Lumber Industry Perspective
3rd Quarter 2012
Panel prices on a wild ride
By Jesse Marzouk
Lumber prices in
the third quarter averaged more than in the
second quarter, although declines at the
end of the September
Framing Lumber Composite Price (FLCP),
which includes prices
from a variety of softwood framing species,
ended at $323 per
MBF after starting the
quarter at $318 per
MBF. They rose as high as
$342 per MBF during the third
quarter of 2012.
The real story, however,
was in the panel market. Prices
for oriented strand board (OSB),
and, to a lesser extent, plywood,
went parabolic during the quarter before falling sharply. At one
point , OSB prices were up
more than 40% from the start of
the quarter. The Random
Lengths OSB panel composite price started the quarter at
$279, and reached as high as
$399 before settling back down
at the end of September at
$321. A few factors drove the
increase. First, the overall recovery in the housing market
has been stronger than anticipated by mills and distributors.
Secondly, distributors began to
bump up against credit limits as
prices increased, which only
served to keep a lid on supply.
Prices increased sharply as
builders had to purchase a
scarce amount of product during
the seasonally strong construction period.
Capacity additions in the
OSB market are coming because of the higher prices.
Even with the sharp pullback in
prices recently, it will be a better
year for panel producers than
almost anyone imagined heading into the year.
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.