LumberFlow Market Pulse | The upcoming 800 MMBF Supply Cliff, week 2 2026

With 800 million board feet of capacity projected to exit the market this year and a Southeast OSB mill idling, the supply floor is rising faster than the demand ceiling.

Macro Snapshot

• Housing Starts: October starts fell 4.6% to 1.25 million units, with a sharp 22% plunge in multi-family construction, signaling a cooling in large-scale residential demand.
• Mortgage Momentum: Despite broader macro weakness, purchase applications surged 20% year-over-year, suggesting a resilient underlying appetite for single-family homes.
• Geopolitical Risk: US military actions in Venezuela and the resumption of direct shipments to Syria introduce new volatility into global logistics and export competition.

Industry Highlights

• Supply Squeeze: Southeast OSB mill idling for at least one month has pushed 7/16-inch prices toward $180 per msf in regional hubs.
• Capacity Losses: Following 900 mmbf of losses in 2025, the industry is bracing for another 800 mmbf in cuts throughout 2026, primarily driven by Canadian curtailments.
• Southern Pine Surge: Tight holiday supplies and a shortage of 16-foot lengths have driven double-digit gains in narrower widths.
• Production Expansion: Zip-O-Log Mills has broken ground on an Oregon expansion to double Douglas fir timber capacity by early 2026.
• Automation Push: Quebec’s St-Elzéar sawmill has tripled productivity via a CA$32.7 million AI investment, highlighting the shift toward high-efficiency, low-labor operations.

The Great Tariff Pause of 2026 The most significant headline for procurement managers this week is undoubtedly the postponement of wood product tariff increases. By pushing the 25% furniture and cabinet tariffs and the expanded softwood timber rates to January 1, 2027, the administration has effectively removed a massive cost-push inflationary variable from your 2026 budget. However, we must view this as a reprieve, not a permanent solution. For those managing complex supply chains, this delay offers a window of relative fiscal predictability, yet the underlying trade tensions with Canada—exacerbated by the 45% duties on many producers—continue to hollow out the northern supply base. The current 10% rate on softwood remains a persistent friction point, acting as a floor for pricing even as other variables fluctuate.

What does this policy shift mean for your immediate order files? In the short term, it stabilizes the "landed cost" variable for imported products, allowing for more aggressive long-term forecasting. You can now approach your 2026 procurement strategy without the immediate threat of a double-digit price jump on the first of the month. But beware: this stability in policy is being countered by a profound instability in production. The 800 million board feet of capacity projected to leave the market this year represents a structural shift that no tariff delay can fix. We are moving into a market where price is dictated less by trade policy and more by the physical availability of fiber.

Procurement teams that ignore the shrinking production footprint in favor of watching Washington will find themselves with favorable duty rates but no wood to buy. The delay of the 25% furniture and cabinet tariffs is particularly impactful for the multi-family and residential remodeling sectors. These industries often operate on thin margins where a 25% swing in material costs can render a project unfeasible. By deferring these costs, the administration has provided a lifeline to developers who were staring down the barrel of significant cost overruns. Nevertheless, the trade relationship with Canada remains fraught. The 45% duties levied against specific Canadian producers have created a bifurcated market where some suppliers are essentially priced out of the U.S. domestic market, forcing a reliance on Southern domestic mills that are already running at near-peak capacity. This reliance creates a bottleneck that could prove more expensive than the tariffs themselves if domestic production cannot keep pace with even modest demand increases.

The Supply-Side Erosion:

The 800 MMBF Cliff If 2025 was the year of the "slow bleed" for North American mills, 2026 is shaping up to be the year of the "surgical cut." The loss of 900 mmbf last year was largely a reaction to the post-pandemic hangover and the normalization of demand; however, the projected 800 mmbf loss this year is a far more calculated reaction to high interest rates and the prohibitive cost of Canadian logistics. This is no longer about trimming the fat; it is about amputating limbs that are no longer viable in a high-cost environment. The West Fraser $409 million impairment charge is a loud signal from the top of the market. It serves as a stark admission that current price levels do not justify the existing footprint in certain high-cost regions, particularly those where timber harvesting costs have outpaced the finished product's market value. We are seeing this play out in real-time with the Southeast OSB mill idling. A one-month pause might seem like a minor blip in a global supply chain, but it has already sent 7/16-inch prices to $180 per msf. This is a classic supply-side shock. When capacity is this lean, any minor disruption—whether it be a mill maintenance cycle, a weather event, or a strategic idling—results in immediate buying urgency. For procurement managers, the takeaway is clear: inventory depth is your only true hedge against a market that no longer possesses a "buffer" of excess capacity. The days of relying on "just-in-time" delivery from the mill are fading as the "just-in-case" philosophy takes hold once again. The psychological shift from efficiency to resilience is becoming the defining characteristic of the 2026 market. The $409 million impairment is not just a line item on a balance sheet; it is a harbinger of a leaner industry. When a giant like West Fraser signals that its assets are overvalued relative to their earning potential, it suggests that more closures are on the horizon. This "surgical cut" is designed to bring supply back into alignment with a higher-for-longer interest rate environment. The result is a market that is highly sensitive to even the smallest uptick in demand. If the industry loses another 800 million board feet of capacity, the floor for lumber prices will effectively rise, regardless of what happens with housing starts or mortgage rates. We are witnessing the permanent decommissioning of high-cost capacity, which means the next demand cycle will meet a much tighter supply ceiling.

