It is difficult to gauge the North American market right now because of these transportation bottlenecks. And while it is easy to blame the weather for all of our problems, I think most of us would agree demand was less than we had expected. As a result, prices peaked well below last year. Our plan was based on 1.075 million US starts, and while this may be in question with the slow start, we still expect to be close.
Prices have softened recently in what is a normal seasonal pattern, although perhaps a bit earlier than some expected. They should bottom a bit earlier than normal, and then start to recover. This year will likely follow the seasonal pattern of prices we saw over the last five years.
With steady offshore volume and 925K housing starts in the United States, we ended 2013 averaging 355.00 mill for 2x4 WSPF (Random Lengths). This was up 18 per cent over 2012.
We expect slightly better demand in the United States this year, and flat demand in Canada. There is some production pickup, but that is mostly offset by some permanent closures. So all in, one can make a case for slightly better average pricing in 2014.
We expect offshore demand to remain stable this year, with supply restricted due to the closure of our Quesnel mill. All of our offshore markets were impacted by the labour disruptions that essentially shut down the Port of Vancouver. Thankfully at time of writing, things are returning to normal and we will be very busy this month cleaning up the backlog of late orders. This unfortunately could take several weeks.
China demand was in line with our business plan. Shipments were light due to the aforementioned transportation issues but this volume will be caught up in Q2. Despite all the talk of a slowdown in China, we continue to see steady demand. A few years ago, most of BC’s volume was low grade destined for Beijing and Shanghai. Today, rapidly expanding interior cities are extending the reach of SPF while an increased interest in higher-grade lumber for furniture and other value-added applications continues to evolve.
Japan is coming off a great year in 2013, and it is expected to moderate slightly this year. Most of our customers are focusing on the emerging wood-frame multi-family sector in Japan that will offset any weakness in single-family construction.
I recently participated in a trade mission to India to investigate opportunities in that country for wood products.
India is a large and growing economy and, much like China a decade ago, holds tremendous potential as the middle class grows and gains wealth, spurring development and construction. Unlike China, India already has a culture of wood use – tropical wood species are used extensively in construction and finishing applications in Indian homes. There is a growing awareness of green building, and a desire to build with wood for its environmental benefits – which presents an opportunity for North American lumber products.
One of the challenges faced in exporting SPF and SYP lumber to India is a lack of familiarity with North American species. A big part of our initial market development work is to provide information on the appropriate applications for SPF and SYP, as well as information on grades, strength and other physical properties.
The other major challenge is that the supply chain in India is hugely fragmented. There are currently several convoluted steps from port to end user which makes quality and service assurance next to impossible at this stage. We will search for ways to smooth out the supply chain and make the process more efficient and transparent so we can ensure that new customers in India get the right product for the right application, every time.