Lumber and Timber Markets Worldwide

Lumber and timber, unprocessed woods, have been market-indexed commodities in the United States since the early 20th century. Similarly, market institutions have since regulated the specificities that are required for orderly trade of these raw materials, such as length and quality measurements. Today, these commodities represent a major international market with great benefits in terms of portfolio diversification. Prices within the lumber and timber markets are mainly tied to international supply and the status of major construction markets. One of the benefits of investing in or managing lumber and timber operations is that if market rates are not favorable at any given time, the trees can simply be kept planted and continue growing. Similarly, the pricing of unprocessed woods tends to have a negative correlation with other commodities and securities, thus making it a safe asset for investment. On the other hand, wood growers are vulnerable to the adverse effects of natural disasters, wildfires, climate variations, and pests. This article explores the status of lumber and timber worldwide.

Lumber and Timber Markets Worldwide

Within the lumber industry, there are softwoods and hardwoods. Hardwoods come from trees such as oak, cherry, and teak; while softwoods include pine, cypress, and redwood. In the particular case of the US, one-third of the national territory is occupied by forests, which represent 8% of the world’s forested areas. Furthermore, the US is the largest producer and consumer of lumber and timber in the world, with an aggregate production of more than 400 million cubic meters of wood annually. Similarly, the US imports a large amount of timber and lumber, particularly from Canada. Other major producers of unprocessed woods are India, China, Brazil, and Canada.

Lumber and timber demand is high in the US because wood is a preferred construction material, particularly for suburban residential developments. Likewise, international markets demand large amounts of wood for the confection of furniture and various household items. On the Chicago Mercantile Exchange, the price of lumber has gone from a low point of US$150 in 2009 to the current pricing of approximately US$310 per unit. One of the biggest difficulties in the lumber and timber markets is fair trade given the large amounts of illegally logged wood that enters the marketplace. Illegally acquired wood commodities in the international market harm the environment and biodiversity because their exploitation is conducted in an unsustainable and unregulated fashion. Similarly, these practices harm legal suppliers of lumber and timber because they represent unfair and uneven competition.

One specific hardwood crop is teak, which provides long and sturdy, yet flexible, pieces of wood. Furthermore, teak wood has a variety of uses and is of high quality, given that it is resistant to a significant amount of termites and other insects. The cultivation of teak, as well as many other trees, for the purposes of lumber and timber takes anywhere between one or two decades and requires regular upkeep. For example, teak trees must be pruned of their branches and they must grow as vertically as possible in order to provide long and neat wood planks.

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