United States

B.C. softwood lumber and panel exports to the US

 

(Softwood lumber, plywood, OSB, MDF and particleboard)

B.C. Position

  • 42% of all commodity wood product (lumber and panels) imports by volume.
  • 48% of softwood lumber imports by volume.
  • 18% of wood panel imports by volume.

Export Sales

  • 2015: 17 million m³ of commodity wood products valued at $3.8 billion (this represents an 8.6% increase in volume and an 11% increase in value over the year before)
  • 2016 (through August): 2016 (through August): 14.4 million m³ valued at $3.5 billion

Market Overview

For the second year in a row, the US economy grew by 2.4%. Given the stable growth over the last two years, the Federal Reserve rate was moved up to 0.5% in December 2015, after having remained at 0.25% since 2008. This increase was supported by other evidence of economic recovery; unemployment dropped to 5.3% in 2015, almost half the unemployment rate of 2010 (9.7%), and with more employment stability, growth in consumer spending rose to a three-year high of 3.1%.

Despite positive employment numbers and consumer sentiment in 2015, housing starts remained modest at 1.11 million units. This is well below the estimated demand for shelter production in the US (1.5 million starts), which increases the cumulative housing stock deficit to over 2 million units. Household formations jumped from 0.79 million in 2014 to 1.88 million in 2015; however, even with the 30-year conventional mortgage rate at near record lows (3.96%), homeownership rates dropped in 2015 to 63.8%.

Consumption of softwood lumber in the US increased 4% in 2015. While domestic production remained flat, imports grew 10% to 32.4 million m3 . Imports of lumber from B.C. rose 7%, although imports from the rest of Canada grew 11%. For the first time since 2001, the rest of Canada sold more volume (43,000 m3 more) than B.C.

While production remained flat, consumption and imports of panels increased 4% and 17% respectively. B.C. exports to the US improved 25% to 1.45 million m3 , while exports from the rest of Canada increased to 4.97 million m3 .

As the US housing market recovers, demand for imported value-added wood products continues to rise. In the last four years, imports to the US have increased by more than $10 billion reaching $24.9 billion in 2015. Following China ($10.9 billion) and the ASEAN4 region ($5.9 billion), Canada exported $3.1 billion of value-added products to the US in 2015.

Market Trends

Smaller homes – The average floor area of a detached home in the US has increased 12% since the construction peak in 2006; however, homes built during the recovery were skewed towards move-up5 and luxury homes. Between 2014 and 2015, growth in average floor area flattened, and it may even decrease in coming years as more starter homes are built. These smaller homes will pull down average home size.

Homeownership continues to drop – Despite the ongoing economic and housing market recovery, homeownership in the US continues to decline. While household formations jumped from 0.79 million in 2014 to 1.88 million in 2015, homeownership dropped from 64.6% to 63.8%.

Multi-family construction shifting to taller buildings – Demographic and social factors are moving the market toward more multi-family (MF) living. Between 2006 and 2016, the percent of MF starts increased from 19% to 36%. MF construction is also going higher. In 2015, 25% of MF floor area was built above six storeys, surpassing the pre-recession (2006) high of 22%.

Supply constraints – Last year saw a labour shortage in the construction sector. In the spring of 2015, 3% of home construction jobs went unfilled compared to less than 2% under normal market conditions. This labour shortage is more acute in MF construction. In addition, many point to a shortage of available building lots in central locations for likely slowing housing recovery as the market has lost its appetite for developments in distant suburbs.

Generational housing shifts – The Millennial (18-34) age group is displaying lower homeownership rates than other generations did at the same age. Millennials are more likely to live with their parents later and are less likely to be married or have children. Further, between 2006 and 2015, homeownership rates for those aged 35 to 44 – a prime child rearing age group – dropped from 69% to 58%.

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