Lumber Industry Perspective
3rd Quarter 2014
Lumber prices move little in Q3
By Jesse Marzouk
Lumber prices held
steady throughout the
third quarter of 2014.
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 $377 per
MBF. Prices increased
mid-quarter, but
declined towards the end,
resulting in little overall
change. Prices for most species followed the overall price
pattern.
For the most part, lumber
prices have remained fairly stable in 2014 compared to prior
years, and especially 2013. In
2014, the FLCP has fluctuated
between $362 and $409 per
MBF, a range of only $47 per
MBF. In 2013, prices were wide-ranging, at $129 per MBF, including a high of $451 and a low
of $322 per MBF.
The primary reason for the
relatively stable price environment in 2014 is simple
–
supply
and demand have been extremely well matched. While
many industry observers were
hopeful that new home construction in the U.S. would grow
at a double-digit pace in 2014,
that appears unlikely at this
point. New home starts in the
U.S. are forecast to increase
approximately 5% in 2014 over
2013. On the supply side, production of lumber in North
America has remained subdued, with increases only totaling approximately 2% through
the first three quarters of 2014.
The lack of supply can be attributed to a number of factors,
including limited production in
British Columbia because of the
invasive mountain pine beetle, a
lack of labor for sawmills that
have been shuttered and are
having difficulty reopening, a
lack of financing for loggers and
sawmills, and a shortage of
trucks, which has delayed the
amount of product being
brought to market. Until either
the demand or supply side of
the equation changes significantly, prices likely will be
locked into a tight range.
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.