Expect Higher Wood Prices Through Part of 2022

After the near stratospheric ascendance of wood prices earlier this year and their eventual descent again towards the earth, lumber prices began to rise again in October.

Expect that to continue through the first or second quarter of next year, according to Domain Timber Advisors, a timberland investment management organization with $585 million in assets under management.

“The biggest driver of wood usage and housing and demand for multifamily has to do with the demographics in the US right now,” Joe Sanderson, managing director and chief executive officer of natural resources, tells GlobeSt.com. “The millennial generation is becoming home-buying age, which happens around average age 33.”

“You’ll see lumber prices will go say from $400 per thousand board feet to maybe $650, maybe $700 per thousand,” Sanderson adds. That will go through the end of this year into the early or middle part of 2022.

While demand is a critical factor, there are others as well. One is the health of Canadian timberlands.

“In the timber space and the lumber space there are some macro things happening outside of the pure demographics,” says Sanderson. “The Canadian forest industry has been significantly impacted by a forest health issue.”

To address the issue, Canadian companies have moved their production facilities into the U.S. “The relocation, the training of employees, the move of distribution centers, all has a big effect.”

And there are other demands for wood products and byproducts that compete for available raw materials.

“One of the things people don’t think about a lot is the tremendous amount of wood used for concrete forms,” Sanderson explains. “Those have a very short lifespan, so they go through a lot of plywood for that. Shipping containers are all lined with plywood and that has a short lifespan. All that economic activity drives up demand for all sorts of wood products. As an example, pulp prices [for cardboard boxes] generally run around $1,000 a metric ton. They’re up to $1,400 per metric ton now. That increased cost is driving up prices for all those products.”

Then there’s the infrastructure bill that, if it passes, would create additional sharp demand for even more wood, adding upward pricing pressure.

Sanderson says the country is “reaching a point of equilibrium between demand and supply.” That could help buffer price increases.