While many commodity markets have experienced huge fluctuations since the outset of the COVID-19 pandemic, and many industries have been forced to make tough decisions in uncertain times, the lumber market is experiencing a boom many suppliers didn’t predict. Let’s take a look at this unexpected turn of events, and the reasons for the success of the lumber market in 2020.
The Numbers Speak for Themselves
As highlighted by the Wall Street Journal in July, “Lumber futures are up more than 85% since April 1. Lumber for July delivery settled Thursday at $499 per thousand board feet while the more heavily traded September futures ended at $481.90. Both are above the pre-pandemic high of $463.00, set during the hottest home-building market since 2006.” These numbers speak to an unforeseen trend predicated on a huge increase in demand, a surprise in a year when many industries have slowed due to lockdown and personal spending was expected to shrink. There are several important reasons that have contributed to why the lumber market is experiencing a boom.
Unexpected Spending Trends
While many other industries experienced an expected downturn in consumer spending as lockdowns increased, the same cannot be said for lumber. Instead, an explosion of home contractor and DIY projects has become prominent across the U.S. Homeowners are having decks, fences, and other outdoor features added to their homes. Restaurants have been adapting to changing regulations by adding outdoor seating areas. And while builders initially slowed construction, many have been deemed essential businesses. Low mortgage rates have helped drive increased demand for homebuilders. All of these factors have contributed to an upturn in business that many in the lumber industry didn’t foresee.
Mills Are Attempting to Keep Up
When the pandemic began, many lumber mills expected demand to diminish, and began to slow production and consider alternative business models to adapt to the circumstance. However, the opposite quickly became apparent and has left many suppliers struggling to keep up with clients who are running low on inventory. The unique situation in 2020, including March and April closures of mills that have since resumed operations, has led to a skyrocketing price-tag for lumber supplies, hungry buyers trying to meet the demand of builders and consumers, and an unprecedented futures market on lumber products. While the question remains how long the boom will last, there’s no doubt that the industry is in uncharted territory, and will likely to continue for the foreseeable future.
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