Southern timber prices in the first quarter of 2023 fell year-over-year for all product types. According to TimberMart-South, average prices dropped 7% to $25.87/ton for pine sawtimber, 15% to $9.39/ton for pine pulpwood, 5% to $31.95/ton for hardwood sawtimber, and 25% to $9.07/ton for hardwood pulpwood. However, the pine sawtimber prices are still above the pre-pandemic level.
The weakened timber prices are mainly caused by reduced demand for lumber. Higher mortgage rates, deteriorated housing affordability, and worries of an economic slowdown have cooled the general housing market and resulted in reduced housing starts (major driver of lumber and structural panel products). Lumber prices skyrocketed during the pandemic but have receded sharply since mid-2022 and have been stabilizing at the long-term average level.
Although we use south-wide average prices, it is hard to say we have an integrated timber market in the U.S. South. It is actually made up of multiple local timber markets and the timber prices are largely determined by local timber inventory, mill types and capacities, logging capacity, site accessibility, transportation conditions, etc. Therefore, some local timber markets may fare relatively better than others. For example, the average pine sawtimber prices in southeast Georgia, north Florida, and east Alabama are generally higher than the average prices in the West Gulf regions.
Considering the oversupply of sawtimber in the region, whether the decrease in timber prices will continue or not largely depends on factors from the demand side. Softwood lumber production capacity in the South has increased 20% in the past 5 years and reached 26.9 billion board feet (bbf) in 2022 (Forisk, 2022a). Announced greenfield construction and existing mill expansion suggest that the capacity could increase by another 5.1 bbf by 2025 (Forisk, 2022b). However, economic outlook (especially the housing market) adds uncertainties to the market.
Forisk. 2022a. Forisk North American forest industry capacity database.
Forisk. 2022b. Forisk Research Quarterly: Fourth Quarter 2022.