Global lumber trade severely disrupted – construction lumber is piling up in warehouses

Lumber prices on the U.S. futures market fell to $566 per 1,000 board feet, the lowest level since March 2026. This is due to ongoing uncertainty and persistent trade tensions, which are weighing on sentiment and driving down lumber prices. The U.S. recently imposed preliminary anti-dumping and countervailing duties on Canadian softwood lumber. Including the existing 10% duty, the effective duties on Canadian imports are expected to be around 35.9% once they take effect in August.

Despite these measures to support U.S. lumber producers, capacity utilization at U.S. sawmills remains relatively low at around 64%, according to market analysts at Tradingeconomics. At the same time, high and rising construction costs and high interest rates are weighing on construction activity in North America as well as in Europe. Confidence among U.S. construction companies has fallen to its lowest level since September 2025.

High mortgage rates and rising real estate prices have significantly slowed new housing construction and led to an oversupply of seasonal goods among lumber dealers. This oversupply forced regional lumber dealers to offer deep discounts in order to clear their inventory during a period of unusually low construction activity.

In addition, the stronger dollar made domestic production more expensive and limited export competitiveness. However, the escalating conflict in the Middle East and rising energy costs remain key factors that could influence the inflation outlook for building materials.

Sawmill closures and rising transportation and shipping costs

On the supply side, sawmill closures in the U.S. and Canada and increased tariffs on Canadian lumber imports are expected to remove over 1.3 billion board feet of lumber from the North American market, according to market analysts at Tradingeconomics. However, geopolitical tensions in the Middle East are also weighing on the outlook in the longer term, as rising energy costs are driving up transportation and shipping costs for lumber worldwide.

These factors actually point to a supply shortage, which could offset the effects of high mortgage rates. On the other hand, regional inventories in North America remain high. While production cuts in British Columbia continue, severe storms in the southern United States have brought construction site activities to a standstill. This has created a supply surplus among lumber dealers, forcing them to offer aggressive discounts to reduce inventory.

The tariffs on softwood lumber imposed by the Trump administration, which were intended to prop up prices, instead dampened demand by significantly increasing the average cost of home construction. This undermined the confidence of homebuilders, which was necessary to reduce existing inventory. In addition, interest rates on 30-year fixed-rate mortgages rose to 6.22% after the Federal Reserve left key interest rates unchanged.

The market is also continuing to be weighed down by a sharp rise in crude oil prices, which is causing energy-intensive transportation and production costs to surge. These factors are forcing homebuilders to cut prices to manage the rise in unsold inventory.

Source: agrarheute.com