Timber prices continue to remain subdued by our estimates. Log demand and prices have declined in most major North American producing regions as the US housing market throttled back and mills were temporarily shut or reduced shifts.

Timber prices are influenced by many factors, one of which is lumber prices. In the US, roughly 70% of lumber demand comes from residential construction. Repair and remodeling (R&R) makes up about 40% and new construction about 30%.

For 2025, Fastmarkets predicts that total US housing starts and R&R will increase 4% and 1%, respectively. Therefore, prices of lumber, in theory, should increase as demand would increase to meet the growing housing and R&R markets.

Housing starts set to grow in the near-term, pushing up timber demand
Housing and R&R are key drivers of wood demand, and the shelter market is still living with the hangover of the Great Recession. Thousands of homebuilders permanently closed. As a result, the homebuilder market has been struggling to ameliorate current shelter demand and underbuilding.

The current builder market is smaller and more consolidated. That market is finding it challenging to meet demographic demand, creating a huge erosion in affordability. This new homebuilding industry is no longer capable of building homes on the scale the country needs.

On top of these structural impediments, both housing and R&R were then hit hard by the sharp rise in mortgage rates that began in 2022. After reaching 1.6 million units in 2021, starts retreated a total of 1.42 million units in 2022-23.

For 2024, existing home sales were on track to fall to one of their lowest levels since the Great Recession. For many would-be homebuyers, the new construction market has really been the only game in town. Builders have been stepping in to fill the demand for shelter while the existing market remains extremely tight.

Starts last year were weaker than initially anticipated, with total starts expected to clock in at 1.353 million units. This represented a 4.8% decline after an 8.4% decline in 2023. Since peaking at 1.605 million units in 2021, total housing starts have fallen by nearly 16%. These have been dragged down mostly by the steep drops in apartment construction.

Total starts are expected to grow 3.7% over the medium-term forecast from 2024 to 2028. By the end of 2028, total starts will average 1.694 million units. This will mark the peak for this construction cycle as demographics ease through the long term.

US West sawlog markets to pick up in 2025, leading to increasing timber prices
Delivered log prices have been falling since reaching their highest levels in nearly a decade in 2022. In 2025, the tables should turn as we project delivered prices will rebound and hold through the entire 5-year forecast period.

In 2028, delivered log prices are expected to reach approximately $975 per MBF, surpassing the 2022 peak. The expected strengthening in log prices in this region correlates with our assumed upward correction in lumber prices and tightening timber availability.

We expect timber available for harvest to contract over the forecast period. This will be due to operable timberland being converted into higher-and-better use (HBU) categories and carbon sequestration projects. Unsalvaged stands damaged by wildfire and changes in public policy will also reduce the amount of timber available.

In 2025, the amount of operable timber converted into inoperable timber is projected to increase. However, this conversion should start to decline toward the end of the forecast.

We anticipate downside risk to the outlook for delivered log prices as the Biden Administration revoked old growth protection plans on federal lands prior to the administration change in January. This will loosen timber availability in regions more dependent on federal lands for timber supply.

US South softwood sawtimber prices will continue to fall
Southern pine sawtimber prices have trended downward for the past several years. Despite an anticipated uptick in Southern pine lumber prices in 2025, we predict that Southern pine sawtimber prices will continue to decline and support the persistently weak correlation between lumber and timber in the South. The downward momentum in Southern pine sawtimber prices is most likely supported by increasing timber inventories throughout the South.

Since 2008, softwood sawtimber growth has significantly outpaced the harvest in the South, causing standing inventories to consistently increase year over year. This has led to a glut of standing pine sawtimber supply throughout the South, which in turn adds downward pressure to prices. In 2025, we predict that standing sawtimber inventories will continue to grow in the South, as we anticipate growth will outpace harvest volumes once again.

A potential reason for the low SYP harvest levels may be associated with SYP lumber demand and production experiencing a challenging year and a half trying to capture market share from other species. Despite capacity investments, mill operating rates have cratered given the challenges, in turn impacting harvest levels and boosting available inventory.

We anticipate US softwood sawlog prices will trend higher over the forecast. This is due to our expectations for lumber prices to begin to rise after a period of recent lows. Additionally, sawlog supplies in most of the major softwood-producing timber baskets outside of the US South will begin to tighten.

After several years of unprecedented volatility in the wood products markets, 2024 experienced a more stable, albeit depressed, environment for wood products demand and prices. The brunt of the industry pain was felt by the softwood lumber market, which saw over 3 billion board feet (BBF) of closures in 2024.

This was preceded by almost 2 BBF being shuttered 2023, which represented a reduction of about 7% of the industry’s capacity base over two years. Against this backdrop, prices dragged along at unsustainable levels.

Source:  fastmarkets.com