With record-breaking lumber prices and increased volatility, how will logging companies cope? 2017 was an interesting year for the logging industry to say the least. With record-breaking lumber prices expected to continue this year and for the foreseeable future, many experts are worried that the industry could end up in limbo. With that in mind, sales are still strong with industry forecasters already releasing the latest financial data from the most significant logging equipment lenders and buyers.
Let’s take a look at the causes for this price volatility along with some predictions for the future of the logging industry in 2018.
Increased U.S. Import Duties
The driving force behind these record-high prices was the initiation of new U.S. import duties on Canadian lumber. Back in November of 2017, the U.S. Department of Commerce ruled that total countervailing duties (CVD) and anti-dumping duties (ADD) of 20.83% would be levied on Canada's lumber exports. This caused not only a political strain, but Canadian companies reacted by swiftly raising their prices before the new duties took effect.
Many were concerned how this would affect the market, and experts predicted that the price difference would ultimately get passed onto the U.S. consumer. These predictions were correct, as many importers accepted the new prices and charged U.S. customers higher prices.
It remains to be seen how this will affect the market moving forward, but many expect that U.S. producers will start to look towards European importers in hopes to boost U.S. domestic lumber production.
A Softwood Shortage?
If import duties stay the same, experts forecast that by the end of the decade there won’t be enough available softwood lumber in North America to meet up with U.S. demand. Luckily, U.S. housing is entering a slow period which has put the potential supply crisis at bay for a while. Even so, the new import duties on Canadian lumber hasn’t helped the situation. To correct the issue and avoid a supply gap, U.S. importers will start importing incremental supplies of lumber and logs each year to keep up. Hopefully, the higher lumber prices will boost the supply side.
Leading Logging Equipment Lenders in 2018
Although we’re only a few months into the year, leading industry research firm EDA has already released some financial data for financing logging equipment. According to their data from February 2018, these are the top five equipment lenders:
JOHN DEERE INDL CREDIT 78
· CATERPILLAR FIN SVC CORP 46
· DE LAGE LANDEN FIN SVC 25
· WELLS FARGO VENDOR FIN SVC LLC 18
· STEARNS BANK 15
What equipment types were the most popular? EDA also has data on this, detailing the top ten most common logging equipment:
EQUIPMENT TYPE BUYERS UNITS
LOG LOADER 41,547 89,621
2. SKIDDER 46,872 89,598
3. GRAPPLE SKIDDER 24,636 60,225
4. CHIPPER 36,962 58,767
5. FELLER BUNCHER 18,252 43,563
6. CRAWLR DOZER LOG 20,806 38,263
7. STUMP CUTTER 23,829 33,041
8. SAWMILL 19,883 25,644
9. WHEEL LDR (LOG) 11,647 23,443
10. EXCAVATOR (LOG) 10,087 23,435
2018 is off to a good start for equipment, with buyers from across the U.S. financing new equipment in significant numbers.
ConclusionWhile the prices of lumber continue to rise, many experts expect that the logging equipment will continue to see positive growth into 2019. So far 2018 is showing to be promising for both buyers and equipment lenders. While ties with Canadian exporters remains volatile, experts predict that U.S. demand will heavily rely on European imports and U.S. production expansions.