Lumber futures have recently decreased to approximately $610 per thousand board feet, pulling back from the recent high of $695.5 reached on August 1st, 2022. This decline can be attributed to a combination of waning demand, improved supply conditions, and trade distortions driven by tariffs that together have weakened pricing power. Demand has notably decreased, as indicated by a decline in U.S. single-family housing starts to an 11-month low and a significant drop in building permits, both effects of rising mortgage rates that have softened the core lumber market.
On the supply side, while sawmills continue to operate below full capacity, production levels have shown stability. Furthermore, Canadian sawmills are increasing their output following a period of production cutbacks, with Statistics Canada projecting recovery in production and shipments well into mid-2025, ensuring ample physical supply. Although tariffs are intended to limit the influx of Canadian lumber, in this context of oversupply, they merely shift trade patterns and lead to inventory accumulation instead of generating scarcity. Consequently, inventories remain substantial, which restricts potential price increases, even in the face of rising duties.
