Softwood Dimension Construction Framing Lumber Prices….a long term retrospective

Regular weekly sources for Madison’s Lumber Reporter say the price of North American softwood lumber is getting worked out in the marketplace right now.

FOR EXAMPLE (from a large stocking softwood lumber wholesaler on the US eastern seaboard, morning of Wed, Apr 26):

Most of the Canadian mills stayed away from the market yesterday. They were concerned about the retroactive part of the CVD ruling which has them reconciling their accounts as to what is owed on what they have shipped over the last ninety days. There was much confusion about this and put many off the market for most of the day. Some mills raised their prices by the 19.88% and sold nothing while others kept prices on par to what they were quoting earlier in the week and sold very little.

– regular weekly source for Madison’s Lumber Reporter

Much has been made of the rise in the past two months of North American softwood lumber prices. Fundamentally those increases are due to sustained strong — moderately improving — demand from the US for real new and ongoing building projects for the past year and a half. Even conservatively it is expected for these lumber purchases to continue for a couple of years if not to 2021.

Most of the powerful reaction is due to a supposed “shock” of new high prices. But are those prices really high? It is important to remember that North America’s forest products industry is only just exiting the single largest downturn in history, since the phenomenal crash of US housing starts starting in September.

The business of producing and selling softwood lumber in the US and Canada did not wait until the general economy financial crash of October 2008 to collapse; forest products companies manufacturing solid wood products started suffering immediately in 3Q 2006, and did not see a way to improvement until long after 2012.

However, the slow but steady return to 50-year average US housing starts has been pivotal in bringing forest products companies back into financial good standing. As well, British Columbia, which produces 50% of Canadian wood, has fostered an excellent brand-new customer in China.

In 2006, when the latest Canada-US Softwood Lumber Agreement was signed, BC shipments to China amounted to less than 800,000 cubic metres. By 2016, that volume is over 6 million cubic metres. China has established itself as the single largest importer of wood products in the world, a lot of it logs. Canada is one of the few countries successful at shipping mostly processed lumber to China.

Western Spruce-Pine-Fir KD 2×4 #2&Btr and #3 vs Southern Yellow Pine KD 2×4 lumber prices 27-year to APR 2017

SOURCE: Madison’s Lumber Reporter

Essentially: just before the duty dropped there was an rush to buying in advance, for customers’ expectation of needs into the beginning of May. By then the duty would be known, and how much for which companies. Those could then start making  their decisions, as quoted above.

Softwood Lumber Prices MARCH ONLY 2003 – 2017

The graphs below show MARCH price points for several standard construction framing softwood lumber and panel prices 2003 -2017:

SOURCE: Madison’s Lumber Reporter
SOURCE: Madison’s Lumber Reporter

Customers are currently waiting as long as possible to buy again; picking up odd scraps of wood from reloads, wholesalers, and secondary suppliers for immediate needs only. Literally just-in-time buying.

Most lumber customers have spent the past week or two organizing logistics to receive wood ordered over two weeks ago, a lot of which is still arriving to destinations now. The past couple of weeks have been a lot of hand-wringing about the duty and dealing with carriers like railways and trucks.