As American consumers switch from DIY to going out, wood prices fall

As American consumers take risks again, timber prices are falling.

Timber prices have fallen sharply Astronomical altitude In recent weeks, following the relaxation of Covid-19 regulations in the United States, homeowners have shifted their spending from building decks and replacing floors to eating out, drinking, and shopping.

Timber prices have plummeted by 48% from a peak of US$1,686 in early May to US$875 per thousand board feet, reflecting a more-than-expected decline in renovation projects.

“As the economy reopens, people do less and less things at home,” said Chris McIver, senior vice president of marketing and corporate development at West Fraser, the world’s largest timber producer. “This is enough to push prices in the other direction because they are too high and unsustainable.”

But Kevin Mason, managing director of ERA Forest Products Research, said that media reports of soaring prices have caused Americans to postpone the purchase of wood and suspend their DIY projects. They still intend to implement these DIY projects because they Working from home will continue after the epidemic. “It’s not so much destruction, it’s better to postpone demand,” he said.

Timber has always been the totem of the heated debate around the US economy: whether price increases fade as the supply chain returns to normal or inflation persists, and demand soars due to monetary and fiscal policies.

Falling prices have made some economists more convinced that the burst of inflation will pass soon. However, the price is still much higher than the 2018 record of US$651 per thousand board feet, which is about three times the historical average price.

“People want to see wood as an indicator of inflation-we have fallen back, but we are still some terrible numbers above the average price level,” said Greg Kuta, president of brokerage Westline Capital Strategies. “From an inflation point of view, it still brings pressure… The inflation sprite is out, and you won’t control it anymore.”

Although costs have cooled, timber brokers expect prices to be high over the years. This is mainly due to the strong demand for new houses after decades of insufficient construction and lower mortgage interest rates during the pandemic released a generation of millennial homebuyers.

The analyst added that in order to meet this demand, sawmills can steadily increase supply, but any rapid increase in capacity will be difficult. In addition to equipment and contractor supply constraints, forestry regions also face special problems ranging from labor shortages in the southern United States to the consequences of the mountain pine beetle epidemic in British Columbia.

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