Lumber Prices on a Runaway as Supply Continues Tenuous

A runaway lumber sales market surprised even Madison’s last week as Friday morning lumber futures on the Chicago Mercantile Exchange were cresting toward up-limit on the March contract, wavering at $480 but on small volumes.

Actual support for lumber prices is definitely coming from the cash market, where under- stocked customers just keep coming back to suppliers for more and more wood they need right now for actual building projects.

Ongoing supply constraints, as well as remnants of transportation woes, due to severely bad weather recently in many parts of the US, hindered customers’ inquiries.

Genuine lack of availability on certain products caused consternation with buyers as sawmills did their best to locate appropriate logs and schedule the manufacture. Order files grew longer accordingly.

Current Softwood Lumber Prices Compared to Historical Highs

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:

SOURCE: Madison’s Lumber Reporter

At this time of year lumber demand is usually ramping up, for the coming building season, and suppliers are accustomed to booking many large orders.

However, there was really no lag — or sales downtime — at the end of last year. In addition the sawmills in British Columbia are still waiting for the latest accurate inventory data from the Ministry of Forests, following the terrible wildfires.

Several wholesalers and other secondary suppliers are counting themselves lucky as reporting well-stocked lumber yards. Others search widely for select items missing in their inventory.

The general situation for most of 2017 continues: Any new lumber produced at sawmills was sold before it was even finished being processed.

The graph below illustrates five-year price trend for some of the most important structural framing lumber commodities, to 2018:

SOURCE: Madison’s Lumber Reporter