Lumber prices slide downward as more sawmill closures are announced
June 4, 2019 By Madison's Lumber Reporter
Confusion reigned only more last week in the North America construction framing dimension softwood lumber market as demand was very soft for what is normally the big home building season in the U.S. This week, major producers announced further permanent closures and curtailments for British Columbia sawmills, due both to high log costs while lumber prices are low and to lack of future timber supply as a result of the mountain pine beetle infestation and the 2017 wildfires. A wildly yo-yoing lumber futures board on the Chicago Merchantile Exchange did nothing to help players get clarity on what is happening in the market.
Wildfire season has already begun in Canada this year, with a massive blaze in northern Alberta forcing the evacuation of the town of High Level. The fire continues to grow, engulfing an area of more than 130,000 hectares.
After a big drop the week before, for the week ending May 31, 2019 the benchmark lumber commodity Western Spruce-Pine-Fir KD 2×4 #2&Btr (RL) FOB sawmill wholesaler price fell -$4, or -1.3%, to U.S. $306 mfbm, from the previous week when it was U.S. $310 mfbm. This week’s price is -$26, or -8%, less than it was one month ago. Compared to one year ago, this price is down -$352, or -54%.
There was a slight improvement in the business of selling lumber last week, in large part thanks to steep price drops on benchmark lumber commodity items. Producers in the U.S. were encouraged by better inquiry and sales volumes, but still frustrated that they had to nudge prices down again to get the ball rolling. Resultant bookings at sawmills got as far as two weeks out on a few items, while many others remained at one week. Rumours continued to swirl of more forthcoming mill curtailments, this time related to facilities in the U.S.
Be ahead of these data releases … Don’t delay, this week’s softwood lumber market comment was published to the website Monday morning.
* Madison’s Lumber Prices, weekly, are a good forecast indicator of U.S. home builder’s current lumber buying activity
Many standard dimension lumber players were encouraged by marginally better business this week; sales of studs and panels floundered on. — Madison’s Lumber Reporter
Compared to the soaring highs of summer 2018, this week’s WSPF 2×4 #2&Btr KD S4S (RL) price is down -$119, or -28%, while relative to the 1-year rolling average price of U.S. $425 mfbm it is down -$145, or 32%. The 2-year rolling average price is U.S. $451 mfbm.
Canadian WSPF producers were “quite a bit busier” this week than they have been in awhile. Trading activity in futures, threat of wildfires, and an increasing lack of quick supply helped nudge many buyers off the fence. Sawmill order files extended up to “a couple weeks” on 2×4 and 2×6 #2&Btr R/L. Meanwhile, promptly available 2×8 and 2×10 started to disappear after mills reduced prices on both by $10 to U.S. $300 mfbm and U.S. $322 mfbm, respectively. Sales of low grade was still a little sluggish.
Another round of curtailments came to British Columbia, this time at Interfor’s Castlegar and Grand Forks sawmills. Due to a combination of weak lumber prices and persistently high log costs, the company’s three mills in Southern Interior B.C. will see down time for several days in the month of June.
Production curtailments announced last week by Interfor are expected to be reduced by roughly 20 million board feet in June, or 2.7 per cent of the company’s total annual capacity of 750 million board feet. — Madison’s Lumber Reporter
Decent weather in target sales markets resulted in spurts of demand, but by the time building in one region got going, another would go down to flooding or heavy rain. For their part, sawmills maintained hand-to-mouth order files, reluctantly filling rail cars and taking “whatever the hell orders they could get” on prices. There was no point even trying to establish a sawmill order file at these price levels.
The below table is a comparison of recent highs, in June 2018, and current May 2019 benchmark dimension softwood lumber 2×4 prices compared to historical highs of 2004/05 and compared to recent lows of Sept. 2015:
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