From Fog to Clarity: Guiding Principles for Uncertain Times and Market Outlooks

One of life’s small gifts I greatly enjoy is the beauty of a foggy morning. Dew glistening on the grass. Rays of sun that pierce through the mist like stained glass. The peace and quiet as the suspended water particles dampen the sounds of cars and birds. 

On these misty mornings, as I drive into work along a winding back-country road, the roadway drops elevation at a few points right into banks of fog. Suddenly, that which was once a source of joy and peace becomes a danger — even with sunlight. 

Driving in fog in the evening or night becomes all the more dangerous as our brights only allow us to see a few meters ahead at a time. The deer crossing ahead or the upcoming embankment is only visible a few moments before we must react. 

Without this foresight, a driver must rely on the fundamentals of good driving — full attention on the road, driving at the appropriate speed and having the peace of mind that the vehicle has been properly maintained and the brakes are in good working order.  

When we go through foggy seasons on the road, in business or life, we have to fall back on the basics, carefully making it safely to our destination.

A little under a year ago, we published an article looking forward to 2024 and the rest of the 2020s. At Columbia Forest Products, we approached 2024 with a moderate degree of caution. Many of the predictors we used in the past to project forward demand in the hardwood plywood market had either been disrupted or made less useful after COVID-19.  

This phenomenon was not unique to plywood and other building materials — many industries and verticals were heading toward a year of foggy conditions, unsure what to expect next. To combat this uncertainty, our focus in 2024 was the basics — being efficient with our labor and raw materials, focusing on quality and on-time delivery and being financially prudent.

Fortunately, the fog surrounding our industry has cleared quite a bit. As we approach Q4 of this year, we see 2024 looking very similar to last year in terms of demand for domestic hardwood plywood. We also have a higher degree of confidence heading into next year and through the remainder of the decade.

In the U.S., much of the domestic hardwood plywood industry is tied to single-unit housing starts and remodeling activity, both residential and commercial. Q1 housing starts as a whole were unusually strong, and a lot of pent-up demand exists for housing, especially as home prices and interest rates have remained relatively high. 

Other than a bit of weakness at the end of this year, we expect housing starts to generally rise in 2025 and 2026 and possibly into early 2027. Housing will be especially strong in Texas, Florida and Indiana, according to a speech from ITR Economics’ Connor Lokar. 

The same article quotes NAR chief economist Lawrence Yun, Ph.D., who cited life events (births, marriages, divorces, etc.) and generational buying habits (specifically Millennials and Gen X) as primary drivers of his expectation for growth in housing starts next year.

While single-unit starts in the U.S. should be a positive driver of demand in 2025, commercial and multi-unit starts are not expected to fare as well. In addition, remodeling activity is expected to soften. 

These latter sectors are primarily tied to the overall U.S. economy, which is likely to see some downward pressure here at year-end due to things like government spending (i.e., inflation) and labor costs. Overall, expect a moderate increase in domestic hardwood plywood demand in 2025, with slightly smaller growth in 2026. 

Now that the fog is lifting, companies in all industries can have a clearer vision for the future and adjust their strategies accordingly to take advantage of the feast and prepare for future famine. Here’s to high visibility and smooth driving in 2025.