The Price of Lumber is Down but Will It Last?
What a rollercoaster the price of lumber has been on since the pandemic started.
What will happen in the future with lumber prices—will they go up, down, or stay the same? Find out about the future of lumber prices from an expert in the lumber industry, Tim Atkinson, Stimson Lumber’s VP of Marketing.
At the start of the pandemic, what did you expect to happen or did you have any expectations with lumber prices?
I think everyone thought sales would plummet, inventories would build, and nobody would purchase lumber.
It didn’t take long to discover that—after everyone pulled back on production 20-25%—sales were moving forward as people were at home performing projects in their spare time, which was ultimately doing the opposite of what all thought would happen.
What were your biggest challenges during the pandemic?
Number one was staffing, especially keeping them safe and healthy. We also struggled with not enough inventory—increased log deliveries, production, and added overtime at all mills for over a year. Then, of course, employee burnout. Our team was working long hours to cover the demand, and that was a challenge.
How did the price of lumber affect the sawmill?
Obviously, margins increased as log cost moved little. The added margin allowed us to re-invest in the business (for future projects) and offer a return to our shareholders.
Did you shut down for a while?
No, we ramped up after 2-weeks of panic from the industry to help supply stronger-than-anticipated home center sales.
Do you know of sawmills that shut down? If so, why do you think they shut down?
Yes, most of the industry took some form of shutdown or reduction at the onset of the pandemic. I believe it was because of the fear of lack of sales, building inventory, and a potential loss of employees (skilled labor).
Did demand for lumber decrease as lumber prices increased?
Eventually, the multi- and single-family homebuilders began to pull back as prices became too expensive. Homeowners decided to shift spending to travel and leisure as restrictions were lifted and projects were pushed aside.
Now that prices have come down a little, are you seeing orders increasing or getting back to normal?
Orders are in a typical 1-2 week order file position right now, but we anticipate the 1st quarter to return to stronger-than-normal spring purchasing habits.
Where do you expect lumber prices to be next year and by 2025?
That is a tough one as a lot of factors weigh in on it: supply chain disruptions, Canadian stumpage prices, higher Canadian duties, lack of imports due to clogged ports, and finally unknown supply as COVID is still impacting production.
The easy answer is up from where we are today, which is due to all the possible reductions in supply. If demand stays strong and production is balanced, then we will see higher prices for the first half of 2022, and then a leveling to normal trends but at a higher level due to the increased costs everyone is experiencing (wages, insurance, packaging materials, diesel/freight, etc.).
Larry Loffer is a senior technician at Wagner Meters, where he has over 30 years of experience in wood moisture measurement. With a degree in Computer Systems, Larry is involved in both hardware and software development of wood moisture measurement solutions.