U.S. lumber prices expected to spike

The North American lumber market is poised to take-off due to recovering U.S. housing starts, improving repair and remodelling activity, and surging demand in China reports WOOD Markets Group.While the timing is probably the only question, increased price volatility is already a reality where prices are expected to touch the US$500/Mbf level in the next two to three years - this compares to the average annual price of US$180/Mbf (for Western spruce-pine-fir 2×4 dimension) in 2009 at the bottom of the market cycle.

After enduring some of the worst market conditions in 75 years between 2008 and 2009, the lumber industry has already seen improvements in the U.S. housing market from the low point of 554,000 units in 2009 to almost 600,000 units in 2010 (+8%). A return to normal U.S. housing levels of 1.6 million units could take 6-8 years to achieve, but the direction will be “up” all the way with gains expected to accelerate in each year of the forecast.

“Total North American lumber demand bottomed in 2009 at 40.6 billion bf and is forecast to rebound steadily to 61.0 billion bf in 2015 - a 50% increase from 2009,” said Russell Taylor, President of WOOD MARKETS. “However, this is still well below the peak of 76 billion bf in 2005, so there is a lot more upside after 2015 before the market finally stabilizes. It appears that the next five years will be quite a ride for lumber!”

WOOD MARKETS 2011 is a strategic outlook report that is the follow-up to previous WOOD MARKETS five-year outlook reports for North America and complements ongoing analysis provided in our newsletter, WOOD Markets Monthly International Report.

Source:International WOOD Markets Group, www.woodmarkets.com