24 WESTERN PALLET
Have North American Lumber Prices Peaked?
John Greene, Forest2Market
After eight consecutive record-breaking weeks culminating in an astoundingly high price, southern yellow pine (SYP) lumber prices finally reversed course in mid-September. Forest2Market’s composite SYP lumber price for the week ending September 18 (week 38) was $895/MBF, a 3.6% decrease from the previous week’s price (and all-time high) of $928/MBF, but an amazing 146% increase from the same week in 2019. Other price trends observed throughout what has become the most chaotic year in recent history include:
- 1Q2020 Average Price: $360/MBF
- 2Q2020 Average Price: $442/MBF
- 3Q2020 Average Price: $738/MBF
- YTD Average Price: $507/MBF
Needless to say, the North American sawmill supply chain has been under a lot of pressure since the COVID-induced “lockdowns” that began in March. Industry capacity has been maxed throughout the summer as wholesalers and distributors snatched up every board they could find, and the trend has not been unique to the South. Data from our British Columbia-based business partner, Madison’s Lumber Reporter, details a similar scenario for benchmark dimension softwood lumber products in western regions. While prices for these products surged in tandem with SYP, there are signs that demand is slowing and prices are flattening.
Per Canadian Forest Industries, “Madison’s indicated last week that most standard construction framing dimension softwood lumber commodities could level off or even start dropping, and that’s exactly what has happened. Players and industry insiders say that supply is improving as sawmills are able to get more lumber production online, just as the usual seasonal drop in demand arrives.”
Market Snapshot & Outlook
As Pete Stewart wrote last month, stronger than expected housing starts and unforeseen demand from the remodel sector caught the market off guard during the peak of the national lockdowns:
“As production capacity has fluctuated, demand patterns have changed, and the lumber manufacturing sector has been chasing a moving target ever since early Spring. For wholesalers and purchasers of finished lumber, who typically buy inventories many weeks in advance, the situation has created a sense of desperation that has resulted in panic buying. They, too, have been chasing a moving target as they try to secure a share of limited inventories while staying one step ahead of the competition and maintaining build schedules. When this kind of panic grips a commodities market, it oftentimes spins into a speculative scenario in which prices deviate significantly from intrinsic values.”