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Lumber Prices Track Forest2Market’s 2011 Forecast

In the February issue of Building Products Digest, Bill Nocerino—Forest2Market’s lumber division manager—wrote the following:

We project SYP lumber prices will peak in the $375/mbf range sometime in the spring and then start to retreat as the hot summer months arrive. The difference between 2010 and 2011 will be the speed at which we reach those peak prices. The dramatic week over week rises we saw in 2010 will be a thing of the past. Instead, we expect a more balanced, less aggressive rise as the peak buying season approaches.

Mill2Market, the weekly lumber price report that is published by Forest2Market every Thursday at 5:00 p.m. eastern standard time, has—so far—confirmed this projection. On March 1st and 2nd, Bill had a chance to talk to many in the industry at the SLMA Spring Meeting. His conversations there confirm that the market is tracking our projections to date. Here is Bill’s report:

Talking with folks here, it is clear the market just is not where it was at this point last year. The general feeling is that by this point last year, we were well into the spring rush of buying, and prices reflected that. Last year, when people started buying in advance of spring, they found lumber to be scarce due to supply issues. The price run started in early January and did not quit until May 13. This year, the market tried to run but then came crashing down—after composite SYP prices exceeded $280/mbf at the end of January, they retreated to the $250/mbf range by mid-February. There was just no real demand out there to support the run.

Based on the last three weeks, it looks like the market is starting to make its spring run, but it is happening abnormally late. We were well into February when prices started to rise. Between the end of January and the week ending March, our composite climbed approximately $35/mbf to $285/mbf range. Last year, however, the composite was already in the $320/mbf range.

Unfortunately for the sawmills, what we said in BPD is starting to look right. Prices will go up, but at a much slower pace, and they will come back to reality by summer. The general feeling here is that with nothing to artificially prop up demand (like last year’s homebuyer tax credits), the market will struggle to provide any bright spots.

Most folks think that the only growth will be in multi-family projects. Recent news reports make clear that more people are opting to rent, and that companies are no longer having to offer free months of rent and other incentives to attract renters.

Read Forest2Market's 2011 Lumber Forecast.