The construction industry in North America is reeling from solid wood construction framing building material prices that continue to soar. It is a frustrating situation for sawmills as supply remains well below extremely hot, indeed unabated, demand. If anything, it looks like the home building and renovating season this year will be busier even than last year. While there are builders and contractors who are cancelling and delaying jobs, this reversal is doing nothing to slow housing activity.
By all accounts sawmill order files are full now well into May, while panel (plywood and OSB) mills are currently quoting into August. Lumber market players don”t know how to react as an impossible situation gets more impossible with every passing day. According to sellers, sales of Western Spruce-Pine-Fir (S-P-F) in the United States ramped up for the week ending April 9. Prices advanced again amid persistently scarce supply, with buyers at all levels desperate to secure any stick of wood they could get their hands on.
After reaching the seemingly unbelievable level of US$1,060, in the week ending April 9, the wholesaler price of benchmark softwood lumber commodity item Western S-P-F KD 2×4 #2&Btr was US$1,130 per thousand board feet. This is up by $70, or 6%, from the previous week. Compared to the price one-year-ago, that week”s price is up by $820, or 265%.
While sawnwood prices soar, logs are still cheap in the US South
US softwood sawnwood prices have soared to records. Demand for wood is skyrocketing. The shares of wood suppliers are surging and yet, trees themselves are dirt cheap in places like Louisiana, where timber supplies are plentiful.
An abundance of harvest-ready trees has kept stumpage fees extremely low across the US South, home to half of the country”s production. Meanwhile, lumber futures are up 85% in 2021 because of soaring demand and, as a result sawmill profit margins are exploding. The spread between futures and stumpage for Louisiana pine, for example, has more than doubled just this year, topping $1,100 per thousand board feet.
“As soon as the supply disruptions sort themselves out and everything gets back to normal, we expect a major correction in prices,” said Joshua Zaret, a senior analyst at Bloomberg Intelligence. “But right now, if you”re producing lumber in the US South — or anywhere for that matter, but particularly in the US South, where your log cost hasn”t come up — it”s very profitable.”