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Recent Price Movements of US Wood Products
2002.09.21


Lumber and Wooden Boards

Lumber prices are soft, both from a year-over-year perspective and a longer-term six-year perspective. However, taking a shorter-term view - either the past month or since the beginning of this year - prices have shown some modest signs of revival. This is in line with the overall economic performance in the United States. After a recession during the second half of 2001, the economy appears to be experiencing a recovery, albeit at a slower rate than initially expected.

With the exception of imported woods, rough sawn lumber and veneer are the only products which saw their prices advance between July 2001 and July 2002. However, the advance was very modest amounting to only 0.2 percent. The price change January 1996 is hardly any more impressive, being below ten percent. Prices of higher value-added lumber products - such as dressed lumber and dimension lumber - as well as engineered panels - such as plywood, particleboard and MDF - declined compared to July 2001. In relation to January 1996, panel prices are moderately higher, except for particleboard and MDF, whose prices are almost ten percent lower. It seems, however, that the low point has been surpassed and since last March, prices of particleboard and MDF have started to firm slightly.

Prices of imported lumber continue their upward trend. The cause must be found in a general supply shortage and the weakness of the American dollar.

Demand, supply and price movements vary significantly between different species, quality grades, drying levels, and growing regions. Below, we are listing the price changes during the past month of several widely used species. (Note that the following comments and data refer to 1000 Board Feet (MBF) of top-quality lumber, 1" thick. Imported lumber is quoted at dockside West Coast port of entry. Approximately $ 50.00 to $ 55.00 will have to be added for East Coast ports).

Generally, green lumber is in shorter supply than kiln-dried lumber and therefore green lumber prices are on a modest upward trend, while prices of kiln-dried lumber are soft. Also, prices in the northern growing regions and in the Appalachian mountains seem to be stronger than prices in the Southern United States. For instance, green Cherry lumber from the Appalachians advanced by almost 4 percent during the month of August. No other product monitored by us - including imported lumber - advanced to the same extent. Similarly, Hard Maple prices went up by 1.1 percent during the same month. On the other hand, kiln-dried Cherry fell by 0.6 percent and kiln-dried Hard Maple prices remained stable. Cherry wood belongs to the most sought-after species by furniture and cabinet manufacturers and prices for 1000 board feet of KD lumber are well in excess of US$3000.00. In fact Cherry prices are fast approaching the prices fetched by genuine Mahogany.

In contrast to Cherry and Hard Maple, several other products saw their prices decline. This applies in particular to kiln dried Red Oak from Southern sawmills. Prices dropped by 1.5 percent in August and are now averaging only US$ 1300 for 1000 board feet of top quality lumber. Considering, that Oak and Cherry have similar properties, and modern finishing methods allows Oak to get a Cherry-like appearance, it is surprising that there is a price difference of almost US$1500 (or some 100 percent) between these two species.

Concerns about the environment and the sustainability of tropical forests have led to supply shortages of Mahogany - and in its wake - rising prices. A thousand board feet of kiln dried Mahogany lumber now costs approximately US$3600 at the US West coast. However, the price advances during the spring and early summer have come to a halt and prices are at the same level as one month ago.

Imported Lumber

S.American Mahogany
KD US$3600 No Change
AD US$3095 No Change
African Mahogany
KD US$2100 No Change


Red Oak
Northern Region KD US$1675 US$15
AD US$1335 US$10
Southern Region KD US$1305 US$20
AD US$1000 No Change
Appalachians KD US$1513 No Change
AD US$1168 No Change


White Oak
Northern Region KD US$1205 No Change
AD US$775 US$5
Southern Region KD US$1040 US$10
AD US$800 US$10
Appalachians KD US$1235 US$5
AD US$880 No Change


Cherry
Appalachians KD US$3100 US$20
AD US$2508 US$93


Hard Maple
Northern Region KD US$2145 No Change
AD US$1785 US$20
Appalachians KD US$1960 US$5
AD US$1575 No Change


Soft Maple
Northern Region KD US$1435 US$20
AD US$1025 US$10
Appalachian KD US$1435 US$5
AD US$1115 No Change


Walnut
Appalachians KD US$2295 US$15
AD US$1705 No Change

Parallel to the sagging prices of lumber, prices for engineered panels also lost ground. Prices for particleboad and MDF are now ten percent lower than in January 1996 and about one percent lower than in July 2001. In view of the sluggish economy and industrial over-capacity, the price erosion continues and may not come to an end until sometime in 2003. Plywood fared somewhat better, as the price decline was minimal over the past year and during the past six years, prices advanced by six percent.

Secondary Wood Products

In contrast to the generally weak prices for North American lumber, prices of semi-finished and finished wood products did not fall to the same extent, and for many items prices even increased. The strongest price erosion occurred for windows and doors, the result of slowing residential housing construction. However doors experienced very modest price advances in the longer-term. Prices today are only 4.5 percent higher than in 1996. This is not surprising, as door manufacturers are switching increasingly to hollow doors, using less expensive MDF skins.

At the "strong end" of the spectrum are cabinets, headboards for beds and office desks, all of which experienced price advances of 3 percent or more during the past twelve months. In fact prices are at or near an all-time record. On a long-term perspective, prices of these products also experienced above average advances, of between 13 and 19 percent. The strong showing of cabinets and headboards is a reflection of the upbeat consumer confidence. On the other hand, the price-strength of desks is surprising in light of the poor profitability and investment apathy of American companies.

In view of the generally stronger prices of secondary wood products in comparison to their raw-materials, Analysts conclude that manufacturers of such products were able to maintain their profit margins (expressed on the basis of sales). However, as sales volumes are suffering in the current economic climate, the profitability (on the basis of assets) of many secondary wood products manufacturers is less than satisfactory. Of course, the situation varies greatly depending on the products being produced and the raw-materials being used. For instance, manufacturers using mostly particleboard and MDF face an entirely different situation compared with manufacturers using mainly solid Mahogany wood.


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