Well, congratulations – anyone reading this actually made it through another year!  As the saying goes, nothing is certain but death and taxes; what is also certain is that there is never any certainty with our timber markets, and the wood products industry is still on its toes, wondering where they are going to take us in 2019.

This past year brought some ebbs and flows for sure, with hardwood prices climbing steadily through the first half of the year, and then tailing off after trade/tariff discussions with China began mid-year.  In general, with the exception of hard (sugar) maple, 2018 species prices ended up at or below where they began.  Outside of some small upward ticks in the pricing of ash and poplar, most species have started off the new year continuing in the same direction – flat.  However, underneath all the continued lackluster price performance and generally cautious opinions we’ve heard, several bright spots have emerged providing a little bit of hope that 2019 will see some decent improvement.

Domestic furniture sales are “finally reflecting the strong US economy – something hardwood producers are feeling in the form of stronger demand for frame stock from furniture manufacturers.  New furniture orders were 6% ahead of the 2017 pace, putting the (furniture) industry on track for its best year since 2014.”  It’s also been reported that the furniture industry is “close to doubling the rate of GDP growth” as well (Hardwood Weekly Review, December 7, 2018 issue.)  It is thought that this will continue into 2019.

Though not projected to set the world on fire, housing starts are predicted to continue increasing in response to the reported shortage that tempered the housing market in 2018.  Rising mortgage rates and housing prices will continue to affect the ability of new home buyers to participate, but its still expected that single-family housing starts will grow between 1-3% “as long as the US economy continues to grow, unemployment remains low, and wages continue to rise” (Hardwood Weekly Review, January 4, 2019).  Of course, housing starts initially create demand for framing lumber from our southern and western forests, but then hardwood demand increases as flooring, cabinetry and furniture are needed to fill these new houses.

Remodeling had seen some resurgence in 2018, and although thoughts are that increasing interest rates and a slowing of economic growth in general will slow this trend down a bit, the Joint Center for Housing Studies of Harvard University (JCHS) projects remodeling expenditures to reach approximately $353 billion dollars this year.  Of course, hardwoods are the primary components of re-modeling activities.

As far as our export markets go, the Vietnamese demand for hardwoods remains robust and is expected to stay steady or grow slightly, as they are increasing their ability to produce low-cost wood products for world consumption.  Though certainly not a “replacement” for the decrease in Chinese demand, the Vietnamese markets are certainly welcomed.

Of course, a lot still hinges on how things go with China and the associated trade talks.  The latest news we have at the time of this writing was that continued talks were in jeopardy, but the Administration’s top economic advisor, Larry Kudlow, denied those reports and that they are still moving forward to meet, negotiate, and strike a trade deal by the March 1st deadline.

As presented in the last issue, the two graphs that follow (Lumber Prices by Species and the Index of Selected Species Lumber Prices) demonstrate the crazy ride we’ve had with the hardwood markets for all of 2018 and into the first month of 2019.  Clearly its been a volatile economic climate for the hardwood lumber market, with the high point occurring in the early summer months, then dipping quickly after trade/tariff talks began, pretty much flattening out in mid-September for most species, except for cherry which has continued to fall, and ash which has fallen but recently started to tick up a little.

It is shaping up to be another year of speculation – of course, we’ll have a much better insight into this year’s hardwood markets when (if) the trade talks between the US and China conclude (if they do.)  In the meantime, stayed tuned as we keep you up-to-speed with the any late-breaking changes or trends.

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