Where has all the lumber gone?

For those of you involved in the consumption of industrial lumber, 2013 was a year to remember!

The year started with a very mild winter and fairly stable supplies. Inventories of lumber were not outstanding, but neither was demand. Things were pretty much in balance.  

In the softwood markets, pricing increased and decreased dramatically throughout 2013 as foreign buyers entered and exited the markets. In the hardwood markets, pressure from a variety of markets kept inventories low and prices on the rise.

 Softwood Market in US
Let’s take a look at the Southeast as an example.  

• Framing lumber prices have doubled since 2009, yet production increased by only about 6% in 2012.  

• Pine lumber producers have grown very cautious since the downturn in 2009.  

• Overall, pine lumber prices peaked in early April 2013 as foreign buyers and spring demand from pressure treaters drove up pricing nearly 18% since the beginning of the year.  

As remodeling projects remain strong and new housing starts continue to improve, what will 2014 look like? Will production be able to increase to meet additional demand? Will foreign buyers continue to drive up prices in North America? Time will certainly tell, but one study suggested that lumber prices would be 30% higher in 2014 than in 2013.

Hardwood Market in US
The industrial hardwood markets faced difficult challenges in 2013.  

• Primarily a very wet spring in the South and increased demand from road/construction mats took its toll on hardwood lumber availability and pricing. Prices increased about 10% over 2013.  

• Many industrial users of hardwood lumber converted to pine during the year as prices continued to rise and availability of hardwood continued to decline.

The primary supply-side issues being faced by the hardwood industry are the lack of loggers and the closure of many hardwood sawmills. In Virginia alone, the number of sawmills has been reduced by more than 50% in the last two decades.  

So what will it take to improve the hardwood supply and stabilize pricing? Perhaps the conversion to the use of more softwood in industrial markets is not just a short-term trend, but is here to stay.

What do you think? Are the 2013 lumber trends here to stay? What do you think we can expect from 2014? Let us know your thoughts by commenting below.

Post by: Rich Reiher, Vice President of Sales