The minutes from the U.S. Federal Reserve’s December meeting along with various payroll reports last week caused lumber prices to fall. In its December minutes, the central bank stated it will keep the Fed funds rate “higher for longer” and theshowed employers added 235,000 jobs in December, above the expected level of 200,000. The payroll reports support the Fed’s stance that interest rates will not be coming down any time soon.
During the initial days of COVID-19, lumber futures dropped more than 50 per cent to US$280. Since then we have seen it rise and fall three times by at least 50 per cent, reaching an all-time high in May of 2021 of US$1,686. Based on more active supply-side management from the producers, lumber looks to be heading into a higher “new normal” range with less price volatility.
in November, 2022, fell to 1.43 million annualized units, a level last seen in June of 2020 . With mortgage rates expected to stay firm at least until mid-2023, demand should remain subdued or even fall until then. Interestingly, even with low inventories, lumber buyers were only covering immediate needs going into the holidays, implying they expected prices to fall further.
in the long run. The lower part of this range is the current average cost of production for West Coast sawmills. With the dynamic downtime strategy they are employing, this should become the new support price. Lumber currently trades at US$360 per thousand board feet before wholesale or retail markups.The impact we see as consumers happens when we purchase lumber at our local hardware store or engage a contractor for a construction project.