The lumber market is entering a period of stability, with prices returning to more predictable seasonal changes, according to Madison’s Lumber Reporter. As a result of the stability, both lumber producers and end-users are able to approach the market with more confidence and plan into the mid-term future.
In mid-September, the price of Western Spruce-Pine-Fir 2x4—the benchmark softwood lumber item—exactly met price levels in 2023: at $410 per thousand board feet.
“Given that the macroeconomic indicators and specific factors affecting the lumber industry last year are well known, that prices are stabilizing at this time of year is a good sign,” Keta Kosman, publisher of Madison’s Lumber Reporter, tells Builder. “This makes it easier for both sawmills and home builders to plan for the coming months; especially the next spring construction season.”
In the week ending Sept. 27, the price of Western Spruce-Pine-Fir 2x4 #2&Btr KD was $394 per million board feet, up 3% from a month ago. Compared to the same week last year, the price per million board feet was down just 4%. According to an NAHB analysis, the Random Lengths framing composite price dropped 7.0% on a year-over-year basis for the week ending Sept. 20; lumber futures are up 6.5% year-over-year in the same period; and structural panel composite prices fell 0.2% from the previous week.
Shifts in the Lumber Market
Kosman says uncertainty in the market beginning as mortgage lending rates started rising in mid-2022 contributed to an “attitude of wariness” in the lumber market. As housing starts trended downward, the sales of construction framing dimension softwood lumber tailed off and lumber prices fell.
“There were so many unknowns and first-time occurrences in the past five years that both buyers and sellers of solid wood products took a wait-and-see approach,” Kosman says. “Since the majority of sawmill announcements in recent time have been about curtailments and additionally downtime, this sentiment of restraint has become entrenched. As a result, the historical practice of stocking inventory shifted to a habit of just-in-time buying.”
Kosman says a major driver of the cautious attitudes and approaches was uncertainty about what the new price bottom would be for lumber. In the past, the lowest sales price for the benchmark softwood lumber item was $230 per thousand board feet, according to Madison’s Lumber Reporter.
“Even as prices leveled off, and the facts of markedly increased cost-of-production at sawmills are widely known, customers have remained wary of what might be the next shock,” Kosman says. “Players would rather get caught short of the lumber they need for ongoing building projects than stock up on wood only to see prices drop. This has meant lumber manufacturers are keeping production volumes lower to stay in line with this soft demand, in order to prevent prices from falling below manufacturing costs.”
Production Patterns
While the volumes of lumber manufactured in both the United States and Canada have recovered from dips at the end of 2023, the levels are still low on a historical basis. According to the Western Wood Products Association (WWPA), U.S. lumber production for the first six months of 2024 fell 3.2% to 18,351 million board feet compared to the same period in 2023. In Canada, lumber production increased by 4.6% to 10,741 million board feet.
The NAHB notes that Canfor’s recent announcement of the closure of two mills in British Columbia and the curtailment of mills in the southern United States will likely result in the elimination of an estimated 670 million board feet on an annual basis.
Kosman says after recent volatility in both the United States and Canada, sawmill capacity utilization rates have leveled off at significantly lower levels than recent years. According to the WWPA’s Lumber Track, sawmill capacity utilization rates in the first six months of 2024 in the U.S. fell to 77% from 82% in 2023. In Canada, the metric was 74% for the first six months of 2024. By comparison, in 2018 the sawmill capacity utilization rate from January to June was 87% in the U.S. and 90% in Canada.
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