Experts say lumber market is unprecedented

September 17, 2020

The North American lumber industry reportedly has been having an unprecedented year, according to www.arkansasonline.com.

In March, sawmills shut down during the COVID-19 lockdown; a month later, pent-up demand exploded. Homebuilders broke ground on many new houses, and more individuals tackled DIY home repairs and remodeling jobs during quarantine.

In the wake of that volatility, futures have climbed 50% this year, and even after falling from a record high in August, prices are still on pace for the largest gain since 1993.

Now it appears the wildfires raging in California and Oregon will affect the lumber industry. Logging bans, closed railroad lines and shuttered mills in the Pacific Northwest have added to what Kevin Mason, managing director at ERA Forest Products Research in Kelowna, British Columbia, calls “an incredibly tight supply chain.”

Weyerhaeuser Co., North America’s biggest wood producer, said the fires had reached its timber operations in Oregon; all employees were safe, but it was too early to measure the potential effects on its business.

During more normal times, some customers would stock up on lumber amid concerns regarding the wildfires, but that is not an option because of a supply shortage.

“We’re in an unprecedented market,” Mason said. “There’s no flood of supply and no reduction in demand.”

Mason said lumber prices will fall in the fourth quarter but rebound strong in 2021, boosted by another wave of demand, delayed in part by the current shortage. In August, futures reached an all-time high of $830.90 per 1,000 board feet. The current price of $640 still is 68% higher than the average during the past five years.

The effects of lumber’s volatility are evident in the U.S. Boosted by higher material costs, the average new single-family home sells for $16,148 more in August than it did in mid-April, according to the National Association of Home Builders. The average price of a new multifamily home has increased by $6,107 during the same period.

Tags: Business | Trends

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