The Western Wood Products Association (“WWPA”) May 2021 softwood lumber stats:
North American softwood lumber production increased 11.5% y/y in May – Both countries saw strong y/y gains with production up 13.3% y/y in Canada and up 10.4% y/y in the US. Sequentially, US production was down 8.6% m/m with a 9.1% m/m decrease in US South production and a 7.9% m/m decline in US West production. In Canada, production was down 4.5% m/m due to declines in both British Columbia (-6.9% m/m) and East of the Rockies (-2.8% m/m).
Operating rates rose in both the US and Canada as producers took advantage of record pricing – According to the WWPA, US operating rates rose by 1 percentage point m/m to 90%, while Canadian operating rates rose by 4 percentage points m/m to 87%. In the US South, operating rates remained flat at 93%, and in the West they increased by 1 percentage point m/m to 86%. The BC operating rate rose to 84% (from 82% in April). East of the Rockies, the operating rate rose to 90% (from 84% in April). The WWPA revised industry capacity ~9.4% lower m/m, with a ~3.0% revision lower y/y. While headline capacity makes the lumber industry appear that it is running well below theoretical capacity, we think May 2021 was a bit of an experiment to see how much producers could effectively produce given an extended period under favorable weather conditions and declining COVID-19 cases. Going forward, it will be interesting to see if the resurgent pandemic impacts production in the US South.
North American softwood lumber consumption was up 18.4% y/y in May – It was a strong month on both sides of the border compared to 2020, with US softwood lumber consumption up 18.1% y/y (-4.1% m/m) and Canadian softwood lumber consumption up 20.4% y/y (-28.0% m/m). The monthly declines in lumber consumption is likely attributable to the slowdown in R&R activity and there being 1 fewer weekday in May. By end-market, we believe that new residential construction continues to show strong y/y growth, which is being offset by a slowdown in repair & remodel markets. Industrial demand and repair & remodel demand are likely to recover as pricing normalizes and buyers look to wrap up projects before the winter.
US softwood lumber imports increased 5.7% m/m – US imports of Canadian lumber imports increased 6.9% m/m to ~1.33 bbf. Non-Canadian imports declined by 0.8% m/m to 222 mmfbm, driven by a decrease in European imports (-6 mfbm m/m). We think the decline in European imports in May is attributable to strong European lumber markets and logistics challenges.
US log exports increased 21.7% m/m – According to the WWPA, US softwood log exports were up 21.7% m/m to 132 mmfbm, with a 36.9% m/m increase in exports to Japan partially offset by a 12.7% m/m decline in exports to China. Softwood log exports were up 9.2% y/y as declining shipments in China were more than offset by increase in shipments to Japan, Canada, and Other countries.
Several producers are curtailing BC lumber production due to wildfires – Interfor announced that it expects production disruptions at its BC Interior sawmills during Q3 due to the ongoing impact of wildfires on log supply. Although the situation remains fluid, Interfor expects to curtail at least 50 mmfbm of production (or at least 24% of our estimated Interfor BC lumber production for Q3). Other announced Q3 downtime includes Canfor (115 mmfbm; wildfires), Resolute (25 mmfbm; capital projects and to optimize summer production), and West Fraser (unquantified; wildfires).