Builders breathe a sigh of relief as lumber prices fall

The pressure of soaring lumber prices appears to be easing for entrepreneurs like Chad Sayers of Langley, although the drop in commodity prices from high stratospheric heights has yet to hit them.

“These are starting to show up,” said Sayers, owner of Sayers Contracting, but “the most important thing I’m starting to notice right now is that my supplier is able to lock me in for prices. ‘a project for at least two weeks. or more. “

For now, lumber yards are probably still sitting on inventory they’ve been striving to get at much higher prices as they approach a peak of US $ 1,611 per thousand board feet. western spruce, pine or fir in May to industry analysts.

“I know we’ll never see the prices that we charged before COVID with (building) materials, ever,” Sayers said, but the relative stability of being able to offer customers a price he knows he does. will not increase is welcome.

Prices have reached all-time highs thanks to the convergence of a US housing construction boom, a surge in home renovations inspired by a pandemic, and supply disruptions due to COVID shutdowns. 19 in the first months of 2020.

But that spike didn’t last long as U.S. homebuilders hit a stalemate with producers, said Keta Kosman, editor of industry news source Madison’s Lumber Reporter, which tracks benchmark prices for the. base wood.

“So the prices hit US $ 1,611 and stayed there for a little while, but not a lot of sales,” Kosman said. “And then it slipped a lot.”

The price of 1,000 board feet of lumber is an industry benchmark. As of July 9, Kosman said, the price of western British Columbia spruce, pine and fir had fallen 52 percent to US $ 760, where it has been for at least two weeks. .

“We kind of think that maybe it’s like a supply-demand balance that we’ve achieved,” she added, but it’s hard to predict if prices still have room to go down or up. again depending on the situation. high demand for housing in the United States.

Soaring lumber prices made this usually tasteless product a hit in the market this spring. Bloomberg reported that lumber futures were trading up to US $ 1,734 per thousand board feet, four times their value a year ago.

Now, from a commodity broker’s perspective, the drop has wiped out all gains and lumber prices.

And the fall was not an unexpected collapse for large British Columbia lumber producers, who profited from the rise, but understood that the unique convergence of events that triggered the price explosion would not last.

The companies have yet to release second quarter financial results, which will reflect record lumber prices, but producers such as Canfor and West Fraser Timber have used some of their windfall to reward shareholders with plans. repurchase of shares.

Canfor, which posted first-quarter net income of $ 434 million based in part on record lumber sales, announced on June 14 that it would repurchase five percent of its outstanding shares.

West Fraser, which made $ 665 million in the first quarter, said on July 7 that it would spend up to $ 1 billion to buy back shares and increased its dividend by 25 percent to 25 cents per action.

However, industry representative Susan Yurkovich said stratospheric prices were “an aberration” and values ​​”are going to come down again, and that’s happening.”

“It was an unsustainable price point,” said Yurkovich, CEO of the Council of Forest Industries. “So you’ve seen people leave the market because they’re just not going to buy at that level. “

In Metro Vancouver lumber yards, prices “aren’t going down as fast as they’ve gone up, so you won’t see a comeback yet,” said Josh Cabral, Vancouver-based retailer Dunbar Lumber.
Products that sell in higher volumes have seen their prices drop compared to more specialized types of wood purchased at higher prices. But Cabral said the drops hadn’t been huge.

“A two-by-four that cost $ 13, right now it’s $ 9.70,” Cabral said. A year ago it was maybe $ 5.

Cabral said Dunbar Lumber has remained busy, but in the United States, a sharp drop in demand from retailers serving the home improvement market has also contributed to the price drop, according to Bloomberg.

“You have post-COVID consumer behavior,” Yurkovich said. “People don’t build a patio in their backyard and repair their basement. They go to restaurants and travel.

Yurkovich called the price spike an “overcorrection at the top” of the market and they could “be heading for an overcorrection down,” but probably not the depressed levels seen before the pandemic.

At Madison’s, Kosman’s opinion is that lumber was previously undervalued as American home builders failed to meet demographic demand for new housing.

And British Columbia, which produces about half of Canada’s lumber exports, is starting to run out of timber supplies as forests recover from mountain pine beetle infestations that have devastated interior forests.

“Over the next couple of weeks, we’ll see if this price is going to cap where it is, or if it’s going to have another drop,” Kosman said. “It is also possible that prices will go up. We’ll see what the housing starts (say). “

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About Natalee Broderick

Natalee Broderick

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