Lumber Industry Perspective 3rd Quarter 2014

Lumber prices move little in Q3

By Jesse Marzouk

Lumber Perspectives Graph Q3 2014Lumber prices held steady throughout the third quarter of 2014. 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 $377 per MBF. Prices increased mid-quarter, but declined towards the end, resulting in little overall change. Prices for most species followed the overall price pattern.

For the most part, lumber prices have remained fairly stable in 2014 compared to prior years, and especially 2013. In 2014, the FLCP has fluctuated between $362 and $409 per MBF, a range of only $47 per MBF. In 2013, prices were wide-ranging, at $129 per MBF, including a high of $451 and a low of $322 per MBF.

The primary reason for the relatively stable price environment in 2014 is simple – supply and demand have been extremely well matched. While many industry observers were hopeful that new home construction in the U.S. would grow at a double-digit pace in 2014, that appears unlikely at this point. New home starts in the U.S. are forecast to increase approximately 5% in 2014 over 2013. On the supply side, production of lumber in North America has remained subdued, with increases only totaling approximately 2% through the first three quarters of 2014. The lack of supply can be attributed to a number of factors, including limited production in British Columbia because of the invasive mountain pine beetle, a lack of labor for sawmills that have been shuttered and are having difficulty reopening, a lack of financing for loggers and sawmills, and a shortage of trucks, which has delayed the amount of product being brought to market. Until either the demand or supply side of the equation changes significantly, prices likely will be locked into a tight range.

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.