Softwood lumber price plunges below Softwood Lumber Agreement threshold, but amid signs of strengthening markets
June 24, 2013
Since peaking on April 5, 2013 at US$451/MBF, the Random Length Lumber composite has fallen precipitously, to US$348/MBF. With these lower prices, there is a good chance that the prevailing monthly price for July 2013 will fall below US$355/MBF, leading to a return to export charges and/or volume restraints under the Softwood Lumber Agreement (though at their lowest level).
Random Lengths framing lumber composite price (2001-2013)
In context, however, this still represents quite high softwood lumber prices. This price correction was expected, as the December 2012–April 2013 price spike was primarily driven by returning U.S. demand in the face of very low inventory levels. Once inventories returned to typical levels prices were bound to decline.
Leading private sector analysis suggests that prices will likely continue to fall for several more weeks before levelling off, and then finish the year close to current levels. This is supported by a pivot in futures price trends (they have started to rise again), rumours of increased shipments to Asia as dealers start to rebuild inventories, and the U.S. entering its peak building and renovation season. Expect price volatility at similar scales (though with a positive slope to the long-term average) to characterize the next four to five years.