Improved Chinese demand may boost US log exports; domestic demand to sustain

WASHINGTON (Scrap Monster) : The encouraging home starts data in recent months have provided the much-needed boost for the US Lumber industry. The positive domestic indicators are well supported by robust demand growth from China.

After several months of dismal figures, the US house starts have recently shown signs of recovery. The recently released statistics indicate that more homes are being constructed as the demand for new homes are seen increasing. Analysts predict at least 930,000 new houses and apartments to be constructed during the year, which is nearly 20% higher than the prediction for the previous year.

The domestic demand is well augmented by improved demand growth from Asian region. The log exports from Alaska, Washington, Oregon and Northern California increased about 9% in the third quarter of 2012.Nearly two-thirds of the exports were destined to China. The Chinese demand is expected to grow sharply by more than 70% by 2015.

The supply side is yet to pick up to cater to the increased domestic and global demand. The shutdown of a large number of facilities in the last few years have put breaks on the production capacities. The supply shortage has spiked up the lumber prices. The US Lumber prices are up by 45% in a year to almost eight-year highs.

The inventory levels are at their lowest points. Any sudden surge in demand may lead to escalation of lumber prices. The likelihood of lumber prices touching the previous peak high cannot be ruled out.

The good news for the industry is that the US housing starts and the wood products consumption may continue to surge through 2014 and 2015. The Chinese economic growth will boost the construction and housing industry which would lead to increased demand for North American wood products.