US lumber prices have fallen to their lowest level in more than two years, bringing two-by-fours back to what they cost before the pandemic building boom and pointing to a sharp slowdown in construction.<\/p>\n
Lumber futures ended Tuesday at $429.30 per thousand board feet, down about one-third from a year ago and more than 70% from their peak in March, when the Federal Reserve began raising interest rates to fight inflation.<\/p>\n
Wood prices crashed in the early days of the 2020 lockdown, but they exploded that summer when stuck-at-home Americans remodeled en masse and suburban home sales surged. Two-by-four prices nearly tripled the pre-pandemic record in an early sign of the inflation and broken supply chains that would bedevil the economic reopening.<\/p>\n
But lumber has led the way down for commodities since the central bank took aim at rising consumer prices and the overheated housing market. For two years, climbing lumber costs lifted home prices. Now home builders say that cheaper wood is giving them wiggle room to offer buyer incentives and to trim prices without crimping their profit margins.<\/p>\n
Wood-pricing service Random Lengths said Tuesday that its framing-lumber composite index, which tracks cash sales in several species, fell to $520, down more than 60% from early March. Now that supply issues have eased and the highest mortgage rates in more than a decade have slowed home sales, buyers are no longer hoarding lumber for fear of running out.<\/p>\n
\u201cAll the urgency over the past two years\u2014\u2018give me everything you can\u2019\u2014that\u2019s basically over. Lumberyards are not scared of the price going up,\u201d said Michael Goodman, director of specialty products at wholesaler Sherwood Lumber Corp., which his family owns and operates. The Melville, N.Y., distributor sells framing lumber and plywood to building-supply companies, truss manufacturers and shipping-crate makers around the country. \u201cThe sexy lumber world is coming to an end, unfortunately,\u201d he said.<\/p>\n
Paul Jannke of Forest Economic Advisors LLC said his firm forecasts that lumber consumption will decline by as much as 2.5% this year and up to 4.5% in 2023 as home construction stalls and remodeling demand reverts to normal following the pandemic renovation boom.<\/p>\n
Despite the steep drop in consumption, Mr. Jannke and others expect wood prices to be much higher than during previous downturns\u2014in the $400s per thousand board feet, rather than the $200s\u2014due to record-low inventories among dealers and rising mill costs, especially in British Columbia, where forest fires, wood-boring beetles and conservation efforts have reduced the supply of logs.<\/p>\n
The lumber price that mills in western Canada need to break even is about $500 per thousand board feet, which means that they are likely to choke back output whenever cash prices for the spruce, pine and fir boards they saw drop below that, Mr. Jannke said.<\/p>\n
Mills there, as well as in the U.S. Pacific Northwest and the South, have already begun cutting back. Canfor Corp. said it began a two-week curtailment at most of its facilities in British Columbia. Work will resume at reduced operating schedules aimed at trimming the Vancouver firm\u2019s production capacity by about 200 million board feet, or about 15% of last year\u2019s fourth-quarter output.<\/p>\n
The consolidation of North America\u2019s sawmills by a few big firms, such as Canfor and West Fraser Timber Co. , has hastened the speed at which production is choked back in response to falling prices and should buoy prices, said H\u00e5kan Ekstr\u00f6m of Wood Resources International LLC.<\/p>\n
\u201cMarkets are a little more controlled with fewer mill owners,\u201d he said. \u201cWhen there were more owners, everyone waited for someone else to slow down.\u201d<\/p>\n
Dealers like Sherwood\u2019s Mr. Goodman say that the quick curtailment triggers are reason to load up on wood. \u201cThere\u2019s upside risk of waiting and really no downside to buying right now, that\u2019s what we\u2019re telling our customers,\u201d he said.<\/p>","protected":false},"excerpt":{"rendered":"
US lumber prices have fallen to their lowest level in more than two years, bringing two-by-fours back to what they cost before the pandemic building boom and pointing to a sharp slowdown in construction. Lumber futures ended Tuesday at $429.30 … Continue reading