The COVID-19 pandemic has hit the new-construction market hard and swift, which has impacted lumber demand, prices and capacity. Housing starts data for March was so dire, in fact, that it marks the largest month-over-month (MoM) percentage decrease in starts since March 1984.
Privately-owned housing starts were down 22.3 percent in March to a seasonally adjusted annual rate (SAAR) of 1.216 million units. Single-family starts decreased 17.5 percent to a rate of 856,000 units while starts for the volatile multi-family housing segment plunged 31.7 percent to a rate of 360,000 units.
Mill curtailments are still in place across the continent as the lumber industry, like many other industries, has made adjustments to the “new normal.” As a follow-up to last month’s snapshot of what’s happening across the North American lumber market, we are providing a glimpse of the latest developments courtesy of data from Madison’s Lumber Reporter and Forest2Market, as well as video field reports from our industry experts.
Western Spruce Pine Fir (WSPF - US):
Prolific reductions in sawmill operations across the North American continent had the effect of stabilizing the lumber market further last week. Deep price corrections and significant counters began to evaporate as supply started to fall behind anemic demand. Purveyors of WSPF in the United States reported “slow” activity in terms of consumption from the construction sector, but with reduced overall volumes it was “enough to get by.” Apparent order files were around a fortnight out, give or take a week depending on the source and item. Transportation was a “hit and miss” affair according to primary and secondary suppliers, with border crossings generating the most conspicuous delays.
Forest2Market Roundtable Discussion on the State of the Lumber Industry in Western North America
Eastern Spruce Pine Fir (ESPF - Canada):
While Eastern Canadian producers and wholesalers struggled to keep business moving, retailers described a “decent market” with contractors remotely ordering steady volumes of framing lumber. Construction has been all but halted in metropolitan centers but jobsites in smaller and further-flung regions continued to soldier on with reduced and rotating staff. The two-tiered market in the West had essentially vanished but was “going strong” in the East, with secondary suppliers competing fervently for orders and undercutting each other considerably.
Southern Yellow Pine:
Southern yellow pine (SYP) lumber prices made a surprising comeback in mid-April. Forest2Market’s composite SYP lumber price for the week ending April 17 (week 16) was $358/MBF, a 5.9% increase from the previous week’s price of $338/MBF, but a 10.7% decrease from the same week in 2019.
Forest2Market Roundtable Discussion on the State of the Lumber Industry in the US South
The following data represent prices for benchmark dimension products (#2&btr 2x4) for the week ending April 17, 2020.
It's difficult to tell where prices will settle as the market rebalances to account for the uncertainty and lumber manufacturers begin to align production with the dramatic shift in market conditions. However, we expect the related economic data to get worse in the near term before it gets better.
“April will likely be a lot worse -- it took until mid-March or even later for many states to tighten restrictions, and there’s a real possibility that many builders fast-tracked what they could in those early weeks before bowing to reality,” Zillow economist Matthew Speakman said in a statement. “With so much uncertainty across the economy, and the outlook not yet getting any clearer, it’s unlikely that builder activity will revert to anything close to ‘normal’ levels any time soon.”
While North American lumber prices will moderate in the coming weeks, the scheduled decreases in production will likely limit the downside price pressure that will be driven by slack demand as manufacturers draw down their inventories. We’re still very much in a “holding pattern” due to the prevailing sense of uncertainty surrounding global markets, politics and daily life.