Lumber Industry Perspective
2nd Quarter 2012
Lumber Prices Gain More in Q2
By Jesse Marzouk
Although off of their
mid-quarter highs, softwood lumber prices gained
5% to 10% in the second
quarter of 2012, depending
on the product. The
Random Lengths
Framing
Lumber Composite Price
(FLCP), which includes
prices from a variety of
softwood framing species,
ended at $318 per MBF
after starting the quarter at
$298 per MBF. Prices
increased as housing
starts continued their slow
march higher and a large fire
shut down one of Canada’s
largest producers of spruce-pine-fir (SPF) lumber.
At the end of May, the FLCP
reached a high of $344, but
dropped to $318 at quarter’s
end. The reason for the drop in
June primarily was related to
Canadian mills shipping more
lumber into the U.S amid reduced duties because of higher
lumber prices. The phenomenon of Canadian mills shipping
more product into the U.S. and
negatively affecting prices after
they spike likely will continue in
the coming years, at least until
the U.S. reaches a more normalized level of housing starts,
which is in the range of 1.2 million starts annually.
When the U.S. does reach
that level, however, which could
happen as early as 2015, lumber prices may be at significantly higher levels than where they
are now. Demand for lumber in
the U.S. will be higher because
of increased housing activity,
while demand from China is
expected to remain strong. On
the supply side, the worst of the
effects of the pine beetle will
hamper supply from Western
Canada, while Eastern Canadian mills are facing government
reductions in their cutting rights.
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.