Lumber prices firm up slightly as field inventories stabilize - North American Lumber market weekly reports

By Madison's Lumber Reporter

The North American forest products manufacturing industry has entered the usual seasonal slower time; although everyone understands that the past two years have not been usual. Since late spring this year, as producers and customers were negotiating to find where softwood lumber price levels would be, the market correction downward did overshoot a little bit.

In early June, prices dropped below what the market could bear, so in the following week prices immediately corrected upward and have remained generally stable since. After the severe volatility of 2020 and 2021, this is good news for the sawmilling and construction industries alike, as price stability is important when making future plans. Of course, some of the issues which caused that extreme volatility remain, especially transportation delays. However, it is encouraging that wood is indeed moving through the supply chain, and that inventory levels in the field are becoming more stable.

With another small increase, for the week ending July 8, the price of benchmark softwood lumber item Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) was US$650 mfbm. This is up by US$10, or two per cent from the previous week when it was US$640, and by US$25, or four per cent, from one month ago when it was US$625.

The week marked the recalculation of stumpage prices in B.C., further increasing the cost of sawlogs for sawmills in the province. This move by the provincial government is expected to result in more downtime among producers, with Canfor having pre-emptively reduced their production to the tune of 375 MMbf between late April and early August.

“Positive momentum in sales of standard grades continued to mount, while demand for panels slowly firmed up.” — Madison’s Lumber Reporter

Traders of Western S-P-F commodities in the U.S. reported solid continued demand during the holiday-shortened week. Overall availability got tighter with each passing day, limiting options for picky buyers. Sawmill order files were in the range of two to four weeks out depending on the item and source. Meanwhile, inexorably rising fuel prices continued to add significantly to forest sector costs.

Further signs of a strengthening-but-conflicted demand were evident for Western S-P-F suppliers in Canada. Most standard- and high-grade offerings took another step forward in terms of pricing, while the bulk of low-grade items lost a few points. Buyers tried to dig their heels in, but stable downstream construction activity forced them to replenish low inventories.

“Southern Yellow Pine sales were robust as some of the fear surrounding the general economy was replaced by grim resignation. Buyers still had depleted inventories to attend to and prices continued to march upward, leading many to pull the trigger on purchases sooner than later. Players noted SYP commodities were still generally undervalued compared to the rest of the #2&Btr complex, but for how long?” — Madison’s Lumber Reporter

Madison’s Benchmark Top-Six Softwood Lumber and Panel Prices: Monthly Averages

Compared to the same week last year, when it was US$760 mfbm, the price of Western Spruce-Pine-Fir 2×4 #2&Btr KD (RL) for the week ending July 8 was down by US$110, or 14 per cent. Compared to two years’ ago when it was US$504, that week’s price is up by US$146, or 29 per cent.