EWA new bull market for lumber? That's what it looks like as all species continue to advance steadily from the lows of late last year. In fact, industry prospects continue to evolve much better than forecasted in Q4/01: many analysts are predicting another U.S. housing-starts year of 1.6 million units or better; and Canadian starts could equal those of 2001 - 160,000 units.

Here's our forecast of average prices for the year.

How about over supply? Many lumber producers suffered operating losses in 2001, which will tend to curb excessive production. Moreover, Canadian suppliers to the U.S. market will probably be confronted with some form of tariff barrier, discouraging uninhibited exports.

Current Market

All species have moved up strongly since last week and most producer order files are extended to mid-February or longer. Lean consumer inventories and unusually warm weather are stimulating activity. If the weather holds, the market could move higher.

MARKET DRIVERS

U.S. Starts Up!

U.S. homebuilders enjoyed a stellar year in 2001, despite the economic downturn and high unemployment:

Forty-year lows in mortgage rates have stimulated demand and helped to keep inventories of both new and existing homes low. And 2002 could see more of the same. Some analysts are revising their forecasts, predicting another year of starts at the 1.60- million level.

European Imports Jump

U.S. imports of European lumber took a big jump in 2001, increasing 37% from 2000. European softwood lumber production is rising and domestic markets are oversupplied. This year, European imports are forecast to exceed 700 million bf and could easily reach one billion bf in 2003.

European Lumber Imports

Canadian Dollar Hits Bottom