Lumber Industry Perspective
4th Quarter 2014
Lumber prices march higher in Q4
By Jesse Marzouk
Lumber prices
continued to move
higher in the final
quarter of 2013 after
rebounding in the
third quarter. The
Random Lengths
Framing Lumber
Composite Price
(FLCP), which includes prices from a
variety of softwood
framing species, ended at $390 per thousand board feet
(MBF) after starting
the quarter at $381
per MBF. Additionally,
the price throughout the quarter
never traded below the price
where it started the quarter.
Lumber prices moved higher as housing starts came in
stronger than expected in the
final few months of the year.
Seasonally adjusted housing
starts for November, which is
the most recent month available, increased to almost 1.1
million units. This number is
29.6% higher than the number
of starts in November 2012 and
brings the total year to date gain
in new housing starts to 19.2%. At a time when people began to
worry about the impact of higher
mortgage prices on demand for
new houses, it appears that the
housing market is accelerating
into the beginning of 2014.
Panel prices, which had
been more volatile than lumber
prices in the first half of 2013,
actually declined slightly during
the fourth quarter. Typically
lumber and panel prices trade
together, but while lumber prices rebounded from a second
quarter swoon, panel prices
have not. The main issue weighing on panel prices, and
especially prices of oriented
strand board (OSB), is the large
amount of supply that has come
onto the market in the last year.
One factor that may help lift
prices of OSB, is a higher level
of industry consolidation, which
would be achieved through the
purchase of Ainsworth by Louisiana Pacific. The Department
of Justice still has not given final
approval for the deal, but its
decision is expected to arrive in
early 2014.
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.