Lumber Industry Perspective
3rd Quarter 2013
Lumber prices rebound in Q3
By Jesse Marzouk
Lumber prices rebounded in
the third quarter after falling off
a cliff in the second quarter. The
Random Lengths
Framing Lumber Composite Price (FLCP),
which includes prices from a
variety of softwood framing species, ended at $381 per thousand board feet (MBF) after
starting the quarter at $324 per
MBF. Lumber prices increased
as purchasers took advantage
of the depressed prices. Chinese buyers stepped back into
the market and helped support
prices. Additionally, Canadian
lumber mills pulled back from
shipments into the U.S. as they
were hit with varying levels of
duties under the softwood lumber agreement after the recent
price declines.
Panel prices, which had
been more volatile than lumber
prices, moved only slightly higher during the quarter. The more
important news for the panel
industry, was the announcement of the purchase of Ainsworth by Louisiana Pacific (LP).
The combination will create the
largest oriented strand board
(OSB) producer in North America, with approximately 33% of
capacity. The OSB market historically has suffered from wild
price swings as the industry was
not very concentrated and the
start of a new or shuttered mill
could have a large impact upon
prices. LP’s acquisition makes
the OSB market closer to an
oligopoly, similar to containerboard, which has undergone massive consolidation over the
last decade. Industry consolidation has been a clear benefit to
the containerboard industry and
something similar could occur if
more consolidation occurs in the
OSB market. Producers would
be able to more closely control
capacity and create a more
stable price environment. This
would primarily benefit producers, but would also help purchasers, who would be able to
count on less volatile 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.