Lumber prices are cracking
By Purchasing Staff -- Purchasing, 3/20/2006 7:00:00 AM
Despite robust wood consumption at housing construction sites throughout North America—spurred by abnormally mild weather conditions in various regions—2x4 Douglas fir lumber prices eased by $12/thousand board feet (mbf) to $341 in February. March sales have continued to weaken to $322 or so.
"Markets have turned softer as a drawdown in customer and wholesaler inventories has reduced demand for lumber at the mill level, while mill production has remained strong," says Richard Egelton, chief economist at BMO Financial Group in Toronto. He expects transaction prices to trend lower in 2006 and 2007, as North American housing construction cools. This would exacerbate the financial woes of many Canadian and U.S. lumber mills that remain embroiled in a softwood lumber war. Canada won a major battle last week with the U.S. when a North American Free Trade Agreement panel essentially eliminated most of the punitive duties levied against Canadian lumber exports to the U.S. market. But the war is far from over since the American mills still can appeal the decision and drag the issue out for up to a year. In fact, the Commerce Department and the lumber industry made clear last Friday that neither plan on accepting the latest Canadian legal victory without further court proceedings.
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