Building and Construction, Operations, V10I2

Reflections on the Lumber Market

(Photo courtesy of Emilian Robert Vicol from Pixabay)

As a commodity that fluctuates weekly, lumber can be hard to predict. 

Still, there are some key points to consider for those in the shed industry who work with this material regularly and want to know more about supply and demand. 

While this editorial feature is for informational purposes only and not meant to be advice for lumber procurement, the sources below from around the country shared their thoughts earlier this year on recent developments and future possibilities along with some trends and suggestions thrown into the mix. 

From lumber pricing to seasonal shifts and other factors, many variables matter when working with dimensional lumber.

DOMINO EFFECT

Varied costs come with the territory for different reasons. 

For instance, lumber prices are always affected by new home starts, according to Erica Goodnight, CEO of Union Grove Lumber Inc. in Harmony, North Carolina, a stocking wholesale lumber supplier that warehouses their material directly from the mill. 

“The higher the new home starts, the higher the prices go because of supply and demand,” she says. “It’s the only thing that dictates the market because it is easily trackable by everyone in the world and permits are required. 

“From that number, the mills dictate whether the price goes crazy like it did during COVID, or not, if new home starts are slowing down. When they are going crazy and lumber is in short supply, there is only so much lumber the mills can cut.”  

Goodnight reflects on some recent drivers as well as current and future conditions. 

“As the market slows, which is what has happened in the last six months, new home starts slow and the price has lowered,” she says.  

Looking ahead, Goodnight sees one circumstance in particular that could make the outcome even more unpredictable in the coming months. 

“This is an election year,” she says. “If ever there was uncertainty in pricing, it would be every single election year. 

“A lot of people right now are kind of waiting on the position to see what’s getting ready to happen,” Goodnight says.

There are other factors to take into consideration that happen throughout the year. 

“Lumber pricing is also based on spring numbers,” she adds. “Most people do that spring run when they are putting in decks and pools that are easier to build in April because you can dig better when there is no snow or ice. 

“When it comes to pricing, there has been stability with a trend heading north into the spring and summer when prices are already trickling up.” 

In her opinion, no one needs to be fretting about the exact increase at this point.

Another trend she mentions concerns quality, which took a hit with the pandemic. 

“During COVID, a lot of folks let things slide because of short supply; you either had to like it or leave it,” Goodnight says. “A lot of mill suppliers became accustomed to that, but everyone is more quality-conscious today.”

In addition to quality and cost fluctuations, material selections have experienced a recent shift as well. 

“People moved to metal and vinyl when prices were higher. Now paintable siding for barns has seen a resurgence. It wasn’t price advantageous a few years ago,” she says.

When asked for some guidance for shed builders, Goodnight —who ships worldwide to locations that include Alaska and Canada—says it would be to forecast one month out. 

“In the non-crystal ball year of an election, I wouldn’t suggest to push your order profile out past that month, but you should keep that one-month profile,” she says. 

“Freight can also dictate the final price, so you can end up empty for product if you ran too slim on your inventory where you should have a month at least on your shelf.”

Lastly, Goodnight points out that world events and other unforeseen restrictions can occur at any time. 

“You never know when European stock is going to have a shipping problem,” she says. “There is no way to expedite it if it gets stuck in the Panama Canal. 

“We can never foresee things that can happen in international waters with tariffs and wars.” 

MATERIAL WORLD

Frank Iavarone, shed division leader for Lumbermen Associates in Bristol, Pennsylvania, a lumber wholesale distributor, emphasizes that lumber pricing will always be affected by the housing market, which is driven by interest rates. 

“Housing costs dictate,” he says. “When they came down, the interest rates went up. When they become unattainable, it creates an environment of inflation.” 

As Iavarone explains, inflation can also impact whether people buy new homes or work with what they have. 

“How people feel on a daily basis matters, too, when groceries that cost $200 to feed a family of four cost $300 now,” he says. 

“People have to carefully examine their spending. That pushed a lot of families to do home improvements when they have a mortgage locked in.” 

Economic twists and turns often drive these decisions. 

“Interest rates and inflation are slowing the economy. As the feds lower rates, 5 percent is still pretty reasonable, so people jump on that as soon as they can,” says Iavarone. 

“New houses mean new sheds. People are going to need sheds and I think lumber prices are going to be pushed up in the next 12 months to bring on a busy year.” 

When it comes to recent trends, the worst one, according to Iavarone, has been a reduction in the amount of inventory from European suppliers. 

“They are sending over very important quality and appearance, but they are not sending enough because the exchange rate isn’t as good for them anymore,” he says. 

