Washington lumber prices soar to new heights amid pandemic

Washington’s lumber industry is reporting record revenue as the pandemic continues to impact production levels and a challenging housing market.

In Washington, the state’s Department of Natural Resources manages more than 2.2 million acres of forest land. Harvests on that land are contracted out to private companies who pay taxes on the profits, 70% of which goes to rural counties.

Based on new projections released by DNR on Wednesday, the cost of wood is rising. Through March 2020, lumber prices peaked at $478 per 1,000 board feet, or MBF, before crashing to $363/MBF in May 2020. The following year was a roller coaster ride.

Since May, prices have trended upwards since they peaked again at $1,000/MBF in September. By November, prices slid back to $623/MBF before rebounding to $1,203/MBF in April or almost double the highest real prices in the past 20 years.

DNR forecasters attribute the surging prices to wood manufacturers struggling to expand output to meet renewed demand and labor shortages.

“Early in the pandemic, we, and others, expected the pandemic to undermine house prices and demand, and, consequently, the demand for lumber,” the reports stated. “However, it appears that the very low interest rates have spurred housing demand and starts, and remodeling and renovation demand also spiked during stay-at-home orders. The result was a sharp drop in supply while strong demand remained, making lumber prices rocket up and pushing up log prices.”

High lumber prices have also raised log prices, with an average DNR log price rising from a low of $498/MBF in April 2020 to a 12-month high of $711/MBF in October. By January, the price pulled back to $692/MBF and rose to $718/MBF in April. The DNR report notes this is high historically but below prices in early 2018.

While timber revenue forecasts for 2021 have fallen by just $0.1 million to $165 million, the DNR estimates 2022 and 2023 will see combined revenue of $364 million or $4 million more than projected. 

Historically, timber revenue in Washington has fallen from where it was in 1995. Between 1995 and 2018, the state’s lost around 45% of its prior timber revenue or about $123.6 million.

The DNR notes the realities of the pandemic are critical to seeing the forest from the trees. It is unclear how long it will take for supply and demand in the commodities market to fall back into balance, much less how lumber fares on the world stage.

Russia, which supplies 12% of earth’s lumber, plans to ban all exports sometime in 2022. That could all send Washington’s lumber prices higher in the near future. 

“The combination of a re-opening economy and relatively high savings have sharply increased demand,” the DNR report states. “However, supply chain constraints have limited the supply response, causing prices to spike from everything from cars to lumber. This will suppress demand in the short term as the various sectors reach new price equilibria.”

This article was originally posted on Washington lumber prices soar to new heights amid pandemic