Lumber Industry Perspective 2nd Quarter 2016

Lumber prices are mixed in Q2

By Jesse Marzouk

Hilco Lumber Industry Perspective Q2 2016

Lumber prices increased slightly overall in the second quarter of 2016 after rising in the first three months of the year. The Random Lengths Framing Lumber Composite Price, which includes prices from a variety of softwood framing species, ended at $347 per thousand board feet (MBF) after starting the quarter at $345 per MBF. The minor increase in the composite price, however, masked underlying price changes in the components. Spruce-pine-fir (SPF) prices, and especially SPF studs, in-creased throughout the quarter. Western SPF (2X4 8-foot studs), increased from $238 to $267 per MBF. On the other hand, Southern Yellow Pine 2X4 #2 prices declined from $393 to $378 per MBF

While prices of SPF lumber, which is produced in Canada, rose throughout the quarter, Canadian producers are cautious heading into the second half of the year. The Softwood Lumber Agreement (SLA) be-
tween the U.S. and Canada expired in October 2015. Under the terms of the SLA, no trade cases can be brought against Canadian producers until one year after the expiration of the agreement. While there have been discussions between the U.S. and Canadian governments regarding a new agreement, nothing has been reached.

The lack of an agreement adds to a list of significant uncertainties for producers in Canada, especially Western Canada. Over the last 18 months, lumber prices and exchange rates have been volatile, and Western Canadian mills have lost market share in China to other countries. Conditions could worsen if duties are en-acted on Canadian shipments of softwood lumber into the U.S. Under the SLA, Western Canadian mills faced the highest level of duties of any province and may be the hardest hit if trade cases are brought by the U.S. lumber industry after Oct-ber 2016.

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.