Lumber Industry Perspective 3rd Quarter 2013

Lumber prices rebound in Q3

By Jesse Marzouk

Lumber Perspectives Graph Q3 2013Lumber prices rebounded in the third quarter after falling off a cliff in the second quarter. The Random Lengths Framing Lumber Composite Price (FLCP), which includes prices from a variety of softwood framing species, ended at $381 per thousand board feet (MBF) after starting the quarter at $324 per MBF. Lumber prices increased as purchasers took advantage of the depressed prices. Chinese buyers stepped back into the market and helped support prices. Additionally, Canadian lumber mills pulled back from shipments into the U.S. as they were hit with varying levels of duties under the softwood lumber agreement after the recent price declines.

Panel prices, which had been more volatile than lumber prices, moved only slightly higher during the quarter. The more important news for the panel industry, was the announcement of the purchase of Ainsworth by Louisiana Pacific (LP). The combination will create the largest oriented strand board (OSB) producer in North America, with approximately 33% of capacity. The OSB market historically has suffered from wild price swings as the industry was not very concentrated and the start of a new or shuttered mill could have a large impact upon prices. LP’s acquisition makes the OSB market closer to an oligopoly, similar to containerboard, which has undergone massive consolidation over the last decade. Industry consolidation has been a clear benefit to the containerboard industry and something similar could occur if more consolidation occurs in the OSB market. Producers would be able to more closely control capacity and create a more stable price environment. This would primarily benefit producers, but would also help purchasers, who would be able to count on less volatile pricing.

Jesse MarzoukJesse Marzouk is a vice president and forestry products specialist. He has appraised numerous U.S. and Canadian pulp, paper, and lumber-related 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.