Lumber Perspectives Q2 20182nd Quarter 2018

Lumber prices soar in Q2, collapse in July

By Jesse MarzoukLumber Perspective - Lumber Prices

Lumber prices increased significantly in the second quarter of 2018 after strong gains in 2017 and the first quarter of 2018.  The Random Lengths Framing Lumber Composite Price (FLCP), which includes prices of a variety of softwood framing species, ended at $547 per thousand board feet (MBF) after starting the quarter at $489 per MBF. The FLCP, which started 2017 at $359 per MBF, reached as high as $582 per MBF during the second quarter.  By the end of July, however, the FLCP had dropped all the way back down to $491 per MBF.

Lumber prices soared in the second quarter as transportation issues limited the lumber supply available from Western Canada.  These problems appeared to work themselves out in the second half of June and July, however, leading to a significant increase in supply.

On the demand side, U.S. housing starts continued a steady rise in the first quarter.  Non-seasonally adjusted U.S. housing starts increased 7.8% in the first six months of 2018 compared to 2017.  Moreover, single-family starts increased 8.1% 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 driven by the mix of single family and multi-family starts.

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.