Barring a sudden run-up in housing starts, lumber prices should hover in the $300 to $400 per thousand board feet (mbf) range this year, according to Paul Jannke of Forest Economic Advisors. Lumber mill capacity is keeping supply strong, but factors such as tight lending standards are keeping demand in check.
Jannke gave a preview of market conditions Feb. 5 during a ProSales dealer breakfast at the International Builders’ Show in Las Vegas. He told about 40 dealers that lumber demand would improve slowly, but factors such as existing home inventory, slower housing starts, tighter lending standards, higher interest rates, and lumber mill production would keep prices constrained.
“As long as housing starts stay around 1.1 million, lumber prices will stay in the under $500 per mbf range,” said Jannke.
Lumber prices have bounced around in the $200 to $300 per mbf range for the past few years. But in late 2012, they started moving up and in early 2013 spiked to around $400. “We believe that lumber prices have stepped higher and we’re not going to see them go back down,” Jannke said.
Housing starts are likely to hit the 850,000- to 1.1 million-unit range but would need to approach 1.2 million to affect prices, since mills are running at 90% to 95% capacity on the assumption of starts hitting 1.25 million. Mill restarts in 2013 brought about 1.4 billion board feet (bbf) of production online; 2 bbf will come online in 2014.
“The good news for 2014 ... is that it is unlikely that prices will go up,” Jannke said.
“As long as housing starts stay around 1.1 million, lumber prices will stay in the under $500/mbf.” Paul Jannke