Reduced Manufacturing Volumes Push Lumber Prices Up

According to Madison's Lumber Reporter, despite somewhat soft demand, as many customers weren’t sure where prices were going so waited to buy, lumber prices popped up again in mid-February. This due mostly to ongoing capacity restrictions, especially in the important timber supply basket of British Columbia. 

As the spring building season fast approaches, end-users will not be able to wait much longer to order the wood necessary for upcoming building projects. Especially given that delivery times remain quite extended — currently a minimum of six weeks. Inventories in the field are tight, as secondary suppliers also held off buying to see if prices might drop. Or flatten. At the current level, the benchmark commodity item, Western S-P-F 2×4, price is hovering at just below the recognized average cost-of-production of US$500 mfbm.

In the week ending February 10, the price of benchmark softwood lumber item Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) was US$476 mfbm, which is up by $16 or 3.0 per cent, from the previous week when it was US$360 mfbm. This is up by $104, or 28 per cent, from one month ago when it was $373.

Supply levels remained tight due to the significant reduction in production volume caused by the aforementioned mill changes.

The Western S-P-F market in the United States experienced balance after a period of solid business activity generated by Western producer curtailment and closure announcements. Sawmill order files extended into late-February or early-March, reflecting producers’ cautiously optimistic confidence. On the other hand, buyers took a step back after shoring up their inventories in January, waiting for the market to show a clear direction.

Demand for Western S-P-F in Canada slowed down to a more stable pace with commodity prices settling at or slightly above the previous week’s levels. In reaction to the myriad curtailment and closure announcements over the past five weeks, most buyers had already extended their coverage, choosing to digest their positions for the time being. Availability of prompt supply was limited, even as the odd load popped up before quickly getting snatched. Two- to four-week order files were most common as producers solidified their positions for the balance of February.

Compared to the same week last year, when it was US$1,220 mfbm, the price of Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) for the week ending February 10, 2023 this price was down by $744, or 61 per cent. Compared to two years ago when it was $960, that week’s price is down by $484, or 50 per cent.

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