One of the processes we do at Zeeland Lumber and Supply is track replacement costs. We take our position and evaluate that position in regards to commodity pricing and freight rates. Most of the commodity products we sell follow pricing trends and we watch those trends closely and use them to the best of our abilities to buy and sell inventory. The only problem with watching historical data is that it only goes back so far. If demand picks up to surpass levels seen in the last five years it pushes us into new territory.
This year pricing has been nothing short of a roller coaster. In past market updates, we have talked about how pricing rose all Spring and then turned the other way hitting a low around the 4th of July. Since then it has slowly started moving back up again.
Since July 4th studs, most dimensional lumber and OSB are all up anywhere from 5% to 10% depending on the product. In stocks when the market climbs up past a previous high point it is said to have broken through any resistance and it generally climbs until it establishes a new ceiling. When the price stops rising it sometimes drops back down to the old resistance and establishes a new floor.
Going forward there is still some demand out there so I would not think it will fall back down to the levels we saw in late 2012. Production is the intangible. There is increased production but there is also a tiered tariff on Canadian wood in the fourth quarter. When lumber prices fall below certain levels for the fourth quarter a tariff is assessed. I have seen reports of old mills coming back online which could further increase production but at this point I really can’t see this affecting lumber pricing much this fall. Don’t discount freight either. Trucking stills seems to be somewhat tight. If anything, I would say continue to count on a gradual appreciation leading to the holidays.
If you have any questions about pricing going into the Fall, we are more than happy to help. We hope you, and your family, enjoy the remaining days of Summer.