Industry News Markets
Softwood lumber prices returning to normal

Friday’s print in Madison’s Lumber Reporter was again US$354 mfbm on benchmark Western Spruce-Pine-Fir KD 2×4 #2&Btr. The price of that construction framing dimension lumber commodity stayed level with the previous week, as did many other standard North American homebuilding wood materials.

Current Softwood Lumber Prices Compared to Recent and Historical Highs: Dec. 2018

Demand for 2×6 sizes in all species and regions was very hot, even as prices also remained flat from the previous week. A big run on 2×6 at the end of the year is unusual, as this is usually a slower time for lumber manufacturing and for U.S. home building. Such a jump in 2×6 sales is notable because that size is used more often for 2-to-4 structure building (meaning condominiums) as opposed to single-family home building, which uses predominantly 2×4 sizes.

A huge surprise arrived Sunday afternoon in the form of cancellation of the current British Columbia forestry trade mission to China. These regular trade missions have always been extremely successful; within a couple of years following each one, numerous Canadian and B.C. companies have signed supply agreements for their lumber with companies in China. The trade mission lead by B.C. Forest Minister Doug Donaldson this year includes approximately 40 company executives, civil servants, and Indigenous leaders on a 10-day sales trip to Korea, Japan, and China.

A B.C. government press release explained the Province of British Columbia has suspended the China leg of its Asian forestry trade mission due to the international judicial process underway [in Vancouver, BC — ed.] relating to a senior official at Huawei Technologies. Government officials returned home after the Japan leg of the trip, but industry and company representatives continued to China and held all their meetings as originally intended.

The trade mission is expected to be rescheduled.

It is normal, as a year winds down, that producers and resellers want to deplete their existing inventories to end the year with their supply yards empty. For their part, customers also don’t want to be caught at year-end with wood-on-hand, so they order only for immediate needs of existing building projects.

All players want to end each year with as little wood in their possession as possible. The usual seasonal curtailment and closures during the holiday season allows manufacturers and end-users each to examine their inventories against their near-term (spring) plans. Once January starts going, it becomes obvious if U.S. builders will be needing large supplies for the coming building season. Sawmills adjust their production plans accordingly, in an effort to keep supply with demand.

This means there is little likelihood of prices dropping further before the end of this year. Sawmill order files are already to mid-December or the beginning of January, so producers will simply not book more wood orders for future delivery. They would rather wait until after the New Year, at which time manufacturers will be better able to see where price levels are.