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Forest Products
Forest Products
A Review of 2022
2022 was another strong earnings year for most operations in the forest products industry. Lumber prices remained elevated in the first half of 2022 both at the national level and in the Appalachian region. Profitability for most sawmill operations was strong in the first half of the year, though tapering off in third and fourth quarters of 2022 due to sharp declines in pricing
A Review of 2022 and demand. Both the domestic producer price index (PPI) for hardwood and softwood lumber and the export price index (EPI) for logs and lumber showed sharp declines in late 2022. While 2022 is believed to have been an overall strong year for most borrowers in the forest products industry, earnings are expected to have moderated from the extraordinary profits seen in 2021.
2022 was another strong earnings year for most operations in the forest products industry. Lumber prices remained elevated in the first half of 2022 both at the national level and in the Appalachian region. Profitability for most sawmill operations was strong in the first half of the year, though tapering off in third and fourth quarters of 2022 due to sharp declines in pricing and demand. Both the domestic producer price index (PPI) for hardwood and softwood lumber and the export price index (EPI) for logs and lumber showed sharp declines in late 2022. While 2022 is believed to have been an overall strong year for most borrowers in the forest products industry, earnings are expected to have moderated from the extraordinary profits seen in 2021.
Producer Price Index and Export Price Index
Exhibit 11: Producer Price Index and Export Price Index
Sources: Export Price Index: https://fred.stlouisfed.org/series/IQ13100
Sources: Export Price Index: https://fred.stlouisfed.org/series/IQ13100
PPI: Softwood Lumber: https://fred.stlouisfed.org/series/WPU0811
PPI: Softwood Lumber: https://fred.stlouisfed.org/series/WPU0811
PPI: Hardwood Lumber: https://fred.stlouisfed.org/series/WPU0812
PPI: Hardwood Lumber: https://fred.stlouisfed.org/series/WPU0812
The sharp, late‐2022 declines in both the PPI and EPI occurred amidst the U.S. Federal Reserve’s tightening of monetary policy. The Fed funds effective rate increased by over 4% in 2022 alone16, and the average U.S. 30‐year fixed mortgage rate increased from ~3.1% in Dec 30th, 2021 to ~6.4% on
The sharp, late-2022 declines in both the PPI and EPI occurred amidst the U.S. Federal Reserve’s tightening of monetary policy. The Fed funds effective rate increased by over 4% in 2022 alone16, and the average U.S. 30-year fixed mortgage rate increased from ~3.1% in Dec 30th, 2021 to ~6.4%
16 Fed Funds: https://fred.stlouisfed.org/series/FEDFUNDS
16 Fed Funds: https://fred.stlouisfed.org/series/FEDFUNDS on December 29th, 2022.17 U.S. single family housing starts showed strong declines after April 2022 and were likely hindered by the increased cost of borrowing.18 Existing home sales in the U.S. also declined throughout much of 2022.19
17 30-year fixed rate mortgage average in the US: https://fred.stlouisfed.org/series/MORTGAGE30US
18 Single family housing starts: https://fred.stlouisfed.org/series/HOUST1F
19 Existing home sales: https://fred.stlouisfed.org/series/EXHOSLUSM495S were likely hindered by the increased cost of borrowing.18 Existing home sales in the U.S. also declined throughout much of 2022. 19
