Lumber Industry Perspective
4th Quarter 2012
Lumber prices finish year on highs
By Jesse Marzouk
Lumber prices continued their strong run in the
fourth quarter and finished
the year at their highest
prices in years. The Random Lengths
Framing
Lumber Composite Price
(FLCP), which includes
prices from a variety of
softwood framing species,
ended at $381 per MBF
after starting the quarter at
$319 per MBF. Panel prices, which have been more
volatile than lumber prices
over the last six months, also
continued their march higher
after a correction at the end of
the third quarter.
Lumber prices increased
steadily throughout the fourth
quarter and really picked up
steam after Hurricane Sandy
ravaged the east coast. While
the storm provided a convenient
excuse for higher prices, the
real story continues to be one of
demand coming back strongly
and supply still being limited.
Demand has continued higher
amid the rebound in new home
construction and remodeling
activities. Seasonally adjusted
new home construction starts
averaged 864,000 for the September through November period, an increase of more than
20% from the year ago period.
On the supply side, lumber producers have been unable or
unwilling to increase supply.
Sawmills have been unable to
increase supply primarily because of the effects of the pine
beetle in B.C. and logging and
sawmill labor shortages. Producers have also been unwilling
to increase supply amid a still
uncertain economic environment. If the housing market
continues recovery for a second
straight year in 2013, however,
many sawmills will likely increase supply to meet the higher level of demand.
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.