Regional Nuances:

The Southern Pine Pressure Cooker While the national headlines focus on fluctuating housing starts, the regional reality in the US South is one of extreme tightness. Southern Yellow Pine (SYP) mills have been uncharacteristically aggressive, leveraging holiday curtailments and year-end maintenance schedules to push quotes higher. We are currently seeing double-digit gains in narrower widths, driven largely by the scarcity of 16-foot lengths. This is a supply-driven rally through and through. It isn't necessarily that demand is booming in the traditional sense, but rather that the available "stick count" at the mills is at its lowest point in several months. When the count of physical units on the ground drops below a certain threshold, the price discovery process becomes incredibly volatile. In the West, the narrative takes a slightly different turn. The Zip-O-Log expansion in Oregon stands as a rare bright spot of capacity growth in an otherwise contracting market. However, this expansion targets a specific niche—Douglas fir timbers—rather than the broader framing market. For the standard framing buyer, the West remains a battleground defined by high log costs and extremely cautious production levels. Furthermore, the resumption of direct shipments to Syria from the Port of Latakia is a fascinating wildcard that few analysts are pricing in. While the initial volumes may be small, the diversion of high-grade clears to rebuilding efforts in the Middle East could significantly tighten the availability of premium domestic selections later this year. This geopolitical variable adds a layer of complexity to an already strained Western supply chain. The pressure in the South is particularly acute because the region has become the de facto "woodbasket" of the country. As Canadian supply diminishes due to tariffs and pest issues, the burden of meeting U.S. demand falls on the Southern Pine belt. When these mills curtail production, there is no secondary source to turn to. The scarcity of 16-foot lengths is a specific pain point for deck builders and residential framers who require longer spans. This regional tightness often foreshadows national price movements, as buyers who cannot find SYP begin to look toward Western species or European imports, eventually pulling those prices upward as well. This "spillover effect" is a critical metric for procurement officers to monitor, as it signals the transition from a regional squeeze to a national shortage.

The Math:

Quantitative Signals vs. Qualitative Noise Our weekly forecast presents a compelling conflict between macro data and market momentum. While the 1.25 million housing start figure is the lowest since 2020—a traditionally bearish signal that would normally send prices tumbling—the price models are almost universally pointing UP. This divergence suggests that the market has already "priced in" the slowdown in new construction and is now focused entirely on the supply constraints mentioned earlier. The industry is no longer looking at how many houses are being built, but rather how much wood is actually being produced to meet that demand. * Southern Pine: Forecasted UP (+2.6%) with 70% confidence. The primary driver here is the immediate price change from the previous week. The market is actively chasing mill hikes, and buyers are showing a willingness to pay premiums to secure immediate shipments. The 70% confidence interval reflects the strong consensus among mill sales desks that current inventory levels cannot support lower prices. * Green Douglas Fir: Forecasted UP (+1.5%) with 67% confidence. This is largely a momentum play. As the broader lumber composite moves, the West Coast species are being pulled along for the ride, despite the regional differences in log costs. The lower confidence here compared to SYP reflects the ongoing uncertainty regarding Western log exports and coastal harvesting regulations. * Framing Lumber Composite: Forecasted UP (+1.4%) with 67% confidence. Despite the widely reported job losses in the construction sector, the market is pricing in the reality of supply curtailments. The consensus is that there is simply less wood available than there was a month ago. This composite move is a direct reflection of the "surgical cuts" taking place across the continent. * Eastern SPF: Forecasted STABLE with a high 82% confidence. This is the notable outlier in our data. The high confidence suggests that the current price level for ESPF has found a definitive floor and isn't ready to break out just yet, likely due to a temporary equilibrium in the Great Lakes and Northeast regions where winter weather has slowed job site consumption. The 1.25 million housing start figure should be viewed with skepticism by procurement professionals. While it looks bad on a chart, it represents a "floor" of demand that is still significant. When you combine this steady, albeit lower, demand with a rapidly shrinking supply side, the result is upward price pressure. The 82% confidence in Eastern SPF stability is particularly interesting; it suggests that for at least one segment of the market, the volatility has paused, providing a brief window for buyers in those regions to lock

How LumberFlow Helps

In a market defined by rapid capacity shifts and regional price surges, staying ahead requires more than just spreadsheets. Use LumberFlow to streamline your procurement planning with price target setting and leverage our AI-parsing tools to instantly compare supplier quotes against current market volatility. To see how our multi-supplier RFQ workspace can stabilize your Q1 margins, book a strategy session with our team.

Ready to stay ahead of market shifts? Book a consultation to see how LumberFlow streamlines dimensional lumber buying.

Action Plan for Buyers

1. Prioritize SYP 16-Footers: With the forecast calling for a 2.6% increase and mill availability tightening, secure your Southern Pine needs for the next 21 days immediately to avoid the 'holiday hangover' premium.
2. Lock OSB Requirements: Given the Southeast mill idling and the jump to $180 per msf, do not wait for a correction. Cover your Southwest and Southeast OSB needs through mid-February now.
3. Audit Supplier Stability: Use the current 'tariff pause' to evaluate your supply chain. With 800 mmbf of capacity leaving the market, identify which suppliers have the most secure log costs and automation investments (like the Quebec AI model) to ensure long-term reliability.