Opinions Vary on Market Conditions as Lumber Prices Rise

FURTHER TO LAST WEEK’S LUMBER MARKET COMMENTPrices Are Elevated and Might Just Correct Downward” …. Madison’s has received, and is receiving many comments with informed opinions from operators:

An astonishing increase in values of lumber futures on the Chicago Merchantile Exchange in the past week did a lot to keep upward pressure on cash lumber prices.

As has been the case for this year so far, producers struggled with log supply constraints and extreme transportation issues. Early in the week customer interest drifted into the lower grades and some of the less usual sizes. Especially buyers of industrial products were so active in the market that they cleaned out any remaining volumes of that product at supplier yards.

Due to a lower overall production ratio of these lower grade products, some worry that this surge in demand will only cause more price increases with standard products as too many customers are trying to purchase the same stock.

Current Softwood Lumber Prices Compared to Recent and Historical Highs

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

With US home building data for JANUARY, of all months, surpassing even the most glowing expectations of 2017, the lack of wood products’ inventory available for known building projects coming on in the next couple of months had both producers and end-users feeling nervous.

Frustrated customers grumbled to each other that sawmills must be withholding supply in an effort to claim longer order files than was realistic. Speculation aside, lumber producers across Canada and the US would assuredly be running — and hence selling — more wood. If only they could; either log supply, a labour shortage, or horrendous difficulties sourcing the appropriate rail cars or trucks were just some of the realities affecting more manufacturing of softwood lumber.

For their part, customers became so frustrated this week that rumours circulated of sawmills colluding to push prices up. In the absence of standard grade and the usual lumber products, buyers turned their attention on the less-often purchased items, such as 2×3 sizes, machine stress rated (MSR) wood, and 1” boards.

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

Last week Madison’s suggested prices could correct downward. Opinions on this vary … almost as widely as there are participants in lumber trading.

However one fundamental to watch for indication of price movement is inventory: US home building season for 2018 is not yet even upon us and already the lack of supply of specific items is concerning. From now into the end of spring, construction companies and builders will find they need certain volumes of specific items to complete the framing of their projects. If regular customers are right now picking through odd sizes and grades of wood to fill their own existing gaps, where is the wood going to come from for those builders in a month or two?