Lumber and wood products arguably are the greenest of all building products –
sustainable, renewable and durable. Lumber and related wood products (plywood, OSB
and engineered wood products) also make up the largest percentage of building materials used in constructing a single family home. Rising prices on these products can squeeze profits.
Many industry experts see lumber entering a “perfect storm” between 2013 and 2015. An imbalance between supply and demand will result in dramatically higher prices. Will their concerns become reality? Consider the variables. The timber harvesting and processing industry in North America has changed in recent decades. Fewer integrated forest product companies own timberland. Today, timberland investment management organizations (TIMO) control vast swaths of forestland, and these TIMOs are chasing higher prices in China while ignoring the needs of domestic mills. Canada, too, has been feeding China’s voracious appetite, but they’ve been doing it mostly with damaged timber. The mountain pine beetle infestation has forced the Canadian government to cut down millions of forest acres in an effort to stem the infestation; however, experts predict Canadian harvest rates will be cut in half by 2015-2016.
Combine a drop-off in supply from Canada, TIMOs exporting lumber for higher prices overseas, continued strong demand from China, and rising demand here in the U.S. and you can see why experts predict higher prices for lumber in the coming years. Experts point to 1992-1994 when the U.S. last came out of deep recession; housing starts boomed and lumber prices skyrocketed. Housing starts are already on the rise. Can higher lumber prices be just around the corner? As always, we’ll keep an eye on the market.
