Lumber Industry Perspective 1st Quarter 2018

Lumber Prices Soar in Q1

By Jesse MarzoukLumber Perspective - Lumber Prices

Lumber prices increased significantly in first quarter of 2018 after strong gains in 2017. The Random Lengths Framing Lumber Composite Price (FLCP), which includes prices of a variety of softwood framing species, end-ed at $489 per thou-sand board feet (MBF) after starting the quarter at $433 per MBF. The FLCP started 2017 at $359 per MBF.

Lumber prices soared in the first quarter as transportation issues limited the lumber supply available from Western Canada. Many com-panies reported problems with the Canadian National Railway, which resulted in a delay in shipments to the U.S.

On the demand side, U.S. housing starts continued a steady rise in the first quarter. Non-seasonally adjusted U.S. housing starts increased 8.0% in the first quarter of 2018 com-pared to 2017. Moreover, single-family starts increased a respectable 7.0% during the same period. As single-family units use significantly more lumber than multi-family units, demand for lumber used in new home construction can be driv-en by the mix of single family and multi-family starts.

Lumber prices have also been supported by countervail-ing and anti-dumping duties in place at various times through-out 2017 and during all of 2018 on imported Canadian softwood lumber. The final ruling from the U.S. International Trade Com-mission became effective on December 28, 2017, with most Canadian companies paying a combined rate of 20.23%. While Canadian companies are ap-pealing the ruling, the level or elimination of duties may be part of a renegotiated North American Free Trade agree-ment that is taking place be-tween the U.S. and Canada. Since duties were announced in early 2017, lumber prices have increased approximately 40%.

j_marzouk

 Jesse Marzouk is a vice president and forestry products specialist. He has appraised numerous U.S. and Canadian pulp, paper, and lumberrelated companies involved in manufacturing and distribution. Jesse received his MBA in finance from Kellogg School of Management at Northwestern University, and has a degree in finance and accounting from Indiana University.