The lumber industry bottomed out in 2009 with the bursting of the housing bubble. In March of that year the physical price of lumber was at $195 per physical unit. Companies sold what they could and hoped to make ends meet. Facilities were closed, men were laid off and hours were reduced for the remaining ones. Today is a different story all together with lumber being the year’s best performer. In fact, the lumber industry is experiencing a type of renaissance that promises a bright future for all those involved.
The Random Lengths trade publication reports that the price for a physical unit has risen to $365 in recent trading making an impressive gain of 87%. In the past year lumber has seen physical prices rise 40% with future prices rising to 49%. Its recent showings have gone beyond the expectations of many producing excitement and even larger expectations.
The lumber industry’s revival has come about for several reasons that include the following. Because many Asian countries now look to America to supply lumber for building and because of a reduced supply of lumber prices have risen. The greatest improvement in the industry has come about because of improving house starts. Housing starts have risen by 20% in November of 2012. There are expectations that these housing starts will remain strong through 2013. The supply and demand for lumber worldwide continues to drive-up the prices.
Although there are many economic woes on the horizon the outlook for wood and wood products continues to be upbeat. Some of those who closed facilities, laid-off workers and reduced hours of operation are now taking a second look of their resources. Facilities will reopen and employees will be rehired to fulfill the tasks at hand. The logistics of reopening and rehiring cannot be filled overnight but the anticipation to do so is real.
Since 2009 the lumber industry only depends on domestic home construction for about one-half of their business. This is down from 90% before the industry bottomed out. To keep their business going they have revamped their equipment to make such things as cedar for decking and home siding. These products are produced in addition to the mainstays such as the white and hem fir. Changing with the times insures that the industry will always have some type of product to rely on to keep their business going.
The future looks bright for the lumber industry. Some believe that the outlook might be a litter over enthusiastic. Still, the future is much brighter than it has been for the past four to five years. The industry’s leaders are hopeful that the present trends will continue for many years. The cost per physical unit of $270 is still $100 over the benchmark sales price. This makes a handsome profit no matter how you look at it!