Just as Madison’s predicted not three weeks ago, demand for solid wood products continues fierce in 2018 and prices are showing signs of further strength in the months to come. It almost seemed like in 2017 lumber prices didn’t have a usual seasonal low; as follow-through of strong demand after US Thanksgiving kept manufactured wood products moving briskly out of North American sawmills. This boosted prices off what would historically be noticeable drops.
As Madison’s expected in the last issue of the Lumber Reporter, lumber producers came back in the New Year to operation with no abatement of demand. Over the holiday break, lumber futures rebounded off steep discounts through a lot of 2017 to close this week at less than 5% discount to cash. For the past three years at least this has usually been closer to a 20% discount.
The below table is a comparison of June 2017 and January 2018 prices for benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05:
North American forestry business started up at full speed right at the beginning of 2018. More than a few operations were still in inventory mode, mostly with lumber but also some with their log yards. While customer orders were a bit lighter than the end of December, there remained several sawmills across the continent — especially in the east, where Quebec is slowly coming back from holiday break and maintenance and extremely bad weather has hit the eastern US — so suppliers were able to keep prices high just due to lack of supply.
The graph below illustrates various years of all-time high prices for WSPF KD 2×4 #2&Btr compared to 2018: