Lumber Industry Perspective
1st Quarter 2013
Lumber prices jump up in Q1
By Jesse Marzouk
Lumber prices continued
their strong run in the first quarter and finished the quarter at
their highest prices in years.
The
Random Lengths
Framing
Lumber Composite Price
(FLCP), which includes prices
from a variety of softwood framing species, ended at $447 per
thousand board feet (MBF) after
starting the quarter at $388 per
MBF. Panel prices, which have
been more volatile than lumber
prices, also continued their
march higher, with gains seen in
both oriented strand board
(OSB) and plywood.
The lumber price increases
can be easily attributed to supply and demand factors. Housing starts, which have seen
recent year over year gains of
25% to 30%, and remodeling
activity in the U.S. have rebounded sharply. At the same
time, a number of supply factors
have limited the amount of lumber available to the U.S. market.
Those factors include: 1) Labor shortages for both loggers and
sawmills because of previously
weak lumber prices and higher
paying jobs in the oil and gas
and mining industries; 2) Reduced timber available to
sawmills in western Canada
because of the devastating effects of the mountain pine beetle; 3) High log prices in the
Pacific Northwest because demand for logs in China has reduced sawmills incentive to cut
lumber; 4) Low inventory levels
in the system because of tight credit standards as lumber prices began to rise; and 5) Fires
that destroyed a number of mills
in Canada.
Going forward, lumber prices appear to be on strong footing because at least some of
the aforementioned factors cannot be remedied easily. With
regards to OSB prices, everyone in the market is trying to
determine the impact that the
restart of a number of mills in
the first half of 2013 will have on
pricing.
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.