Lumber prices: the decline was inevitable – Sherwood Lumber

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Jun 17, 2021
  • Lumber prices have dropped by 51.91% since it hit its record high of $1,734 in mid-May.
  • Sherwood Lumber’s COO has stated that the decline was inevitable as prices had hit an unsustainable level.
  • Prices may remain high amid heightened demand and challenges along the supply chain.

Lumber prices remain on a downtrend after hitting a record high of $1,737 in May. According to Sherwood Lumber’s Kyle Little, the decline was inevitable. Little has noted that the plunge is a sign of the market pushing back after the prices hit an unsustainable level. However, he acknowledges that a rebound is imminent due to heightened demand and challenges along the supply chain.

lumber prices

Sherwood Lumber’s COO on lumber prices

Lumber prices are trading below $1,000 as they remain on a downtrend. At the time of writing, Random Length lumber futures were up by 4.13% at $900.7. According to Sherwood Lumber’s COO, Kyle Little, the decline from the record-high of $1,734 in May was inevitable. Since then, the prices have dropped by about 51.91%.

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During an interview with Fox Business’ Mornings with Maria, Little stated that lumber prices had hit an unsustainable price point. As such, it was a matter of time before the marketplace pushed back. At the same time, Little has indicated that heightened demand for lumber is imminent. He attributes it to the ongoing challenges in all the segments of its supply chain.     

Last week, lumber producer Weyerhaeuser’s chief executive, Devin Stockfish stated, “I don’t think $1,000 lumber prices are the new normal. But that being said, when you think about the amount of housing that we’re going to have to build in the US over the next three, five, ten years, that’s just a significant amount of demand for wood products.”

On the same platform, lumber producer PotlatchDeltic’s executives forecasted that lumber prices will remain between $700 and $800 in the next year. While this is a significant decline from its current level, it is still higher than the pre-pandemic level of $639.

The decline in lumber prices comes at a time when homebuilder confidence has declined to its lowest level in 10 months. According to the National Association of Home Builders (NAHB), the decline is as a result of supply-chain shortages and the rising prices of various raw materials. In June, the homebuilder confidence for newly-built single-family homes came in at 81. The figure represents a decline of two points. However, a reading above 80 still signals heightened demand amid reduced inventory in the housing market.  

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