The cost of operating a business has gone up as well. 

“It costs so much more for manufacturing, and delivering costs so much, too,” says Iavarone. “If I imagine myself as a buyer on course with these items and that price goes up and down for those products, I would say don’t lock on more than two months at a time.” 

Still, when it comes to lumber, what the future holds can be hard to predict as recent times have shown. 

“I think we will see that typical spring climb, but anything is possible,” he says. “If we learned anything in the past few years, it’s that every time we think we know how the market moves is baloney.”

SEASONAL SHIFTS

Weather can affect demand around the country. For instance, in the wintertime things slow up, says Tim Lindsey, who handles purchasing and sales for Free State Lumber Company in Haleyville, Alabama. 

“Sales are down on shed building this time of year. It’s all about the weather and demand. In the coming year, we’re on the low end right now, but I think things will get better,” he says. 

“Things will pick up in the springtime after February and March. Demand drives pricing, so I believe prices will be back up and we’ll have a decent year somewhat.”

As Lindsey knows, other factors can contribute to increased demand. 

“When interest rates go on the downward side, that gets the economy growing and going better. If that happens, things will get better,” he says. 

When it comes to current trends, Lindsey says they have been pretty much the same as before for the last few years, but they are ready for an increase in demand.

“We cater to the shed business, and we keep a big inventory year-round,” he says. “That way we can sell something and get it out in a couple of days. 

“We’re big on quality and keeping the customer happy. We have a lot of mills out there and we sell all the way to California.”

PRICE CHECK

Tom Merkert, vice president of sales for Capital Forest Products in Annapolis, Maryland, a wholesale distribution company, shares some thoughts on recent lumber pricing. 

“Definitely the log costs in Europe have gone up,” he says. “One of the reasons is that the products coming from Europe were cut back quite a bit about a year ago. We’re down to almost cut in half from some suppliers. 

“Log costs have really escalated over the last year. The demand has slowed down also since building has gotten back to more normal times.” 

In the coming year, because of supply tightening up more and more, in March, April, and May, with any small building demand in the U.S. in general, Merkert thinks there could be about a $50 to $75 per thousand jump in the lumber market. 

“That would be my gut feeling for mid-April and early May just because the supply chain tightened up quite a bit,” he says. 

Merkert also mentions an industry event he attended in December where he learned that barn builders didn’t buy as much this time around. 

“They did buy pretty well, but they were a little more cautious as they went into the wintertime. But business has moved up since then,” he says.  

“I think that we’re speculating a little bit right now, but I don’t think we’re going to see a $200 to $250 upswing in the market, maybe an uptick in the spring in the lumber market, but I do not think it is going to get out of hand,” adds Merkert.

“The market starts to ease up in mid-June, but we still have a lot of log issues in the Western U.S. and British Columbia. There has been a lot of damage from forest fires that wiped out a lot of timber in Oregon, Washington, and British Columbia. 

“A lot of log sawmills buy from federal land, and they’re keeping it pretty tight on what they’ll allow.” 

ON BOARD

Lastly, Craig Constable, vice president of sales for Landmark Lumber Group, a hardwood and softwood lumber wholesaler in New Freedom, Pennsylvania, has some insight about lumber prices over the past six months to a year. 

“Pricing always depends on the dynamics of supply and demand for each product,” he says. 

“Framing lumber and plywood prices have softened over the past year to more affordable levels. This is mainly due to improved supply conditions with SPF and Douglas fir, along with a pullback in demand in the last half of 2023, so you can occasionally find a few great deals. 

“Western SYP and SPF are up over last year which is mostly due to supply disruptions.”

As to what could happen in the coming year in terms of supply and pricing, especially when it comes to lumber that shed builders often utilize, Constable says they see framing lumber and panel products holding steady or continuing price erosion as both are readily available. 

“We don’t see that changing over the next six months, so prices should hold firm with short lead times, he says. 

“If you are looking at Eastern white pine for board and batten, or cedar, this supply is tighter, so pricing will most likely rise, particularly for EWP due to weather conditions affecting log supply. Wide-width cedar is in tight supply, so we anticipate those prices rising.” 

When asked if he has any advice for shed builders about future lumber purchases, Constable looks to recent times for guidance. 

“As we’ve learned over the past few years, lumber supplies and pricing can be unpredictable,” he says. “My advice would be to work closely with your supplier to preplan inventory needs and sources. There are so many variables to keep on top of, for instance, Canadian duties will be increasing this year so you can expect import prices to increase, which may increase demand on American lumber products. 

“Here again, pricing will depend on supply chain and demand dynamics.”

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