Lumber Industry Perspective
4th Quarter 2014
Lumber prices remain steady in Q4
By Jesse Marzouk
2014 was characterized as
a solid, if unspectacular, year in
the lumber market. The Random
Lengths Framing Lumber
Composite Price, which includes
prices from a variety of
softwood framing species, ended
the year at $382 per thousand
board feet (MBF) after
starting the year at $390 per
MBF. Prices held within a tight
range throughout the year, as
supply and demand were extremely
well matched. While
the U.S. housing market generally
underperformed expectations
heading into 2014,
sawmills had a difficult time
increasing production.
Entering 2015, there appear
to be a number of tailwinds for
the U.S. housing market. Mortgage
rates declined heading
into 2015, as opposed to increasing
one year prior, and
have fallen even further at the
start of the year. Moreover, job
creation picked up over the last
six months of 2014, with approximately
250,000 jobs created
per month on average over
the period. Lastly, consumers have been given a windfall with
the recent decline in gasoline
prices. It is estimated that at
current levels, U.S. consumers
will save approximately $150
billion per year.
Lower gasoline prices, however,
also have a negative impact
on the housing market.
Homebuilders have recently
reported weakness in the Texas
market, which had been one of
the strongest markets over the
last five years.
China, which had also been
a source of strong demand for
lumber over the last five years, has backed away from the market
since last summer. The
Chinese government, moreover,
appears dedicated to transitioning
the economy away from one
based on infrastructure and
construction to one based on
consumer demand. With more
than 90% of lumber utilized for
concrete forming in China, it
appears that this transition will
have a negative impact on lumber
demand.
It will be interesting to see
how these opposing forces interact
to shape the lumber market
in 2015.
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.