Consumers will likely see cheaper wood this summer, but they shouldn’t expect pre-pandemic prices, as many retailers will still have leftover stock purchased at higher prices and producers avoid flooding the market.
Wholesale timber prices started falling in mid-March and have since fallen by 40 percent over the past three weeks, yet industry analysts and retailers say it could take four to six weeks before consumers notice any significant drop in retail prices.
The general availability of lumber has improved dramatically as demand for do-it-yourself projects falters while supply bottlenecks dissipate. The regional shortage seen during the wood mania a year ago is no longer common.
But many sawmills are cutting production because they have more stock than usual, so don’t expect a glut in the market this summer, woodworkers say.
When retail prices drift lower, they are expected to remain sharply above 2019 pre-pandemic levels.
Vancouver-based Kerrisdale Lumber, which sells to contractors and residential customers, is an example of a retailer adjusting prices based on when new shipments arrive and when existing inventory is depleted.
“In the past two years, prices have sometimes gone out of hand, and the next time we receive a product, if the price is raised or lowered, we will work on that price,” said Charlene May, one of the moderators. In Kerrisdale Lumber (ed.).
While commodity cycles often span five to six years, wholesale lumber prices have actually risen and then fallen three times over the past two years, including this spring’s vortex.
Lumber prices are dropping as interest in DIY renovations slows
The early stages of the epidemic initially led to a significant drop in demand for sawn timber, but in the summer of 2020, people stuck in their homes unleashed a boom in do-it-yourself repairs and rebuilding.
“Because of COVID, people have been focusing on their homes and backyards and not spending money on travel,” Ms May said.
But this spring, as the economy opens up, consumers have more options to spend their disposable income, including trips abroad. This shift in consumer behavior has left retailers with stocks of wood purchased at higher prices several weeks ago.
Dustin Galbert, chief economist at Fastmarkets, which publishes Random Lengths, an Oregon-based newsletter that monitors lumber markets, said the supply chain in western Canada has been gradually improving in recent months.
Floods and mudslides in British Columbia damaged or destroyed large sections of roads and railroads near Vancouver in mid-November. The congestion disrupted major transportation routes and helped fuel the timber rush from late November through mid-March, before wholesale prices began to fall.
“We’ve had a lot of movement in wholesale prices over the past few weeks, but you’re not going to see it right away in retail,” Galbert said in an interview. “It’s kind of a gasoline price, right? When crude oil prices are down, the price of gasoline can be on the downside at the pump kind of flat.”
Cash prices – what sawmills charge wholesalers – fell 16 percent, or $120, last week to $630 per 1,000 feet of spruce, pine and western fir boards, according to Random Lengths. This means that cash prices have fallen 55 percent over the past 11 weeks.
“Deep price drops have kept buyers on the sidelines, fearing a further pullback,” Random Lengths said.
Despite the recent slump in liquidity prices, industry analysts say that with producers interested in curbing their production, prices are unlikely to collapse this summer to levels last seen in 2019, when Western SPF usually sells for $350 to $400 per 1000 feet of plate.
British Columbia producers continue to face logging restrictions, particularly in old forests. As the largest producer of softwood in Canada, BC accounts for 40 percent of the country’s production and 14 percent of North American production.
“We’re going to have a new equilibrium of demand and supply, and prices are likely to bounce off that – or that’s the logic,” Galbert said.
Madison’s Lumber Reporter, a Vancouver-based industry newsletter, said Western SPF demand doubled last week. “Lumber mills have continued to cut their asking prices,” Madison said in her weekly commentary.
On the Chicago Mercantile Exchange, wood futures for July delivery have fallen 53 percent since early March.
Hamir Patel, analyst at CIBC World Markets Inc. In a research note “wood product prices continue to decline.” “Business contacts indicated weak demand from supermarkets.”
Last week, the US National Association of Home Builders reiterated its call for the United States to eliminate duties on Canadian lumber.
“Ending tariffs on shipments of Canadian sawn timber will enable builders to build affordable housing, provide quality rental housing and support the national economy,” said association president Jerry Counter in a press release.
US Trade Representative Catherine Taye visited Ottawa in May to meet International Trade Secretary Mary Ng, but there were no signs of progress in the long-running lumber dispute.
“No progress appears to have been made in recent months toward US-Canada negotiations on a new softwood agreement,” Random Lengths said.
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