Selective Cuttings

Lumber prices drive higher

December 24, 2012

Lumber contract trading has continued in earnest despite the holiday season, during which it traditionally slows down. Unexpectedly high demand drove the Random Lengths Composite price higher, finishing December 21 at US$373/mbf. This is a psychologically important level, because this is the highest price in more than six years. Indeed, it is necessary to go back to May 5, 2006 for a higher price to the composite: US$377/mbf.

Random lengths composite price (2002-2012)

A line graph displays Random Lengths Composite Price for softwood lumber from 2002 to 2012. Though volatile, the price generally increases to a peak in 2004, before declining through 2009. It remains relatively stable at a low level until mid-2012 after which it rapidly increases.

May 2006 was the peak of the U.S. housing bubble: seasonally adjusted U.S. single family housing starts stood at 1.6 million (they currently stand at 565 thousand), and average U.S. housing prices (as reported by Case-Shiller) were 44% (!) higher, Canada’s softwood lumber exports to the U.S. were more than 110% higher. We have already noted that prices as high as they are today, in spite of demand so relatively weak (though improving) implies very strong prices over the next three years.