A number of forest analysts were projecting that while we are in midst of a long period of strengthening lumber markets, prices could fade this summer due to increasing production on both sides of the border. The 20% jump year-over-year in U.S. housing starts experienced in Q1 was widely explained by the mild winter compared to 2015. While no one projects another 20% jump in starts this year, homebuilding activity continues to grind forward. Demand for lumber has been surprisingly strong through mid-August. Notably, the Framing Lumber Composite Price is up almost 20% since the Softwood Lumber Agreement expired last October.

The positive correlation illustrated below suggests the “surge” in cross-border shipments during the standstill period to date is largely demand-driven. The chart plots B.C. softwood exports to the U.S. per BCStats vs. the Framing Lumber Composite Price by month per Random Lengths (most recent data for softwood shipments is June; the Composite Price had climbed to $369 by the end of last week).