US Lumber Industry is seeing strong profits as demand and prices continue to rise

According to an April 30th article in Bloomberg, lumber prices have risen at the faster rate in 2 decades.   The supply and demand issues that have been written about in previous posts continue to play a large role in the equation.   The housing industry continues its strong recovery with housing starts in March 2013 being the highest reported in the last 4 years.  The Mountain Pine Beetle epidemic continues to curb supply as recent reports (Bloomberg) indicate that over 50% of lumber has been lost to the beetle kill epidemic.  After 2 years of stagnate growth, China’s economy is starting to grow again, China is one of the largest consumers of North American lumber.  These three major factors continue to push the supply chain.

It seems that last year when the lumber demand started to outstrip supply, the lumber industry was hesitant to aggressively increase its demand.   Re-starting up a saw mill is expensive and can take months.  But here are a few recent headlines:

Coushatta sawmill reopening with 90 jobs – May 08, 2013

Vaagen Brothers Deal Will Reopen Sawmill in Canada – May, 2013

Lumber mills boost production as home starts rebound  – May 8th, 2013

Mills reopen as home building lifts lumber business – April 30th 2013

Lumber companies are reporting strong profits and there are a number of signs that the wood industry is now more aggressive in increasing capacity. According to USA today, “At least 14 lumber mills in the U.S. and Canada have reopened or plan to reopen”.   This is good news for wood consumers as hopefully prices will start to stabilize.   HOWEVER:  If you are hoping for some price reductions, don’t hold your breath as most analysts are doubtful that  lumber prices are going to drop this year. In fact prices may still increase as reported in the May 10th Vancouver Sun- Growing demand for lumber means profits and problems for B.C. mills.  To quote:

” Despite the jump in lumber prices that has already taken place – and the increased value of forest company stocks – the industry is still just at the beginning of a supercycle that is expected to continue into the foreseeable future, said Daryl Swetlishoff, head of research at investment dealer Raymond James. He said there is still room for a 50-per-cent increase in lumber prices as U.S. housing starts recover. He expects housing starts to hit the long-term average level of 1.5 million in 2016.” – Vancouver Sun.

Packnet is a major consumer of wood products that include both high grade and lower grade framing lumber and a variety of wood paneling.   We are continually working with our supply chain to mitigate cost increases as well as to insure that we have an adequate supply to meet our customer’s needs.    Over the last 4 months, Packnet has seen significant lumber material price increases.