The Random Lengths Framing Composite Price hit $523 per 1,000 board feet for the week ending July 10, marking the first time prices have topped the $500 level since July 2018. Indeed, lumber prices have soared 50% since April 17, 2020.
The primary drivers of the price increase include:
- Mills closed in the spring due to stay-at-home and social distancing measures enacted by state and local governments.
- When prices fell between March and April as a result of the COVID-19 pandemic, mills projected that housing would be adversely affected and therefore anticipated a large drop in demand. Accordingly, mills that remained operational substantially decreased capacity utilization.
- Producers did not anticipate the massive uptick in demand from do-it-yourselfers (DIY) and big box retailers during the pandemic.
- Housing weathered the storm much better than most anticipated.
- DIY demand has not abated much as states reopen and construction demand has far surpassed lumber mills’ projections.
The combination of all of these factors has caused a dislocation of the usual supply/demand equilibrium. Suppliers continue to catch up to orders to the point that, in some cases, builders and traders are being forced to place orders without a delivery date or price. Mills were taking orders to the end of July back in early-June, which may have been the driver of the large increase in lumber futures over the past few weeks.
Tariffs Exacerbate Price Spikes
The recent spike in all northern U.S. and Canadian species has no doubt been exacerbated by the lumber tariffs averaging more than 20% on Canadian imports into the U.S. market.
The Commerce Department has indicated it could lower the countervailing and antidumping duties to just over 8% in August following an administrative review of the tariffs.