🖤 Donations of all sizes power our public service journalism Give Now

Housing slowdown fells lumber industry

Marketplace Staff Oct 4, 2006

BOB MOON: Fed Chief Ben Bernanke weighed in on the housing market today. His take: We’re in the midst of a “substantial correction” and we can expect that to slow economic growth by about one percentage point for the second half of the year. It’ll continue to be major drag next year.

We’ve got one case in point: The lumber market, where prices have fallen to their lowest levels in almost five years. Nancy Marshall Genzer has the story.

NANCY MARSHALL GENZER: Falling construction means less demand for wood. Good news for trees but sawmills are hurting.

Weyerhaeuser has suspended production at two mills in Canada, indefinitely. Paul Latta, of the Seattle brokerage firm McAdams Wright Ragen, says freefalling prices are headed toward the bottom of the Grand Canyon.

PAUL LATTA:“I think we’re near the bottom of the canyon but we’re not at the bottom. In the short term we have a little more softness ahead of us and we’ll be at the bottom probably in January.”

The lumber business is cyclical. Producers are used to a bit of a see-saw market. Still, Ladda says he didn’t expect prices to slide so fast. He hasn’t seen anything like it in 15 years. And one other thing? Lumber is what analysts call a leading indicator. It’s causing prices for other construction materials, such as precious metals, to slide.

Latta says some people are perfectly happy with today’s prices:

LATTA:“It’s not not great news for Weyerhauser or Louisiana Pacific, but it could be good news for Home Depot.”

Lumber producers will be ready when the market turns in their favor. Dennis Hardman of the Engineered Wood Association says sawmills will be poised to pounce after prices have bottomed out and start to edge up.

DENNIS HARDMAN:“These mills can change production rates quickly, respond quickly. So I don’t see that it’s going to create a shortage, that’s for sure.”

So, as the cheap woodpile continues to grow, this might be the time to build that deck you’ve been dreaming about.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

There’s a lot happening in the world.  Through it all, Marketplace is here for you. 

You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible. 

Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.