Recent fluctuations in lumber prices have captured the attention of construction business owners nationwide. According to recent reports from Madison’s Lumber Reporter and the National Association of Home Builders (NAHB), lumber prices have shown a notable downward trend due to weakened demand. For the week ending June 28, the price of Western Spruce-Pine-Fir 2×4 #2&Btr KD fell to $346 per thousand board feet, a 3% decrease from the previous week and a 10% drop from a month ago. Year-over-year, this represents a 21% decline, and it’s significantly down from $630 per thousand board feet two years ago.

An NAHB analysis for the week ending June 21 also highlights a double-digit year-over-year decrease in framing lumber prices, with lumber futures prices dropping nearly 20% compared to the prior year.
While current demand is being met promptly by sawmills and lumber manufacturers, experts warn that even a minor uptick in wood sales for new home construction or post-storm reconstruction could lead to immediate shortages. Builders and lumber buyers have been cautious in their purchasing since mid-2022, fearing significant price drops and aiming to avoid overstocking.
The era from 2020 to 2022 established a new floor for lumber prices, which are unlikely to return to the lows of 2010. This shift is largely attributed to the doubling of production costs for sawmills over the past five years. The ongoing macroeconomic uncertainty and global conflicts further exacerbate the lack of confidence in the market.
Impact of Sawmill Curtailments
Recent sawmill curtailments have done little to improve market sentiment. Despite a slight month-over-month and year-over-year dip in housing starts, the total number of starts year-to-date remains in line with last year. This steady trend in commonly traded lumber items reflects the consistent pace of new housing construction. However, as national holidays and summer breaks approach in Canada and the U.S., the volume of lumber sales remains uncertain.
Canadian Lumber Exports Surge
In the first quarter of 2024, Canadian lumber production and manufacturing sales remained nearly flat compared to the same period in 2023. However, Canadian lumber exports saw a substantial increase, with exports to the U.S. rising by 11%.
U.S. Lumber Production Recovery
U.S. lumber production is on a recovery path from early 2023 lows, while Canadian volumes—a crucial source for the U.S. market—are still lagging. In 2023, U.S. sawmills produced 37,271 million board feet, a 1.2% decrease from 2022. Canadian sawmills, on the other hand, saw a 6% reduction in productivity, generating 21,423 million board feet. Compared to 2019, a pre-pandemic benchmark year, U.S. production volumes have slightly increased, while Canadian volumes have decreased.
Sawmills in the U.S. Pacific Northwest and British Columbia are facing significant challenges, including difficulty accessing fiber and rising costs, amidst a soft lumber market. British Columbia’s timber harvest has seen a dramatic decline from 65 million cubic meters in mid-2016 to just 32.5 million cubic meters at the end of 2023. The forecast for 2024 suggests a further decrease below 30 million cubic meters.
Navigating the Future: Strategic Planning for Construction Business Owners
Given the current landscape, construction business owners should consider the following strategies to navigate the volatile lumber market:
  • Monitor Market Trends: Stay updated on lumber price trends and market forecasts to make informed purchasing decisions.
  • Diversify Supply Sources: Explore multiple suppliers to mitigate risks associated with regional supply disruptions.
  • Invest in Inventory Management: Implement robust inventory management practices to balance between overstocking and potential shortages.
  • Consider Long-term Contracts: Negotiate long-term contracts with suppliers to lock in prices and ensure a steady supply of materials.
  • Stay Informed on Policy Changes: Keep abreast of any policy changes or trade agreements that could impact lumber imports and exports.
By staying vigilant and adapting to market conditions, construction business owners can better manage their resources and maintain stability in their operations amidst ongoing industry fluctuations.