By: The Working Forest Staff
According to Random Lengths, the average price of lumber per thousand board feet on March 11 was at $1,044. An all-time high for the industry and triple the amount from two years prior. This has put a strain on construction of new houses along with the price passed on to new home buyers.
What has been the cause for the lack of timber? Analysts believe it’s a classic example of supply versus demand for American who’ve been under quarantine over the past year. On one hand supply has been eaten up by COVID-19 restriction on sawmills across the county and those tackling do-it-yourself projects. What makes matters worse is interest rates remain at low levels, along with a hot housing market driving up the demand for new houses. In fact, a 14-year high in new housing development has been the result of a perfect scenario in market conditions.
But will there be much-needed relief for those needing wood?
Dustin Jalbert, a senior economist at Fastmarkets RISI who specializes in wood prices believes there will be a market correction soon.
“For some mills, this latest wave of COVID-19 from November to January restrained production at a time when mills would have liked to add overtime or shifts to meet unseasonably strong demand,” Jalbert told Fortune. “As COVID-19 cases continue to plummet, vaccination rolls out over the coming weeks and we achieve some level of herd immunity, I expect mill production to ramp up and distribution delays to start dissipating. Supply should increase in the coming months.”
Jalbert also has good news for the southern region of the US. He sees lumber supply increasing this year as new producers, particularly in the South, get into the business. The record prices are hard to resist for producers. That expected ramp-up in production, he says, should continue into at least 2023.
As for the demand, market analysts believe more people will cease DYI projects around the house, allowing the stock of lumber to replenish at store towards the end of the year. But even with people returning to work, the housing construction surge is expected to dip starting in 2022 and will add to a correction.
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