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In recent years, the lumber industry has faced supply chain limitations and fluctuations in demand due to factors like COVID-related home improvement trends. This industry is accustomed to experiencing boom and bust cycles. Currently, higher interest rates are affecting construction and consumer spending, leading to a decrease in lumber demand in Europe, North America, and Asia.<\/span><\/p>\n The demand for lumber in the US, heavily influenced by housing starts, is expected to decline by 10-25% in 2023. However, a recovery is anticipated in 2024-2025. In the European Union, confidence in the construction sector has diminished in 2023, primarily due to higher interest rates impacting project financing costs. On June 15, the European Central Bank announced a 0.25 percentage point increase in the key interest rate, bringing it to 4%. Experts predict that interest rates will remain elevated until at least 2025. Similarly, the construction and housing sectors in Japan and Korea are also experiencing a downturn.<\/p>\n The global softwood lumber demand declined by 5% in 2022. In the US, demand fell by 3% in 2022 and is projected to decrease by an additional 6% in 2023, with a return to growth expected in 2024. The forecast indicates a more significant and prolonged contraction in Europe, with demand declining by over 10% from its peak in 2021 to a low point in 2025.<\/p>\n Furthermore, the ongoing conflict in Ukraine is reshaping lumber trade routes globally and causing cost increases for inputs such as energy, as well as sawlogs in certain regions. In 2021, Russia accounted for 11% of global softwood lumber production and 22% of exports. Trade restrictions imposed by Western countries on Russia have led Russian sawmills to redirect more exports to China, intensifying competition for European and Canadian exporters in the Chinese market. Sawmills in western Russia are facing significant expenses due to the lengthy trade route to China, while import bans on Western harvesting and sawmill equipment present challenges for sawmills throughout Russia.<\/p>\n Lower demand and cost inflation will impact sawmills worldwide. Two key exporting regions, Canada and Central Europe, were already encountering difficulties. Canadian exports, which provide around 80% of US lumber imports, are expected to decline as sawmills in British Columbia deal with tighter profit margins and reduced availability of sawlogs. In Central Europe, including Germany, the Czech Republic, and Austria, lumber production will see substantial reductions following the damage caused by the spruce bark beetle infestation in recent years. The US South, on the other hand, is expected to exhibit relatively strong performance in the coming years due to cost advantages and announced capacity expansion of 5 million cubic meters (11%) from 2022 to 2024.<\/p>","protected":false},"excerpt":{"rendered":" In recent years, the lumber industry has faced supply chain limitations and fluctuations in demand due to factors like COVID-related home improvement trends. This industry is accustomed to experiencing boom and bust cycles. Currently, higher interest rates are affecting construction … Continue reading