Transportation problems continued to plague softwood lumber suppliers and customers, providing opportunity for producers to keep prices up as they could legitimately not say when wood ordered two weeks ago would get delivered.
In this new reality of the forest industry, it is becoming apparent that demand for uses beyond only US home building is keeping sawmills running at high (90% to 92%) capacity. Yes, monthly new home building in the US is only going up, and rebuilding and remodelling are now a higher proportion of North America wood demand than it was traditionally. However, other purposes outside of building entirely are also clamouring for just more and more wood every week.
The below table is a comparison of June 2017 and February 2018 prices for benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05:
Even as standard grade dimension prices rise further this week, it is pallet and crating stock demand that is currently driving the prices of #3/Utility and #4/Economy narrows up at sawmills across Canada and the US. For a few years after 2010, when China’s imports of British Columbia lumber reached volumes to impact the market, Madison’s would look at WSPF 2×4 #3/ Utility prices to measure that demand. Those volumes settled at a steady proportion of BC’s annual export volume and manufacturers have worked those orders into their production plans.
However currently, a chronic dearth of crating and pallet component stock for almost a year is now sending those prices higher due to specific market circumstances in their own right.
Current Softwood Lumber Prices Compared to Recent and Historical Highs
Altogether, lumber demand is not letting up. Folks made their plans and orders for expected spring construction and produce harvest, but are now back on the phones almost daily for seemingly never-ending fill-in orders.
Inventory in the field is good but individually almost all operators have holes here and there of some kind. It is now coming down to how desperate the customer is vs what particular wood a supplier has on had to sell which determines the final sales prices.
Expectations are that once these insane transportation woes are (at least somewhat) resolved, prices will moderate downward. Most large US home builders, stocking wholesalers, secondary suppliers, and retailers will have made their orders by now for known spring demand. Historically, February is often the highest prices for a year.
The impact of terrible wildfires last year will cause problems on supply as sawmills in the North American northwest come to realize exactly how much of their respective timber supply was lost. As well, the potential for similar epic wildfires this year could be called ‘certain’.