Lumber prices are falling as interest in self-help renovations has cooled

Lumber prices are falling as interest in self-help renovations has cooled

Timber markets have been on a roller coaster after the COVID-19 pandemic initially disrupted demand in the first half of 2020.DARRYL DYCK / The Canadian Press

Lumber prices have fallen in the last 10 weeks as consumers move away from DIY projects and builders are slowing down the pace of housing start-ups.

Despite a 46 percent drop in prices since mid-March, consumer relief is unlikely to last at least four weeks, and recent prices are still twice as high as two years ago.

According to Random Lengths, an Oregon-based wood market monitoring company, the cash prices – which sawmills charge wholesalers – are $ 750 for 1,000 feet of two-and-four boards made from western spruce, pine and fir (SPF). Random Lengths’ survey shows that prices fell $ 150 last week to the lowest level in six months.

BC’s largest forestry companies focus on American lumber barons

On Wednesday, futures prices fell by 7 percent, indicating that a further decline in cash prices is likely in June.

Timber markets have been on track as a roller coaster after the COVID-19 pandemic initially disrupted demand in the first half of 2020. In the summer of 2020, people who stayed at home began looking for building materials for terraces, fences and renovations .

But as consumers have more opportunities to use their disposable income this year, the market for repairs and conversions has failed, said Dustin Jalbert, chief economist at Fastmarkets, which publishes Random Lengths.

“People are traveling now and leaving the house,” he said in an interview. “Consumer behavior is changing.”

The latest decline marks the third time since autumn 2020, when cyclical timber markets have plummeted after a sharp rise.

While consumer spending on services such as travel is rising, household budget belts are tightening, Jalbert said.

“Consumers are struggling with inflation right now. So you have a much larger disposable income, which is tied to higher food costs and higher energy costs, “he said. “Between inflation and higher interest rates, it’s a brake on consumption and growth.”

Cash prices reached a record high in May 2021, reaching $ 1,630 per 1,000 2×4 plate tracks produced by the Western SPF before falling in the second half of last year and then recovering. Just 10 weeks ago, prices were as high as $ 1,400.

Mr. Jalbert expects prices to be less volatile in the second half of 2022 and could eventually settle between $ 450 and $ 600 next year. In 2019, before the pandemic, lumber was usually sold for $ 350 to $ 400.

In a weekly commentary, Madison’s Lumber Reporter, a Vancouver-based industry reporter, said demand fell further amid shorter working weeks in May, first with Victoria Day in Canada and then Memorial Day in the United States. “Producers have found limited success that has attracted buyers, even with three-digit price declines,” said Madison’s.

It is likely to take four to six weeks for lower wholesale prices to pass on to retail stores. Many stores first need to sell stocks purchased at higher prices, and these prices vary regionally.

“It all depends on where you get the wood, when it comes, and what’s available,” said Josh Cabral, store manager at Dunbar Lumber in Vancouver.

The widely used 2×4 frame wall mandrel, which is almost eight feet long, sold at some Canadian retail stores for $ 7 this week, less than $ 10.50 a year ago, but still higher than $ 3.25 charged on early 2020.

On the Chicago Mercantile Exchange, prices for lumber futures, delivered in July, have fallen 54 percent since early March. They fell $ 49 per 1,000 feet on board on Wednesday to close at $ 604.50.

“High inventories and cautious customer buying patterns are pushing prices,” BMO Capital Markets analyst Mark Wilde said in a survey. “Transportation and logistics issues in Western Canada are causing stock-level stock backups.”

Canfor Corp. CFP-T announced last week that it would prolong the slowdown in operations at its sawmills in Western Canada, with its ability to transport lumber being limited by continuing disruptions in the global supply chain. Since the end of March, Vancouver-based Canfor has operated at about 80 percent of its production capacity.

Congestion in the global supply chain persists as the Port of Vancouver and other nodes try to process container shipments and various types of cargo face rail and storage delays.

“We are working to get our stocks back into balance by reducing our production,” said Don Kayne, CEO of Canfor.

Canadian lumber shipments to the United States continue to be subject to softwood tariffs levied by the US Department of Commerce, which increases the cost for American home builders and consumers.

“The United States is in the midst of a housing affordability crisis, driven in part by timber tariffs, which acts as a tax for American home buyers,” said Jerry Konter, president of the US National Association of Construction Companies, in a recent statement.

The 2006 Canada-US softwood agreement expired in October 2015 without compensation. In the final round of the trade dispute, Canadian producers have been paying US tariffs on timber since April 2017. The current tariff rate for most Canadian forestry companies is 17.91 percent, although it is planned to reduce it this fall.

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