Lumber and log prices hold their own. But will they stay?

For two months in a row, lumber and log prices have remained robust and strong as home values go on, improving with sales and building. Home construction, housing markets, lumber, and logs all continue to improve along with the manufacturing industry.

Statistics look healthy: Mortgage rates seem are remaining steady, the median value of homes continue to increase, and prices building permits are staying consistent, among other factors – but an overall improvement, nonetheless. But log and lumber prices are another story altogether.

The price for logs have remained stable at US$720, and the price of lumber has likewise stayed at US$360 for two months in a row, the highest price since 2013 and the other peak at 2005. The recovery – at a snail’s pace, but an honest one, nevertheless – began in 2013. In 2012, the median prices for homes had hit rock bottom at US$151,600 in January, 2012. During the Great Recession from 2007 to 2009, mill production levels met their lowest points, and only the growing demand in 2013 managed to bring up the prices of lumber again. However, once the mill production levels increased to meet the new demand and the anticipation of housing starts begin rising, the prices dropped. But now, there may be a new cycle at play.

It is hard to say if these lumber prices stay there and remain relatively strong to log prices. Housing starts will begin to sneak up, on average, year after year, but mills do not need to add in more shifts today as compared to the past. That aside, a multitude of mills have upgraded their equipment either recently, or are currently. Some examples include Swanson Group Plywood in Springfield, Seneca Sawmill, and Weyerhaeuser Cottage Grove, among many, many others.

And then there is the issue of the log supply. The log supply in south Oregon may be smaller and more limited than it was before. This is due to the fact that while private landowners frequently raise log production during times of prosperity, federal lands for logging by the Forest Service and BLM has been reduced.

Log prices are reliant on the demand and supply of logs, and with the vast improvements in the industry, log demand will rise and place upward pressure on the prices of logs, as product prices pave the way for log prices.

The upgraded manufacturing facilities will improve efficiency and capacity. But while manufacturers attempt to hold onto their product prices, they, too, are hinged on the strength of product demand. If the price of lumber continues to stay high in the ensuing months, the big picture detailing the supply and demand of logs will begin to form. But, the cycle here could be reminiscent of the pattern of log and lumber prices going strong into the later spring months, something not seen for more than ten years. But only time can tell if this cycle in the wood products industry is a new one or not.

Source: The News Review