Softwood lumber prices just kept climbing last week as Canadian housing starts and home prices for July broke records. US housing starts this week were no different; new home building in the US increased +23% in July - the biggest gain since October 2016 - to a seasonally adjusted annual rate of 1.496 million units, the US Commerce Department said.
Single-family construction rose by more than +8% and single-family permits increased +17% to a 983,000 rate, the strongest since February. The number of residential projects authorized but not yet started also advanced, to 101,000 units in July, the biggest backlog since the end of 2018, according to Madison’s Lumber Reporter.
Due to this, demand for building materials and consequently sales prices continued their relentless increases at a time of year when usually builders and contractors have ordered the wood they need for construction projects, and prices have started falling. Where this situation will go no one knows, a combination of unprecedented circumstances makes every day a new adventure for sawmills and for customers.
As Western S-P-F sawmill order files in the US pushed into the first and second weeks of September, buyers voiced their increasing frustration with limited availability, sky-high prices, shipping delays, and wire-thin credit lines. Contractors struggled to keep jobsites going as lumber and studs were impossible to find. Substitutions abounded as long as the species in question satisfied state building codes. Sawmills had no way of increasing their production volumes to catch up with feverish demand, as most were at capacity while still dealing with the odd coronavirus-related staff shortage.
Western S-P-F producers in Canada reported another insane week in the lumber market as #2&Btr dimension offering prices pushed record highs, rising between $70 and $88. Prices of 2x4s rocketed up $80 to a head-spinning US$746 mfbm, and buyers didn’t even blink. Following the trend developed over the past several weeks, Canadian buyers bought every scrap of wood by 7:30am before any cash wood could be offered to US customers. September 14th order files at sawmills were the norm.
For the week ending August 14, 2020, prices of standard construction framing dimension softwood lumber items shot up yet again. Benchmark softwood lumber item Western S-P-F 2x4 #2&Btr KD price increased a mind-boggling +80, or +12%, to US$746 mfbm (net FOB sawmill), from US$666 the previous week. The price for this lumber commodity was up +$192, or +35%, from one month ago. Compared to the same week in 2019, when this item was selling for US$342 mfbm, it is up +$404, or an unprecedented +118%.
Eastern S-P-F #2&Btr lumber and stud pricing advanced significantly once more last week. Demand was again unceasing according to players, as buyers had trouble covering even their most immediate needs. Secondary suppliers continued to offer quicker shipment whenever they had material, but availability of all commodities remained virtually nonexistent. Order files at sawmills were well into September. Stories persisted of construction outfits postponing already-quoted jobs to avoid paying record-high numbers for lumber and studs.
Rising still further to unheard-of levels, last week's Western S-P-F 2x4 price increased by +$334, or +81%, relative to the 1-year rolling average price of US$412 mfbm and was up +$352, or +89%, compared to the 2-year rolling average prices of US$394 mfbm.
The below table is a comparison of recent highs, in June 2018, and current August 2020 benchmark dimension Softwood Lumber 2x4 prices compared to historical highs of 2004/05 and compared to recent lows of September 2015:
