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COVID-19

Lumber prices climb as people stuck at home build those gazebos they’ve been putting off

Andy Uhler Jul 10, 2020
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Timber on the dock of a New Zealand port in February. Demand for lumber hasn't slowed, but production has. Phil Yeo/Getty Images
COVID-19

Lumber prices climb as people stuck at home build those gazebos they’ve been putting off

Andy Uhler Jul 10, 2020
Heard on:
Timber on the dock of a New Zealand port in February. Demand for lumber hasn't slowed, but production has. Phil Yeo/Getty Images
HTML EMBED:
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Lumber is a commodity, kinda like soybeans. Greg Kuta, president of Westline Capital Strategies, calls his job trading lumber futures risk management.

“You quote stuff 30, 60, 90, 120 days out, and you need to quantify that risk because you’re not going to deliver that wood until the job starts to come due,” he said. “So they need to lock in the risk and quantify that risk moving forward.”

There are a couple of reasons the price of lumber is at a 2½ year high. First, hardware stores are selling a lot more of it than brokers expected, as folks stuck at home tackle those long-postponed projects. And although home construction paused for a bit in March and April, it never went away. The saw mills, however, slowed down drastically.

“You did see a decrease in production,” Kuta said. “And to bring that production back online, you don’t flip light switches. Running sawmills and turning them off and then turning them back on is a slow, laborious process,” he said.

Kuta said right now, buyers are just trying to get their hands on any lumber they can, whatever the price. 

Pete Stewart, president of the timber analytics company Forest2Market, admits that high demand for lumber will lead environmental groups to worry about deforestation. But that concern could be overstated.

“In the U.S., we’re growing 15% to 20% more trees than we are consuming, which is good for the environment, good for everything,” Stewart said.

Growing more trees also will help ensure the lumber supply is healthy when those sawmills get back to running at full steam.

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