Lumber Pricing - what goes up – must come down

Friday 10 Sep 2021

It was inevitable that US lumber prices would eventually return to some state of normalcy. I wrote an article less than 50 days ago noting that futures and cash prices, despite having quadrupled in slightly over a year, had dropped 40% in June 2021.

Pandemic measures were being lifted, the effect of stimulus payments were receding, and owing to completion or returning to work home improvement projects were wrapping up. High prices, as they do, drew more wood into the market; mills increased weekly hours for sawmill employees, and substitutes for timber, whether different types of wood or composites, were used where possible.

But over the last week or two, the delirium which began in the summer of 2020 and reached a crescendo in April and May of this year has been utterly inverted. A late July 2021 poll reported that 49% of lumber dealers were suddenly reporting excess lumber inventories. And whereas in April 2021 40% of lumber dealers had reported low stocks, in late July/early August none of the respondents indicated such.

Lumber prices have fallen 75% since the all-time high of $1,686 per thousand board-feet on May 7, 2021. All the price gains since the summer of 2020 have been given back, and at under $500 per thousand board-feet the front month futures price is actually below the average price of lumber back to 2017.

Needless to say, the first and second quarters of 2021 were heady times for owners of timberland, mills, and other forestry-related businesses. In mid-July 2021;

West Fraser Timber recorded net income of $1.49 billion for April, May and June, an amount the company has historically needed years to earn…

PotlatchDeltic, which owns timberland in six states and mills in four, said its wood products division was more profitable in the latest quarter than it was during all of last year…

Canfor, which operates 10 mills in western Canada and 12 in the US South, followed suit reporting its own record quarter on Thursday.

Weyerhaeuser Co., the largest US timberland owner and operator of mills in the US and Canada…said it had its most profitable quarter ever by 40%, with net income of $1.03 billion.

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Some market commentators are also predicting that sawmills and pricing will bounce back to a level where sawmills are making money again.

Source: citizensjournal

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