Want To Save Money On Your Backyard Project This Weekend? Skip It.
If you need lumber of any kind for your holiday weekend project, do something else and wait until Spring. You’ll have a better Labor Day and probably save quite a bit of money.
Lumber prices in the Chicago futures markets more than tripled in the five months from April 1, 2020 to August 31, 2020, but current stratospheric prices won’t last. Futures markets appear to have topped, and futures prices for delivery next Spring are already 35% lower than they are for delivery today. Prices could go even lower over the winter.
Legions of homebound DIYers caused the demand for lumber to skyrocket during the pandemic. Home improvement projects, from backyard decks to full blown house additions, put a strain on supplies of milled lumber across the globe. Americans with time on their hands and stimulus money in their pockets headed to their local box stores and scooped up building supplies of every kind, including lumber.
The resulting surge in demand resulted in a corresponding surge in the futures price of lumber traded on the Chicago Mercantile Exchange. But unexpectedly rising demand was only part of the inflated pricing picture. Antidumping fees were levied on Canadian sourced lumber imports in April of 2017 when the Trump administration claimed harm to the US lumber industry by Canadian government subsidization of its own domestic lumber exporting companies. Import duties were imposed for Canadian Lumber of up to 24% with the average at around 20%. This had a direct impact on lumber prices because imports from Canada account for more than 80% of US lumber imports.
Canada and the National Association for Homebuilders challenged the duties, resulting in a February 2020 decision by the US Commerce Department to decrease the levies to around 8%. But bureaucratic requirements and COVID-19 related delays have pushed the implementation of the levy decrease to late November 2020. Barring an unforeseen change, the loosening of the Canadian import fees, coupled with the coming wintertime seasonal slump in lumber demand, are likely to cause prices to head lower than they are today.
Of course, lumber industry insiders know this, and prices started sliding this past week in anticipation of the changes. Spot futures prices have declined over 25 percent since peaking above $900 per one thousand board feet after a virtually uninterrupted run from an April 2020 low price of around $250. Spot prices are under $700 as of this writing, and futures prices for delivery in May of 2021 are already indicating a further price drop, with values running around $550. It is unlikely that lumber prices will return to their spring 2020 values under $300 any time soon, but the trend has changed. Once again the old commodity adage rings true: “high prices cure high prices.”
All of this leaves lumber buyers with a choice; pay up and work all holiday weekend on your latest project, or relax, have a barbecue and enjoy your family time this weekend, all in the knowledge that next Spring you’ll have something to do and probably some extra money in your pocket.