Lumber Industry Perspective
1st Quarter 2012
Lumber Prices Gain about 10%
By Jesse Marzouk
Softwood lumber
prices gained approximately 10% in the first
quarter of 2012. The
Random Lengths
Framing Lumber Composite
Price, which includes
prices from a variety of
softwood framing species, ended at $298 per
MBF after starting the
quarter at $270 per
MBF. Prices increased
as housing starts rebounded and distributors were forced to buy
amid previously low levels of
inventory.
Seasonally adjusted housing starts in the U.S. averaged
697,000 units from November
2011 through February 2012,
reaching the highest levels
since the first-time homebuyer
tax credit spurred demand in
early 2010. Although warm
winter weather across much of
the country was partially responsible for the gains, it appears that the U.S. has hit bottom in terms of new home construction starts. While the recent gains in new home construction is certainly a positive, it
is unlikely that lumber and panel
prices will experience a sustained recovery until housing
starts reach at least 900,000 to
1 million units.
The recent gains in housing
starts have averaged approximately 25%. The majority of the gains, however, has come from
the multi-family sector. If this
trend holds, it presents a problem for lumber and panel producers, as the average multi-family unit utilizes approximately
one-third the amount of lumber
as a single-family home. It will
be interesting to watch if this
recent trend becomes a longer
term trend, or if it simply a function of the foreclosure process
and demand for rental units
Jesse 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.