Columnists, Darren Satsky, Lumber Market Report, News, V6I2

Market Encouraged by Current Supply/Demand Environment

2020 continued its strong start with builder confidence at a decade’s-high level. Building on strong mill order files and historically favorable lumber prices in Southern Pine and SPF studs, the market has a much better outlook than a year ago. 

At this writing, March and May Lumber Futures trade at a $20 premium to cash prices indicating the market is encouraged by the current supply/demand environment. Let’s examine deeper the positive factors, followed by our forecast. 


Builder confidence continues its strong showing. The National Association of Builders Index (HMI) dropped only one point in January to 75, its second highest reading since 1999.  The index gauges builders’ perceptions of current single-family home sales and also asks builders to rate traffic of prospective buyers. 

Three factors are driving the optimism: low supply of existing homes, low mortgage rates, and a strong labor market. While many economists and builders expect the index to increase in coming months, the market is still under performing due to supply-side constraints like labor and land availability. Furthermore, development costs are hurting affordability. 


January lumber markets were mostly positive with Canadian SPF studs leading the way.  Western SPF 2 by 4 dimension #2 & better prices were higher in the year over year period by about $49/mbf.  Eastern 2×4 Spruce moved up $51/mbf.  SPF 8-foot stud prices increased $25/mbf year over year. SYP 2 by 4 prices reported marginal increases. Western 2 by 4 #2 SYP prices rose $8 mbf, while Eastern SYP increased $14.   

While the Canadian SPF 2×4 dimension market looks expensive, a good alternative is the increase of imported products available to the market. 



If we look historically at the previous five-year average, today’s SPF lumber prices are still above the previous five-year average and well ahead of prices last year at this time. The stud market has now kept pace and is running on par with historical averages. 

So, from a technical view, the best deal is SYP.  We would not be surprised to see a slight pull back in the SPF stud and dimension lumber market, thus setting the stage for future gains.

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