U.S. sawmill and wood preservation firms maintained steady production and capacity levels throughout 2024, but capacity utilization rates declined to 65% in the fourth quarter on a four-quarter moving average basis. This decline reflects a continuing trend since 2017, where production capability has expanded, but real output remains lower than 2018, according to the National Association of Homebuilders (NAHB) analysis.

Capacity utilization rates, calculated as the ratio of actual production to full production potential, illustrate a growing gap between these two figures. The lower utilization rate stems from factors such as material shortages, order limitations, and labor constraints.

The NAHB estimated current U.S. sawmill production capacity by combining data from the Federal Reserve’s production index and the Census Bureau’s utilization rate. With U.S. firms operating below potential, imports continue to fill gaps in supply, particularly for softwood lumber.

Since U.S. firms do not produce at their full potential, imports help to supplement domestic supply, especially in the softwood lumber market. According to Census international trade data, existing tariffs on Canadian softwood lumber have not reduced the need for imports to meet domestic consumption but have made the U.S. more reliant on non-North American lumber, resulting in unnecessarily complex supply chains. The current AD/CVD Canadian softwood lumber tariff rate stands at 14.5% and is expected to double under the administrative review process by the Department of Commerce. Potential tariffs on lumber, such as the ongoing 232 investigation and 25% on all Canadian goods, could push tariffs rates on Canadian softwood lumber above 50% later this year. Higher tariffs on softwood lumber mean higher costs for builders who use lumber as a key input to construction. Given the current housing unaffordability crisis, any additional costs will continue push homeownership and affordable housing further out of reach for households in the U.S.

Source: NAHB