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Lumber prices have dropped by more than 60% YTD to their lowest in more than two years, and a recovery seems improbable given that higher interest rates and inflation likely will continue to hurt demand for single-family homes.
Lumber futures (LB1:COM) settled Tuesday at $429.30 per 1,000 board feet, down about a third from a year ago and nearly 75% from their peak price of $1,670.50 in May 2021.
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The rate at which new U.S. housing is being built is down 13% from April, when residential construction activity hit its highest level in more than a decade, according to the Census Bureau.
Mill executives and timber consultants who gathered last week at a World Forestry Center conference in Oregon, said the lumber sector is bracing for recession, though not a severe one, The Wall Street Journal reported.
Lumber consumption is forecast by Forest Economic Advisors to decline by as much as 2.5% this year and up to 4.5% in 2023 as home construction stalls and remodeling demand reverts to normal following the pandemic renovation boom.
However, many experts foresee higher wood prices than during previous downturns - in the $400s per 1,000 board feet rather than the $200s - because of record-low inventories among dealers and rising mill costs, especially in British Columbia.
Camfor (OTCPK:CFPZF), a major North American lumber producer, said it began a two-week curtailment Monday at most of its facilities in B.C., and work will resume at reduced operating schedules.