The increase may be seasonal, with prices remaining steadier than they have in the recent past.
If you were buying lumber, June 13 was a good day with spot prices and futures down to $528 per thousand board feet, the lowest they’ve been since early September 2021. But now they’ve headed back up.
If you’re in construction or development, take a deep breath because the changes aren’t like they were in April 2021, when prices broke the $1,600 mark and left construction industry professionals feeling very broke.
“We are seeing the market’s initial reaction to price cuts since March,” Alex Meyers, Mickey COO, tells GlobeSt.com. “We can assume lumber prices will fluctuate within the $400 to $600 range due to continued demand and a significant backlog of mill orders. As interest rates begin to peak and home building starts slowing, prices would likely start pushing the other direction.”
Part of the current increase is timing. “There is a seasonal buy just before the July 4th holiday,” says Mike Wisnefski, CEO of MaterialsXchange. “The market corrected down to the new trading levels and many buyers that have an order file of business to cover decided to step in and make a purchase. In addition, the overall current demand is still solid so buyers holding inventories have been able to draw down the inventory levels and needed to replenish. I do not think that we had much of a speculative build of inventories though.”
However, at this point, no one could be blamed for a bit of a flinch.
“The difference now, as opposed to a year or two ago, is people are less likely to hit pause or try to wait out market fluctuations,” Micah Solit, senior project manager at Project Management Advisors, tells GlobeSt.com. “Instead, our clients are pricing in uncertainty and risk, whether that’s added contingency or allowances, extended schedules or some other strategy. For example, on wood-frame residential projects, we work with the general contractor, subcontractor and maybe even the lumber fabricator on developing a strategic approach to purchasing the contract for the structure.”
Then there are the tradeoffs that builders can make. For example, Solit says, if there’s enough qualified labor available, “we may factor in more confidence in the quality and capacity for work and be willing to take greater risk on the cost side by waiting on commodity pricing to drop.” But if timing is critical, they might make their lumber buy early “and live with the consequences.”
For now, at least, the potential consequences aren’t anywhere near as bad as they have been.
Source: “Lumber Prices Head Up Again but Without the Jet Propulsion“