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Blog

North American Lumber Prices on a Runaway as Supply Remains Tight

February 21, 2018
Author: Keta Kosman

North American lumber demand continues to be strong even as customers digest the rush of wood that was ordered over three weeks ago. Actual support for lumber prices is definitely coming from the cash market, where under-stocked customers keep coming back to suppliers for additional wood supplies, which they need immediately for building projects.

At this time of year, lumber demand is usually ramping up for the coming building season, and suppliers are accustomed to booking large orders. However, no lag—or sales downtime—occurred at the end of 2017. In addition, sawmills in British Columbia are still waiting for the latest accurate inventory data from the Ministry of Forests following the catastrophic wildfires from last summer.

Ongoing supply constraints—as well as transportation woes due to severe weather in many parts of the US—have been challenging. A genuine lack of availability of certain products has caused consternation with buyers as sawmills have done their best to locate appropriate logs and schedule the manufacture. Order files have grown longer accordingly.

 

Current Softwood Lumber Prices Compared to Recent and Historical Highs

Confusion has reigned among customers as operators have worked hard just to get logs in and lumber out. Having visited sawmills and distributors looking to fill inventory holes, customers have been met by either sustained high prices or even price increases. Prices on specialty items and sizes have already increased by more than standard items; this week those leapt up by alarming ratios as supply was simply not available and sawmills were not confidently able to quote a date for production.

 Screen Shot_Feb_2.png

SOURCE: www.madisonsreport.com

 

A very reliable Madison’s source has provided some information on the large loads of European lumber 2x8 that arrived on the US east coast in early January. These boards were initially destined to be ripped down to 2x4s for use in US home building but were rejected due to not meeting building standards:

Harald Mack of EUWID Woodproducts and Panels wrote in a recent email to Madison’s that, “Some 25-30 million board feet are affected, delivered by 4-5 Swedish and German sawmills. Primarily it seems to be a problem with WCLIB [West Coast Lumber Inspection Bureau]. In the past, the inspectors have been broad-minded when it comes to holding grading standards. Since August/September last year, this changed to the opposite. Lowest variations are sanctioned.”

In general, the market situation that most producers experienced during 2017 continues into 2018: Any new lumber produced at sawmills continues to be sold before it is even finished being processed.

The graph below illustrates five-year price trends for some of the most important structural framing lumber commodities.

 

Screen Shot_Feb_1.pngSOURCE: www.madisonsreport.com

 weekly lumber market report and benchmark

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