With so many factors at play, getting a clear call on the immediate future is next to impossible.
Where are lumber markets going? Some insist prices will be up this summer, some say maybe down a bit. The only certainty is its lack, and that lack of clarity is in abundance because today’s lumber market is unlike previous incarnations.
Currently, spot prices are just over $1,000 per thousand board feet. Futures markets, the bets on where prices will land over the next few months, closed out last week at $935.60. It would sound like prices were heading down. But, again, current conditions are causing a lot of cloudiness in crystal balls.
“There are so many extenuating factors going on,” Mike Wisnefski, CEO of MaterialsXchange tells GlobeSt.com. These include supply chain issues, the Russian-Ukraine War that has resulted in sanctions and an effective end to lumber exports from Russia.
If transactions are completed, that would be bullish for prices. But China is also closing down entire cities because of another Covid wave. So, is that less demand and lower prices, or higher prices because the building products and goods coming out of China now have to be replaced? “The NorthAmerican wood is going to stay here,” Wisnefski says.
Housing starts are up, but mostly multifamily which should mean heavy usage, as Wisnefski says one multifamily unit uses less than a 5,000 square foot house, so that might mean more efficient use. Then again, there’s a heavy number of homes under construction, many waiting for delayed components to count as finished. Once available, that could satisfy some consumer demand and reduce pressure on building, some ameliorating prices.
Has this started to sound like the scene in The Princess Bride where the character Vizzini tries to get which cup of wine is poisoned? To massage a movie quote slightly, “Wait till we get going!”
Alex Meyers, chief operating officer of Micky Group, thinks prices are going to head upward, at least to some degree, not due to lack of supply. Sawmills have plenty of material. The issue is transportation.
“Lumber availability is down but lumber available to ship is really high,” Meyers says. “There are not enough trucks to move the lumber, primarily 2x4s and building materials.” The culprit: a shortage of flatbed trucks that are the preferred form of transport. Availability of trucks is “horrible” and expensive, he adds.
In addition, because of Covid in China, there’s a bottleneck in Shanghai, a major supplier of kitchen cabinets, flooring, and architectural millwork. “I personally believe that’s going to keep things tight,” says Meyers. And when the ships arrive? “When you finally start to see the import containers, we’re going to see logistics problems.” Again.
“And this is all until when the next blender comes up. What’s the next logistics play? What’s the next covid outbreak? What’s the next supply chain woe that will throw off our projections here?”
Which is why so many in the industry don’t want to guess where the number will land. At this point, no one really knows.