2014 Market Outlook

There were a couple of interesting interviews over the holidays on the Business News Network (BNN). The video clip of West Fraser CEO Ted Seraphim’s December 24th interview is available here. CIBC’s Mark Kennedy was interviewed on the same day here. The prevailing themes in their lumber market outlooks for 2014:

  1. The U.S. housing market recovery will continue. “We’re still early in the recovery,” says Seraphim. Mark Kennedy remains very bullish, but alludes to some market “headwinds” due to Fed tapering and higher mortgage rates. His forecast has housing starts climbing to 1.130 million next year.. which Mark notes is still “25% below the norm of 1.5 million.”
  2. Demand from Asia will remain strong. In the face of China’s fibre deficit, Kennedy projects that China’s record 2013 imports of both logs (+18%) and lumber (+17%) will grow another 5-10% next year. Seraphim notes West Fraser is “very confident of the future (growth) in China.”

Mark Kennedy projects that lumber prices will average $400/M next year, up from $350-355 this year. There are some noteworthy quotes from Ted Seraphim concerning mid-term timber supply. He defines the medium term as “not five years, but 10, 20, 30 years.” He considers the Mountain Pine Beetle epidemic “over” and predicts that B.C. mills will complete their shift “entirely from MPB-killed wood to green wood” within the next 5 to 7 years. “The industry is smaller today and it’s going to be smaller tomorrow in British Columbia.” In the face of shrinking timber supply in B.C., we’re told that West Fraser has grown their footprint in Alberta and the U.S. South. Regarding West Fraser’s 14 Pine mills in the U.S. South, Seraphim confirms this is “one of the few regions in North America where the timber base is growing.”

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