Lumber prices have been on a steady climb since the beginning of this year. In January, global lumber prices hit a record high of $460 per cubic foot. Similarly, in February, the price reached $500 per cubic foot. That’s an increase of $30 per cubic foot in just two months. But why is this happening? The answer lies in several macroeconomic factors, including rising raw material costs and low demand for construction materials in many countries. In other words, there just isn’t enough supply to meet increased demand. Lumber prices have risen so much that they now constitute the highest they’ve ever been since 2008 (when the Great Recession affected the construction industry greatly). Demand for residential housing has also dropped significantly in recent years. This is leading some to speculate that high lumber prices are here to stay for longer periods than initially expected. In this article, we will examine when consumers might see savings from lumb…
How Lumber Prices Work
Lumber prices are determined by three factors: demand, supply, and the US dollar. When demand is high, suppliers charge more to make a profit. When demand is low, suppliers are also less inclined to sell their goods. The price of lumber is often set by the price of a raw material, such as hardwood or softwood. The US dollar is also a factor that affects the price of lumber. The right combination of these factors can explain high lumber prices.
Global Lumber Price Factors
– Rising Raw Material Costs: The price of lumber is affected by increasing costs related to raw materials. In the case of softwoods, this includes wood fungus and insects. In the case of hardwoods, costs are driven by rising gas prices, which are mainly due to the use of coal in power plants. – Low Demand for Construction Materials: This price factor can also be attributed to decreasing demand for buildings. The low demand for new construction is being driven by low interest rates and an increase in mortgage rates. – Low Construction Activity: This can be attributed to several factors, including the overall low economic growth rates in some countries. – Falling Market Prices: The price of lumber is determined by the cost of raw materials, demand for construction materials, and the US dollar. Factors that can influence market prices are low demand for lumber, rising raw material costs, and a drop in demand.
U.S. Lumber Price Outlook
The US industry is the largest producer, consumer, and exporter of all types of wood products. However, the recent rise in lumber prices has caused a shift in demand. In early 2017, the US Lumber Imports report showed that lumber imports dropped to a level not seen since 2004. This indicates that US customers are now looking to domestic sources for their needs. The US Lumber Price Outlook shows that the price of softwood lumber is expected to increase over the next two years. Demand for residential building is expected to remain low, while demand for other applications, such as framing and sheathing, is expected to increase.
China’s Impact on Global Prices
The increased demand for lumber from China is affecting prices across the world. China has the lowest per capita consumption of lumber worldwide. However, the country’s rapidly growing construction market is expected to change the landscape. Low interest rates, a growing middle class, and a more urban population will increase demand for residential housing. A rising construction sector will also create more demand for materials, including lumber, steel, and cement.
Japan’s Role in the Market
Japan imports almost all of its lumber. The country is a major importer of softwood lumber from Canada, the US, and Chile. Japan also produces, or has access to, lumber plantations in several eastern Asian countries. The Japanese market is also very sensitive to market prices. The country has a large construction industry, and the market is sensitive to changes in this sector. Consumers are also willing to pay a premium for lumber that is certified as being sustainably harvested. This is just one reason why lumber prices remain stable in this market.
India’s Importance to the Market
Asian countries are important importers of lumber. China, South Korea, and Japan are all significant importers of lumber. India is an important importer of wood products, particularly softwood lumber. The country’s urban population and growing middle class will drive the demand for new homes. In addition, government initiatives to promote home ownership are encouraging Indian households to build new homes. This is leading to higher demand for construction materials, including lumber.
Conclusion
Lumber prices have risen significantly in 2018, especially in the US and Canada. This is due to several factors, including rising raw material costs and low demand for construction materials. In the near future, though, low interest rates and an increase in mortgage rates are expected to lead to a drop in lumber prices. This will be good news for consumers looking for cost savings on home improvements.
