US Lumber Prices and Sawmill Production Are Hitting Record Values in April 2021
On April 9, US lumber prices reached an all-time record close of $1125 per thousand board feet. Compared with the pre-pandemic price of $381, this represents an increase of over 180%. According to AGGRECOST, a single-family home in the US is now $26,800 more expensive due to the effect of lumber prices, before considering the impact of other construction materials. The multifamily sector has also been affected, with an average price increase of $11,000 per home. Contractors can expect to see prices at the yards from $1300-$2000 MBF. View our Lumber Tracker Here
The high lumber price can be explained in terms of supply and demand, and the increase in single-family home construction has played a key role:
- Homebuilders are taking advantage of low interest rates, and privately-owned housing starts reached an 14-year high of 1.67 million in December 2020. Almost one year earlier, January 2020 had also been an active month with 1.617 million housing starts.
- Home construction had not reached this level since before the 2008 recession.
- At the same time, there was a shortage of lumber production between November 2020 and January 2021, since the second wave of COVID-19 forced sawmills to ramp down.
In other words, there was an increased demand for lumber precisely when sawmill productivity was hampered by the pandemic.
US Lumber Mills Are Ramping Up their Production
Lumber mill output has reached a 13-year high, according to Yahoo! Finance, but their production is still lagging behind the demand of homebuilders.
The US industrial production index for wood had reached a low of 111.6 in April 2020, just after the COVID-19 pandemic started, but it has now recovered. The index reached a value of 134 in January 2021, a level unseen since before the 2008 recession, before dropping slightly to 132.5 in February. The US increased its softwood lumber output by 4.3% in 2020, while Canada had a drop of 4%, according to the Madison Report.
US lumber prices experienced some volatility in March 2021, but there is a marked trend toward higher prices. Western S-P-F KD 2×4 #2&Btr, a benchmark lumber item, had a price increase from $998 to $1040 (4.2%). The following table summarizes the chance in benchmark lumber prices (per thousand board feet) between February and March 2021.
|Lumber Product||Mar. 2021 Price||Feb. 2021 Price|
|WSPF KD #2&Btr 2×4||$1,040||$998|
|SYP KD East #2&Btr 2×4||$1,105||$1,157|
|ESPF KD Std&Btr 2×4||$1,165||$1,091|
|STUDS KD WSPF 2×4 PET||$950||$823|
|Douglas Fir Green Std&Btr 2×4||$930||$838|
|Cdn Softwood Ply TO 9.5mm||$1,276||$989|
How the American Jobs Plan Could Affect Lumber Prices
The $2 trillion infrastructure plan from the Biden Administration, officially called the American Jobs Plan, includes a budget of $213 to build and renew over two million affordable homes. Since the housing sector has been driving demand for lumber, this aspect of the infrastructure plan could lead to higher prices. However, a corresponding increase in lumber mill productivity would help keep the prices stable.
The NAHB is seeking action from the Biden Administration, to address the lumber shortage and its impact on housing prices. They have proposed government collaboration to increase production from lumber mills, or reaching a softwood lumber agreement with Canada.