When Will Wood Prices Go Down?
Lumber is currently historically expensive. But exactly how long will that be case?
The price of wood has risen dramatically over the last year, driven to historically high levels due to a combination of coronavirus-related complications. COVID-19 slowed sawmill production in early 2020, lowering lumber inventory just before demand for housing and lumber ballooned in the summer. That along with issues within the supply chain and ongoing trade disputes with Canada, which serves as a major source of lumber for the United States, have caused the price of wood to skyrocket to the point where lumber now costs more than three times as much as it did in May 2020.
But how long will it be before this trend reverses? As vaccination rates rise and the world steadily goes back to normal, it might seem reasonable to expect that lumber prices will also normalize fairly quickly. Unfortunately, though, most economic experts predict that it will be some time before the cost of wood goes back down to pre-pandemic levels— and some say we might never see lumber prices that low again.
“If the production factors remain that are limiting log supply, I find it hard to believe we return to historical price ranges,” Stinson Dean, CEO of Deacon Lumber, told Fortune.
But even if the price of lumber never again drops below $400 per thousand board feet like it was in early 2020, there is some optimism among experts that prices could drop significantly before the end of 2021.
“I think prices will ease a little bit in the summer,” said Steve Sallah, president and CEO of LBM Advantage. “The average lumber historically has been between $300 and $400 per thousand board feet. Right now, it’s over a $1,000. I see it in the $700 or $800 price range by summer.”
Sallah predicts that demand for housing and home improvement will go down as COVID-19 infection rates drop and people spend more time outdoors and traveling, leading naturally to a decline in lumber demand. Other lumber market experts are not quite as optimistic, with many expecting that it will take as long as a year and a half for lumber prices to get anywhere near pre-pandemic levels.
Samuel Burman of Capital Economics said in a recent report that he “expects lumber prices will remain elevated over the next 18 months”, but also gave two reasons why he believes they eventually will drop.
“For one, the progressive easing of quarantine measures should allow lumber mills to return to full capacity fairly soon,” said Burman. “In addition, the recent pick-up in hiring and higher trucker pay are likely to alleviate the current shortage of truck drivers, which should help resolve some of the logistical constraints.”
Burman went on to forecast that lumber prices will be somewhere around $550 per thousand board feet by the end of 2022.