Columnists, Darren Satsky, V4I3

High Prices Likely Here to Stay


The lumber market has continued to make new highs, and the industry has come to the realization that high prices are here to stay. With little evidence that dealers and distributors have built a 90-day inventory, the capacity for future gains looks inevitable.

Why are lumber prices making history? Rising demand, supply disruptions, logistic problems, mill orders filed, and warmer weather are all factors conspiring to create high prices. I will highlight the logistic problems later.

Despite a growing sense that strong prices will eventually abate, many mills, customers, and distributors see little downside risk any time soon.


U.S. homebuilding increased more than expected in March due to a rebound in the construction of multi-family housing units. Weakness in the single-family segment suggested the housing market was slowing.

Housing starts rose 1.9 percent to a seasonally adjusted annual rate of 1.319 million units, according to the Commerce Department. Data for February was revised up to show groundbreaking
declining to a 1.295 million-unit pace instead of the previously reported 1.236 million units.


Prices for 2 by 4 Standard and #2, Western SPF, showed modest gains over the period. The pace slowed from the first two months, but still recorded a 2 percent gain in the period. Eastern SPF
tallied a 1 percent gain.

Meanwhile, Western and Eastern SPF studs outpaced the gains in dimension lumber with both gaining about 4 percent. Reversing course, 2 by 4 #2 SYP prices fell 5 percent over the period, but 2 by 6 # 2 SYP showed a 10 percent gain.

Treated SYP was mixed as expected with the move in bright stock.


If you see prices going higher for everything from food to lumber in the next few months, you can probably blame this stark reality: There aren’t enough truck drivers delivering the goods.

A severe shortage of truckers is pushing up freight costs and, in turn, retail prices. It’s occasionally leading to late deliveries. Self-driving trucks eventually may provide some relief, but
driver shortfalls are expected to only get worse over the next few years.

The crunch is also affecting corporate profits and the stock market, as higher transportation costs impact company earnings now being reported. It occasionally has forced manufacturers
to shut down production if they don’t receive raw materials in time.


Distribution and wholesale inventories are still currently low. It does not appear that anyone has built a 90-day inventory. This indicates surging market demand, and hand-to-mouth buying.

With elevated lumber prices, many customers are bumping up against their credit limits, and logistics only will get worse.

All of these factors will conspire to keep the market at elevated prices.

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