North American lumber prices bounced on the heels of the Labor Day weekend. But how long will it last? Madison’s Lumber Reporter has been following the ups-and-downs of North America construction framing softwood dimension lumber prices in 2019, which remain baffling.
A look at the latest US housing starts and home sales data shows continued mixed performance.
- US housing starts dropped 4% in July—a decrease for the third straight month, as homebuilding on multi-family housing units tanked.
- Total existing home sales rose 2.5% in July to a seasonally adjusted annual rate of 5.42 million units, and sales are up 0.6% from a year ago.
- The inventory of available homes continues to decrease steadily even as home prices push further upward.
If the lumber market seems soft, the data above demonstrate that steady demand for finished lumber products is simply not there. While existing home sales and home inventory levels provide some guidance on the general direction of the market, a jump (or upward trend) in housing starts will ultimately drive the kind of lumber demand needed to move the needle.
That said, the current news for lumber producers is not necessarily bad. The price of benchmark lumber commodity Western Spruce-Pine-Fir KD 2x4 #2&Btr in the first week of September gained +$24, or +7%, to close the week at US$370 mfbm compared to $346 the week before. In a reversal of trend for the past month, that week's price was also up +$24 or +7% from one month ago. Compared to one year ago, however, this price is down -$114, or -24%; it is also down -$78, or -17% relative to the 2-year rolling average price of $448, and down just -$2 relative to the 5-year rolling average price of $372.
A number of British Columbia sawmills noted that, even with a sizeable contingent of players on vacation for the Labor Day holiday, they achieved sales at higher numbers quickly and easily.
Producers of kiln-dried Douglas-fir dimension lumber also enjoyed another strong week. Buyers were in the mix every day, keeping suppliers busy even during the lead-up to Labor Day; sawmills had order files into mid- and late-September on all commodity items. With the impressive recent rally in green Douglas-fir prices, dry fir commodities are now finding their way into a few Southern California markets at a discount to green on a delivered basis.
In Eastern Canada, brisk sales of Eastern Spruce-Pine-Fir have allowed sawmills to extend their order files into mid- or late-September. The flurry of buying activity slowly died down during the Labor Day weekend, but a resounding sense of optimism remained. After seeing the quick shift in the market, a considerable amount of buyers booked orders thereafter to fill in their nearly-depleted inventories.
The below table is a comparison of recent highs, in June 2018, and current September 2019 benchmark dimension softwood lumber 2x4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept 2015: