Home sales are slumping, renovation spending is losing steam and yet lumber prices have risen this summer to their highest level in four years.
Back in 2022, the price of two-by-fours was falling back to earth after a record-setting spike during the Covid pandemic, which set off a suburban building boom and sent stuck-at-home Americans into a do-it-yourself frenzy.
This time around, reduced supply rather than unyielding demand has driven lumber prices higher. Imports are down due to steep duties on Canadian boards and President Trump's 10% softwood lumber tariff, while low prices last year prompted sawmill curtailments and closures from British Columbia to northern Florida.
The Random Lengths Framing Lumber Composite price reached $535 per thousand board feet last month, its highest reading since September 2022. The price gauge, which is a weighted average of 15 key framing lumber prices used in construction, declined $3 last week after a bond rout pushed up mortgage rates to their highest level in a year, yet the lumber benchmark remains 23% higher than a year ago.
"Given softwood lumber demand to date is pretty much flat, the supply side is clearly doing most of the work to push prices up this year," said Dustin Jalbert, director of wood products and timber for Fastmarkets, which owns pricing service Random Lengths.
Home builders including D.R. Horton and Meritage Homes say the run-up in prices has become a headwind and will filter through to the cost of houses they sell later this year. Yet lumber futures, which are down about 11% from their high in late July, suggest that wood prices may have peaked for this year.
"We suspect lumber prices now approximate what will ultimately be their highs for the year with seasonal factors and rising mortgage rates likely to weigh on the demand side," said Kurt Yinger, an analyst with D.A. Davidson.
Supply is already down. Dozens of sawmills have closed across the U.S. and Canada in recent years, with a big wave of closures coming in the past year due to the prolonged housing downturn and higher import taxes. Canfor announced one of the latest last week when it said it would permanently shut its Fox Creek sawmill in Alberta by the end of September.
Canfor owns mills in northwestern Canada, the southeastern U.S. and Sweden. It cited persistently weak wood markets, difficulties with log supply related to wildfires and the wood-boring mountain pine beetle as well as the U.S. duties and tariff.
Antidumping and countervailing duties on Canadian softwood lumber stem from a trade dispute that has been raging for decades. The combined duty rate on Canadian lumber more than doubled last year to about 35% for most producers. The 10% tariff was layered on top of those heavily litigated duty rates, which are based on prior years' sales.
The new duty rates are set to come down later this year. Though they aren't due to be finalized before later this month, the preliminary combined rate is about 25%.
Though a reduced duty rate should give sawmills in Canada a little more wiggle room to operate profitably at lower lumber prices, executives don't expect the decline of roughly 10 percentage points to be enough to significantly boost shipments across the border.
"I don't anticipate that those mills that have been shut down are going to come back," Weyerhaeuser Chief Executive Devin Stockfish told investors last week. "There's a certain amount of volume that's just out of the system."
Canadian softwood imports were down 15% through May, compared with a year earlier, according to Foreign Agricultural Service data. European imports, which rose in recent years when suppliers there raced to salvage logs from forests damaged by wind, fire and pests, have also declined.
The U.S. Lumber Coalition, which has fought for the duties, says the import taxes on Canadian lumber have enabled U.S. producers to add more than 8 billion board feet of sawmill capacity over the past decade and boost their share of the domestic market to 75%. Meanwhile, the share fulfilled by Canadian lumber has shrunk to about 19%, from more than 30% in 2016, the trade group says.
Another $500 million of investments in U.S. sawmill capacity have been announced since Trump added a 10% softwood lumber tariff last autumn that applies to all imports. That so-called Section 232 tariff was levied in the name of national security, similar to those slapped on aluminum, steel and copper products.
"The positive impact of the antidumping and countervailing duty measures coupled with President Trump's Section 232 tariffs has been nothing short of historic, and as such must be maintained," said Zoltan van Heyningen, the group's executive director.
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