Experts share insights on lumber market
Anyone who follows the lumber industry closely knows it’s not for the faint of heart. Market volatility, which is frequently inflamed by any number of economic, environmental, political or logistical fluctuations, can make lumber pricing seem like an unpredictable flume ride. Practically speaking, it makes buying and selling a tricky proposition.
So, what’s the latest on this roller coaster of a market? We sought guidance from industry veterans Russ Kathrein, VP of lumber and building materials for Do it Best, as well as Tim Johnson, VP of forestry products at LBM Advantage. Below are their thoughts on which way the wood winds are blowing.
Q: What are you experiencing now with lumber prices?
Kathrein: Lumber and panel prices have defied expectations and actually dropped in Q2, which is typically when business picks up. Weather has played with demand, and both lumber and panel manufacturers are dealing with too much capacity.
Johnson: We are seeing lower prices in framing lumber driven by the lack of demand in both the repair and remodeling sector and the new home construction market. High mortgage interest rates and inflation are stifling the market in a normally busy season. We are generating footage gains year over year, but the associated dollars are just not there.
Q: Are you seeing price differences or volatility in any particular types of lumber in particular?
Kathrein: Southern yellow pine (SYP) seems to have less volatility than spruce (SPF) or Douglas fir/Hem fir. It is also priced at a much more affordable level, which is allowing it to take an ever increasing share of the dimensional lumber market.
Oriented strand board (OSB) pricing is very regional. The regions compete with each other on pricing to the degree that truck freight makes them competitive in other regions.
Johnson: Fiber access and affordability are a major issue for producers in the western U.S. and across Canada, and new mill startups and recent capacity improvements in the U.S. South are adding supply to an already difficult market. The price challenges are happening across all species of framing lumber, and mills are struggling to break even and current market levels.
Commodity inflation
As lumber prices return to earth, other commodity prices are rising—particularly bolts, nuts and screws. Here's the latest Producer Price Index on 10 key commodities.
Q: What trends do you foresee in the coming months?
Kathrein: If we experience increased forest fires or additional mill curtailments, we would expect pricing to jump up as much as 20%. However, we have been saying this for the past few months, and prices have actually moved down at a slow but steady pace.
Johnson: There have been some recent production curtailment announcements, and we are approaching the scheduled summer downtime for many mills. But to this point, there has not been any impact on price or availability. With the Fed’s recent pivot to possibly only one rate reduction for 2024, a major change in production will be needed to bring supply and demand in balance for the remainder of this year.
Q: What impact has lumber pricing had on your company, customers or members lately?
Kathrein: Dealers are buying hand-to-mouth. They are not comfortable jumping in and buying any inventory beyond 30 days.
Johnson: Our members are a resilient group of operators who have weathered many storms over the years and are coping very well to this year’s challenges. This current downturn will be short lived, as the underlying housing shortage issue remains. Lower interest rates and reducing inflation will drive increased activity and demand in 2025.
