In March 2020, U.S. lumber companies scaled back production to prevent a high stock of supply. Ironically, more and more consumers turned to home renovations during the quarantine and causing demand for lumber to increase exponentially.
According to AZ Big Media, lumber prices have started to slide downwards, but it’s going to take time for the end user to see those savings. “It’s like gasoline at the pump,” Morris explains. “People hear about a pipeline breaking and gas at the pump goes up 50 cents per gallon. Then we find out it really didn’t break, but it takes two months for it to finally get back down to where it was.”
Nun agrees, adding that a decrease in demand or increase of supply will need to continue for some time before price reductions happen further down the pipeline. “Futures will come down because investors recognize that production will come back up. But the demand is still there, so there’s no compelling reason for producers to drop prices until they finally see a reduction in orders. And right now, they’re selling everything they can produce,” he says. “There has to be a drop in demand or a big increase in supply before prices start to really come down at our level.”