Good housing news is bad for wood prices

Latest housing starts data shows some promise for a sustained housing recovery.   According to USA Today, housing starts jumped almost 7% in June to a 3.5 year high.  These starts are exceeding expert estimates given earlier in the year.  This increase is interesting because it appears material shortages and price increases have yet to slow the pace down.  Mind you we are still building houses at about 50% the rate of a “normal” market.

Whether the housing continues strong depends on lots of factors, but for now the pressure on the supply chain should remain in place for a little while.  As mentioned in the last blog, while the demand is still lower than pre 2008 years, the supply chain has reduced its capacity considerably by closing mills.   The saw mill fires in Chili and Vancouver also strained the capacity a tad.

All this adds up to continued upward pressure on lumber and wood panels.  Currently structural panel prices are 30 to 50% higher than a year ago with a 6% average increase from last week alone.  Unfortunately these cost increases have impacted some of our prices on wooden crating and packaging.  We aren’t experts in predicting panel pricing, but all indications point to a continued upward trend for a few weeks.  Hopefully things will stabilize in the late fall when home construction starts to ebb.  We would like to see some saw mills add capacity, but like every other industry, business is staying tight with their money.