After surging to record highs at the pinnacle of North America\u2019s pandemic housing market boom, lumber prices have taken a tumble in 2022 and recently hit their lowest point of the year to date.<\/p>\n
A spike in borrowing costs and a cooler housing market saw lumber futures plummet to a low of $413 per thousand board feet at the end of September, 64% down over their peak this year, with the sky-high prices of 2021 a distant memory.<\/p>\n
Higher mortgage rates are \u201cdampening everything\u201d where the lumber market is concerned. While housing starts were still trending relatively well, those weren\u2019t necessarily the best measure of the construction industry\u2019s health in Canada because starts are currently dramatically ahead of completions.<\/p>\n
Existing home prices were already way too high, so they\u2019re going to have to come off and become affordable, and we\u2019re all going to be waiting for the economy to go through its digestion of a recession until interest rates can move back lower and we can stimulate the market again.<\/p>\n
While activity is currently being spurred by homebuilders who still have existing order files, the first half of 2023 may see something of a lull until interest rates start to fall.<\/p>\n
Lumber prices are likely to settle somewhere in the $450-to-$500 range next year, \u2013 dramatically lower from where they\u2019ve been during the last two years, but still above the long-term trend of approximately $400.<\/p>\n
Still, it could be a bumpy ride until then, with further twists and turns possible as the market continues to contend with various challenges.<\/p>\n
Supply chain snarls disrupted lumber shipping and transportation at the height of the pandemic, helping push up costs. While container and trucking rates are down significantly in a sign that supply and demand are moving back into balance, some BC mills are only running three days per week as they\u2019re unable to get trucks or railcars in to transport the wood out. They\u2019ve been down most of the third quarter, and they expect to be down much of the fourth quarter. So there are still issues here in other regions.<\/p>\n
Europe appears to have borne the brunt of Russia\u2019s war in Ukraine where the lumber market is concerned, with European markets in disarray because of the high energy costs facing mills.<\/p>\n
A grim fourth quarter could be in the cards in Europe \u2013 and while Canada should experience a softer landing, it\u2019s still tied inextricably to what\u2019s going on south of the border in the United States. China market is soft and with very low prices, and Japan is steady, but prices are now similar to US prices.<\/p>\n
As the supply chain starts to improve and mills start to get production up, we\u2019re going to have a little bit of a semi-perfect storm where you\u2019ve got too much production now facing too little demand. That\u2019s one of the reasons for a potential volatile period in the offing for the lumber market in the coming months before it eventually settles to a consistent level.<\/p>\n
The mill curtailments and the dealers don\u2019t order very much wood, and then the order files at mills are very short \u2013 as soon as there\u2019s a demand increase or a surge, all of a sudden you have a price spike.<\/p>\n
That\u2019s why we can expect a spike up to $600 pretty quickly until things balance out and move lower. So a quite a volatile period is expected \u2013 maybe not so much in the fourth quarter, but in the first quarter of 2023 when everyone tries to position themselves for the spring.<\/p>","protected":false},"excerpt":{"rendered":"
After surging to record highs at the pinnacle of North America\u2019s pandemic housing market boom, lumber prices have taken a tumble in 2022 and recently hit their lowest point of the year to date. A spike in borrowing costs and … Continue reading