Framework, V5I1

Staying Ahead of the Market in 2019

The lumber market’s historic volatility in 2018 seems to have found some stability at year end. Prices adjusted only slightly throughout the period.

Strong fundamentals supported business activity but were tempered by adequate supply of product and transportation. 

In this column, I’ll look at what’s been affecting the market and will forecast if the recent price trend will continue in 2019, or if we will experience the sharp swings seen in 2018.  


Growth estimates for the fourth-quarter are currently around a 2.5 percent pace. Economists expect GDP growth to slow further in 2019 as the fiscal stimulus fades, and the effects of a bitter trade war with China, as well as trade disputes with other trade partners, take their toll.   

Moves by the Federal Reserve Bank to raise interest rates will also concern market participants as housing affordability depends upon low mortgage rates. 


Lumber markets were mixed at year-end, with some prices higher and others lower. 

Western SPF 2 by 4 Dimension #2 and better prices were flat over the period while Eastern 2 by 4 Spruce was slightly higher by about 4 percent.  

Western SPF 8 foot studs, up about 2 percent, fared better than its dimension counterpart and Eastern studs recorded increases of 5 percent. Also, 2×4 #2 SYP prices dropped 6 percent over the period. Treated SYP moved in line with the change in bright stock prices. 


As the year drew to a close, many lumber items continued to represent investment levels. As you approach the first quarter of 2019, what should you expect in the lumber market and what should you do? 

The major thing to consider is the volatility of lumber prices. While I expect lumber prices to increase in the first quarter, the pace will be dependent on progress of international trade disputes, winter weather, job site construction, and developments in trucking and rail availability. Many market participants will take a wait-and-see approach. 

In my view, that will make the market susceptible to sudden swings in volatility. While the sharp moves seen last year are unlikely to be repeated, we could still have unbalanced supply-and-demand issues. 

At current price levels, the benefit of covering first quarter needs now outweighs the risk of owning high-priced inventory and the expense of carrying it into the spring.

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