Price of sawmill lumber

The main use for sawmill lumber is in the building and remodeling of residential homes. Therefore, the demand for sawmill lumber is closely tied to the demand for new home construction. As the residential construction industry shrank following the bursting of the housing bubble in 2008, demand for sawmill lumber tumbled and the price index fell along with it, from a 152.0 average in 2007 to a 124.9 average in 2009. Not only were people putting off new home construction, but they were also putting off major remodeling projects, which represent the other major use of sawmill lumber. However, the price rebounded in 2010 as the economy stopped its free fall. New housing construction remained anemic in 2011 and 2012 as foreclosed homes threaten to flood the market. Still, slow economic recovery pushed the price up slightly (1.6% and 3.5%, respectively).

In 2013, a further recovery of the economy helped release pent-up demand, causing the price of sawmill lumber to rise an estimated 13.3%. Rising housing starts and increased expenditure of renovations put upward pressure on the price of lumber, which caused it to increase a further 8.0% over 2014. Since reaching a peak in 2014, lumber prices declined over 2015 due to a global economic slowdown and weak demand growth, especially from the Chinese market. In 2015, the price of sawmill lumber fell 7.9% due to overcapacity and weak demand. However, as global demand picks up and Canadian production flattens out, the price of lumber returns to growth and increased gradually to 2018. In 2019 alone, however, the price of lumber decreased 10.1%, primarily due to the bad weather and a decline in homebuilding.

In 2020, amid the pandemic, a lumber shortage and a second-half surge in residential investment led to a 19.3% price increase. Multiple factors contributed to the price spike. Tariff increases on Canadian wood raised domestic prices and pandemic concerns led to many mills and building materials producers temporarily closing. However, domestic construction markets still needed to decrease demand proportionately. Instead, consumers opted to improve the homes they spent more time in during the public health crisis. As social distancing restrictions have eased, producers have not been able to ramp up production as quickly as demand has increased, leading to a spike in the price of sawmill lumber. These trends persisted into 2021 as producers ramped production to benefit from the record-high prices as prices increased an additional 36.3% in 2021, driven by growing demand despite supply chain disruptions.

Amid inflationary pressures, which weighed more on consumer spending patterns, lumber prices have declined 2.7% in 2022. While lumber prices increased substantially in the first quarter of the year, lumber prices took a sharp decline in April 2022, with prices inclining for the first time since September 2021. Further inclines in price growth continued later in the year, especially as construction activity remains pressured in response to elevated interest rates, which raised the cost of borrowing money, hurting prospects for financing larger construction endeavors. In 2023, as recessionary fears loom more over the markets in the year, even as volatility in these predictions is set to leave consumers nevertheless less investment-hungry, construction markets are set to remain pressured, which is set to leave the price of sawmill lumber pressured to endure a more dramatic 25.4% decline, following record-high prices in the prior years. Continued fears regarding a potential mild recession hitting the market in 2024 is expected to continue volatile prices for sawmill lumber. IBISWorld expects the price of lumber to rise in 2025 due to trade tension with Canada and tariffs expanding the price of Canadian lumber.