North America Softwood Lumber Market New Year Projection: 2024

VANCOUVER, BC, Dec. 21, 2023 /CNW/ - In the final weeks of this year, the full trendline for 2023 shows some real stability for North America construction framing softwood lumber prices. Indeed, the weekly price of both benchmark Western S-P-F and Southern Yellow Pine East Side 2x4s landed almost exactly where they were one year ago. This gives industry the ability to better understand market conditions and to plan for the coming year. For their part, customers ? whether home builders or lumber retailers ? continued to show reluctance to make purchases beyond immediate needs.

After all the uncertainty of recent years, lumber buyers are concerned that prices might fall, thus have been holding off stocking inventory. The muted housing construction activity for the second half of this year also suggests caution in keeping extra volumes of wood on hand. However, the discipline exhibited by sawmills across Canada and the US, to curtail when demand was soft, has done a lot to keep the level of supply in balance with demand.

For the week ending December 15, 2023, the price of Western Spruce-Pine-Fir 2x4 #2&Btr KD (RL) was US$414 mfbm, which is up by +$6, or +1%, from the previous week when it was $408, said weekly forest products industry price guide newsletter Madison's Lumber Reporter. That week's price is up by +$11, or +3%, from one month ago when it was $403.

Compared to the same week last year, when it was US$390 mfbm, the price of Western Spruce-Pine-Fir 2x4 #2&Btr KD (RL) was up by +$24, or +6%. Compared to two years ago when it was $750, that week's price is down by -$336, or -45%.

Madison's Western S-P-F KD 2x4 #2&Btr Prices: 2021 ? 2023

Shrewd investors know that construction framing softwood lumber prices are a good leading indicator for US housing activity, including home building and home sales  Don't miss out, get lumber price data updates directly to your desktop every Friday morning.

Western S-P-F suppliers in the United States reported a reserved market overall as the holiday break approached. There was still some preparatory winter buying, but the number and volumes of orders were small as customers only wanted enough hand-to-mouth coverage to squeak through into 2024. With sawmills in good shape to close out the year and getting ready for holiday shutdowns, there was a slight feeling of undersupply in the market. No urgency was exhibited on the side of buyers however, as they felt no pressure from their own charges with construction activity seasonally slow.

Sales of Western S-P-F lumber in Canada continued to enter hibernation mode. Producers were in the process of tapering off their operations for the holiday break and demand was flat to down as buyers increasingly retreated to the sidelines. Those customers who needed material pronto had little trouble finding specific mixes and LTL loads from secondary suppliers for quick shipment. Weather in much of Western Canada remained comparatively clement for the time of year, keeping transportation disruptions at lower-than-normal levels.

Madison's Benchmark Softwood Dimension Lumber and Panel Prices: December 2023 Compared to Historical Highs and Lows

The Madison's Lumber Prices Index for the week ending December 15, 2023 was US$446 mfbm
This is up by +0.5%, or +$2, from the previous week when it was US$414.

The new formulation having existed for 1.5 years, Softwood Lumber Futures, as traded on the Chicago Mercantile Exchange, dropped from a high of US$578 mfbm in mid-July to US$542 in mid-December.

* Madison's Lumber Prices, weekly, are a good forecast indicator of US home builder's current lumber buying activity ??> DETAILS

Madison's Lumber Prices Index vs Softwood Lumber Futures: 2022 ? 2023

Housing starts exploded higher in November 2023, surging by nearly +15% to a 1.56 million unit annualized pace, the best reading since May and second-best in a year and a half. The new housing market remains underpinned by an acute shortage of previously owned homes available for sale.

After a bit of volatility in recent months, total housing starts in the US for November 2023 skyrocketed up, by +15, to 1.560 million units, compared to the 1.359 million units reported for October 2023, and were up +9% from the November 2022 rate of 1.427 million units. 

Building permits meanwhile, an indicator of construction activity to come, showed a decline as is the normal seasonal cycle for winter, down -2.5%, at 1.460 million units, from the October rate of 1.498 million. This is more than +4% above the November 2022 rate of 1.402 million. These permits will eventually become starts and will help to underpin residential construction. 

November starts of single-family housing, the largest share of the market and construction method which uses the most wood, also shot up, by +18%, to a rate of 1.143 million units, from 969,000 units in October. Single-family authorizations were at 976,000 units, which is almost +1% above the October figure of 969,000 units. Building permits are generally submitted two months before the home building is begun, so this data is as indicator of November construction activity.

US Total and Single-Family Housing Starts November vs. Madison's Lumber Prices Index December: 2020 - 2023

As we go forward into next year, the usual processes of running a sawmill: hiring loggers, contracting truckers, making a lumber production schedule, and so on, will be less fraught with uncertainty and confusion than it was during the past three years. In this new landscape of bigger changes happening more quickly, compared to how sawmill operations were five years ago, the big question of "what will business be like in 2024?" looms large.

This latest US housing construction data looks promising, however there remain many unknowns with macroeconomic conditions. That said, demographics clearly point to ongoing increased demand for housing. What will that housing look like? Regardless of whether it will be more standard detached homes or more condos and apartments, the reality is that demand for wood will not drop.

When the first two months of next year come upon us, as always since 1952 Madison's will be there every week to detail the current situation of lumber sales and prices. By the end of February many answers will be available.

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Established in 1952, Madison's Lumber Prices is your premiere source for North American softwood lumber news, prices, industry insight, and industry contacts. The weekly Madison's Lumber Reporter publishes current Canadian and US construction framing dimension lumber and panel wholesaler pricing information 50 weeks a year and access to historical pricing as well.

Madison's offers a variety of products to meet your information needs regarding the North American forest products industry including:

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SOURCE Madison's Lumber Reporter