Over the last few months I have been trying to explain that lumber and OSB prices have moved up to higher levels and sustained those levels for the first time since 2006. The only exception was the stimulus months in early 2010. As I wrote in the Monthly Update, lumber prices have consolidated; many of the lower priced items such as Southern pine have caught up with the spruce items. Below is a 7 year composite chart of lumber prices; you can see how the market has changed. The incomplete line is 2012, it shows the leveling that I talked about in the May update and the price appreciation of the earlier months of the year. If you take the composite prices from the first of the year until today you will note that prices have risen around 28% on average since January.
So what does this mean for the balance of the year?
I will go out on a limb and say that I think we have reached the top of the lumber market. The economy will have to get better or we will need some market interruptions to force it higher. Even though building is better than last year we have reached a point where production is in line with demand. Ultimately, supply and demand is what sustains an uptick or causes a down-tick in the market. In the final analysis, I do believe the pricing will trend higher than the six other lines on the graph below.
What does this mean for you?
Expect lumber prices to remain near today’s levels for the next few months. I would expect to see price changes in lumber related products such as i-joists, glu-lam beams, lsl products and the like. Most of the manufactures have held the line on price changes due to the fear of losing market share but as prices remain higher they will have to give in to cost pressures they are experiencing.
Now a note on OSB.
OSB pricing is about 35% higher than we saw at the beginning of the year. I think this product may have just a little more to go before it hits the top. For now be aware of the increased cost of this product.
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