Lumber Market Report, News, V8I1

Things to Look for in 2022

(Photo courtesy of Scott Graham on Unsplash)

Lumber prices surged higher as the 2021 year-end approached. Demand and supply imbalances and renewed fears of increased price volatility left traders wondering what new possibilities exist for early 2022.  

ECONOMIC FACTORS

The November housing market report provided affirmation for this surge in framing lumber prices. Housing starts increased 11 percent to 1.68 million starts and permits rose 3.8 percent.  

The most important issue for the housing market remained the lack of inventory, according to the National Association of Home Builders.  Looking forward, builders will contend with supply-chain issues and higher mortgage rates, and benefit from higher home prices and a tight housing market. 

LUMBER PRICES

Inadequate lumber supplies in the distribution system pushed up prices of SPF and SYP lumber. 

Lumber prices nearly doubled over the past month (December). Supply-chain issues covered the gamut: weather-related log inventories, COVID-19-related labor issues, rail and truck logistics issues, and mill production curtailments.  

On the demand side, strong housing starts and active contractor yards fueled the market’s upward direction. SYP 2 by 4 #2 prices increased by about $340 per thousand board feet over the previous three weeks.  

Domestic Western SPF 2 by 4 #2 and better prices increased about $270 per thousand board feet, while the same item in Eastern SPF increased $345. Staggering price changes by any account.  

Euro Premium spruce dimension grades spiked with the move up in Domestic premium #2 prices. Euro Premium and Domestic Premium stud prices gained more ground.   

SUPPLY STRATEGIES

Supply-chain issues may persist for the near term, while the housing economy looks resilient. Longer-term housing demand should remain strong the next three years, as almost 5 million millennials enter their prime home-buying years. 

Will there be sufficient new lumber production coming on board this year to meet the increased demand? 

We think so because higher lumber prices at the beginning of the new year will incentivize increased lumber production. If you haven’t covered your early 2022 needs you may get another chance to do so this spring.   

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