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Lumber shortage - is there more to it than supply/demand balance?
Posted on 5/21/21 at 8:17 am
Posted on 5/21/21 at 8:17 am
Lumber Production Index
2006 index = 150
2020 index = 130 (13% decrease from high water mark)
New Home Construction
2006 new home construction = 2 million homes/month
2020 new home construction = 1.5 million homes/month (25% decrease from high water mark)
Demand for lumber by homebuilders have seen a 25% decrease in demand since housing production fell down from their high water mark in the 2005-2006 timeframe. Yet production for lumber is only down 13% from there. That should still be a 12% surplus not including imports from Canada. So we should be relatively quickly catching up to market demand at the very least.
Are that many people really remodeling and building fences while working from home? Or are there other factors like shipping issues or market manipulation from our friends in China?
2006 index = 150
2020 index = 130 (13% decrease from high water mark)
New Home Construction
2006 new home construction = 2 million homes/month
2020 new home construction = 1.5 million homes/month (25% decrease from high water mark)
Demand for lumber by homebuilders have seen a 25% decrease in demand since housing production fell down from their high water mark in the 2005-2006 timeframe. Yet production for lumber is only down 13% from there. That should still be a 12% surplus not including imports from Canada. So we should be relatively quickly catching up to market demand at the very least.
Are that many people really remodeling and building fences while working from home? Or are there other factors like shipping issues or market manipulation from our friends in China?
15
Posted on 5/21/21 at 8:18 am to goofball
The crunch is in the mills and imports
Posted on 5/21/21 at 8:21 am to goofball
The mills are intentionally inflating the price. Supply of raw timber has been minimally impacted and the mills are paying the same price for that timber. They’re just using the current market landscape to hike prices artificially.
Posted on 5/21/21 at 8:23 am to goofball
Its not a supply issue. People need to get back to work.
Posted on 5/21/21 at 8:24 am to goofball
Inflation
Posted on 5/21/21 at 8:25 am to Dixie Normus
quote:
Supply of raw timber has been minimally impacted and the mills are paying the same price for that timber. They’re just using the current market landscape to hike prices artificially
I know a lot of mills had to shut down during the height of Covid like everyone else. But they are all back open right?
Just looking in the gulf coast region, I've found press releases for lumber mill expansions in at least 4 different locations in Alabama, Mississippi, and Louisiana. Including one that will double the size of the Holden mill.
I'm sure there are even more expansions in the works for mills in the northeast (upstate NY, Ontario, Pennsylvania, etc.).
Posted on 5/21/21 at 8:26 am to goofball
Read about supply crunch in Canadian spruce imports a month or so ago. I forget the details.
Posted on 5/21/21 at 8:28 am to GumboPot
quote:
Read about supply crunch in Canadian spruce imports a month or so ago. I forget the details.
I will. Thanks for the tip.
Do we use a lot of spruce in the US for home construction and renovations? I thought pine was the predominant wood for that. And there's a historic high of raw materials when it comes to harvest-ready pine logs, thanks to a major campaign to expand the timber industry in the height of the housing boom.
Maybe they use more spruce up north.
This post was edited on 5/21/21 at 8:29 am
Posted on 5/21/21 at 8:31 am to goofball
quote:
Maybe they use more spruce up north.
That's my understanding. Not an expert here. Just kind of interested in the subject because everyone uses lumber.
ETA: here is 5 month old article...
The US is increasingly dependent on overseas lumber supply as Canadian softwood lumber production continues to decline
This post was edited on 5/21/21 at 8:35 am
Posted on 5/21/21 at 8:34 am to goofball
We make the tarps that go over lumber for rail cars. Within the past week, I've had three separate orders. Basically had none since January, so something is changing
Posted on 5/21/21 at 8:38 am to goofball
Transportation issues. We need more big rig truck drivers.
Posted on 5/21/21 at 8:43 am to goofball
quote:
I know a lot of mills had to shut down during the height of Covid like everyone else. But they are all back open right?
Nope. Perfectly good mill sitting in Dequincy, LA. Last day it ran was in June 2020. GP shut it down because of “market conditions”. Laid off 200 people including myself. No signs of it starting back anytime soon.
Posted on 5/21/21 at 8:44 am to Shexter
quote:
Transportation issues. We need more big rig truck drivers.
No, you need less shitty trucking companies abusing their rookie drivers to the point they quit the industry within the first year.
Posted on 5/21/21 at 8:47 am to jojothetireguy
Things are definitely changing as the lumber price has dropped 30% in the past 10 days. Still a long way to go before it hits pre covid levels.
Timber growers have been getting screwed too. There is an oversupply of timber in the US and especially the south due to the tax benefits given to growers back in the 80’s. That land is now mature and we have an estimated 10 year over supply of timber. Typically timber and lumber move in concert price wise but there has been a big disconnect in the past year.
Anyway, I suspect collusion amongst the mills and in the futures market where the price is set. Sure there was a pickup in demand at the beginning of covid but there was plenty of timber and really not that much shutdown at the mills.
Congress is getting involved too. The rats will scurry real fast
Timber growers have been getting screwed too. There is an oversupply of timber in the US and especially the south due to the tax benefits given to growers back in the 80’s. That land is now mature and we have an estimated 10 year over supply of timber. Typically timber and lumber move in concert price wise but there has been a big disconnect in the past year.
Anyway, I suspect collusion amongst the mills and in the futures market where the price is set. Sure there was a pickup in demand at the beginning of covid but there was plenty of timber and really not that much shutdown at the mills.
Congress is getting involved too. The rats will scurry real fast
Posted on 5/21/21 at 8:48 am to Ldogg123
quote:
Nope. Perfectly good mill sitting in Dequincy, LA. Last day it ran was in June 2020. GP shut it down because of “market conditions”. Laid off 200 people including myself. No signs of it starting back anytime soon.
That's weird. Lumber prices have never been higher.
Was this mill damaged by the hurricanes last year?
Posted on 5/21/21 at 8:51 am to SlidellCajun
My parents got a quote for lumber since it was coming down recently and it was 4x what it would normally be
Posted on 5/21/21 at 8:51 am to dewster
From what I’ve heard some of the paneling on the sides of the buildings got ripped off and some of the roof. Nothing that would prevent it from running. The time it’s sat idle has probably had more of an effect on the equipment than the storms.
Posted on 5/21/21 at 8:52 am to Slidellproud
Cool name bro
Slidell!
Embrace it.
Screw the haters!
Slidell!
Embrace it.
Screw the haters!
Posted on 5/21/21 at 8:52 am to Ldogg123
quote:
GP shut it down because of “market conditions”.
Koch's are scumbags
Posted on 5/21/21 at 9:00 am to goofball
Correct. I only put my $.02 in there because I had a guy that owns a timber farm give me some inside scoop on the prices from his end.
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