A year-long rally in lumber markets is collapsing, with the price of two-by-fours falling 38% from record highs set just four weeks ago.
Despite the recent drop, spot prices – what sawmills charge wholesalers – are still 171% higher than a year ago.
The two-by-fours made from western spruce, pine and fir sold this week for US $ 1,005 per 1,000 board feet. That’s a drop of US $ 255, or 20%, from last week’s survey, according to Random Lengths, an Oregon company that monitors lumber markets.
The latest survey marks the fourth consecutive week that spot prices have fallen from a record high of US $ 1,630 in mid-May.
“What we saw through COVID was the biggest price hike the industry has ever seen,” said Peter Barynin, senior lumber economist at Fastmarkets RISI, which publishes Random Lengths. “It was phenomenal. “
But after hitting dizzying highs, lumber prices reversed amid a slowing pace of US housing starts. “The markets have taken a major turn,” Barynin said in an interview.
Lumber markets collapsed at the start of the pandemic, but prices surged in mid-2020 as Canadians and Americans stranded in their homes embarked on DIY projects or hired contractors.
In recent weeks, the renovation and remodeling boom has lost momentum on the demand side, although wood supply constraints persist in many parts of North America.
“In the wake of last week’s rout, lumber prices plunged even more sharply, with deep triple-digit declines common to all species,” Random Lengths said in its latest newsletter.
Lumber spot prices follow the downward trend that started last month in futures trading.
On the Chicago Mercantile Exchange, prices for lumber futures contracts for delivery in July have fallen by nearly half since reaching an all-time high on May 10.
Spot price data compiled by Madison’s Lumber Reporter, a Vancouver-based industry newsletter, shows that two-by-fours made from western spruce, pine and fir have come together. sold an average of US $ 321.60 per 1,000 board feet in April 2020. In the following five months, lumber prices surged before a temporary decline last fall. The spot markets then resumed the rally in late 2020 and continued on a bullish trajectory until mid-May.
Price gains earlier this spring have largely been erased, with spot markets retreating to levels last seen in early 2021. The two-by-fours have averaged US $ 930.50 per 1,000 feet. plank in January and US $ 1,008 in February, according to statistics from The Madison Show.
“The impressive collapse in the lumber market has continued at a steady pace this week,” Madison said in her weekly commentary. “A large contingent of customers continued to rely on the inventory they had in the field while waiting to pounce to the elusive bottom. “
As the largest producer of softwood lumber in Canada, British Columbia accounted for 40 percent of the country’s production last year.
The imbalance between supply and demand can be traced back to the devastating impact of the mountain pine beetle in British Columbia from 1999 to 2005, when forests were decimated by insects in the interior of the province. For many years, companies have salvaged trees damaged by beetles but still in good enough condition for harvest. These supplies are exhausted.
The forest fires in British Columbia in 2017 and 2018 further eroded wood fiber supplies.
Industry experts predict that the total tree harvest in British Columbia will decline in the coming years to less than 58 million cubic meters per year, down 35% from the peak of nearly 90 million. cubic meters in 1987.
Further supply constraints could arise if environmental groups can persuade the BC government to halt logging in old growth forests. The outer part of older trees has tight rings, making them much more valuable as a wood product, compared to second-growth trees which produce two-by-four trees used in residential construction.
Higher grades of lumber, like western red cedar, sell for premium prices because they are virtually knot-free and go into high-end wood products, including specialty doors, interior paneling and outdoor furniture.
Two environmental groups, Canopy and Stand.earth, launched separate campaigns this week to lobby the BC government to dramatically improve protection for old growth forests.
Their campaigns were supported by a wide range of indigenous leaders and other dignitaries.
Grand Chief Stewart Phillip, former Prime Minister Brian Mulroney, climate activist Greta Thunberg, singer Bryan Adams and actress Jane Fonda are among more than 120 personalities who have backed an open letter from Canopy urging the Prime Minister to British Columbia, John Horgan, to “protect the irreplaceable. ”
The Stand.earth campaign includes a video with guest appearances by actor Mark Ruffalo, author Margaret Atwood and scientist David Suzuki. “The government has yet to shut down the chainsaws,” International Stand.earth program director Tzeporah Berman said in a statement.
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