What’s in Store for Lumber Prices in the Wake of 2017’s Hurricane Season?

What’s in Store for Lumber Prices in the Wake of 2017’s Hurricane Season?

The 2017 hurricane season wasn’t kind to some of the major lumber producing regions in the United States. With Harvey putting Texas out of commission, Irma knocking out Florida and Maria devastating Puerto Rico, the state of domestic lumber is perilous. And with the ongoing Canadian-US lumber dispute continuing with no end in sight, the devastation wrought by the hurricanes this year couldn’t have come at a worse time.

Increasing Demand, Dwindling Supply

As areas impacted by hurricane damage start to rebuild, demand for building supplies soars – including both soft and hardwoods. As regional supplies dwindle, contractors are sourcing from a broader geographic area, preferring domestically sourced lumber when possible and seeking imported lumber to bridge the gap.

But it’s not just about sourcing the cheapest materials; some lumber types are simply unsuitable for housing needs, especially in the wake of disasters that require complete rebuilds.

During a recent International Trade Commission meeting on the state of softwood lumber, members of the National Association of Homebuilders (NAHB) cited a preference for Douglas fir and spruce-pine-fir over the less costly, more readily available southern yellow pine. The former is more suitable for framing homes while the latter has a tendency to warp and buckle over time, according to NAHB spokespersons. Even though there’s a great supply of southern yellow pine and a comparatively low price, builders still want and need access to Douglas fir and spruce-pine-fir to rebuild in affected areas.

Increased Costs

Even if you work outside of areas affected by the biggest hurricanes of the 2017 season (so far), you’ll still see their impact.  Historically speaking, lumber prices always rise in the wake of a natural disaster due to demand. But that may not be the case in Texas, Florida and Puerto Rico.

NAHB economists are hesitant to make any assumptions on the cost of lumber, due to a number of factors in play. Because of delays in legislation regarding Canadian imports of lumber, it’s too early to tell how long pricing will remain higher for imported lumber, and with an active wildfire season across the northwestern United States, it’s also too early to tell what the next few months will hold in store for domestic wood.

By the Numbers

According to the most recent Producer Price Index released by the Bureau of Labor Statistics, softwood prices increased by 2.5 percent in the month of August, the second consecutive month for increases for that material after falling 3 percent in June of 2017.  To put it in a broader perspective, the demand price index for softwood has increased by 22 percent since the beginning of 2016.

But softwoods aren’t the only lumber to experience a cost jump: oriented strand board (OSB) also saw an increase of 2.9 percent in August of 2017. This is the first month OSB has seen an increase within the past quarter, with an overall increase of 9.2 percent since January of 2017 and a 33 percent increase in price from January of 2016. It’s worth noting that the BLS’s statistics for OSB also include waferboard, whose particles are not oriented.

How Will the 2017 Hurricane Season Impact Lumber Prices?

It’s tough to separate what pricing increases are due to the ongoing Canadian lumber disputes, wildfires in the northwestern parts of the United States and the demand caused by two states and one US territory being hard hit by natural disasters. And since the 2017 hurricane season doesn’t officially come to a close until November 30th, only time will tell what impact natural disasters will further have on the availability, supply, demand and pricing of lumber for US contractors.

1 Comment

  • james buchanan October 12, 2017 at 9:39 am

    Kevin ,
    Thanks for the heads up it could be awhile before things come back to an affordable level and may slow building down

    Reply

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