Well, it’s been quite some time since we provided an update on our hardwood lumber markets – we apologize for that, but since our last report in February, we’ve been trying to navigate through the interesting times we are in, paying close attention to the ever-changing guidelines that the various governmental agencies continue to produce concerning COVID-19 mitigation procedures in the workplace. We are blessed to say that, despite several logistical challenges, FORECON has remained quite busy, and most importantly, our staff has remained healthy. We hope and trust the same for you.
Though we haven’t written about them, we have been quite focused on our hardwood markets – obviously, they determine the success of our clients and therefore our business. Healthy markets are obviously primary to maintaining healthy forests that provide healthy returns to our small private landowner and institutional investment clients, alike. Our industry has been collectively on-edge for quite some time now; first through the Chinese-US Tariff period, then it saw some promise of recovery after the Phase 1 agreement was signed with China, and almost exactly when Phase 1 began, we were hit by the COVID-19 pandemic. Ever since, we’ve been bracing for the impact of that on our lumber/timber pricing but, so far, through both anecdotal evidence as well as direct evidence from in-house timber sale events – the COVID-19 situation has not had a significant affect on what we are seeing in our current marketplace. Please note the we said, “so far”, as we certainly can’t predict what will happen as the economy goes through its fits and starts in getting back to its strong position again.
To illustrate the rather vapid reaction (so far) to the COVID-19 pandemic, below is a graph that tracks the price trends of certain species of Appalachian hardwood lumber since the first of this year – this illustration starts BEFORE the Phase 1 Tariff Agreement between the US & China was signed (January 15th), through the onset of the COVID-19 Pandemic (January 31st), the announcement of the COVID-19 related National Emergency (March 13th), the shutdown of most businesses (March 15th), COVID-19 cases being reported in all 50 States (March 17th), US COVID-19 cases surpassing all other countries (March 26th), and the US hitting a landmark of 1,474,600 COVID-19 cases and 88,600 COVID-19 related deaths (May 17th). These “milestones” are indicated on the graph to give context to this illustration.
Though some species have had some “downs’, some had had some “ups”, while others have remained significantly flat through this time period. The “downs” and the “ups” seem to have been more attributable to normal market occurrences than the pandemic itself.
On a species-specific basis, we’ve seen 4/4 #1 common Ash stay at its high of $445/MBF through the winter and most of the spring, then slipping slightly in mid-spring to its current low of $415/MBF (starting on May 22nd and holding through June 12th). The demand for ash has declined steadily since mid-April, however, according to reports from buyers and sellers as per the Hardwood Review Weekly, the market for it remains a “mixed bag”.
Basswood has been the steadiest of all the species mentioned here, as it has stayed consistent at $370/MBF throughout the year to-date. This species is not discussed often in market analysis reports (it’s a relatively minor player compared to the other species mentioned in this article), but it is an important species and is often used for moldings, shutters, blinds, wood carving material, and a number of other uses.
Cherry has been almost as steady in price as basswood through this time period, though it remains quite a bit below its pre-US-Chinese tariff war value. It’s only dropped $5/MBF shortly after the beginning of the year, leveling out at $525/MBF and remaining there to this point. Most recently, there have been reports that cherry may be seeing somewhat of an uptick as some Chinese demand has increased, and some mills are reporting sales are now pretty much “split between domestic and Chinese customers” (Hardwood Review Weekly, June 12, 2020).
Hickory has experienced a roller coaster ride from $530/MBF at the beginning of the year, slumped to about $500/MBF in February and March, and now stands at about $545/MBF. Industry discussions mention a recent strengthening in demand for hickory.
Hard maple has cycled from a high of $895/MBF during the beginning of the year, down to its current low of $855/MBF, however, this is mainly due to the typical seasonal downturn in price hard maple experiences going into the summer months.
Soft maple peaked in early February and stayed constant at $875/MBF throughout April, then like hard maple, started a slight seasonal decline, and is currently at $830/MBF.
Red oak wins for “most improved” during this COVID-19 time period, going from a low of $500/MBF at the beginning of the year, up to its current annual high of $555/MBF. The gradual increase in red oak prices is coming from both a rise in Chinese demand, coupled with restrained production throughout the spring.
The previously consistent species of Poplar has seen a fairly steady decline in price since the beginning of the year, coming down from its high of $390/MBF to its current level of $360/MBF. Even though European demand has increased slightly for poplar over the course of this year, it’s been reported that the major reason for the tail-off of pricing for poplar is largely due to the reduced demand from China and Vietnam over this period,
(Major Source: Hardwood Review Weekly publications, Charlotte, NC)
To provide a longer term viewpoint, below is a graph showing the price performance of these species for an entire year (June 14, 2019 through June 12, 2020). The most significant declines in pricing came as a result of tariff war affects. You can see that, basically, after Phase 1 was signed, despite COVID-19, most pricing trends decline much less significantly or in some cases started to climb again.
Again, please understand that this does not suggest that there won’t be any affects from the COVID-19 pandemic on our regional hardwood markets, nor does it suggest that there haven’t already been some negative consequences to the industry. This is simply a snapshot of what’ s happened to-date with specific lumber pricing, and often it takes a while for supply chain affects to become evident. Expert opinions vary right now from a very lackluster market until 2021 or beyond, to others thinking that after a summer slowdown, markets will begin rebounding in the fall of this year. We will definitely continue to monitor and report what we both hear and see as we continue to sell timber for our clients!
The “unique” nature of our hardwoods provides a stabilizing affect, even when markets are hit, and the combination of enjoying demand from both domestic and international markets provide hardwood timberland owners some price protection. Timber continues to sell, and some species are selling at strong prices right now. Should you need any help in selling your timber, or have any basic questions, please call one of our foresters – you will be glad that you did!