Lumber Prices Sky-High Again
New York, NY, December 20, 2021-Lumber prices have shot up again in a rise reminiscent of a year ago, when high-climbing wood prices warned of the hinky supply lines and broad inflation to come, reports the Wall Street Journal.
“Futures for January delivery ended Friday [December 17] at $1,089.10 per thousand board feet, twice the price for a prompt delivery in mid-November.
“Cash prices are way up as well. Pricing service Random Lengths said that its framing composite index, which tracks on-the-spot sales, has jumped 65% since October, to $915. A $129 gain this week was the biggest on record, eclipsing a $124 jump in May, when lumber prices crested at all-time highs.
“Though lumber is traded in esoteric markets, two-by-fours became a proxy in the debate over whether inflation would fade with distance from the lockdown. In June, Federal Reserve Chairman Jerome Powell pointed to lumber prices plunging from a shocking peak as evidence that surging costs would subside. On Wednesday, he said the central bank would hasten the wind down of its bond-buying program, setting the stage for a series of interest-rate hikes meant to tame inflation.
“Lumber prices have a way to go before they threaten the records set in spring, when futures hit $1,711.20. Still, lumber prices with a comma were unimaginable before the lockdown, when mills were caught off guard by do-it-yourself and home-building booms and all the decks needed to facilitate outdoor dining.
“Analysts and traders say conditions are ripe for prices to keep climbing through winter, as they often do ahead of the spring building season.
“Flooding in British Columbia has cut off sawmills from forests and customers, unusually warm autumn weather has extended the building season and wood buyers are loading up in fear of further price increases and supply problems.
“The prospect of higher interest rates cooling the hot housing market also looms. Higher borrowing costs would reduce buyers’ ability to keep up with the price hikes that builders have used to offset their own increased costs. Most Fed officials have penciled in at least three quarter-percentage point rate increases next year.
“‘Builders think that they’re getting close to the end of a cycle and they’re doing everything they can to get houses going,’ said Matt Layman, an analyst and consultant who publishes Layman’s Lumber Guide. ‘They know they can pay $1,500 for two-by-fours. They didn’t like it, but it didn’t hurt them.’
“Random Lengths said that demand has exceeded supply, prompting sawmills to aggressively raise prices in hopes of slowing orders that are backing up into the new year. “Some producers unable to dissuade buyers with defensive pricing went off the market,” the trade publication said.”