Timber prices fall to new 2022 lows as lumber inventories begin to pile up

  • Timber prices fell 7% on Wednesday and 12% this week as the commodity hits new lows in 2022.
  • Building materials came under pressure from soaring mortgage rates and falling new home sales.
  • Lumber stocks are starting to pile up at sawmills and home improvement stores.

Lumber prices fell 7% on Wednesday and 12% so far this week as the essential construction product hit new lows in 2022 at $604.50 per thousand board feet.

The decline has been persistent this year as mortgage rates hit multi-year highs, with the traditional 30-year fixed mortgage rate still above 5%. This increase in the cost of borrowing has helped cool the housing market in recent weeks as both new home sales and existing home sales have declined.

Now, a glut is forming in the lumber market as inventory begins to pile up at sawmills and home improvement stores where professional builders tend to shop. The sharp increase in lumber supply could lead to a further downward spiral in lumber prices if demand does not pick up soon.

Lumber buyers have slowed their orders and sawmills are starting to cut prices as inventories pile up, according to a weekly report from Random Lengths, cited by The Wall Street Journal. “Three-digit discounts have become the rule rather than the exception,” Random Lengths said.

Canfor, one of the world’s largest lumber producers, said it would extend the reduction in its production schedules as the company faces continued supply depletion.

“The global supply chain crisis has had a significant impact on Canfor and Canfor Pulp in recent quarters. This has resulted in operational downtime, with our western Canadian sawmills currently operating on a reduced schedule to manage excess inventory at our mills,” Canfor CEO Don Kayne said on the call on the company’s results last week.

Kayne expects these supply chain issues to last at least several more months.

Meanwhile, lumber inventory remains “flush” at home improvement retail stores like The Home Depot and Lowe’s, according to a Wednesday report from JPMorgan, which included channel checks of multiple outlet locations. retail.

“Professional traffic was the most balanced of the day with relative strength in hardware/fasteners and power tools, but, like other locations, lumber remained weak,” JPMorgan said.

Lumber prices are down 47% year-to-date and are down 65% from the 2021 high of $1,733 per thousand board feet. This significant drop in prices should help ease inflationary pressures in the housing market as the cost of construction declines.

Comments are closed.