Softwood Lumber Prices Stabilize as Industry Rectifies Supply-Demand Balance

Softwood Lumber Prices Stabilize as Industry Rectifies Supply-Demand Balance

Previously overblown North America softwood lumber and panel prices for most of 2018 have dropped sharply these past couple of months. That plummet slowed last week as the supply-demand balance corrected. Producers and customers, having wrestled over prices since the usual seasonal slow-down starting in September, are now assessing inventories for year-end accounting purposes. Players like to have their yard, whether sawmill or reseller, empty to avoid tax implications.
However it is a fine line, since expectations are for US buying to come back strong right at the beginning of January as it did this year and in 2017.

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

As explained last week, ongoing demand for 2×6 sizes is very telling, as this dimension is used most often in multi-family building, specifically 2-to-4 unit structures and condominiums. When US housing starts data comes out for November and December 2018, there should show a pop in completions for those building types.
In February, if a premium on 2×6 prices continues, that supply will be slated for new housing starts of these multi-family structures. Especially if 2×6 stud prices stay strong before spring, that would indicate strenuously that new building of duplexes, condominiums, and townhouses will again be strong in 2019.

Sales of 2×6 continued the most robust but the market as a whole sagged. — Madison’s Lumber Reporter

Pointed out already by Madison’s during this year, the respective price trends of benchmark Western Spruce Pine Fir and Southern Yellow Pine East Side KD 2×4 #2&Btr have inverted then returned to prior relationship. An examination of the changes in spread between these two pivotal softwood lumber commodities compared to historical past is a very interesting topic Madison’s will explore in the near future.

Below is a graph of the highest volume, or benchmark, North American lumber prices from January 2017 to December 2018:

SOURCE: Madison’s Lumber Reporter

In this last week before traditional holiday break for North America forestry, particularly in Canada and most emphatically in eastern Canada, benchmark prices are down from one year ago but up from two years ago. In January 2017, WSPF 2x4s were selling for US$318 mfbm. In January that price was US$636 while last week’s print in Madison’s Lumber Reporter was US$344. For it’s part, SYP prices two years ago were US$454 while this January that price was US$592. Last week Madison’s print was US$413 on SYP 2x4s.

A few Eastern Spruce-Pine-Fir sawmills announced extended downtime from December 24th to January 7th, wanting to be patient and see what happens in early 2019 — Madison’s Lumber Reporter

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

SOURCE: Madison’s Lumber Reporter

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