Lumber Prices in USA & Canada - North American Timber Market -16-30th September 2006

North American Lumber Market

16-30th September 2006

US housing sector shows mixed results
Sales of existing homes fell less than expected in August. Home re-sales slowed 0.5% to 6.3 million units a year while the average price dropped 1.7% to $225,000 from a year earlier, the biggest decline since November 1990.

Privately-owned housing starts dropped 6% in August to a seasonally adjusted annual rate of 1.77 million units, according to the US Commerce Department. This was 20% below the pace of a year ago. The decline was due to a 5.9% reduction in the single-family sector, which accounted for about 80% of the houses built. The chart below shows that privately-owned housing starts have plunged 27% since January this year. Building permits (down 2.3% from July) and housing completions (down 3.2%) also dropped in August.

In contrast, the sales of new homes unexpectedly posted the biggest increase in five months, raising hopes that the steep slide in the US housing industry might be levelling off. Sales of new single-family homes increased 4.1% to a
seasonally adjusted annual rate of 1.05 million units. However, the average price fell to $237,000, down 1.3% from August 2005.

US expects levelling sales of existing homes
According to the National Association of Realtors, sales of existing homes in the USA will level out in the months ahead, slowing the frenzied pace earlier this year. The decline of sales in the third quarter of 2006 was stronger
than expected and mirrored the slumping sales of new houses. Surprisingly, this was not supported by the still favourable economic fundamentals such as GDP growth, job creation and interest rates. One explanation could be found in the saturation of the housing market due to the strong building boom in 2005 and the first half of 2006.

Psychological factors were also causing some US buyers to remain on the sidelines, waiting for prices to stabilize at a lower level. Furthermore, consumer confidence was waning as it was generally expected that the US economy would enter a less favourable phase later this year and in 2007.

Renewal of GSP draws opposing views
Senior members of the US Senate were having conflicting positions regarding the renewal of the General System of Preferences (GSP), according to IWPA. While the House Ways and Means Committee Chairman, Bill Thomas (California), signaled that he wanted to proceed with a short-term extension for the GSP of less than two years,Senate Finance Committee Chairman, Charles Grassley (Iowa), thought otherwise. Mr. Grassley considered that GSP eligibility should be removed for Brazil and India and was delaying legislative action in his Committee until November, when the GSP review by the Office of the US Trade Representative would be concluded.

Abbreviations

LM Loyale Merchant, a grade of log parcel	Cu.m Cubic Metre
QS Qualite Superieure	Koku 0.278 Cu.m or 120BF
CI Choix Industriel	FFR French Franc
CE Choix Economique	SQ Sawmill Quality
CS Choix Supplimentaire	SSQ Select Sawmill Quality
FOB Free-on-Board	FAS Sawnwood Grade First and
KD Kiln Dry	Second
AD Air Dry	WBP Water and Boil Proof
Boule A Log Sawn Through and Through	MR Moisture Resistant
the boards from one log are bundled	pc per piece
together	ea each
BB/CC Grade B faced and Grade C backed	MBF 1000 Board Feet
Plywood	MDF Medium Density Fibreboard
BF Board Foot	F.CFA CFA Franc
Sq.Ft Square Foot	Price has moved up or down

Source: ITTO' Tropical Timber Market Report