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The Current Lumber Market

Friday, August 13, 2021

 

We’re all hearing more about the lumber market in the news than we ever used to – such as “lumber prices are skyrocketing” followed just months later by “falling panel prices”. The term “lumber futures”, is something usually reserved for commodity traders and lumber buyers but not as of late. On one hand, it’s great to see some attention being paid to the issues our industry is facing, but it’s also simplifying a complex supply chain and that can be a little misleading to the consumer.

First, it’s true – lumber prices ARE coming down. We’ve been able to drop the price on lumber by double digit percentages since the 2021 highs, and the prices in the lumber market are still dropping. This is long overdue good news.

Our goal at Marcus Lumber is and has been to offer you as much price consistency and stability as possible within the commodity markets. Frankly it makes projects go smoother. For example, when lumber futures bounce around, we don’t adjust prices as rapidly as that more volatile marketplace. This is true for the bounces in either direction for both the futures market but also the cash market. Furthermore, it takes time for nationally published future and cash price offerings to work their way through the supply chain.  This isn’t new and we know that. Marcus Lumber has been selling, pricing and reacting to the changing lumber markets for four generations, spanning over 100 years.

So, when everyone talks about the falling prices or the market crashing they may be right, at this moment, but we must remain cautious going forward – there are several things to watch out for that include:

  • Wildfires – there are currently over 50 uncontained large fires in the western US, and studies show that area to be the driest it’s been in 20 years. Any large scale damage would cause disruption to a very fragile supply chain and likely drive prices up.
  • Labor – we’re still not out of the woods with COVID issues such as work forces coming back to work and playing catch up from earlier down times.
  • Freight – the national trucker shortage and railroad worker strike(s) continue to drive transportation costs up. Also, the backups at our nation’s ports are simultaneously increasing costs and extending lead times
  • Continued High Demand – Housing Starts nationwide were reported up 35%+ from 2020, and with interest rates at an all-time low people are continuing to build.
  • Natural Bounce-back – from our record keeping, significant downward price movements have often bottomed out and then bounced back upward as buyers load up on material, which we anticipate will happen again soon.
  • Supply side moves – Markets are always moved by general supply and demand economics. When prices drop, suppliers will react to level off price drops. These supply side moves can move markets and we know that will happen if prices drop for long periods of time.

So, let’s all celebrate the fact that we may be seeing a return to the old days and that the industry’s prices are coming down. That’s great news for everyone – but let’s also remember that we’re dealing with a commodity market in an environment that is still not near “normal” yet.

If you have questions on what this all specifically means for your project, please give us a call as we’d be happy to discuss it with you.