Current Softwood Lumber Prices Compared to Recent and Historical Highs: NOVEMBER 2018

Current Softwood Lumber Prices Compared to Recent and Historical Highs: NOVEMBER 2018

Happily the hunger for wood following an extended US Thanksgiving long weekend holiday was strong enough to push prices on many North American construction framing lumber prices up. Demand, which had been muted to minimal on plump inventories and slowing construction projects, came back somewhat robustly that week. Sawmills were boasting growing order files, at two-weeks out for most Canadian and US softwood lumber producers. Customers, for their part, claimed sufficient stock-on-hand, and wanted only wood for immediate building projects.

Softwood Lumber Dimension Prices Rebound Slightly in 3Q 2018 After Major Drops

Despite significant correction of Canadian and US softwood lumber prices downward after Labour Day and to US Thanksgiving, this week the supply-demand balance weighed on the side of suppliers and prices actually rebounded upward slightly.

Below is a graph of Madison’s benchmark lumber Western Spruce-Pine-Fir KD 2×4 #2&Btr price trends at various recent and historical highs.

SOURCE: Madison’s Lumber Reporter www.madisonsreport.com

While starting at a level matching other historical high years, wholesale prices on benchmark Western Spruce-Pine-Fir KD 2×4 #2&Btr softwood lumber commodity at the beginning of January 2017 had risen to US$318 per thousand board feet (mfbm) (net FOB mill). This construction framing item then skyrocketed +$196, or +38%, to January 2018 when that price was US$514 mfbm.
During summer 2018 sustained demand and continued timber sourcing issues for sawmills in various regions kept prices high, which finally reached an astonishing US$658 mfbm in May 2018. An appropriate correcting drop downward landed this wood commodity by winter at US$354 mfbm for current week November 2018.

This level is higher than the year-end price trend for previous historical years, of between US$240 and $318, which was for 2011 and 2017 respectively.                                                              — Madison’s Lumber Reporter www.madisonsreport.com

Another development for fibre supply was the noticeable increase in buying of logs all around North America, and indeed the world, in advance of Spring Break for business in China. Madison’s noticed active interest from all Canadians in selling any kind of wood, whether logs or lumber, to hungry customers in China during the recent North American Wholesale Lumbermens Association annual meeting. NAWLA is usually the opportunity to connect with customers in the US, but this year all Canadian eyes were on Asia.

There has already arisen a divergence in the price movement of other main US construction framing lumber product Southern Yellow Pine KD 2×4 #2&Btr East Side.

SOURCE: Madison’s Lumber Reporter www.madisonsreport.com

Please see graph above. There is a very noticeable switch in the premium price, away from SYP and toward WSPF, in mid-summer 2017. Quite sharply at autumn 2018 this switched again, giving Southern Pine once more a premium in the price relationship between these two benchmark items. These are accompanied by widely-ranging, with deep swings, of log prices in the respective regions providing SYP logs and WSPF logs to lumber manufacturing facilities.

As for the individual items, benchmark WSPF 2×4 prices this week are US$358, a -42% drop from the raging highs of summer 2018, when it was US$622 mfbm.

An interesting development, and a good barometer of cash price trend, are softwood lumber futures on the Chicago Merchantile Exchange closed the November contract on par with Madison’s print.

While volumes of lumber futures trades remain starkly lower than prior to the crash of US home building in 2006, the price points with the cash market have converged. Around Thanksgiving, futures were no longer at a premium or a discount to cash, but are measured right along with wholesale prices on actual wood destined for delivery.

Madison’s Lumber Reporter www.madisonsreport.com

The below table is a comparison of June 2018 and November 2018 prices for benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05:

SOURCE: Madison’s Lumber Reporter www.madisonsreport.com

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