generally quite stable (-1% y/y) through the first three quarters of 2025, with a 5% drop in domestic production almost entirely offset by a 17% hike in offshore imports. Looking ahead, we expect these trends to shift as US output ticks higher following the imminent restart of Hood Industries’, Beaumont, MS, mill. Looking at trade, Brazil has represented roughly half of all offshore plywood imports in the past three years, and, with shipments from Brazil subject to 50% tariffs, we forecast import volumes will drop sharply in the near-term. Lower import volumes, coupled with stable (albeit uninspired) demand, should push prices up marginally in both 2026 and 2027.

Pellets  – U.S. pellet exports continued to grow in volume (LTM up 2%) and in value (LTM unit value is up 1%) through 2025. Export volume growth has slowed, however, from the prior three-year CAGR of 4%. There are still several large potential projects, but Drax has just closed two small mills (in AR and BC) and has paused its project in WA. The UK has remained the largest buyer of US pellets, and Drax and the UK government agreed to financial terms for the period from April 2027 through March 2031. That said, we expect global demand growth over our forecast horizon to be slower than in recent history.

Market Pulp (Softwood) – We forecast modest price recovery next year as more high-cost production comes out of the market. That said, our full-year forecast remains below the 2024 average and about in line with 2023, marking the fourth year of sub-$800 China NBSK pricing. Demand is expected to remain flat, with slow growth in tissue markets offset by renewed declines in paper demand. There are more downside than upside risks to our forecast. These include weak consumer confidence and demand (including the continuation of very weak Chinese purchases of US softwood pulp) and a continued slow pace of needed supply reductions. However, little new capacity of either primarily grade is expected to enter the market (outside of China) over the next few years.

Newsprint – Newsprint demand looks miserable this year (-18% ytd through October) and total shipments are almost as bad (-14% ytd). The secular decline in newsprint demand accelerated this year after moderating in 2024. Again, the weakness has mainly been in commercial print (-23% ytd, with demand from newspapers off 16%). We foresee a somewhat milder (but still horrible) 12% drop in overall demand next year. With Domtar’s Grenada mill shut and both White Birch’s F.F. Soucy and Kruger’s Corner Brook still idled, producers initiated a $50 price hike in November. We expect the full amount to be realized in Q1. If idled mills stay offline and government-supported Kap Paper is finally allowed to shut, pricing strength will last longer.

Containerboard – The bulk of the weak indicators for the industry are improving, with many driven by the shuttering of an enormous 10% of US capacity. Although we foresee box shipments rising only mildly 2026 (a bit better in 2027), that massive contraction in capacity will drive operating rates solidly into the mid- (and perhaps even high) 90s, virtually ensuring a successful price hike. We forecast a price increase for Q1/26, sure to be followed by one or two more in the coming years given the snug supply/demand balance. Imports are not a threat and substitution options for the humble cardboard box are minimal. Pricing power has returned to producers and we are confident they will use it.