Lumber finally rises from the forest floor

A stronger housing market and growing overseas demand have pushed prices to an 8-year high, ending the industry's long recession.

By Bruce Kennedy Mar 18, 2013 7:09AM

Image: Lumber, construction © fotog/Tetra images/Getty ImagesAnother sign that, knock wood, the economy is recovering.

Lumber prices hit an eight-year high last week, thanks in large part to the U.S. housing market thawing out after a long deep freeze and rising overseas demand.

"The last few years have been a slow recovery from the recession for wood products," Phil Tedder, a forestry consultant at Resource Economics, told the Los Angeles Times. "The main consumer was new housing, and that obviously wasn't very good. But now things are picking up."

California's long-established timber industry is also hauling itself off the forest floor. According to the Times, sawmills shut down by the recession have reopened, and trucking companies that deliver cut wood out of state are seeing business improve. The newspaper also notes lumber prices have jumped 40% just in the past year's time.

Also, China's seemingly endless hunger for raw materials has extended to American timber. The U.S. Forest Service says log exports from Alaska, Washington, Oregon and Northern California increased about 9% in the third quarter of 2012 -- with 62% of those West Coast log exports going to China.

In a report from ABC News, timber industry newsletter Random Lengths said the composite price for the framing lumber used in home construction was up last month to $415 per 1,000 board feet, compared to $284 a year ago. Plywood and paneling prices are up sharply as well.

Rising consumer demand is also helping. Home Depot (HD) recently announced its fourth-quarter 2012 sales rose 13.9% compared to the same period in 2011. Chairman and CEO Frank Blake attributed those strong numbers to "a continued recovery in the housing market coupled with sales related to repairs in the areas impacted by Hurricane Sandy."

But while the timber industry may be finally catching a break, it's also worried about falling behind.

"Supply has been chasing demand, but has not caught up," Jon Anderson, president and publisher of Random Lengths, told ABC News. "Producers, because of the depth and length of the recession, have been reluctant to add shifts or increase production. They've held off re-opening mothballed facilities."

However, he says,"you're starting to see mills increase production or come back online."

More on moneyNOW

Mar 18, 2013 1:59PM
Don't sell the timber to China unless you double your prices.
Mar 18, 2013 12:38PM
It's still about supply and demand.  The supply of lumber being produced declined as the house building declined.  Now new starts are quickly rising and is putting a demand on the supply.  Prices go up.  Lumber producers will probably wait until they are sure the surge is not temporary before ramping up production.  Rising costs of lumber will mean rising costs of houses.  Rising costs is not a sign of a recovering economy.  It usually spells a rise in inflation.
Mar 18, 2013 9:19AM
Not necessarily a sign that the economy is recovering. More likely a sign that the dollar is becoming more worthless. An eight year high would signal that demand hit the housing boom levels of 2005....I doubt it.
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