Issue link: http://palletcentral.uberflip.com/i/860755
30 PalletCentral • July-August 2017 palletcentral.com there would be a one year period before either side could initiate a new trade agreement. It is important to remember that every time a trade dispute begins, lumber prices become more volatile. In the first half of 2017, lumber prices moved much higher. In the second quarter, prices were 25% above year ago levels. Prices have declined in the last few weeks. The surge was not driven by either higher costs or strong demand. The overall demand for North America lumber has not moved up significantly over the last few years and remains far below the peak levels of 2005. The growth in U.S. demand has been offset by declines in exports to China. Russia has been gaining share of the Chinese lumber and log markets because of the sharp drop in the value of the ruble due to falling oil prices and a trade sanction after the invasion of Ukraine. The surge appears to have been due to inventory speculation. Current lumber prices reflect the expected CVD levels. With the industry's current cost structure and the expected demand levels in 2018, lumber prices will be near or below current levels. Bottom line: Expect Growth to Continue Economic growth expected to remain healthy through 2018. Given the weakness in the U.S. dollar and sustained consumer spending growth, industrial production growth – the good measure for pallet demand growth – should also remain near 2% through 2018. This would be a significant improvement over the last few years. PC ECONOMY Lynn Michaelis is President of Strategic Economic Analysis, a company which assists business managers in thinking about the future. Although the primary focus of his firm is housing and wood products, the company stays current on overall economic activities in the USA and globally. Lynn may be reached at lmichaelis@getfea.com or 206-434-8102. Industrial production growth – the good measure for pallet demand growth – should remain near 2% through 2018.